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Legal Professional Privilege – can this be claimed for legally conducted internal investigations?

02/06/2017
Director of Serious Fraud Office v Eurasian Resources Corporation Ltd [2017] EWHC 1017 (QB) This recent High Court case could have profound consequences for regulatory and other public bodies who conduct reviews or investigations to understand their own performance in respect of statutory or procedural compliance, adherence to governance arrangements and decision-making. Mrs Justice Andrews has recently reiterated that the parameters of Legal Professional Privilege ('LPP') should be narrowly defined, which could mean that any internal investigation, strategic review or quality compliance audit conducted by an in-house or external solicitor, is disclosable.

Director of Serious Fraud Office v Eurasian Resources Corporation Ltd [2017] EWHC 1017 (QB)

This recent High Court case could have profound consequences for regulatory and other public bodies who conduct reviews or investigations to understand their own performance in respect of statutory or procedural compliance, adherence to governance arrangements and decision-making. Mrs Justice Andrews has recently reiterated that the parameters of Legal Professional Privilege ('LPP') should be narrowly defined, which could mean that any internal investigation, strategic review or quality compliance audit conducted by an in-house or external solicitor, is disclosable. 

Our Dispute Resolution team commented on this case here [link to publication] last week, looking specifically at the effect the judgment may have on corporate cooperation with the SFO.  Setting out the relevant legal principles, the Court reminded us that LPP is a fundamental human right guaranteed by the common law and vital to the administration of justice.  However, the case law demonstrates that there has been a general trend towards seeking to confine rather than extend the ambit of litigation privilege to encourage candour and openness between litigating parties (Waugh v British Railways Board [1980] AC 521, Three Rivers DC v Bank of England (No 6) [2004] UKHL 48).  The impact of this trend may not be fully understood in a regulatory context.

LPP can be claimed in two ways. Litigation privilege applies to all communications between solicitor and client in connection with existing or contemplated litigation.  However, for material to attract litigation privilege, three conditions must be satisfied:  (1) it must be the case that the litigation is in progress or in 'reasonable contemplation', (2) the communications must be made with the sole or dominant purpose of conducting said litigation, and (3) that the litigation must be adversarial, not investigative or inquisitorial in nature. 

In respect of the first and third conditions, the Court made clear that it must be litigation or prosecution that is in reasonable contemplation, and not merely an investigation.  Eurasian Resources Corp Ltd (ENRC) sought to argue that communications in relation to an anticipated investigation by the SFO should be covered by litigation privilege, but McAndrews J was clear that whilst ENRC may have considered the SFO investigation to be a foregone conclusion, "documents that are generated at a time when there is no more than a general apprehension of future litigation cannot be protected by litigation privilege just because an investigation is, or is believed to be imminent".  Investigations do not always lead to prosecutions and consequently they are not part of one "amorphous process".

As to the second condition, the Court did not consider the disputed documents in question to have been created with the sole (or even a subsidiary) purpose of conducting any contemplated litigation. The disputed material amounted to an in-house investigation (carried out by external solicitors) into allegations made by a whistleblower in relation to mining activities being carried out by ENRC in Africa and Kazakhstan.  The Court held that the reason for the internal investigation was to allow ENRC to understand whether there was any truth to the allegations, and therefore address compliance and regulatory issues ahead of any external investigation (not just the SFO); the purpose of the review was not to prepare for future litigation. 

Accordingly, litigation privilege could not be claimed in respect of the investigation or the evidence gathered including witness statements, correspondence and working notes.

Legal Advice Privilege attaches to all communications passing between the client and its lawyers in connection with the provision of legal advice.  Litigation need not be contemplated and the privilege attaches to all material forming part of the continuum of the lawyer/client communications, even if those documents do not expressly seek or convey legal advice. 

However, McAndrews J was clear that this would not extend to fact-finding or evidence gathering exercises where litigation is not in contemplation, which will be referred to in or form the basis of later legal advice. Factual material which does not contain legal advice attracts no privilege unless it "betrayed the tenor of the legal advice."  So for example, a transcript of an interview or a summary of a document or report would not be privileged whereas the solicitor's notes of their thoughts or comments on either type of document would attract the privilege.  Likewise, documents obtained from third parties to be shown to a solicitor for advice will not attract legal advice privilege unless the criteria for LLP are made out.

Notably, the Court also made clear that what is meant by 'client' for the purposes of legal advice privilege, should be narrowly construed in that only communications between the solicitor and a party authorised to seek and receive legal advice on behalf of the client, are privileged. McAndrews J held that "communications between the solicitors and employees or officers of the client, however senior in the corporate hierarchy, who do not fall within that description will not be subject to legal advice privilege". 

Equally, preparation work or information compiled by a junior officer in an organisation or corporation with no authority to seek or receive legal advice, would similarly not come within the legal advice privilege definition. McAndrews J held that this would amount to communication only, and even if the junior officer had permission to convey information to the organisation's solicitor, this permission would not extend to the authority to seek or receive legal advice. 

In the regulatory context, this judgment makes clear that much of the material and information one might have considered to have been protected by LPP, may in fact be disclosable to a party interested in seeking it under Freedom of Information legislation, or pursuant to judicial review, appeal and employment tribunal proceedings. Accordingly, regulatory bodies seeking to conduct strategic or reputationally significant reviews and investigations via their internal or external legal team, must proceed with great caution. 

Thought will need to be given to the true purpose of any review, and to claim litigation privilege the regulator will need to be able to demonstrate that it is clearly tied to future litigation with a particular individual. To claim legal advice privilege regulators need to understand and tightly control lines of communication and schemes of delegation in respect of any communications or dealings with internal or external lawyers.  The implementation and ongoing structure of any internal investigation may determine the success or failure of any future LPP claim, so regulators with ongoing or anticipated internal investigations are advised to seek early legal advice to maximise their prospects of preserving the confidentiality of sensitive information. 

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