In a recent speech given by Lord Neuberger on the scope and role of legal professional privilege (also known as legal advice privilege) (LPP) and its proper place in the context of corporate internal investigations, Lord Neuberger identified that whilst LPP is traceable to the 16th century and has become a “fundamental human right”, it is now facing a number of challenges. Lord Neuberger also provided a helpful reminder of the circumstances in which LPP might apply in investigations.
Is there a need for LPP?
First, Lord Neuberger highlighted that there has been judicial doubt as to the need for LPP at all outside of litigation (see, for example, the Court of Appeal decision in Three Rivers (No 6)) . The House of Lords went on to consider this issue in Three Rivers (No 6) and reiterated that the purpose of LPP, as established by earlier authorities, is to ensure that an individual or corporation is able to obtain the legal advice they require and, in order for such advice to be provided, clients and their lawyers must be able to communicate openly and candidly without fear that their communications will be disclosable. Lord Snowden recently confirmed in PAG v RBS that the same principles of public policy support LPP applying in the regulatory context also.
Is LPP out of date?
Lord Neuberger pointed out that as judges are not always up to date with developments in the corporate or financial worlds, the law of privilege may be somewhat out of date in its ability to deal with the practical situations clients and their lawyers are faced with today.
One such instance arises from the increasingly international nature of investigations and enforcement actions and the challenges that follow. For example, the law will need to develop to address situations where regulators or enforcement agencies in multiple jurisdictions are co-operating and sharing documents but the privilege regimes under those jurisdictions vary. In his speech, Lord Neuberger questions how a joint defence agreement, commonly used in the US and analogous to a common interest agreement used in this jurisdiction, would be treated by the English courts. We expect it will not be long before the English court has to grapple with these issues.
Who is the client?
Lord Neuberger noted that the decision of the Court of Appeal in Three Rivers (No 5) to restrict the definition of “client” for the purpose of LPP to the narrow class of individuals tasked with receiving advice from the lawyers has not been followed in a number of other common law jurisdictions and, interestingly, commented that it “may in due course be distinguished on its facts, overruled – or affirmed”. Without providing his personal view on which way the courts should go, Lord Neuberger advised that the “sensible course of action” for now is for parties to proceed on the basis that LPP will only apply to a narrower class of individuals rather than the organisation as a whole.
The law as it stands presents an issue for a company faced with a regulatory investigation which is still in the early/ enquiry stage as it will be difficult for that company to satisfy the requirements for litigation privilege (i.e. that the investigation is sufficiently adversarial such that litigation was reasonably in contemplation at the time the document was created and that the document was produced for the dominant purpose of litigation) such that privilege would also extend to documents passed between the organisation (or its lawyers) and third parties.
If litigation privilege is unlikely to apply, a company will need to try to rely on LPP if it intends to resist disclosure. As LPP only applies to communications between a lawyer and the client for the purpose of obtaining legal advice, unless interviews of company employees are conducted by the company’s solicitors and those employees fall within the definition of “client”, records of those interviews are likely to be disclosable. The same rule applies to witness statements taken from employees outside the definition of “client” and other documents passed between the organisation and third parties during the investigation.
Lord Neuberger identifies that whilst a party could try to widen the class of employees within its definition of “client” or to vary the definition of the class at certain stages of an investigation in order to resist disclosure, these methods carry the risk that confidentiality and, in turn, privilege could be lost. They are also unlikely to be looked on favourably by the court.
A further minefield for LPP is the issue of self-reporting. Lord Neuberger points out that the most recent guidance on self-reporting from the SFO indicates that a corporate body wishing to self-report will need to co-operate fully with the SFO which will include making witnesses available and disclosing the details of any internal investigations. Such co-operation will likely require an organisation to hand over privileged material to the SFO which carries the risk that privilege will be lost in those documents.
Similar issues arise in the context of cartel investigations. Section 188B(3) of the Enterprise Act 2002 provides a defence to the offence of forming or operating a cartel where the accused can show that it took reasonable steps to disclose the arrangements in question to a legal adviser for the purpose of obtaining legal advice on those arrangements. In order to benefit from this defence it is likely that an organisation will be required to disclose the legal advice it received in connection with the relevant arrangements or, at least, evidence that it obtained such advice.
In light of the helpful reminder by Lord Neuberger of the issues which can arise with the application of privilege during investigations, we set out some below practical tips for you to consider should you find your organisation subject to a regulatory investigation or carrying out your own internal investigation:
- Lawyers should be engaged to advise on both internal and external investigations as early as possible.
- Consider from the outset which individuals within your organisation will be responsible for instructing the lawyers and receiving legal advice. This group should include all individuals with the relevant knowledge to instruct the lawyers in connection with the investigation. However, the larger the group, the greater the risk that privilege will be lost.
- Careful consideration should be given at the outset as to which individuals need to be interviewed and/or provide evidence during the investigation and how those interviews will be conducted and statements taken. Where possible, these tasks should be carried out by the lawyers engaged to advise the company on the investigation.
- Before sharing privileged information with a regulator, either in response to a request for documents or as part of settlement discussions or a self-reporting procedure, legal advice should be obtained on the potential benefits and risks of doing so.
- It may be possible to ensure that any documents provided to a regulator are shared subject to confidentiality obligations and on a limited waiver basis.