On Wednesday 5 September the Court of Appeal overturned the highly controversial decision of the High Court in The Director of the SFO v Eurasian Natural Resources Corporation Limited [2018] EWCA Civ 2006 which had threatened to narrow the scope of Legal Professional privilege (“LPP”). The Defendant successfully argued that documents prepared during the internal investigation, both by its lawyers and forensic accountants, were protected by litigation privilege.

LPP prevents the disclosure of confidential legal communications.  There are two types of LPP:

·       Legal Advice privilege – this can be claimed over any communication between a client and lawyer where the client seeks, and the lawyer gives, legal advice.

·       Litigation privilege – this can be claimed over any communication between a client, lawyer and third party where the dominant purpose of the communication is for use in actual, pending or contemplated litigation.

In 2009/2010, ENRC became aware of allegations of criminality on the part of certain African companies that it was seeking to acquire. On 20 December 2010, ENRC received an email from a whistle-blower alleging corruption and financial wrongdoing within a wholly owned subsidiary company.  ENRC’s audit committee engaged external lawyers to investigate the allegations.  Around the same time, ENRC instructed a firm of forensic accountants, to undertake a books and records review.

The defendant, ENRC, asserted that certain documents generated during an internal investigation into its activities by its solicitors and forensic accountants were the subject of legal advice privilege or litigation privilege. A dispute arose as to when privilege applied.  The Director of the SFO claimed the documents were not the subject of legal professional privilege. 

In a High Court ruling in May 2017, Andrew J ruled against ENRC and required it to hand over documents to the SFO.  The Commercial Court ruled that an investigation by the SFO does not amount to 'adversarial litigation' and viewed it as merely the first stage in assessing whether further steps would be taken.  Consequently, the court held that no criminal prosecution was reasonably in contemplation.  The Court further found that legal advice privilege would not apply as the majority of the documents demanded by the SFO were not lawyer/client communications, or, where they were, these were not given to the "client" and formed part of ongoing communications.

The Commercial Court ruling resulted in a bizarre situation where those involved in a civil investigation had a higher degree of privilege protection than those facing a criminal investigation.  ENRC appealed the decision.

The Appeal

In a detailed judgment, the Court of Appeal reversed the decision of Andrews J, holding that all of ENRC’s claims to legal professional privilege should be upheld (save in respect of two minor documents), on the basis of litigation privilege.

On appeal, the court found that documents in three categories, including interview notes, and material associated with a review by forensic accountants had the benefit of litigation privilege. It also said that advice whose dominant purpose is to avoid legal proceedings, or which is given with a view to settlement, is as much protected by litigation privilege as advice given for the purpose of defending such proceedings. 

Comment

The decision reversed the earlier judgment and enabled ENRC to assert privilege over documents created during its internal investigation. This decision will be welcomed by those assisting in investigations relating to misconduct and clearly recognises that it is in the public interest for companies to be allowed to investigate prior to going to a prosecutor without losing the protection of legal professional privilege.  Moreover, it brings very welcome clarification on the application of litigation privilege in the regulatory/criminal context.

Having decided the matter on the basis of litigation privilege, the Court of Appeal did not feel it necessary to determine the question of legal advice privilege.  The judgment does however refer to the Supreme Court’s potential future consideration surrounding Three Rivers and in particular the difficulties which arise for global entities in the restrictive approach of keeping correspondence passing within a relatively small group of employees, defined as the narrow “client” group, and a company’s lawyers.  The Court of Appeal gave a strong indication that it sees a need for the Supreme Court to review Three Rivers (No.5).  The Court of Appeal has not granted permission to appeal at this stage, and therefore it remains to be seen whether the SFO will seek leave to appeal to the Supreme Court.