Privilege Appeal

Mrs Justice Andrews has set the cat amongst the practitioner pigeons on legal professional privilege with her judgment in the ENRC case (SFO v Eurasian Natural Resources Corporation Ltd [2017] EWHC 1017 (QB).) ENRC have announced an intention to appeal, and the judgment does seem to raise quite a few appealable issues.

Herbert Smith Freehills have done a very decent job of summarizing the case here. In the broadest terms, the question was whether documents created by or for an investigation by solicitors (and others) in response to allegations that ENRC had been involved in bribery in Kazakhstan and Africa where protected by legal professional privilege. Initially, these investigations began before the SFO had heard of the allegations, but ENRC wanted to be ready should they mount a dawn raid and decide to investigate. There were claims of litigation privilege and advice privilege depending on the documents and the circumstances of their creation. You’ll all know already (won’t you) that advice privilege only extends to communications between lawyers and their clients (other rules apply, but essentially when the dominant purpose of the communications is for the giving of advice) and litigation privilege only applies between lawyers, clients and third parties where litigation is imminent (again other rules apply, I’m keeping it simple for now because I can’t remember those rules either):

HSF says that the High Court decision takes a restrictive approach to both litigation privilege and legal advice privilege. Judge Andrews says she is just applying the existing rules on privilege and that she is thus not extending the rules of privilege. I’m not so interested in whether it is an extension or business as usual, although HSF’s framing of it in this way does indicate the way the profession seems to approach the issue of legal professional privilege generally which is to thrash about with a foaming mouth if absolutely anything that they say or do, and particularly anything they take the trouble of putting down in writing on a file, is not protected from any scrutiny whatsoever. I’m exaggerating, of course, and HSF, in particular, are restrained in their comments. Indeed, in fact I have some sympathy with some of the anxieties that this judgment raises. The judgment needs careful and balanced consideration. The appeal will provide an opportunity, perhaps, to really start to thrash out some of the problems with privilege (and investigations) which Lord Neuberger touched upon, unsatisfactorily in my view, a year and more ago, but I want to begin (this is a very preliminary view) to mount a general defence of the ENRC judgment.

Let me use HSFs summary as a framework to give you a feel for what the court decided (I am quoting or paraphrasing from their blog unless it is in square brackets during these bullet points):

  • litigation was not in reasonable contemplation (so the first limb of the test for litigation privilege was not met) even though a criminal investigation by the SFO was reasonably contemplated [to be fair, the SFO had not even begun to investigate for much of the relevant period, so this finding is quite reasonable on the facts]
  • it is likely to be easier to establish that litigation is in reasonable contemplation in the context of civil proceedings than criminal proceedings [essentially because commercial opponents are likely to issue in circumstances where a sensible prosecutor would not]
  • Only a prosecution, not an investigation, amounts to “litigation” for the purposes of litigation privilege, and the contemplation of a criminal investigation does not necessarily equate to the contemplation of a prosecution. Prosecution only becomes a real prospect once it is discovered there is some truth in the allegations, or at least some material to support them [I suspect that it is harder than this to trigger the test and find litigation was in contemplation but it doesn’t much matter for now].
  • In any event, the court found that the primary purpose of the documents (which were produced for an investigation, were, “to find out if there was any truth in allegations made by a whistleblower and (if there was) to decide what to do about it. [The documents were not thus prepared for litigation anyway and Mrs Justice Andrews made something of the fact some of the documents were produced to be shared with the SFO and in those circumstances they cannot be privileged either].
  • Obtaining advice in relation to a criminal investigation so as to minimise the risk of it happening would not mean the documents were covered by litigation privilege.
  • Advising on and preparing for the settlement of litigation once it is in train is covered by litigation privilege but legal advice as to how best to avoid contemplated litigation is not. [HSF make quite a point of this difference between prevention and settlement “This seems a fine distinction, and an arbitrary one, which may give rise to significant problems in practice,” they say but we should recall that the advice would be protected by legal advice privilege, it is communication with third parties which is important here for litigation privilege].
  • Legal advice privilege only extended to communications with the client and [consistent with the recent RBS case], lawyers’ notes of interviews with their clients’ employees were not privileged because there was no evidence that the interviewees were authorised to seek and receive legal advice on behalf of the client company. A company giving permission for its employees to talk to a lawyer cannot claim that conversation is privileged unless the employee is the person (or one of the persons) instructing the lawyer for the company. [Privilege is only for the Captains not the cabin boys might be one interpretation, but this is really about ensuring that there is really a nexus between privilege and advice giving – whether this is the right way of going about it is moot].
  • The court also rejected an argument that the lawyers’ notes were privileged on the basis that they were lawyers’ working papers, endorsing the decision in RBS that lawyers’ working papers are privileged only if they would betray the trend of the legal advice.
  • A lawyer’s summary of the facts would be privileged if it is part of the continuum of communications between solicitor and client for the purpose of giving or receiving legal advice.
  • Communications with individuals who are qualified lawyers but are not employed in a legal role, even if they are in fact giving legal advice, are not privileged. Here privilege was denied to advice given by ENRC’s Head of Mergers and Acquisitions, even though he was a qualified lawyer, had previously been ENRC’s General Counsel, and subsequently reverted to that role.

