A long-awaited and important decision in a case involving Eurasian Natural Resources Corporation Ltd (ENRC) has been announced. The Court of Appeal has overturned an earlier High Court decision regarding the scope of litigation privilege, by ruling that it can apply to legal communications forming part of a company’s internal investigations.
Facts of ENRC case
In a case brought against ENRC by the Serious Fraud Office (SFO), ENRC argued that a number of documents created during its own investigations into an alleged fraud committed by one of its overseas subsidiaries were protected from disclosure to the SFO. ENRC argued that the documents were protected by both litigation privilege and legal advice privilege. These documents included:
- notes made by solicitors during interviews with current and former ENRC employees;
- papers forming part of a review by forensic accountants;
- factual findings presented to the company’s Corporate Governance Committee by its solicitors; and
- a range of email communications between ENRC and a previous member of its in-house legal team.
High Court decision
Previously, the High Court had ruled against ENRC in favour of the SFO, concluding that litigation privilege could not apply to documents coming into existence before criminal proceedings were reasonably contemplated. The High Court agreed with the SFO’s arguments that the main purpose of their creation was for ENRC's own investigation, rather than to obtain legal advice.
However, the investigation findings presented to ENRC’s board by its solicitors were held to be covered by legal advice privilege. The principle of legal advice privilege does not require litigation to be in contemplation, but it can only apply to direct communications between a client and their lawyer. Accordingly, the High Court determined that ENRC had to submit all but these documents to the SFO for the purposes of its investigation.
ENRC appealed the decision of the High Court.
Court of Appeal decision
The Court of Appeal allowed ENRC’s appeal on the points relating to the scope of litigation privilege. In doing so, the Court of Appeal held that documents created in the investigation for the dominant purpose of avoiding litigation were just as protected as advice given to ENRC in the defence of legal proceedings.
In the Court of Appeal’s view, the High Court’s ruling was wrong, as it was based on the fact that a prosecution wasn’t in contemplation during ENRC’s internal investigations. The Court of Appeal concluded that, where the SFO specifically alerts a company to the possibility of prosecution and lawyers are engaged to deal with the issue, as in this case, this is sufficient for litigation privilege to apply.
Practical implications of the decision
Some commentators are calling the Court of Appeal decision on litigation privilege a “landmark” judgment, but what does it mean for lawyer-client confidentiality in practice?
The scope of litigation privilege will cover criminal investigations, and for the most part, regulatory investigations and investigations relating to civil/commercial claims. Where litigation privilege applies to documents forming part of an in-house internal investigation, the party claiming privilege will have the absolute right to withhold the documents created from disclosure, whether to prosecuting and regulatory authorities or opposing parties in commercial claims. This applies regardless of their potential relevance to the case, and no adverse inferences may be drawn by the court in relation to any such non-disclosure. This is clearly good news for company in-house legal teams in particular.
Companies can now feel more comfortable conducting their own investigations before potential any proceedings are confirmed, without fearing that they will lose the non-disclosure benefits of privilege.
A practical point, which remains a challenge for companies conducting internal investigations, and a point which was briefly considered by the Court of Appeal, is as to the current legal position, whereby legal advice privilege (the more restricted category of privilege) in an internal investigation by a company still only applies to documents produced by a very limited group of individuals within a company. The practical consequence of this is that investigation documents produced by, or circulated to, other persons within a company, outside such a group, will not be protected by legal advice privilege, albeit litigation privilege may apply if the appropriate threshold test for that is satisfied. That remains an area where companies need to take proper legal advice before conducting any formal or informal investigation or fact-finding exercise, whether in the context of possible criminal or regulatory action, or civil and commercial claims and litigation.
“This judgment is a long-awaited and welcome reassurance for companies, which means that they will now be free to act responsibly ahead of criminal, regulatory and commercial legal proceedings, without fear that the documents produced in their own investigations will be used against them.”
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