We have previously reported on the restrictive approach to legal advice privilege adopted in Three Rivers District Council and others -v- Governor and Company of the Bank of England (No 5) [2003] EWCA Civ 474 by the Court of Appeal. That case established that only communications made between those authorised by a corporate client to seek legal advice on its behalf and its lawyers fell within the scope of legal advice privilege. All communications within a corporate entity, even where geared to generating information needed by lawyers to provide legal advice sought, fell outside the scope of legal advice privilege and could only be protected if they fell within the wider litigation privilege.

The courts have continued a general approach of reducing the scope of privilege with litigation privilege being under scrutiny this time. In The Director of the Serious Fraud Office (SFO) -v- Eurasian Natural Resources Corporation Ltd (Eurasian) [2017] EWHC 1017 QB, the High Court has taken a narrow interpretation of what documents were covered by litigation privilege in the context of a fraud investigation by the SFO. The decision is an important one for companies carrying out internal investigations.

Facts

The SFO sought disclosure of certain categories of documents generated during investigations by solicitors and accountants into the activities of Eurasian. Disclosure was sought against the background of criminal investigations by the SFO involving allegations of fraud, bribery and corruption in Kazakhstan and Africa. Four categories of documents were identified which the SFO requested sight of:

  1. Notes of evidence taken by Eurasian’s lawyers from individuals interviewed as part of the investigation. These documents were created before the SFO commenced its formal prosecution. Eurasian claimed that these documents were subject to litigation privilege and/or legal advice privilege. Eurasian’s position was that the dominant purpose of the interviews was to enable its lawyers to obtain relevant information and to provide advice in connection with anticipated adversarial (criminal) litigation
  2. Materials generated by forensic accountants engaged by Eurasian as part of their ‘books and records’ focusing on identifying controls and systems weaknesses and potential improvements. Eurasian claimed that these documents were subject to litigation privilege as the dominant purpose of the reports was to identify issues which could likely give rise to intervention and prosecution by the SFO
  3. Documents indicating or containing factual evidence presented by the lead partner at Eurasian’s lawyers to Eurasian’s Corporate Governance Committee and board after the SFO investigation had begun. Five particular documents were identified and Eurasian’s primary case was that these documents were subject to legal advice privilege or in the alternative litigation privilege
  4. The final category, comprised the documents at category 2 above or correspondence relating to those documents. Eurasian claimed that these documents were covered by litigation privilege in the same way as the documents in category 2 above

The law of privilege – summary

Briefly, privilege is a rule of evidence that entitles a party to withhold evidence (including documents) from production to a third party or the court. Once privilege has been established, the privilege is absolute, the court will not be called upon to exercise any discretion, whether on the grounds of public policy or otherwise to require disclosure. The fact that a privileged document may be relevant to a dispute is of no consequence; were it not relevant, it would be unnecessary to claim privilege at all. In litigation, the litigant’s entitlement is to withhold inspection of privileged documents although the obligation to include the documents in the list of documents remains.

There are different types of privilege – including legal advice privilege and litigation privilege.

Legal advice privilege applies to all communications passing between the client and its lawyers, acting in their professional capacity, in connection with the provision of legal advice. There is no need for litigation to be contemplated.

Communications between parties or their solicitors and third parties for the purpose of obtaining information or advice in connection with existing or contemplated litigation qualify for litigation privilege if, at the time of the communication in question, the following conditions are satisfied:

  1. litigation is in progress or reasonably in contemplation
  2. the communications are made with the sole or dominant purpose of conducting that anticipated litigation
  3. the litigation must be adversarial, not investigative or inquisitorial

The Eurasian case was primarily concerned with litigation privilege and there is clearly scope for interpretation when assessing when litigation is in contemplation and the purpose for which documents are created.

Findings

The High Court in the Eurasian case held that most of the documents sought by the SFO were not covered by litigation privilege. The basis for this was that a criminal or regulatory investigation was not felt to be the same as adversarial litigation and that there was no prospect of adversarial litigation at the time the documents were produced.

The following reasons were given:

  1. Documents created before the SFO commenced its prosecution were not adversarial in nature as Eurasian did not reasonably contemplate a criminal prosecution, only a potential investigation. A distinction was drawn between investigations and prosecutions, the latter are adversarial litigation, the former are not
  2. The documents were created for the purpose of avoiding an investigation, which is not the same as for the purpose of a defence in a criminal prosecution brought against Eurasian (i.e.the documents failed to meet the ‘dominant purpose’ condition for litigation privilege)
  3. Some of the documents were created for the purpose of generating reports that would eventually be shared with the SFO. Given the expectation that the SFO would want to verify that the reports were thorough and accurate, Eurasian knew that it could not refuse access to the underlying documents. Accordingly, there could be no privilege in documents that were created for the purpose of sharing with the SFO

Where next?

The case produced a narrow interpretation of litigation privilege and Eurasian are appealing the decision (current timing is that the appeal is to be heard in July 2018 with the Law Society seeking permission to intervene in the proceedings) but in the meantime, the case has profound implications for corporate internal investigations. Businesses contemplating internal investigations need to proceed on the basis that any reports or findings of the investigation (or other related documents) may well be disclosable to regulators, enforcement agencies or other parties. Undoubtedly, once the scope of litigation privilege has been narrowed as here, there will be parties who will seek more widespread disclosure. We will report further on this important issue when the appeal decision becomes available.