In a recent judgment, the Swiss Federal Tribunal has ruled that, where a financial institution delegates its investigation and reporting obligations under the Swiss Anti-Money Laundering Act ("AMLA") to external counsel, certain work produced by external counsel on the internal investigation will not be privileged.1
This note explains the judgment and compares it with the law on privilege in England and Wales.
Background to the Judgment
The case before the Swiss Federal Tribunal concerned an investigation by the Office of the Attorney General of Switzerland ("OAG") into the activities of a former bank employee suspected of involvement in money laundering and document forgery while working as a client advisor at the bank.
During its investigation, the OAG ordered the bank to produce all minutes of management and board meetings at which the allegedly corrupt banking relationships had been discussed, as well as all documents arising out of the bank's own internal investigation conducted with the assistance of external legal counsel.2
In an appeal before the Swiss Federal Tribunal, the bank and its law firms argued that the draft report of the investigation and underlying interview notes produced by external counsel were covered by legal privilege and thus protected from disclosure.
The Swiss Federal Tribunal's Ruling
Dismissing that argument, the Swiss Federal Tribunal (the highest court in Switzerland) ruled that neither the draft investigative report as a whole nor the interview notes were covered by legal privilege.
It also held that notes of employee interviews could not be withheld pursuant to the prohibition of self-incrimination unless the interviews had been conducted under threat of criminal penalties.
Under Swiss law, legal professional privilege (or attorney professional secrecy) applies to attorneys registered with the cantonal bar of their place of business in Switzerland. It does not apply to attorneys working as in-house counsel (e.g. at banks, NGOs and other institutions).3 As a result, only the work of attorneys covered by the Swiss Attorneys Act of 2000 may benefit from the privilege. Yet the Federal Tribunal refused to afford the protection of privilege to document produced by external counsel (including Swiss external counsel) during the bank's internal investigation.
Whilst significant, the Federal Tribunal's decision is perhaps not quite as far reaching as one might at first think. The ruling concerned circumstances in which the bank had, in effect, delegated to external counsel its compliance-related obligations under the Swiss AMLA. In concluding that privilege would not apply, the Federal Tribunal noted that compliance work falls within a bank's general obligations; it is not part of the typical remit of legal counsel, and cannot therefore be brought under the protection of attorney-client privilege if outsourced to external counsel. To do so would jeopardise the effectiveness of the Swiss AMLA.
However, legal advice provided during a bank's anti-money laundering inquiry would, the Federal Tribunal concluded, still remain privileged. Accordingly, legal advice contained within the draft investigative report could be, and was, redacted.
In addition, investigation documents produced in anticipation of defending criminal proceedings would be covered by privilege.
One impact of the Federal Tribunal's ruling may be that, in future, employees in Swiss-related internal investigations will be less inclined to be volunteer information during interviews. This may in turn affect the quality of any final investigation report.
Would the Documents have been Privileged under English law?
An internal investigation report, prepared by legal counsel, which considers a client's liability and surrounding issues is generally covered by legal advice privilege4 on the grounds that it is a confidential communication from lawyer to client for the purpose of giving legal advice. Furthermore, the English High Court in Property Alliance Group5 held that legal advice can include factual briefings where given in a relevant legal context.
However, the extent to which notes of employee interviews are covered by legal advice privilege remains a complex issue. While interview notes do not generally record the content of a communication between lawyer and client (internal investigation interviews typically take place between a lawyer and a third party, the employee), the court's approach in Property Alliance Group may be seen to provide support for claims to legal advice privilege over such documents. In particular, the English court noted that lawyers are often tasked with investigating relevant information; the public interest requires that lawyers be able to provide their clients with candid factual briefings secure in the knowledge that such communications (and any records thereof or decisions taken in consequence) may only be disclosed with the client's consent. However, the Property Alliance Group case did not deal directly with employee interview notes.
Whether employee interview notes are covered by legal advice privilege will depend on the facts of each situation. Considerations include whether the employee(s) in question can be considered the "client", the content and circumstances of creation of the notes, and whether the notes are shared with the employee(s).
The question of privilege in respect of employee interviews has been the subject of much recent debate in light of comments made by the SFO and FCA.
Late last year, the FCA criticised firms for allowing privilege to become an "unnecessary barrier" to sharing the output of internal investigations with it. The FCA expects firms to share with it the core product of their internal investigations – the evidence, including witness statements and investigation reports.
Moreover, the Deferred Prosecution Agreement ("DPA") code of practice makes clear that the SFO expects witness accounts to be disclosed as part of the cooperation that companies must provide to avoid prosecution and qualify for a DPA. The SFO's statements on this topic in recent years range from suggesting that privilege over such notes should be waived, to questioning whether privilege applies at all. In practice, the SFO's approach has persuaded a number of corporates to hand over witness interview notes in the hope of securing a DPA.
Effect of the Ruling
While the Swiss Federal Tribunal's ruling is significant, it only applies in the context of Swiss AMLA investigations and where litigation is not in contemplation.
The case highlights interesting comparisons that can be drawn with the position under English laws of privilege. For example, there remain complexities around whether certain of the documents considered by the Federal Tribunal – such as internal investigation interview notes – attract legal advice privilege under English law (irrespective of whether created in the context of an anti-money laundering obligation enshrined in statute, or in connection with any kind of legal advice given by lawyers). Such uncertainty reinforces the need to ensure that careful thought is given to the structure and conduct of all internal investigations at the outset.