A Safe(r) Space: Litigation Privilege & Regulatory Investigations

Gordon DowniePosted by

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.

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One comment

  1. The decision is worth a full read, but a couple of (reasonably long) extracts are of particular interest and are a useful reminder of the principles that sit behind the arguments.
    At paragraph 125 the court said:
    “It is more important that a principled analysis of the purpose of legal advice privilege should be undertaken. Lord Scott in Three Rivers (No. 6) set out the parameters as follows at paragraphs 28-30:-
    “28. So I must now come to policy. Why is it that the law has afforded this special privilege to communications between lawyers and their clients that it has denied to all other confidential communications? In relation to all other confidential communications, whether between doctor and patient, accountant and client, husband and wife, parent and child, priest and penitent, the common law recognises the confidentiality of the communication, will protect the confidentiality up to a point, but declines to allow the communication the absolute protection allowed to communications between lawyer and client giving or seeking legal advice. In relation to all these other confidential communications the law requires the public interest in the preservation of confidences and the private interest of the parties in maintaining the confidentiality of their communications to be balanced against the administration of justice reasons for requiring disclosure of the confidential material. There is a strong public interest that in criminal cases the innocent should be acquitted and the guilty convicted, that in civil cases the claimant should succeed if he is entitled to do so and should fail if he is not, that every trial should be a fair trial and that to provide the best chance of these desiderata being achieved all relevant material should be available to be taken into account. These are the administration of justice reasons to be placed in the balance. They will usually prevail. …
    30. The second sentence of the cited passage [from Three Rivers (No. 6) in the Court of Appeal] does, however, pose a question of great relevance to this appeal. It questions the justification for legal advice privilege where the legal advice has no connection with adversarial litigation. A number of cases in our own jurisdiction and in other common law jurisdictions have sought to answer the question. In R v Derby Magistrates’ Court, Ex p B [1996] AC 487, Lord Taylor of Gosforth CJ said, at pp 507, 508:
    “In [ Balabel ] the basic principle justifying legal professional privilege was again said to be that a client should be able to obtain legal advice in confidence. The principle which runs through all these cases … is that a man must be able to consult his lawyer in confidence, since otherwise he might hold back half the truth. The client must be sure that what he tells his lawyer in confidence will never be revealed without his consent … once any exception to the general rule is allowed, the client’s confidence is necessarily lost.”
    In R (Morgan Grenfell & Co Ltd) v Special Comr of Income Tax [2003] 1 AC 563, 607, para 7 Lord Hoffmann referred to legal professional privilege as “a necessary corollary of the right of any person to obtain skilled advice about the law” and continued:
    “Such advice cannot be effectively obtained unless the client is able to put all the facts before the adviser without fear that they may afterwards be disclosed and used to his prejudice.”””
    The function of legal advice and litigation privilege is to create a safe space where a client can discuss their legal position with their legal adviser. If that safe space could be invaded by regulators, authorities or opponents then client (and lawyers) would structure their discussions in an altogether different way. The purpose of the protection is to encourage clients to be open with their advisers so that proper advice can be given and disputes resolved.
    A further difficult issue in the case was “who is the client”. The case of Three Rivers (No 5) decided that the client was the small group of people tasked with seeking and receiving advice on behalf of the client. Since that decision lawyers have been carefully constructing and advising only the “client team”.
    The Court of Appeal was urged to review the Three Rivers (No 5) decision, but refused to do so. It said “As will be apparent from what we have already said, we would have determined that Three Rivers (No. 5) decided that communications between an employee of a corporation and the corporation’s lawyers could not attract legal advice privilege unless that employee was tasked with seeking and receiving such advice on behalf of the client, as the BIU was in Three Rivers (No. 5).”

    However the court did recognise that English law appeared to be out of step with many other common law jurisdictions. It said:
    “127. …large corporations need, as much as small corporations and individuals, to seek and obtain legal advice without fear of intrusion. If legal advice privilege is confined to communications passing between the lawyer and the “client” (in the sense of the instructing individual or those employees of a company authorised to seek and receive legal advice on its behalf), this presents no problem for individuals and many small businesses, since the information about the case will normally be obtained by the lawyer from the individual or board members of the small corporation. That was the position in most of the 19 th century cases. In the modern world, however, we have to cater for legal advice sought by large national corporations and indeed multinational ones. In such cases, the information upon which legal advice is sought is unlikely to be in the hands of the main board or those it appoints to seek and receive legal advice. If a multi-national corporation cannot ask its lawyers to obtain the information it needs to advise that corporation from the corporation’s employees with relevant first-hand knowledge under the protection of legal advice privilege, that corporation will be in a less advantageous position than a smaller entity seeking such advice. In our view, at least, whatever the rule is, it should be equally applicable to all clients, whatever their size or reach. Moreover, it is not always an answer to say that the relevant subsidiary can seek the necessary legal advice and, therefore, ask its own lawyers to secure the necessary information with the protection of legal advice privilege. In a case such as the present, there may be issues between group companies that make it desirable for the parent company to be able to procure the information necessary to obtain its own legal advice.”

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