In a decision released on May 8, 2017, London’s High Court held that interview notes and working papers prepared by a company’s external counsel as part of an internal investigation into allegations of corruption were not protected by privilege. The decision is both surprising and of concern to corporations who may find themselves subject to potential regulatory investigation.
The documents, generated during investigations undertaken between 2011 and 2013 by solicitors and forensic accountants of Eurasian Natural Resources Corporation (ENRC), included notes from interviews of 85 individuals undertaken by ENRC’s counsel. ENRC claimed these documents were subject to litigation privilege (which applies to documents prepared for the dominant purpose of preparing for anticipated or pending litigation) and legal advice privilege (the UK equivalent to Canadian solicitor-client privilege, which applies to communications between lawyers and clients for the purpose of seeking or providing legal advice).
In rejecting this argument, the Court ruled that ENRC’s reasonable contemplation that an investigation by the UK’s Serious Fraud Office (SFO) was imminent was not sufficient to make out a claim for litigation privilege, since an investigation does not constitute “adversarial litigation”. It found that documents 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. Regarding the claim for legal advice privilege, the Court found that the communications between the interviewees and counsel were not made in the course of conveying instructions to counsel on behalf of ENRC. Rather, the Court found the documents were intended by ENRC to be used to compile presentations to the SFO as part of the self-reporting process. The Court held that the fact that the notes were made by external counsel rather than verbatim transcripts did not strengthen the claim for legal advice privilege.
The UK Court’s ruling is of significant concern for corporations facing potential regulatory action, and would be particularly troubling should its reasoning be adopted by a Canadian court. Best practice for companies that become aware of allegations of wrongdoing has long been to conduct an internal investigation into the allegations; indeed, in certain circumstances, failure to do so may even be seized upon by enforcement authorities or constitute an unlawful act unto itself. ENRC argued before the High Court that any sensible corporation would want to start carrying out its own investigation, and that it would be counter-productive to deny litigation privilege to the fruits of such an investigation on the basis that it was premature. However, this argument was rejected by the Court.
For their part, Canadian courts have considered a number of factors in deciding whether to extend privilege to documents generated in the course of internal investigations. These factors include: (i) the purpose underlying the generation of the documents, (ii) whether they were prepared by counsel in their capacity as a legal advisor, (iii) the reasonable anticipation of litigation at the time the documents were created, (iv) whether documents were collected or compiled to allow counsel to provide legal advice, (v) any alternate purposes to the investigation, and (vi) whether the documents were intended to be privileged (and so marked) at the time they were created.
In Canada, most legal experts who pursue internal investigations on behalf of clients agree that facts learned or documents gathered in the course of an investigation are not privileged even if the investigation is pursued by counsel. However, lawyers’ contemporaneous notes and work product that contain or reflect bona fide privileged information ought to be protected. For this reason the way an investigation is structured at the outset, and the purpose for that setup, is crucial. The High Court’s decision is currently under appeal. Companies and practitioners (both in the UK and Canada) will be monitoring the decision closely on appeal. Should it be upheld, companies will have to be prepared for the possibility that their counsel’s work product in carrying out internal investigations may make its way into the public record. This could have significant consequences for the manner in which such investigations are carried out going forward.