Overview

The UK Serious Fraud Office (SFO) faced heavy criticism from the English High Court in a recent judgment following its decision not to challenge the refusal by a company with which the SFO had agreed a Deferred Prosecution Agreement (DPA) to provide the notes of the first interviews of company employees[1] for the purposes of parallel criminal proceedings against those employees.

The decision suggests that companies wishing to withhold disclosure of first account interview notes on the basis of legal professional privilege (LPP) are likely to face tougher challenges from the SFO in the future. It also raises questions to as to whether companies hoping to enter into a DPA will be required by the SFO to waive LPP claims over all documents relevant to the subsequent investigation and prosecution of individuals in order to comply with their DPA obligation of continuing cooperation.

Background 

In 2012, the SFO began an investigation into a company known publicly as XYZ[2] in relation to bribery allegations. XYZ self-reported to the prosecutor following an internal investigation, during which the company’s lawyers interviewed four employees. In February 2016, one of the four employees (AL) was charged with a number of bribery and corruption offences, together with other individuals (together, the Defendants). Shortly thereafter, in July 2016, the SFO entered into a DPA with XYZ. The terms of the DPA obliged XYZ to cooperate fully with the SFO in the investigation and prosecution of company employees in relation to the alleged conduct which formed the subject of the DPA.

During the investigation into the company, the SFO asked XYZ to disclose the original notes of the 2012 employee interviews. XYZ refused, claiming that the notes were subject to LPP. The SFO disagreed that the original notes were protected by LPP but agreed to allow the company’s lawyers to proffer an oral statement which purported to summarize the employee interviews. The SFO recorded and transcribed the oral statement and provided that transcription to the Defendants after the DPA had been agreed. In response, the Defendants requested the original notes of the interviews from the SFO, which in turn asked XYZ to produce the notes, but the company refused. 

In September 2017, AL applied to the Crown Court for an order requiring the SFO to disclose the original notes of the 2012 employee interviews. The application, made under the criminal disclosure rules, was unsuccessful on the basis that the Crown Court was unable to order the SFO to disclose the original notes because they were not in the prosecutor’s possession. Following the Crown Court’s decision, the SFO reverted to XYZ and asked it to reconsider its position. XYZ maintained its LPP claim and refused to disclose the notes. In October 2017, the SFO confirmed to AL that it would take no further action against XYZ.

Subsequently, AL sought a judicial review in the High Court of the SFO’s decision not to pursue XYZ for the original interview notes on the basis that XYZ’s refusal constituted a breach of the provisions of the DPA requiring XYZ to cooperate fully with the SFO and a failure by the prosecutor in its duty to safeguard the fairness of the trial process.

The decision

The High Court held that in deciding not to take further action against XYZ, the SFO had committed a series of material public law errors, including applying an incorrect approach to the law on privilege.

In defending its decision not to pursue XYZ for the original interview notes, the SFO claimed that XYZ’s claim to LPP was “not obviously wrong”. Disagreeing, the Court criticized the prosecutor for a failure to apply the existing case law on LPP contained within the recent RBS[3] and ENRC[4] judgments, stating that the “law as it stands today is settled. Privilege does not apply to first interview notes”. Generally, litigation privilege will apply to a document which is created in reasonable contemplation of adversarial litigation; however, the English Courts have held that an SFO investigation does not constitute adversarial litigation. Similarly, legal advice privilege will generally attach to communications created between a lawyer and a client for the purposes of giving or receiving legal advice. However, the English Courts have defined “client” narrowly, and in most circumstances employees interviewed as part of an internal investigation would not be considered the “client” for this purpose.

The Court also criticized the SFO for its failure to consider that the oral statement proffered by XYZ’s lawyers objectively constituted a waiver of LPP over the original interview notes. The SFO’s failure to consider whether it could insist that XYZ waived any LPP claim over the original interview notes on the basis that XYZ has a contractual duty under the DPA to cooperate with the SFO’s prosecution of company employees was also subject to criticism by the Court. The Court did not give its view on whether it perceived XYZ to be in breach of the terms of the DPA but commented that there was an argument to be made in this respect. 

Whilst the Court acknowledged that prosecutors have a margin of discretion when deciding whether or not to prosecute a case, that discretion did not extend to the SFO’s disclosure obligations, which were designed to ensure a fair trial for the Defendants. Citing the relevant criminal disclosure rules[5] and the Attorney General’s guidelines on disclosure[6], the Court highlighted that where the SFO knows that material relevant to the prosecution of an individual is held by a third party who refuses disclosure, the SFO was required to apply to the Crown Court for an order to compel the third party to disclose that material[7]. Despite acknowledging that it did not agree that the interview notes were protected by LPP, the SFO offered no explanation as to why it had not applied to the Crown Court, although it had suggested to AL that he take the course of action. 

Change of approach?

The judgment contains important messages for those representing companies interested in pursuing DPA with the SFO, as well as those representing individuals facing prosecution following on from a DPA.

In light of this judgment, the SFO may revise its approach to assessing privilege claims from DPA recipients and corporate defendants generally when conducting, or intending to conduct, parallel investigations or prosecutions against individuals. In the past, the SFO has on occasion been willing to accommodate alternative arrangements in lieu of receiving original interview notes, such as the proffering of an oral statement (as in this case) or the provision of written interview summaries or distillations. However, it is now possible that the SFO will be more reluctant to make such accommodations in the future. 

What is less clear is whether this judgment will impact upon the concept of cooperation for the purposes of achieving and maintaining a DPA. Whilst it seems unlikely that the SFO would ever be in a position to compel the production of genuinely privileged material, we may see the SFO increasing the pressure on companies to waive privilege in order to be considered a suitable candidate for a DPA. 

Next steps?

Ultimately, AL’s claim for judicial review in this case failed on the basis that he had not exhausted all available remedies in the Crown Court, which, the Court held, was the proper forum to resolve disputes relating to disclosure in criminal proceedings. However, the High Court was clear that if it had had jurisdiction, it would have quashed the SFO’s decision not to pursue XYZ for the original interview notes and remitted the decision back to the SFO for reconsideration. Following the judgment, it remains an option for the SFO to apply to the Crown Court for an order requiring XYZ to produce the original interview notes. Alternatively, XYZ may decide to volunteer the notes to avoid a potential costs order from the Crown Court, further negative publicity and any risk of being held in breach of its DPA.