Now put like that, the law of privilege looks a bit of a mess does it not? Yet, as the learned judge makes plain she is deciding the case on the basis of existing law and, she thinks (and my initial analysis would be to agree) consistent with the principal policy justifications offered for privilege in the case law. In broad terms, although the courts would not put it like this I don’t think, one can tell one’s story to a lawyer frankly and get advice protected by privilege if one is that lawyer’s client, and one prepare one’s case with the benefit of a lawyer and get privilege, but until a case is imminent one cannot use lawyers to help one prepare the facts of the future case (should it arise) with the benefit of privilege. Keen observers will have noted the Director of the SFO complaining about lawyers trampling over crime scenes through the conduct of such investigations and those of longer memory might remember British American Tobacco, where the tobacco company sought to protect its spring cleaning of documentation which showed they knew a lot about the ill effects of tobacco prior to litigation (which the court found was not yet in contemplation). The reason was pretty simple, although again the court did not put it in these terms: you cannot manage evidence (including destroying it) and claim litigation is imminent, because you would be perverting the course of justice in so doing. The courts use the temporal proximity of litigation as a prophylactic against such naughtiness.

We do not have a suggestion of such extremes in this case, as I read it, but one factor which I would suggest weighed heavily on the judges mind, and to which the bullet points above did not pay regard, was that the ENRC investigation was instigated with a view to forestalling an SFO investigation (or prosecution) and their lawyer (from a firm they subsequently fell out with) was in negotiations with the SFO towards the latter stages of the investigations on the basis that they were conducting investigations, the SFO should not launch an investigation, and ENRC would share the product of those investigations with them. ENRC could not be pro the having of cake and pro the eating of it. Furthermore, the SFO’s policy on investigations, which changed during the ENRC cases, is to look for self-reporting and maximum cooperation from potential defendants with which it engages. One cannot say one is cooperating fully and then pull the rug by saying all the material you were going to show by way of cooperation is privileged. One cannot be cooperating a bit, depending on what one finds out, and then withdraw that cooperation. One has to decide whether one is really cooperating or not.

So there might very well be good reasons for taking the line the judge did. There might also be problems too though. Let me deal with one that occurs to me:

  1. Imagine you are a corporate that knows full well it has, how shall I put it? “a high risk appetite in the Caucuses” And that you become aware that employee X is getting really hacked off with the Board and is likely to start leaking to the press, or the SFO, or both. Imagine you put in place an immediate investigation instructing a reputable firm of solicitors to investigate. Those investigations are more likely, under the bullet points above, to attract privilege because the SFO are highly likely to investigate and highly likely to prosecute, assuming they are successful in their investigation. It seems at first blush to offer more protection to the bad man corporate than the good, because only the bad man gets privilege, but that is contingent on a) the courts agreeing that the prosecution was really imminent (I agree it is more likely they would than in the facts as they were on ENRC. But that does not mean they will); and, b) it treats privilege as the central issue when what is really the central issue is more complicated, hence…
  2. The same company that is more likely to be able to claim privilege is less likely to be able to claim and demonstrate full cooperation. This might go to the eventual punishment it would be likely to receive and to its ability to mount defences – reputational or legal – that it took all reasonable steps to manage for, and tackle problems, when they became apparent. Also, there may be other reputational needs to attend to, like showing they are a well-run company.
  3. The only other benefit I can forsee is that the investigation genuinely does muck up the crime scene for the investigators and so makes it more genuinely difficult to prosecute. This depends a bit on the competence and ethicality of those conducting the investigation; an area where some lawyers have not always covered themselves in glory. Investigations can be managed for inappropriateness. Interestingly, only the SFO has made that argument though and they brought the ENRC case, and presumably takes the view that this is a risk worth taking. We may find out soon if the Court of Appeal agrees.

So, whilst I think there are lots of points to argue about in the ENRC judgment, and I have just scratched the surface here, I am not immediately persuaded that the criticism that is coming Mrs Justice Andrews way will be justified. Let me focus for a moment on the question of lawyers talking to other employees. Let us assume a company virtuous in intent, but somewhat lacking in competence and understanding of how it is running itself. On receiving news of a potential bribery problem it decides to find out more. Should involving a lawyer in that finding out elevate the secrecy with which that finding out is shrouded? Does that put them at an advantage over those who were more on the ball but are tackling the problem? The claim is that employee witnesses should have the protection of privilege to enable them to make a clean breast of it to the Company’s lawyer. But that privilege is the Company’s, it can be waived by the business and so the protection is not worth a lot – giving an employee witness apparent privilege may actively mislead them, and giving them nonwaivable privilege may put the lawyer in a conflict situation with the witness and the company. Put another way, and dealing with litigation privilege, litigation privilege is there to protect the production of the brief, it is not there to shroud the runnings of the company in watertight secrecy just because they pay outside lawyers to do their compliance and audit work. Corporate clients have to make a choice, and looking at privilege in the way the ENRC case does makes that choice a serious one, but also a real one. It is not a choice to be made just to test the waters, or the prosecutor’s mettle.

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About Richard Moorhead

Director of the Centre for Ethics and Law and Professor of Law and Professional Ethics at the Faculty of Laws, University College London with an interest in teaching and research on the legal ethics, the professions, legal aid, access to justice and the courts.
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2 Responses to Privilege Appeal

  1. truthaholics says:

    https://polldaddy.com/js/rating/rating.jsReblogged this on | truthaholics and commented:
    ” Put another way, and dealing with litigation privilege, litigation privilege is there to protect the production of the brief, it is not there to shroud the runnings of the company in watertight secrecy just because they pay outside lawyers to do their compliance and audit work. Corporate clients have to make a choice, and looking at privilege in the way the ENRC case does makes that choice a serious one, but also a real one. It is not a choice to be made just to test the waters, or the prosecutor’s mettle.”

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