In a decision dated 21 July 2015 the District Court of Braunschweig has increased the protection of documents against seizure by criminal prosecution authorities in the context of internal investigations. The decision has significantly extended the scope of legal privilege which is, however, very disputed in Germany as in 2010 the District Court of Hamburg denied the application of legal privilege in the case of HSH Nordbank.
The background of the discussion is an ambivalent situation that is regularly associated with an internal investigation: On the one hand, the misconduct of individual employees may already be prosecuted by the competent authorities. On the other hand, the company carrying out the internal investigations is not yet subject to the preliminary proceedings of these authorities. In this respect, the District Court of Hamburg held that documents prepared by a law firm on behalf of the HSH Nordbank were not exempt from seizure. Instead, the lawyers were ordered to hand over attorney work products to the investigating authorities. The District Court of Hamburg explained its decision mainly with the fact that (i) only the HSH Nordbank – and not its incriminated employees – is qualified as the lawyers’ client and (ii) there was no mandate-like relationship of trust between the lawyers and the incriminated employees. Therefore, the documents were not protected against seizure under Section 97 German Code of Criminal Procedure (Strafprozessordnung, StPO).
The District Court of Braunschweig now takes a different approach to assess whether or not the disputed documents also serve the legal defence of the company itself. The District Court of Braunschweig found that
“the initiation of investigation proceedings against the affected individuals (…) does not constitute a necessary requirement, as a relationship of trust concerning the preparation of a defence worthy of protection may also exist if the client merely fears the future initiation of investigation proceedings.”
In order to determine whether or not the relevant documents were prepared at least partly for the purpose of defending the company against future investigation proceedings, the District Court of Braunschweig examines the timeline. It differentiates between documents that had been created before the first seizure of documents (in the decided case: auditing reports) and those that were created after that date (in the decided case: documents created by a law firm). According to the court, in the first case the documents are missing the required purpose of defence, while the latter meet this condition. As a consequence, the documents drafted in close temporal relation to the opening of criminal investigations are exempt from seizure (Section 97 para. 2 StPO).
Although this decision was – as usual for appeals against a confiscating order – made on the level of a district court, the position of companies carrying out an internal investigation on the basis of suspicions has been strengthened significantly. In the course of future internal investigations, it is advisable to document precisely that the relevant documents have been created for the purpose of a legal defence against subsequent investigation proceedings. With regard to regular auditing reports, this will not be sufficient. In this context, the documents focus on risk management. As soon as further investigations are based on documents such as auditing reports, however, a respective defence purpose should be documented. That way documents created by external lawyers as well as internal documents may be protected against a seizure in the course of future internal investigations.
However, it has to be noted that decisions of a district court have no binding effect in Germany. A different district court is not prohibited from ruling otherwise. Unfortunately, diverging court decisions have to be expected in the present situation: Currently it is the prevailing view in legal literature that – contrary to what the District Court of Braunschweig held – the threat of future prosecution does not suffice to substantiate the alleged purpose of defence with regard to the relevant documents. On the contrary, the prevailing opinion in legal literature suggests that for such purpose of defence, investigation procedures against the company must actually have started.
Nonetheless, the decision of the District Court of Braunschweig is more than welcome as it strengthens the position of companies carrying out internal investigations and constitutes an opportunity to reconsider the scope of legal privilege in Germany.