Legal professional privilege is one of the most important protections for companies and individuals facing regulatory investigations, some of which can end with criminal proceedings being issued. Many regulators (including HSE) now have powers that are, in practical terms, capable of closing businesses, as well as leading to prison sentences and company director disqualification. Some are able to seek recovery of the proceeds of any crime committed, whether by a company or an individual.
Most businesses do not deliberately break the law, but many will still face some form of regulatory scrutiny and intervention. One of the key issues in an investigation is the creation and protection of information and documentation. The HSE can, under section 20 of the Health and Safety at Work Act 1974, compel people to produce information (including reports, e-mails, and even text messages) if the inspector believes it will assist their investigation. One of the key exemptions, however, is that information and documents subject to legal privilege are protected from disclosure and the HSE cannot demand that they are handed over.
The scope of legal privilege
First of all, it is unique to the legal profession. There are two types: legal advice privilege, and litigation privilege. In simple terms, legal advice privilege will protect confidential communications between a lawyer and their client, for the purpose of giving or receiving legal advice. So if there is a chain of e-mails between you and your lawyer, in which you have (for example) asked for advice about the legal implications of a particular event, and your response to it, that will normally attract legal advice privilege.
Litigation privilege protects confidential communications between the client, lawyer and third parties, where litigation has commenced or is in contemplation, and the communication is made for the “dominant purpose” of that litigation. By way of example, a company may have had to deal with an accident to an employee involving machinery. The company asks its lawyers to advise on whether there are any grounds for prosecution. The lawyer considers that there is insufficient information to enable them to advise the company, and then appoints an expert engineer to go to site, and look at the machinery in question, with a view to producing a report on whether there would be grounds for a regulator to prosecute. Such a report would, in principle, be protected by legal privilege.
Key to both limbs of privilege, however, is that the communications must be “confidential”. That does not mean that all confidential information is exempt from production to a regulator: it is not. Even highly sensitive material is disclosable, unless protected by one of the limbs of legal privilege.
In the case of litigation privilege, there are added requirements – first, litigation must already be underway, or at least be in contemplation. The Court of Appeal has very recently considered this question, and we summarise the key points below. The second element is that the communication for which a person seeks to claim privilege must have been prepared for the dominant purpose of litigation. Although there are inevitably grey areas, it will usually be a relatively straightforward question.
Finally, the litigation in contemplation must be adversarial – there are some legal fora that are not adversarial (a coroner’s inquest would be one such example). Potential criminal, or director disqualification, proceedings are, however, adversarial.
SFO v Eurasian Natural Resources Corporation Limited (“ENRC”)
In September, the Court of Appeal heard an appeal by ENRC against a decision in the High Court which had gone against them. The case involved an investigation by the Serious Fraud Office (“SFO”) following allegations of bribery made by a whiistleblower. The principles are of general application for all sorts of regulatory regimes where criminal sanctions are a possibility.
Once the allegations surfaced, ENRC had immediately engaged lawyers to investigate whether the whistleblower’s allegations had any merit. That investigation spanned several overseas jurisdictions, and eventually, forensic accountants were also engaged to assist with the investigation.
Discussions had been ongoing between ENRC, its lawyers, and the SFO, with a view to concluding whether ENRC could, in effect, report itself to the SFO, and so avoid potential criminal proceedings. It appears that the discussions went on for some time, and the SFO became frustrated at what it perceived as a lack of progress. It then took the decision to commence a criminal investigation, and sought disclosure of a range of documents, including notes taken by the lawyers of evidence given to them by ENRC’s employees and others during the course of the lawyers’ investigations. ENRC contended that these documents were legally privileged, and that the SFO had no entitlement to see them.
The Court of Appeal, in a lengthy judgment, concluded that ENRC was broadly correct. The Judges observed the following:
Some practical tips
Any decision on legal privilege will be fact-specific. However, there are steps that companies can take to ensure that they give themselves the best chance of claiming legal privilege to protect documents created during the course of an investigation:
Finally, always be careful about what you commit to writing – e-mails and even text messages are potentially disclosable. Always imagine your lawyer is sitting by your side, and picture the look on their face before you press the send button!
Gary Lewis, Director at law firm Squire Patton Boggs, provided his views on what the ruling means for companies.
