Whistleblowing, investigations and privilege: ENRC and beyond | Fieldfisher
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Whistleblowing, investigations and privilege: ENRC and beyond


United Kingdom

It is long established that litigation privilege attaches to documents created for the sole or dominant purpose of adversarial litigation which is, at the time of the creation of the document, in reasonable contemplation. The question of whether documents created during an internal investigation, which will often follow a whistleblowing report, are privileged has been the subject of high profile litigation over the last few years. Privilege is important in this context because businesses want to be able to investigate reports of wrongdoing without creating material that might then have to be handed over to a prosecuting authority or regulator if the company discovers there is an issue.
The Serious Fraud Office (SFO) will seek disclosure of internal investigation material from a company that self-reports an issue, including notes of interviews conducted by the company or its lawyers before the SFO was involved. If litigation privilege applies then the documents do not have to be handed over (although the SFO may ask a company to waive privilege voluntarily to show they are cooperating in a way that is “genuinely proactive“ – one of the criteria for agreeing a deferred prosecution agreement and avoiding protracted proceedings).
The most important case of recent years regarding whistleblowing, investigations and privilege is that brought by the SFO against the mining company ENRC. The case concerned an internal investigation carried out by ENRC into a whistleblower's allegations of "corruption and financial wrongdoing". ENRC took the whistleblower's report seriously and engaged lawyers and forensic accountants to conduct an investigation into the wrongdoing.
ENRC engaged in dialogue with the Serious Fraud Office (SFO) which later commenced a criminal investigation. The SFO sought disclosure of documents generated during ENRC's internal investigation, including interview notes and forensic accountancy documents. ENRC resisted disclosure on the basis that these documents were privileged. This was because ENRC's position was that they were created for the sole or dominant purpose of adversarial litigation (here, SFO criminal litigation) which was, at the time, in reasonable contemplation. Although accepting that the contemplation of litigation may have been one reason for creating the documents, the SFO disagreed that they were created for the dominant purpose of litigation.

The judge at first instance agreed with the SFO, finding that there was no privilege because an SFO investigation, as opposed to a prosecution, was not 'adversarial' and a prosecution was not in 'reasonable contemplation'. She also considered that the dominant purpose of creating the documents was for fact-finding, regulatory and compliance purposes, which were not litigation purposes.
This ruling threw into question how businesses could investigate possible wrongdoing without creating material, including potentially incriminating documents, that would have to be handed over to investigators.
Following the first instance decision in the ENRC case, another case was heard in which a former employee of a company referred to as XYZ Limited, which had been prosecuted by the SFO (and  had entered into a deferred prosecution agreement), sought the written notes of XYZ internal investigation interviews to prepare his defence to related charges. Although obiter (as the judges concluded the case had been brought in the wrong forum) Mr Justice Green said that it was settled law that privilege does not attach to written notes of internal investigation interviews. The judges referred to the judgment in the case known as the RBS Rights Issue Litigation which set out that interview notes were not privileged because they were created as part of an “information gathering” process. The judges also referred to the ENRC decision.
Given these decisions, it therefore appeared that the position was clear: internal investigation documents were not privileged. This raised the likelihood that corporates would avoid entering into dialogue with regulators and/or stop conducting thorough investigations in response to whistleblower reports. This would have resulted in a significant shift backwards in relation to good governance and transparency.
However, the ENRC decision was overturned on appeal. In relation to whether adversarial litigation was reasonably in contemplation, the Court of Appeal looked at the full context and considered the 'sub-text' of the relationship between ENRC and the SFO was that, if the matter could not be resolved through the self-reporting process, a prosecution may follow. It also said that if  there is a clear risk of criminal enforcement, it does not matter if investigations are only at an early stage, with matters still requiring exploration. The Court recognised that investigations frequently serve multiple purposes but accepted, in ENRC's case, that the dominant purpose was litigation, commenting that:
"where there is a clear threat of a criminal investigation ... the reason for the investigation of whistle-blower allegations must be brought into the zone where the dominant purpose may be to prevent or deal with litigation"
It therefore remains the position, as it was prior to the ENRC case, that litigation privilege can (but will not always) attach even in the early stages of an investigation, including before any regulator contact or allegations are made. However, it may be a very fine line regarding what the dominant purpose of creating a document is, particularly where it serves multiple purposes. To give investigation documents the best chance of being privileged, the investigation's purpose and scope should be clearly defined and it must be made clear why litigation is contemplated. It should also be made clear that the dominant purpose of each document created is and remains litigation. All changes in scope of the investigation should be carefully considered, incorporated and documented to ensure they are tied to the litigation in contemplation and the dominant purpose of their creation is that litigation. Engaging external lawyers at an early stage to assist with the investigation and engage third parties such as forensic accountants is likely to assist in demonstrating that litigation is in contemplation.

Nonetheless, ultimately each case will turn on its facts. In the recent case of State of Qatar v Banque Havilland SA, the Court held that an investigation report and associated documents prepared for Banque Havilland by PwC was not subject to litigation privilege as it was not prepared in reasonable contemplation of litigation or for the dominant purpose of litigation. Important factors were that there was no evidence that the bank actually anticipated a claim against it at the time of the investigation and that even though PwC had been instructed through the bank's lawyers, the decision to start the investigation had been taken by the bank before the lawyers' involvement. On the face of it this decision sits somewhat uneasily with the Court of Appeal decision in ENRC but it demonstrates the importance of lawyers being involved from the outset and the documentation of the purpose of investigations as being for contemplated litigation.

Litigation privilege in the context of investigations lives on but remains a fragile and fact specific beast.

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