Last week the Court of Appeal (The Director of the SFO v Eurasian Natural Resources Corporation Limited  EWCA Civ 2006) reversed the High Court’s controversial and troubling decision from 2017 that concerned the extent to which litigation privilege could apply to documents generated in the context of internal investigations.
ENRC successfully argued that legal professional privilege protected from disclosure to the SFO certain documents that had been prepared by ENRC’s lawyers and forensic accountants as part of an internal investigation into allegations of financial irregularities at ENRC.
The Court of Appeal’s decision will be welcomed by clients who can once again instruct lawyers to undertake internal investigations into allegations of wrongdoing without fear of possibly having to reveal the legal work product to prosecutors, governmental authorities or regulators at a later stage.
In December 2010, following a whistle blower’s allegations of ‘corruption and financial wrongdoing’ within ENRC, ENRC instructed forensic accountants and lawyers to undertake an internal investigation into these allegations. Documents such as lawyer’s interview notes, forensic accountants’ reports and working papers were prepared as part of this internal investigation (“Documents“). ENRC hoped to avoid criminal prosecution by presenting the SFO with a report of the investigation.
But the SFO did not just want to see ENRC’s end report on the investigation, it also wanted to see the background material, including the Documents. Therefore, the SFO challenged ENRC’s claim that the Documents were privileged and therefore not discloseable.
High Court Decision
ENRC argued that the Documents should be the subject of legal advice privilege and/or litigation privilege as the dominant purpose of the Documents was to obtain evidence or legal advice regarding anticipated litigation.
The judge disagreed and held that the Documents were not covered by litigation privilege as they were prepared in anticipation of a criminal investigation (which was non-adversarial), not a prosecution. The judge said that a criminal prosecution required a sufficient evidential basis for prosecution and there was no evidence that at the time the Documents were created, the ENRC regarded the risk of prosecution as anything other than a mere possibility.
The judge also held that, following Three Rivers (No.5), none of the persons interviewed by ENRC’s lawyers as part of the internal investigation were authorised to seek and receive legal advice on behalf of ENRC. Therefore, legal advice privilege did not apply to the lawyers’ interview notes.
ENRC appealed to the Court of Appeal.
Court of Appeal Decision
The Court held that the judge was wrong to conclude that a criminal prosecution was not reasonably in prospect. In the Court’s view, the whole sub-text of the relationship between ENRC and the SFO was the possibility of prosecution if the self-reporting process did not result in a civil settlement.
The Court further stated that where there is a clear threat of criminal investigation, the dominant purpose of the investigation of whistle-blower allegations would likely be to prevent or deal with litigation.
The Court clarified that it is in the public interest that companies investigate allegations prior to going to a prosecutor without losing the benefit of legal privilege for the work product. If this were not the case, companies may not investigate at all, for fear that what they uncover would be required to be disclosed to a prosecutor.
Accordingly, the Court decided that litigation privilege applied to protect from disclosure lawyers’ interview notes and the material associated with a review by forensic accountants.
The Court left the Three Rivers (No.5) issue to be decided by the Supreme Court. It did however, state that it would have departed from the narrow interpretation of ‘client’ in Three Rivers (No.5), if it could have done so.
It is understood that the SFO is considering appealing to the Supreme Court. So watch this space for further news.