Lawyer's work products of internal investigations exempt from confiscation?

The February edition of our corporate crime update dealt with a critical reflection of the decision of the Regional Court of Bochum dated 16 March 2016 (II-6 Qs 1/16), which had ruled that documents an ombudswoman had received from a whistleblower were not protected against confiscation by prosecution authorities. In connection with the latest developments in the investigations of the Munich Public Prosecutor's Office into Volkswagen's diesel emissions scandal a similar legal debate has now arisen with regard to lawyers' work products of internal investigations. On 15 March 2017 the prosecuting authorities raided the local offices of Jones Day and seized the law firm's work results of its internal investigations that they had carried out for Volkswagen. This has not been the first time in Germany that a law firm, which is engaged to carry out internal investigations, has been raided by prosecution authorities (e.g. Freshfields Bruckhaus Deringer in connection with HSH Nordbank). However, the legal situation remains highly unclear because the judicature is still split; the regional courts competent for complaints against search warrants rendered by criminal judges have ruled divergently on this particular issue.

According to Sec. 160a (1) of the German Code of Criminal Procedure (CCrP, Strafprozessordnung), which has been revised in 2011, an investigation measure directed at a lawyer shall be inadmissible if it is expected to produce information in respect of which he would have the right to refuse testimony (see Sec. 53 (1) no. 3 CCrP). This applies to information that was entrusted to the lawyer or became known to him in this capacity. In light of this, the Regional Court of Mannheim declared in its decision of 3 July 2012 (24 Qs 1/12; 24 Qs 2/12) that internal investigation documents collected by external lawyers that are stored in their offices are exempt from seizure unless the documents were deliberately handed over to the lawyers with the sole purpose of protecting them from seizure by prosecuting authorities. It will be difficult, however, to determine whether the transfer of critical documents to external lawyers was abusive or lawful. In any case, a distinction between lawful behaviour and abusive motives does not seem to be necessary, as Sec. 97 (1) no. 3 CCrP prohibits the confiscation of objects and recordings, on which the lawyer has the right to refuse testimony anyhow.

However, the Regional Court of Hamburg in its earlier decision of 15 October 2010 (608 Qs 18/10), when Sec. 160a (1) CCrP in its current legal phrasing did not yet exist, concluded that Sec. 97 (1) no. 3 CCrP only prohibits confiscation in the direct attorney-client relationship in the context of a pending criminal investigation (defence mandate), but not between the attorney and the interrogated subject of the internal investigation. This ruling has become outdated after Sec. 160a (1) CCrP has been revised by explicitly naming lawyers in general and not limiting its scope to defence lawyers only.

Since the Federal Constitutional Court considers attorneys to be members of the administration of justice, whose independence from state control is fundamental as it strengthens the proper administration of justice, an untroubled bond of trust between the lawyer and his client as part of the attorney-client privilege is highly important. The right to secrecy and the prohibition of confiscation are elementary conditions for such a bond and subsequently also represent the prerequisite for any professional legal activity.

Furthermore, the transition from a preventive internal investigation to the point where the company needs to prepare a defence strategy with regard to the results of said investigation can be fluid. While the internal investigations usually serve to identify misdevelopments in corporate governance and possibly to prepare claims for damages against the responsible managers, such investigations can quickly turn into a situation in which the (possibly damaged) company itself becomes the target of prosecution authorities. Therefore, in order to ensure a fair trial, it seems necessary to protect documents of internal investigations in the lawyer's custody from confiscation. The obligation to hand over or to tolerate the seizure of such documents and data obtained as part of the lawyer's advocacy could easily interfere with his defence strategy. Having sensible information seized that could obstruct any potential defence strategy is a considerable risk not everyone will be willing to take. If law firms lose the authority to dispose of internal documents and can no longer ensure their secrecy, the purpose of internal investigations could be sustainably undermined and thus discourage companies from conducting such investigations.

After the Regional Court of Munich had dismissed their complaints, Volkswagen and Jones Day have announced to file a constitutional appeal with the Federal Constitutional Court. Hopefully, they will do so, as a ruling by the Federal Constitutional Court could remove the legal uncertainty and set out guiding principles to define the legal status of internal investigators with due regard to the proper functioning of the attorney-client privilege. Until then, with view to the ruling by the Regional Court of Mannheim, it is advisable to store investigation reports or presentations in the lawyers' offices.