In the latest decision in Eurasian Natural Resources Corporation Limited v Director of the Serious Fraud Office  EWHC 1017 (QB), the CoA has provided reassurance in regard to a company’s right to claim privilege over documents created in the context of an internal investigation into potential criminal wrongdoing.
These issues arose in the context of a Serious Fraud Office (SFO) investigation into allegations that Eurasian Natural Resources Corporation Limited (ENRC) (and its subsidiaries, officers and employees) had committed various acts of fraud, bribery and corruption in Kazakhstan and an unnamed African country. Using its powers to compel the production of documents, the SFO had sought to require ENRC to provide documents created during ENRC’s own internal investigation into these issues. ENRC had refused to do so, on the basis that the documents were covered by legal advice privilege and / or litigation privilege.
The disputed documents included: (i) notes made by ENRC's external solicitors of interviews with individuals (including current and former employees); and (ii) a review of ENRC’s accounting records by forensic accountants.
The SFO had successfully applied to the High Court for a declaration that the documents were not privileged. The High Court held that criminal litigation had not been "in reasonable prospect" when the documents were created, because the SFO had not yet decided to bring criminal proceedings, nor had evidence been uncovered which rendered a prosecution likely. Further, ENRC had repeatedly stated its intention to cooperate with the SFO and to share the findings from its internal investigations with the SFO. On that basis, the High Court considered that the "dominant purpose" behind the creation of the documents had been to avoid litigation (by persuading the SFO not to prosecute) rather than to conduct litigation.
On ENRC’s appeal, however, the CoA took a different view on the key elements of the test for the application of litigation privilege:
- On whether litigation is reasonably in prospect, the CoA was clear that where (as in this case) a prosecuting authority writes to a potential defendant and specifically draws attention to the “prospect” that it could be prosecuted, and legal advisers are instructed to deal with the situation, there is a “clear ground for contending that criminal prosecution is in reasonable contemplation”.
- On whether litigation is the sole or dominant purpose of particular communications, the CoA held that documents created for the purpose of heading off, avoiding or settling litigation are as much protected by litigation privilege as documents created for the purpose of resisting litigation. (Whether or not there is a subsequent waiver of privilege is a separate issue.)
As to legal advice privilege, the CoA declined to challenge the existing case law (per the longstanding decision in Three Rivers (No5)  EWCA Civ 474) that communications between an employee of a corporate entity and the lawyers of that corporate entity will only be privileged if the relevant employee is within the group of employees specifically authorised to seek legal advice. The CoA did state that it would have decided the point differently today, given the rise of the large national and multinational corporation, in which knowledge of the relevant facts is likely to be widely distributed. However, any development of the law on this point will be for the Supreme Court to determine in an appropriate case in due course; the SFO has confirmed that it will not appeal the current CoA judgment.
This latest decision means that, where a potential criminal offence has occurred, there is greater scope for a company to investigate the relevant events and to claim litigation privilege over the product of that investigation. However, given that the scope of legal advice privilege remains narrow, it is even more important that businesses maximise any claims they may have to litigation privilege. Where litigation is not in reasonable prospect, care should be taken to ensure (wherever possible) that sensitive communications with a company’s lawyers are made by the individuals who have been tasked with instructing those lawyers. Communications from other employees should be made in the knowledge that they are likely to be disclosable in any future proceedings.