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On September 5, 2018, the English Court of Appeal issued its decision in The Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Limited [2018] EWCA Civ 2006. The much anticipated decision arose from the High Court’s decision in May 2017 that several commentators feared had limited the scope of legal professional privilege under English law.

Back to the Future – Legal Professional Privilege

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SummaryOn September 5, 2018, the English Court of Appeal (the Court) issued its decision in The Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Limited [2018] EWCA Civ 2006. The much anticipated decision arose from the High Court’s decision in May 2017 (see our previous <a href="/resources/publications/170515-internal-investigations-uk.html">client alert</a>) that several commentators feared had limited the scope of legal professional privilege under English law. On appeal, the Court disagreed with the High Court on issues of both fact and law and reversed several of the High Court’s key rulings: bringing the position back, and potentially indicating a broader scope for the future.It was decided that litigation privilege was engaged as the facts of the case showed that there was reasonable contemplation of legal proceedings by relevant parties. Furthermore, the Court disagreed with the current position on legal advice privilege under English law that extends privilege only to communications between counsel and a restricted class of employees in a company who are tasked with seeking and receiving legal advice, remarking that this thinking was “outdated”. The Court stated that if it had been open to the Court, it would have departed from this position. However, it held that it was not and a departure from the law as it stands would require a future ruling by the UK Supreme Court.BackgroundEurasian Natural Resources Corporation Limited (ENRC) received an email from a whistle-blower at the end of 2010 alleging corruption and financial wrongdoing within a Kazakh subsidiary, which prompted ENRC to engage external counsel to conduct an investigation into the allegations. Towards the end of 2011, the UK’s Serious Fraud Office (the SFO) contacted ENRC to discuss the SFO’s reporting guidelines and to extend an invitation to meet to discuss ENRC’s internal investigation.The SFO and ENRC’s external counsel met on several occasion in 2011 and 2012 to discuss the progress of ENRC’s internal investigation. At the end of 2012, ENRC’s external counsel indicated to the SFO that it had prepared a report regarding ENRC’s internal investigation and sought clarification whether ENRC was part of the SFO’s corporate self-reporting process. ENRC stated that the report would only be submitted under limited waiver of legal professional privilege and if no settlement were to be reached between the SFO and ENRC, the SFO would not be entitled to use the report in any criminal proceedings against ENRC. The SFO did not consider that ENRC was part of the self-reporting process since it had, at that point, not done any self-reporting. Furthermore, the SFO was unwilling to give any assurances as to whether the report and the underlying evidence would be subject to legal professional privilege.In March 2013, ENRC’s counsel submitted its report to the SFO. Shortly thereafter, the SFO commenced a criminal investigation into ENRC. The SFO sought discovery of four categories of documents generated by ENRC during its internal investigation (the Documents). ENRC asserted legal professional privilege over these Documents. The High Court held that legal advice privilege did not attach to all but one of the categories of Documents.Litigation PrivilegeThe Court addressed two key issues in relation to ligation privilege, namely (i) whether criminal legal proceedings against ENRC were reasonably in contemplation; and (ii) whether the Documents were created for the dominant purpose of resisting contemplated criminal proceedings.The Court considered whether legal proceedings were in reasonable contemplation to be a question of fact. The Court found that while every “manifestation of concern” by the SFO may not be regarded as adversarial litigation, “when the SFO specifically makes clear to the company the prospect of its criminal prosecution (over and above the general principles set out in the Guidelines)”, and legal advisers are engaged, as was the case for ENRC, it is clear that criminal prosecution is in reasonable contemplation. The Court clarified that not every criminal investigation would result in a criminal prosecution, however based on the facts of the case it was clear that there was reasonable contemplation of prosecution if the “self-reporting process did not succeed in averting it”. The Court also stated that the distinction the High Court had drawn between civil and criminal proceedings was illusory and while civil actions can sometimes be brought without foundation, pursuant to the specific matrix of facts in this case, the threat of criminal proceedings was extremely serious.When remarking on the dominant purpose, the Court determined that lawyers’ interview notes as well as certain draft documents had been created for the dominant purpose of resisting contemplated criminal proceedings. The Court noted “where there is a clear threat of a criminal investigation, even at one remove from the specific risks posed by the SFO should it start an investigation, the reason for the investigation […] must be brought into the zone where the dominant purpose may be to prevent or deal with litigation.” Furthermore, the Court stated that preparation of documents, with the intention of showing the documents to the opposing party, does not automatically deprive work done of litigation privilege. The Court also noted that litigation privilege should extend equally to advice given to head off, avoid or even settle reasonably contemplated proceedings, as it would for the purpose of resisting or defending the same.Legal Advice PrivilegeThe Court also considered whether this case would attract legal advice privilege, in particular, in light of the judgment in Three Rivers District Council & Ors (No. 5) [2003] QB 1556 (Three Rivers (No. 5)). Three Rivers (No. 5) restricted legal advice privilege to communications between employees and the company’s lawyers to situations where employees were specifically “tasked with seeking and receiving legal advice”.The Court disagreed with the decision in Three Rivers (No. 5). The Court noted that while only the Supreme Court could overturn such precedent, the Three Rivers (No. 5) decision was outdated and did not recognise the realities of managing the legal affairs of a modern corporation. The Court also acknowledged that while it continues to be the law, the judgment is “out of step” with numerous common law countries which would inhibit the operation of multinational companies. This question should now be considered a live issue which may be presented to the UK Supreme Court for determination in the near future.While the SFO has confirmed it will not be appealing the decision, this question is now a live issue that is likely to be presented to the UK Supreme Court for determination in the near future.