FML Timeline: Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd

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In 2011, ENRC instructed external solicitors and forensic accountants to undertake an internal investigation into whistle blower allegations of fraud, bribery and corruption. Following lengthy communications, under the SFO’s self-reporting guidelines, the SFO launched a criminal investigation into these allegations in 2013.

Under s.2(3) CJA 1987, the SFO can compel the production of specified documents, or documents of a specified class, which appear to relate to any matter relevant to the investigation. Notably, these powers do not apply to documents subject to legal professional privilege.

ENRC claimed that the following classes of documents were subject to litigation privilege, legal advice privilege, or both: (i) forensic accountants’ reports; (ii) documents containing factual updates from external solicitors to present to the ENRC Board of Directors and other committees; (iii) email communications between ENRC employees, one of whom was a legally qualified businessman; and (iv) interview notes recorded by solicitors of the evidence provided by ENRC’s past and present employees, subsidiaries, suppliers and other third parties.

The SFO applied for a declaration that the four classes of documents were not privileged.

Decision

Litigation Privilege

A document which is a confidential communication between the lawyer and client, or between one of them and a third party, which is created for the dominant purpose of obtaining legal advice, evidence or information for use in the conduct of litigation which was at the time reasonably in prospect.

Litigation not reasonably in prospect

The court held that criminal investigation by the SFO is not classed as adversarial litigation; it is a preliminary step and any decision to prosecute is made following consideration of the results of the investigation. The judge noted that criminal proceedings only become a real prospect once the prospective defendant knows enough about what the investigation is likely to unearth, or has unearthed, to acknowledge that a prosecutor will be satisfied that it has a sufficient evidential basis for prosecution. However, in this case, there was no evidence to support the allegations and thus it could not be shown that, at the time the relevant documents were created, there was anything more than a “general apprehension of future litigation”.

"Dominant purpose" test not met

Even if prosecution by the SFO had been reasonably in prospect, the documents were not generated for the dominant purpose of being used in the conduct of litigation. At the time the documents were created, ENRC were engaged in an internal investigation to determine the truth of the whistle blower’s allegations, and to prepare for any subsequent SFO investigation; their focus was not on constructing a defence in criminal proceedings.

Furthermore, if a document is created with the express purpose being shown to the prospective adversary, it cannot be subject to litigation privilege. As ENRC intended to share the majority of the documents created during the internal investigations to the SFO, this was a barrier to their claim to litigation privilege.

Legal Advice Privilege

A document which is a confidential communication between a lawyer and a client which was prepared for the purpose of giving or receiving legal advice.

The court held that the majority of the relevant documents did not benefit from legal advice privilege.

The communications between employees were not privileged because the legally qualified businessman was acting in his capacity as a businessman, and had not yet been engaged as a legal advisor.

In relation to the interview notes, the Court upheld the narrow definition of "client" applied in The RBS Rights Issue Litigation [2016] EWHC 3161 (Ch), such that the fact that an employee is authorised to communicate with ENRC’s lawyer does not mean that employee is “the client or a recognise emanation of the client”. There is even less justification for treating an ex-employee, subsidiary or supplier as such. In addition, the judge noted that a verbatim account from a prospective witness cannot be privileged merely because the solicitor, rather than the client or a third party, recorded the information. Privilege can only attach to lawyers’ working papers if they “would betray the tenor of the legal advice”.

Only five of the factual updates prepared by solicitors to present to the EMRC Board of Directors were held to benefit from legal advice privilege.

The appeal is due to be heard in July 2018.

Noteworthy/ Novel points

The decision has bolstered the RBS Rights Issue Litigation decision of 2016, which established that: in a corporate context, legal advice privilege will only protect communications between its lawyers and those employees responsible for seeking legal advice on their employer’s behalf. Consequently, unless litigation privilege applies, these communications and any communications between employees cannot benefit from legal professional privilege.

However, this judgment is unlikely to impact claims to litigation privilege in respect of civil litigation, given the clear distinction made between criminal proceedings and civil litigation.

The judgment implies that there is a higher threshold required to claim litigation privilege in criminal proceedings, due to the narrow definition of when litigation can be said to be reasonably in prospect and the fact that preparing documents for the ‘dominant purpose’ of a criminal investigation does not attract litigation privilege. This may impact corporate transparency and governance, for example companies may be less willing to keep thorough written records during the course of internal investigations.

For more information, please refer to our separate article on the decision.