When carrying out an internal investigation, a company will naturally be cautious about revealing potentially sensitive communications with its lawyers. They may assume that legal professional privilege is available to protect attorney-client communications in this context. Indeed, when properly asserted by a company, legal privilege is a strong shield; it gives absolute protection against disclosure of a document to a third party, and a court cannot draw an adverse inference just because privilege has been claimed. But, how easy is it to claim such privilege, and are companies right to put their faith in it? The answer is not straightforward and will vary depending on where the question is being decided.
In common law jurisdictions, legal privilege is a welldeveloped doctrine. Under English law, it falls into two categories: litigation privilege and legal advice privilege (LAP). Although the scope of litigation privilege is much wider, LAP is most relevant to an internal investigation. This is because litigation privilege requires litigation either to be taking place or to be in reasonable contemplation, and the document in question must have been created for the dominant purpose of such litigation. It has been held in the English courts that proceedings must be adversarial rather than inquisitorial in order for litigation privilege to apply, and there is considerable doubt as to what extent internal investigations may meet this test, with little case law to assist.
LAP requires there to be: (1) a confidential communication, (2) between the client and legal adviser, (3) made for the purposes of giving or receiving legal advice. It is therefore important for companies to consider carefully how they structure their investigations in order to ensure the full protection of LAP wherever possible.
There are two options.
The first is the use of a third-party investigations agent (such as a forensic accountant or auditor) to carry out tasks such as collating documents or processing data. These agents may possess expertise not always found in law firms, and costs could, in some cases, be lower. However, their work would not fall within the scope of LAP, as they do not meet the definition of legal advisers. The same is true when the agent is carrying out its investigative work in another country. It has been clearly established in the English courts that, no matter the location of the work, if proceedings are conducted in England then English law will apply for the purposes of determining LAP.
The second option is using an internal or external legal team. Using an in-house team may seem like the obvious choice, particularly for a large company or institution. In-house lawyers can, and often do, fall within the definition of a legal adviser. But care must be taken. In-house counsel can often perform various roles with a company and, in order to claim LAP, they must be providing legal rather than commercial advice to their internal client. Privilege cannot be claimed simply because a lawyer does the work. Unfortunately, engaging an external lawyer is not a silver bullet—the same considerations would apply.
Where an internal or external lawyer’s role extends to producing a report advising the company on potential legal liabilities, risks and obligations, LAP could apply to the report, as well as the lawyer’s working notes and the underlying documents themselves. However, it is important that any review and analysis of the underlying documents is carried out with the purpose of enabling the lawyers to be in a position to provide legal advice. In other words, the documents and working notes must be capable of being regarded as a continuum of information that the lawyers need in order to properly advise their client.
Who exactly is the client in this context? Where in-house counsel is used, the boundary between lawyer and client becomes blurred, and this question becomes more vexed. Under English law, the definition of a client for the purposes of LAP is very narrow; it does not mean the entire company or all its employees, no matter how senior they are. In a recent case, the definition of a client was said to extend only to “those employees authorised to seek and receive legal advice from the lawyer.” In the same case, it was made clear that LAP will not cover information provided by employees for the purpose of being placed before a lawyer. This narrow idea of the client means that, for example, records of interviews between lawyers and company personnel made in the course of an investigation would only be protected by LAP if the interviewees were strictly part of the “client.”
On a practical note, during the course of an internal investigation, companies in England must avoid creating unnecessary records regarding legal advice and issues. For example, if legal advice is given to a client team in the business, members of that team should not create and circulate summaries of that advice as there is a risk of LAP being lost. Business managers should be warned against producing documents commenting on what went wrong and what the company could have done better (so-called “lessons learned” reports), as these documents may be disclosable to a court, regulator or law enforcement agency in the future. Discussing matters verbally with relevant team members may be a better option. Lawyers may consider providing their advice verbally, although not having written records of advice given could lead to other issues in the future, and so this option must be approached with extreme caution.
LAP is not automatically permanent. It can be lost if, for example, a communication is no longer confidential. LAP can be explicitly waived by the company which claims it. It may also be lost implicitly, for example, by quoting legal advice in non-privileged, open correspondence or by an employee carelessly forwarding a previously privileged email to an interested colleague. Proper training is therefore vital.
Particular care needs to be taken in the context of group companies. Sharing of privileged material with members of the group who are not considered part of the “client” could amount to waiver of LAP, making such communications disclosable. This situation could arise where legal advice was given directly to a subsidiary and then disclosed to the parent company. Companies will need to make sure that there is always a “lawyer-client” professional relationship in order to maintain LAP or else attempt to rely on the doctrines of limited waiver, common interest privilege or joint instruction. The details of these doctrines are beyond the scope of this article, but it is worth noting that where the interests of group entities are not aligned, common interest cannot then be asserted.
