UK: decision in SFO v ENRC restores privilege — but what’s next?

There are two forms of legal professional privilege: legal advice privilege and litigation privilege. Legal advice privilege protects communications between you and your lawyer when giving or getting legal advice. Litigation privilege protects communications between you, your lawyer, and third parties when seeking advice or information in adversarial proceedings. These may be either actual or reasonably contemplated.

In English law, legal professional privilege protects certain confidential communications. If a document is privileged, you, as the client, have an absolute legal right to withhold it — both in civil proceedings and from criminal authorities.

1. Privilege in practice before SFO v ENRC

The SFO wanted interview notes created by ENRC’s lawyers and documents generated by forensic accountants during an internal investigation. The High Court decided the documents weren’t privileged. It took the view the interviewees were witnesses, not “the client,” because they weren’t responsible for seeking or getting legal advice for the company.

The High Court also considered litigation privilege in criminal investigations. Litigation privilege applies only if adversarial proceedings are ongoing or reasonably in contemplation. The High Court decided an anticipated criminal investigation by the SFO was not “adversarial.”

2. Privilege as it stands today  

After the High Court judgment, we acted for ENRC in the Court of Appeal. We argued that litigation privilege did, in fact, protect the relevant documents. In a landmark judgment in September 2018, the Court of Appeal overturned the High Court decision.

The Court of Appeal emphasized it is “obviously” in the public interest for companies to investigate alleged wrongdoing, before going to a prosecutor such as the SFO. Companies should be able to do so without losing privilege for any documents generated by their investigation. The court recognized that, otherwise, “the temptation might well be not to investigate at all, for fear of being forced to reveal what had been uncovered” to the prosecutor.

On the question of who “the client” is for legal advice privilege, the court noted English law is out of step with international common law. Large corporations, as much as small companies and individuals, need to seek and obtain legal advice without fear of intrusion. Yet the court said that it was bound by the Court of Appeal decision in Three Rivers (No. 5) and that this question would have to be considered again by the Supreme Court in the future.

For more on the SFO v ENRC decision, see ENRC wins landmark privilege appeal against Serious Fraud Office.

3. The way forward — a bright future or are there clouds on the horizon?

There’s been a groundswell of relief among investigators since the Court of Appeal decision. The SFO had argued that participation by a company in a self-reporting process was inconsistent with the application of litigation privilege. The court dismissed this notion. It found “the whole sub-text” of the SFO–ENRC relationship was the implicit threat of prosecution.

The court stopped short of establishing that any approach from a prosecutor will cross the threshold for litigation privilege. But its approach will have implications for both prosecuting agencies and companies conducting internal investigations.

The High Court had suggested companies would have to self-incriminate to claim litigation privilege. The Court of Appeal rejected the idea that proceedings cannot be reasonably in contemplation unless you have got to the bottom of the issues, or unless you have made enough progress to have an informed belief that there’s a basis for a charging decision against you. Even if a company has to investigate further to understand its exposure, this doesn’t mean it should be denied privilege.

The court’s criticism of the English law position on the definition of client suggests it won’t be long before a case goes to the Supreme Court to resolve this issue. Commentators suggest regulators may hold back from challenging claims that interview notes are covered by legal advice privilege. The fear is their case might 'leapfrog' the Court of Appeal to the Supreme Court, as appears likely in the near future. 

4. Despite the ENRC case, pitfalls remain 

Attention has since turned to more recent decisions. Take the October 2018 decision in Financial Reporting Council v Sports Direct International plc. The High Court held that Sports Direct could not withhold privileged documents after a notice from the Financial Reporting Council concerning their investigation into Sports Direct’s auditors.

And there’s the judgment handed down on 30 November 2018 in West Ham v E20. The Court of Appeal found that emails between a company’s board members regarding the commercial merits of a settlement proposal were not covered by litigation privilege.

The ENRC decision made clear “conducting litigation” includes advice given to avoid or settle litigation. Yet the documents in question weren’t prepared for the dominant purpose of getting either advice or information for the conduct of the claim. Rather, they were purely commercial discussions; it had not been said their disclosure would reveal the legal advice. This presents a conundrum. There may be many documents created for extant litigation, but not for the specific purpose of getting advice or information.

SFO v ENRC is a positive decision for privilege. But it doesn’t rewrite the rules. You should continue to be careful how you articulate your company’s privilege claims. Further battles lie ahead.