Serious Fraud Office v Eurasian Natural Resources Corporation [2018] EWCA Civ 2006
In an eagerly awaited decision published yesterday (5 September 2018), the Court of Appeal has overturned the decision of the High Court and in so doing has clarified the proper scope of legal professional privilege, particularly in relation to internal investigations. The case is a blow to the Serious Fraud Office (SFO) which had taken a combative approach to the issue of legal privilege in the context of criminal investigations.
Such was the importance of the case to the legal profession that the Law Society took the unusual step of intervening in the proceedings as a third party. The decision has been described by the Law Society as an important boost to the principle of lawyer-client confidentiality and a significant benefit to in-house lawyers and clients, as "the rule of law depends on all parties being able to seek confidential legal advice without fear of disclosure".
Please click here to read the case in full.
Background
The brief facts are that ENRC was made aware of allegations of bribery, via a whistleblower, in 2010. It instructed outside counsel and commenced an internal investigation. The SFO became involved, ENRC self reported and numerous meetings took place between ENRC and the SFO which ultimately resulted in a formal criminal investigation being commenced by the SFO in 2013.
As part of the investigation, the SFO sought disclosure of a wide range of documents relating to the ENRC investigation. This included outside counsel's interview notes in relation to 184 interviews it conducted with current and former employees and documents generated by forensic accountants. When ENRC refused to disclose four categories of documents on the basis that they were subject to legal advice privilege, litigation privilege or both, the SFO commenced High Court proceedings to compel ENRC to disclose the documents. The decision of Mrs Justice Andrews in the High Court sent shock waves throughout the legal community - she ruled that ENRC had to disclose all but one category of documents to the SFO, on the basis that, as the documents were created prior to criminal legal proceedings being contemplated, legal privilege did not apply.
Court of Appeal
The Court of Appeal overturned the decision of the High Court. It ruled that the categories of documents in dispute did have the benefit of litigation privilege. In particular, the Court of Appeal ruled that the judge was wrong to conclude that a criminal investigation was not reasonably in prospect when ENRC initiated its internal investigation into the allegations and that the whole sub text of the relationship between the SFO and ENRC was the possibility, if not the likelihood, of prosecution if the self-reporting process did not result in a civil settlement.
Consequences for internal investigations
The decision of the Court of Appeal is welcome and provides important clarification for both in-house and external counsel in relation to the scope of legal professional privilege when carrying out internal investigations. However, this area of law remains highly complex and great care must be taken when setting up an internal investigation to ensure that privilege is maintained. To assist with the assertion of privilege, a specific team should be set up to manage the internal investigation which can then be considered as the "client" for the purposes of giving instructions and receiving legal advice. Investigations should ideally be conducted by external counsel to afford the strongest position in relation to privilege. As the law of privilege is entirely jurisdiction dependent, what is privileged in one jurisdiction may well not be in another and this must be carefully considered when dealing with international investigations.
SFO Update
Lisa Osofsky has just commenced her 5 year term as the new Director of the SFO and gave her first speech on 3 September when she committed to a proactive and engaged approach, focused on international co-operation to achieve global settlements (such as Rolls Royce), strategic use of cutting edge technology and continued use of Deferred Prosecution Agreements, where appropriate. Click here to read the transcript of her speech.
One of the SFO's impending challenges will be their application to the High Court to reinstate the charges against Barclays Bank. The SFO previously brought charges against Barclays of conspiring with former executives to commit fraud by false representations. The SFO charges had centred around an allegation that the bank gave unlawful assistance to Qatar through a USD 3 billion loan to directly or indirectly acquire shares in a fundraising. The charges were dismissed by a judge at Southwark Crown Court in May, although the trial in relation to the individuals charged will take place in January.
Written by David Leckie, Laura Nelson and Roberta Dalby.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.