The decision of the English Court of Appeal earlier this week in the case of Serious Fraud Office v Eurasian Natural Resources upholds and strengthens the ability of firms subject to criminal investigation to rely on litigation privilege withhold details of their own internal inquiries from the prosecutor. It also prompts an important question about whether this protection also applies to firms subject to other regulatory investigations.
A whistle-blower had alerted Eurasian to allegations of corruption, fraud and bribery within its group and it had undertaken investigations. The Serious Fraud Office (SFO) had investigated, with a view to pursuing a possible prosecution. It issued notices compelling the production of documents, including statements and evidence provided by Eurasian’s employees and officers; reviews of books and records by forensic accountants; factual evidence; and documents containing legal advice. The company asserted that all documents were subject to litigation privilege. The SFO maintained that there was no generic entitlement to litigation privilege.
The High Court (as I mentioned in a post at the time) found that the company could not claim litigation privilege because it could not establish that the relevant documents had been created for the dominant purpose of being used in the conduct of litigation. It held that a criminal investigation by the SFO was not “litigation”, but a preliminary step taken prior to a decision to prosecute. The judge found that in the case of a corporate client, legal advice privilege only attached to communications between a lawyer and those individuals authorised by the company to obtain the legal advice, but did not extend to other officers or employees of the company.
Litigation privilege upheld
The Court of Appeal found that the High Court judge had been wrong to conclude that a criminal prosecution had not reasonably been in prospect. Contemporaneous documents showed that the company was aware of circumstances which rendered litigation between itself and the SFO a real likelihood rather than a real possibility. Not every SFO manifestation of concern would properly be regarded as adversarial litigation, but in the instant case the SFO had made clear to the company the prospect of its criminal prosecution, and legal advisers had been engaged to deal with the situation.
There was a clear ground for contending that criminal prosecution was in reasonable contemplation. Whilst a party anticipating possible prosecution would often need to make further investigations before it could say with certainty that proceedings were likely, that uncertainty did not in itself prevent proceedings from being in reasonable contemplation.
The Court of Appeal also ruled that the fact that Eurasian’s solicitors prepared a document with the ultimate intention of showing that document to the SFO did not automatically deprive their preparatory legal work of litigation privilege. In both the civil and criminal contexts, legal advice given so as to head off, avoid or even settle reasonably contemplated proceedings was as much protected by litigation privilege as advice given for the purpose of resisting or defending such contemplated proceedings.
In the Court of Appeal’s opinion, the judge ought to have concluded that most of the documents had been brought into existence for the dominant purpose of resisting or avoiding contemplated criminal proceedings. The documents covered by litigation privilege were notes of interviews conducted by the company’s lawyers with employees, former employees, officers of the company and its subsidiaries, suppliers and other third parties. They also included materials generated by a books and records review commissioned by the company.
Implications for other regulatory investigations
The Court of Appeal was concerned in this case with what might be described as ‘classical’ criminal law proceedings. The SFO is a prosecuting body which brings cases in the criminal courts. However, there is a broader category of cases where regulatory bodies, such as competition law authorities and economic regulators, have powers to impose extremely large penalties for regulatory breaches without having to resort to the courts.
The proceedings by which such penalties may be imposed by these regulatory bodies have been found in various cases to amount to criminal proceedings, e.g., for ECHR purposes. Given the risk that these bodies could seek production of internal investigatory materials, it will be important to test in due course whether the Court of Appeal ruling in SFO v. Eurasian is capable of applying to them as well as bodies such as the SFO.