SFO v ENRC judgment could signal the demise of business cooperation with the SFO
Yesterday saw the publication of Mrs Justice Andrews' judgment in the claim brought by the Director of the Serious Fraud Office (SFO) against Eurasian Natural Resources Corporation Ltd. (ENRC) in which the SFO sought a declaration to compel production of documents requested from ENRC under s.2 of the Criminal Justice Act 1987.
The SFO's request was resisted by ENRC on the grounds that legal professional privilege (LPP) attached to the documents in question as they were the work product of their internal investigation which commenced in 2011 following whistleblower allegations of fraud, bribery and corruption in its mining operations in both Kazakhstan and Africa. ENRC's then instructed lawyers liaised regularly with the SFO on the progress of the investigation up until their dismissal, after which the SFO took the decision to commence its own criminal investigation in 2013.
In a landmark ruling, Mrs Justice Andrews held that LPP did not apply in circumstances where documents were not prepared with the sole or dominant purpose of conducting adversarial litigation. Rather, the investigation was a fact-finding exercise, the results of which ENRC had promised to disclose to the SFO. Mrs Justice Andrews ordered that three out of four categories of contested documents are to be handed over to the SFO. These documents include interviews, correspondence and working papers generated by solicitors and forensic accountants during investigations undertaken between 2011 and 2013 into the activities of ENRC.
For years the SFO has tried to encourage businesses to self-report corporate crime; holding out the carrot of more lenient treatment if they do so, as against full scale prosecution if their activity is discovered. A programme of civil penalties for business under the SFO's former head, Richard Alderman, was replaced by a formal deferred prosecution agreement (DPA) regime under his successor, David Green, in 2013. Since 2015 there have been 4 DPAs.
The success of the SFO's leniency regime is now under threat. The recent DPA with Rolls Royce sounded the death knell for self-reporting, as the court approved the SFO's proposed DPA with enhanced discounts for exceptional cooperation, in the absence of a self-report. This week's judgment against ENRC may well signal the ultimate demise of business cooperation with the SFO. As a result of the judgment it is clear that cooperation with the SFO may limit businesses' ability to maintain any claim for litigation privilege, as cooperation with an investigation may be interpreted as the "dominant purpose" for the production of documents rather than contemplated legal proceedings.
Unless the terms of DPAs are made much more attractive to businesses, by increasing discounts on penalties, businesses are less likely to engage in the SFOs leniency regime as a result of these recent developments.