In a significant High Court decision, Mrs Justice Andrews has sought to recalibrate the scope of litigation privilege. The ruling will be of particular importance to those facing criminal or regulatory investigation, and their professional advisors, but will also be relevant to any business that is involved in a commercial dispute.
In The Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd, four key points were held by the court, which appear to limit the scope of litigation privilege.
- Despite the fact that litigation is in contemplation, a document prepared for the purpose of avoiding litigation will not be privileged. The ruling states that privilege only applies to documents created for the conduct of litigation; in the view of the court, this does not include avoiding litigation.
- A document created for the purpose of being shown to a potential opponent (for example, to self-report to authorities) cannot be subject to litigation privilege.
- Perhaps of most critical importance, reasonable contemplation of a criminal investigation, or even the fact of a criminal investigation, does not necessarily give rise to a reasonable contemplation of litigation, which in a criminal context means a prosecution. Litigation privilege will only apply when litigation is reasonably in contemplation or prospect.
- Documents will only attract litigation privilege if they are prepared for the dominant purpose of the conduct of litigation. That’s not new, of course. However, this case seems to indicate that it must have been prepared as part of assembling an actual defence case. Accordingly, documents, such as records of interview, which simply record accounts obtained to establish if allegations made have any substance, will not attract privilege. The ruling suggests that such documents will not be considered as having been prepared for the conduct of litigation.
The ENRC decision itself follows closely behind the ruling of Mr Justice Hildyard in The RBS Rights Issue Litigation, which applied a restricted definition of a client for the purposes of being able to establish legal advice privilege, which is distinct from and separate to litigation privilege. These two decisions taken together have significantly limited the legal professional privilege that was previously understood to apply to work undertaken by lawyers in the conduct of internal investigations.
A detailed analysis of this important decision will follow, but we do anticipate that the ruling will in any event be appealed and may ultimately require consideration by the Supreme Court.
For now at least though, those contemplating an investigation will need to proceed with great caution, and perhaps it is, for the time being, prudent to anticipate that the product of any investigation will fall to be disclosed to an enforcement agency or regulator.
In a wider context, the decision may in time prove unhelpful to authorities such as the Serious Fraud Office (SFO). The SFO hopes to promulgate an environment where commercial organisations self–report issues of concern, for example incidents of overseas corruption. However, there is no guarantee that a self-report will lead to leniency, and the prospect, that now may be real, of the SFO requiring disclosure of an internal investigation may disincline organisations from engaging with the SFO in relation to issues that the SFO would probably otherwise been unaware of.
Thus, whilst the ENRC decision is undoubtedly a victory for the SFO in the short term, over time the old adage of “being careful what you wish for” may come into play.