A question we are asked regularly is whether litigation privilege applies to documents created for the purpose of a regulatory investigation or, in other words, whether the regulator can get access to these documents. Unfortunately, there is no definitive answer to this question. Much depends on the type of investigation, and the best approach is to proceed with caution and to work on the assumption that the documents you create may not be protected from disclosure.
Traditionally litigation privilege only applied to adversarial court proceedings. However, recent years have seen a dramatic shift in the regulatory landscape: regulators have more farreaching powers than ever before, their investigations are becoming increasingly adversarial, and the consequences for the person/body under investigation can be significant. As a result, the Irish courts have been more willing to allow litigation privilege to apply in the context of regulatory investigations. However, the position is not certain, and there is no rule that litigation privilege applies in all such cases.
WHAT IS LITIGATION PRIVILEGE?
Communications which are privileged – whether because of legal advice privilege or litigation privilege – do not have to be disclosed to the other side or to the court in legal proceedings.
Legal advice privilege applies to communications between a lawyer and his/her client that give or seek legal advice. Legal advice privilege applies in the same way in regulatory investigations as it does in legal proceedings, i.e. communications protected by legal advice privilege do not have to be disclosed to the regulator.
Litigation privilege applies to:
» confidential communications between a lawyer and a client, or between either of them and a third party;
» where the communication was for the dominant purpose of litigation; and
» at the time the communication was made, the litigation was in being or reasonably contemplated.
The rationale behind litigation privilege is that parties to litigation should be free to prepare their case without being concerned that they will have to disclose their preparatory materials to their opponent.
The question which arises here is whether a regulatory investigation constitutes “litigation” for the purposes of litigation privilege.
IS A REGULATORY INVESTIGATION “LITIGATION” FOR THE PURPOSES OF LITIGATION PRIVILEGE?
The view of the Irish courts as to what constitutes “litigation” appears to have been broadened in recent years to include, in some circumstances at least, certain types of investigations by regulatory bodies.
In Ahern v Mahon the High Court held that a witness before a tribunal of inquiry whose conduct was under investigation was to be regarded as being in the same position as a party to High Court litigation and was entitled to assert privilege over documents prepared for the tribunal in the same way as a party to litigation.
In Quinn v Irish Bank Resolution Corporation the High Court was satisfied that documents prepared for the dominant purpose of engaging with an investigation by the Office of the Director of Corporate Enforcement (ODCE) were covered by litigation privilege.
More recently in Director of Corporate Enforcement v Buckley the High Court recognised that communications between a company director, his solicitor and an IT expert for the purposes of preparing a draft response to a request from the ODCE during the course of a statutory investigation were protected by privilege and so did not have to be disclosed to the ODCE. The judgment did not contain any analysis as to whether litigation privilege can be properly asserted in the context of a regulatory investigation, suggesting perhaps that both the parties and the Court took it as a given that it does apply in these circumstances.
The position in the UK is similar in that litigation privilege does not automatically apply to regulatory investigations. However, the recent decision in SFO v Eurasian Natural Resources Corporation Ltd (ENRC) suggests that the English courts may be less willing to allow claims of litigation privilege in this context than their Irish counterparts. In that case the UK High Court found that documents created in contemplation of a criminal investigation by the Serious Fraud Office were not protected by privilege as the SFO investigation could not be regarded as “adversarial litigation”. The UK Court said that the policy behind litigation privilege does not extend to enabling a party to protect itself from having to disclose documents to an investigator. Litigation privilege would have applied had the documents been prepared in contemplation of a criminal prosecution, not merely a criminal investigation (and had the other conditions for litigation privilege been met). This decision is under appeal.
The entitlement to claim litigation privilege in the context of a regulatory investigation will depend on the specific circumstances of the regulatory procedure. It seems from the case law that a claim to litigation privilege will be more likely to succeed where:
» the investigation is adversarial rather than merely inquisitorial (this appears to be a more significant factor in the UK case law).
» the regulator can impose penal sanctions on the person/body being investigated (e.g. a prison sentence/ fine/suspension from practice) or the regulator has the power to require them to do something (e.g. pay damages, obey an injunction, undertake not to do something).
1. Do not assume that litigation privilege will automatically apply to documents prepared for a regulatory investigation.
2. Consider how to deal with potential privilege issues as early as possible – set out the purpose of the investigation in all communications.
3. Seek legal advice as to how best to structure your dealings with and response to the regulator.