Are documents generated in internal investigations privileged?

Documentation

The question of legal professional privilege has been considered again by the Court, which has maintained its narrow scope and has approved the approach taken most recently on the topic as part of The RBS Rights Issue Litigation. In the case of Serious Fraud Office (SFO) v Eurasian Natural Resources Corporation Ltd (ENRC) the SFO has successfully challenged claims to legal professional privilege made by ENRC in respect of documents that were generated by forensic accountants and solicitors during an internal factual investigation. ENRC started the investigation following a whistle-blower’s allegations of bribery and corruption within ENRC’s Kazakhstan and African mining business operations. ENRC is seeking to appeal the decision, although permission to appeal has not yet been granted.

The internal investigation spanned over two years, and ENRC then self-reporting its findings to the SFO.  Despite this cooperative approach, the SFO commenced a criminal investigation into ENRC in April 2013. Pursuant to its powers under the Criminal Justice Act 1987, the SFO issued notices to compel the production of various categories of documents that were generated during ENRC’s internal investigation.

The SFO’s powers of compulsion do not extend to documents which the recipient of the notice “would be entitled to refuse to disclose or produce on grounds of legal professional privilege in proceedings in the High Court”. ENRC resisted producing four categories of documents on the grounds of legal professional privilege (a combination of both legal advice and litigation privilege) as follows:

  • Category 1 – notes taken by ENRC’s lawyers produced during a fact finding investigation including interviews of ENRC employees, former employees, officers and other third parties such as suppliers;
  • Category 2 – documents produced by ENRC’s forensic accountants as part of the internal investigation;
  • Category 3 – documents presented by ENRC’s lawyers to ENRC’s board which included some results of the fact finding investigation; and
  • Category 4 – emails between (i) ENRC’s head of mergers and acquisitions, a qualified lawyer, and (ii) a senior ENRC executive.

The Court decided that three out of the four categories were not protected by privilege and ordered that ENRC hand these documents over.  The only documents that legal professional privilege was maintained over were those falling within Category 3.   The Judge stated these were “plainly privileged as they are part and parcel of the confidential solicitor-client communication, and also fall within the ambit of the protection of solicitors’ work product.”

The judgment serves as a reminder of the following principles:

  • Legal advice privilege attaches to all communications passing between the client and its lawyers, acting in their professional capacity in connection with providing legal advice but it will not cover communications with lawyers who are not providing legal advice, either because
    • they are carrying out factual investigations (i.e. the Category 1 documents) or
    • they are acting as ‘people of business’, rather than as lawyers (i.e. the Category 4 documents).
  • For litigation privilege, the following criteria must be met (as set out in the Three Rivers cases):
    • Litigation is in progress or in reasonable contemplation
    • The communications are made with the sole or dominant purpose of conducting that anticipated litigation
    • Litigation must be adversarial, not investigative or inquisitorial

      It does not necessarily extend to third party documents created to obtain legal advice as to how best to avoid contemplated litigation.

Following the judgment in this case, it is important for businesses to be careful when carrying out internal investigations.  Ultimately, even if an external investigation or civil claim is contemplated, privilege may not cover documents which are created during that internal investigation and these could be seized by the SFO and indeed other regulatory bodies or be required to be disclosed to your opponent.

We will be following the progress of the permission to appeal application to see whether the Court of Appeal will be considering this important topic again.

Update

Permission to appeal has now been granted for this case, see our update here.

Contact our experts for further advice

Catherine Penny, Hannah Lunn

Search our site