There may also be times when companies feel they need to waive privilege; for instance, the Serious Fraud Office (the UK agency that investigates and prosecutes complex fraud cases) has made it clear that behaving cooperatively can increase the chances of a company being able to negotiate a Deferred Prosecution Agreement. One key element of cooperation is providing the SFO with access to the factual elements of the company’s own investigation, and that information will often be found in otherwise privileged documents.
In summary, the position reached in English law can cause headaches for companies seeking to take investigatory steps in preparation for obtaining legal advice. Although the protections afforded by LAP are strong, great care must be taken when determining whether LAP actually applies.
While the American and English approaches to privilege share many commonalities, the US affords parties more protection in designating attorney-client communications as confidential.
Similar to LAP under English law, US courts recognize a doctrine that protects confidential communications between an attorney and client for the purpose of providing legal advice. Although facts that are revealed during an investigation are not privileged, communications with counsel about those facts may be privileged. Also like the English system, communications between in-house counsel and company employees are generally privileged, assuming the advice given is legal and not business advice.
US courts take a more expansive view than their English counterparts in recognizing privilege between counsel and corporate employees in the context of investigations. Where counsel has been retained by a corporation, the “client” is the corporation, not the employees of the corporation. However, because the corporation is a mere entity, it must speak through its employees or representatives. In evaluating whether privilege exists, all federal courts and most state courts follow the test set out in the US Supreme Court case of Upjohn Co. v. United States, 449 U.S. 353 (1981). Under Upjohn, a corporation may assert privilege over communications between its counsel and corporate employees where: (1) the employee is speaking with counsel at the direction of their corporate superiors; (2) the communications are made to obtain facts to assist counsel in providing legal advice to the corporation; (3) the employee is aware he or she is being questioned for the purpose of providing legal advice; and (4) the communications concern matters within the scope of the employee’s corporate duties.
When interviewing their client’s employees in connection with an internal investigation, counsel should provide an oral Upjohn warning. During the warning, counsel advises the employee that he or she represents the company, not the employee personally. He or she advises the employee that although their communications are protected by attorneyclient privilege, the privilege belongs to the company, not to the employee personally. As such, the company can elect at any time to waive the privilege by, for example, disclosing the content of communications to a third party, including a government agency. Significantly, and in contrast to English law, attorney-client privilege largely extends to communications between counsel and corporate employees about the substance of the employees’ anticipated testimony at a deposition or trial.
The American counterpart to English litigation privilege is the work product doctrine. This protects documents relating to an investigation if the company created the document in anticipation of or for the purposes of litigation. Therefore, documents prepared in the ordinary course of business are generally not protected by the work product doctrine. Like the attorney-client privilege, the work product privilege can be waived. For example, most courts hold that voluntary disclosure of an internal investigation report to a government entity waives privilege.
Finally, the US, England, and Wales recognize a limited common interest privilege, which maintains the confidentiality of attorney-client communications forwarded to or made in the presence of third parties that share a common interest. In the US, the extent and circumstances to which courts recognize this privilege varies by jurisdiction.
There is a significant contrast between the common law position on LAP and the doctrines applicable in Continental Europe under civil codes. There is no equivalent doctrine of privilege under civil law because there is no equivalent doctrine of disclosure.
Taking Germany as an example, because legal privilege does not apply to internal investigations at all, there is no advantage from a privilege perspective of lawyers conducting investigations or producing investigative reports in that country.
In France, there is some protection of lawyer-client communications via confidentiality obligations imposed on lawyers, although this only applies to members of the French Bar. When a lawyer becomes employed by a company, that lawyer loses his or her Bar registration, and so the use of external lawyers in investigations is vital. The Italian position is similar. Lawyers who are members of the Italian Bar can refuse to disclose certain documents to the authorities by asserting professional secrecy. However, unlike LAP in England, this is a right that belongs to the lawyer rather than the client. This means that documents held at a client company’s premises may be seized by a regulator or law enforcement agency in the course of an investigation. In addition, the assertion of professional secrecy can be overturned by a judge or even a prosecutor in some cases. Employed in-house lawyers cannot be members of the Bar, and in general are not subject to—or protected by—professional secrecy obligations.
It is also worth noting that there are certain activities in the UK that (at least until Brexit is concluded) fall under European Union law, where the rules can be very different. A classic example is a European Commission antitrust investigation. The European Court of Justice has ruled that although correspondence in relation to the defense of a Commission investigation should be protected from disclosure, this only applies in the case of an independent, external lawyer. Communications with in-house lawyers do not attract such protection.
In summary, when conducting cross-border investigations, counsel should take care to structure the investigation in a manner that will maximize the applicability of all relevant legal privileges. This requires taking a methodical approach in analyzing the applicability and breadth of any attorney-client privilege by examining the risks of mandatory disclosure/waiver in each jurisdiction involved, and limiting, wherever possible, the dissemination of privileged communications to a need-to-know basis.