When dealing with international investigations, counsel for corporations must navigate a variety of issues relating to the attorney-client privilege. By now, many experienced white-collar lawyers are aware of the vagaries of the rules applicable to in-house counsel (in many European jurisdictions, the privilege does not apply to communications with them), but recent pronouncements by United Kingdom authorities prodding companies to forego the protection of the privilege in connection with internal investigations have introduced a new twist into the mix. The approach to the corporate attorney-client privilege taken in the United Kingdom is symptomatic of a relatively negative view of the privilege articulated by many European regulators and courts.
Representatives from the United Kingdom’s Serious Fraud Office (SFO), which investigates and prosecutes serious and complex fraud, and the Financial Conduct Authority (FCA), a financial regulatory body that regulates financial firms in the United Kingdom, have announced their expectation that corporate firms share the core product of their internal investigations with regulators, including documents and witness statements protected by privilege. This position stands in stark contrast to the current position taken by the United States Justice Department and Securities and Exchange Commission and is likely to create further uncertainty in cross-border investigations, especially when authorities from each country are working in tandem.
The contrasting attitudes towards the sanctity of the privilege will require strategic advance planning by multi-national companies and their in-house and outside attorneys.
Recent Statements from the United Kingdom
In a November 5, 2015 speech, Jamie Symington, the FCA’s Director of Enforcement, pronounced: “We fully understand and respect the needs and the rights of firms to claim and protect their rights to legal privilege where appropriate. But at the same time, firms need to take care when conducting internal investigations not to let legal privilege become an unnecessary barrier to sharing the output with the FCA.”
This statement echoes the position taken by the United Kingdom’s SFO. The Deferred Prosecution Agreements Code of Practice issued in 2014 by the SFO in conjunction with the United Kingdom’s Director of Public Prosecutions specifically provides that a company’s cooperation is measured by its willingness to identify relevant witnesses and disclose internal investigation documents and witness statements. In February of 2015, David Green, the director of the SFO stated that he was prepared to “bring to heel” companies that sought to “obstruct investigations by hiding behind the shield of legal professional privilege.” As an example, in the case against Barclays, the SFO sought the disclosure of privileged documents and communications by arguing that they were created for criminal or fraudulent purposes and therefore not privileged.
The implication underlying the position by UK authorities seems to be that a corporation’s assertion of privilege is perceived as a pesky barrier. Symington opined that a company’s “choice” to conduct internal investigation interviews in such a way as to create claims to privilege “devalues the usefulness of the whole exercise … [and] might require the FCA to undertake additional enquiries.” The United States government – at least currently – seems to place a higher premium on these long-recognized legal privileges.
Here, the question of whether a company should be required to waive attorney-client privilege or work product protection in order to gain cooperation credit has been debated for over a decade. Not too long ago, United States authorities took a position similar to that recently articulated in the United Kingdom. In 2003, when public anger at corporate malfeasance was as its height as a result of scandals at Enron and WorldCom, the Justice Department issued the Thompson Memorandum instructing prosecutors to take into account whether a corporation was willing to waive the attorney-client privilege and work product doctrine in disclosing the results of internal investigations when weighing a company’s cooperation. The SEC announced a similar policy.
This approach quickly drew criticism not only from the defense bar but also from courts and Congress, which threatened legislation to undo such policies. In the face of the barrage, both the Justice Department and the SEC did an about face. Today, Justice Department and SEC policies prohibit their staff from requesting waivers of privilege from cooperating entities except in extraordinary circumstances. These policies also provide that cooperation credit cannot depend upon any privilege waiver or lack thereof.
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Current State of Affairs
The many distinctions among the privilege law of different countries make it especially difficult for corporate counsel to maximize privilege protection in all relevant forums. Consideration must be given to the fact that some jurisdictions, most notably the European Union, does not recognize the privilege with respect to communications with in-house counsel. In the EU’s case, its position is in direct opposition to the laws of certain EU member states including the UK, Ireland, Norway, Spain, Portugal, and the Netherlands, all of which under certain circumstances recognize the privilege for in-house counsel. Thus, certain communications and documents privileged in a national context may not be privileged in the context of an investigation conducted by the EU’s executive branch.
The contrasting expectations of each country regarding privilege waiver further complicate matters for companies and their attorneys. Allowing a company to waive privilege in one context, such as an investigation in the United Kingdom, could open the door to the release of otherwise protected information in another country, such as the United States or in a parallel civil proceeding. Accordingly, corporations must seriously weigh the benefits of cooperation efforts and privilege waivers in one forum against the potential unintended waiver of privilege protection in another forum or consider an alternative approach which may allow for the provision of information and facts to assist in the investigation without waiving the privilege.
Aggressive attacks on the privilege in the United Kingdom and elsewhere threaten the sanctity of the attorney-client relationship and guarantee ongoing uncertainty for corporations operating abroad when it comes to criminal and regulatory investigations.
From The Insider Blog: White Collar Defense & Securities Enforcement.