The UK Serious Fraud Office has now said it will not appeal last month’s Court of Appeal judgment in Director of the Serious Fraud Office v Eurasian Natural Resources Corporation (ENRC) as we discussed previously here. So where does this leave the law on privilege when it comes to internal investigations? The following is a brief outline of where we are now.
Legal Advice Privilege – Who is the Client?
As we have outlined previously here legal advice privilege for corporate entities has been an issue for some time in the UK. The Three Rivers District Council & Ors v Governor and Company of the Bank of England (No 5) case provided authority that in a corporate context information gathered from an employee (for example, an employee interviewed by the corporate entity's legal advisors as part of an internal investigation) cannot be considered to be governed by legal advice privilege unless it can be demonstrated that the employee was authorised to seek or obtain legal advice on behalf of the corporate entity. This was then considered in a number of other cases and upheld.
Although the Court of Appeal in ENRC was bound by this narrow definition of 'client' set by the Three Rivers judgments they outlined that, in their view, this definition was unsuited to modern business practice and that large corporations should not be at a disadvantage to smaller entities seeking legal advice.
The approach set down by the Court of Appeal in ENRC to litigation privilege means that now in both civil and the criminal context, legal advice given so as to head off, avoid or even settle reasonably contemplated proceedings is as much protected by litigation privilege as advice given for the purposes of resisting or defending such contemplated proceedings. The judgment also means that it is possible to successfully assert litigation privilege over confidential communications made at a time when the corporate entity was engaged in a self-reporting process.
The test for when the proceedings are in "reasonable contemplation" is still a grey area but the Court of Appeal judgment demonstrates the type of factual evidence the courts will consider when assessing any claim to privilege.
Decision not to appeal to the UK Supreme Court
The decision by the SFO not to appeal further to the Supreme Court means that the law on privilege in the UK remains as set out by the Court of Appeal in ENRC and previous decisions, including Three Rivers.
Although the decision not to pursue a Supreme Court appeal by the SFO means that the UK Supreme Court will not have an opportunity to consider this issue (again) it does signal a possible change in the future.
As we have noted previously (see here) the law in relation to internal investigations and privilege in Ireland is less developed, although it has been addressed in a number of decisions for example in Quinn & Ors v IBRC & Ors and The Director of Corporate Enforcement v Leslie Buckley.1 Although the case law is less developed here, on the basis of these cases litigation privilege can be successfully asserted in non-traditional courtroom settings, for example in response to a request for information by a regulator as part of its investigation of a regulated entity.
Whilst issues surrounding privilege arise rarely in day to day corporate work when they do arise, they often concern records of critically important communications and result in disputes over privilege that lead to lengthy court applications.
Best practice is never to presume that communications created for an investigation will always be protected by privilege and to always obtain specialist legal advice at the outset on how best to deal with privilege in a given context.