The threat to Legal Professional Privilege (LPP) has been of concern to lawyers for several years. Now what may be a landmark High Court ruling by Mrs Justice Andrews in favour of the Director of the Serious Fraud Office (SFO) in a case brought against Eurasian Natural Resources Corporation (ENRC) has brought the issue sharply into focus – with significant potential implications for claims to LPP in the context of internal investigations.
LPP protects confidential communications between a lawyer and their client, and between a lawyer and/or their client and third parties. The SFO successfully challenged claims to litigation privilege and legal advice privilege (the two elements of LPP) in relation to several categories of documents created by ENRC’s lawyers. The Judge rejected all of ENRC’s claims to privilege, save for one category.
In 2011, ENRC had agreed with the SFO that it would engage lawyers to conduct a self-reporting investigation in relation to allegations that bribes were paid to secure contracts in Africa and Kazakhstan. The investigation was conducted between 2011 and 2013 by Dechert, which involved extensive witness interviews and evidence gathering.
The High Court held that the documents generated during this self-reporting investigation as part of ENRC’s engagement with the SFO are not protected by LPP. This is the first judgment to consider the application of LPP in the context of self-reporting investigations.
‘Reports of the SFO v ENRC decision by the High Court are alarming,’ says Robert Bourns, President of the Law Society of England and Wales ‘as they suggest an erosion of this vital legal protection. Legal professional privilege is a fundamental part of the relationship that solicitors have with their clients – ensuring they can seek legal advice in confidence.
‘Anything that undermines or inappropriately limits legal professional privilege threatens not just that particular person or case, but the functioning of our whole justice system, which depends on every person having the right to seek legal advice confidentially. The Law Society will be studying the judgment carefully to understand its full implications.’
According to the Judge’s ruling, litigation privilege can only protect documents which are prepared with the sole or dominant purpose of conducting litigation. It cannot protect documents produced with the purpose of enabling advice to be taken in connection with anticipated litigation. The purpose of avoiding, as opposed to conducting, litigation could not be a purpose which engaged litigation privilege.
‘The law as it is thus currently understood can lead to difficulties when a company carries out internal investigations and a regulator, prosecutor or other entity asks for the resulting documents,’ said Lord Neuberger in an address last year. He added: ‘When it comes to failed privilege claims, the SFO can be bitten as well as biting’, pointing to the agency’s failed LPP claim against Vincent Tchenguiz which resulted in the SFO paying £3m to Tchenguiz in 2014 by way of compensation for its actions.
‘We live in a world where the law of privilege as developed by judges is modified on a rather ad hoc basis by legislation,’ according to Neuberger. ‘Many aspects of modern commercial and legal practices give rise to potential problems in relation to LPP.’
So why does LPP matter?
Not wishing to comment on the judgment in the SFO v ENRC case, Chairman of the Bar Andrew Langdon QC explains why the principle of LPP is so important: ‘It is essential to have that relationship of trust between client and advisor – that there is full freedom to communicate with your advisor to ensure that he or she is told everything they need to know in order to represent you properly, and that they learn everything in order to give you robust and sensible advice. The courts operate on the basis that there has been free flowing communication, so that those who advocate and represent clients are not hindered to any extent in representing them fully and fairly.
‘The ability for a client to speak with confidence in complete confidentiality, in itself has all sorts of ramifications – that’s why it has become a sacrosanct protection. Because everyone has understood that the consequences of the “chilling effect” aren’t just a matter of inconvenience, but you pay a price if you are not careful for not being able to allow confidential communications to take place in the course of a professional relationship in terms of trust in the system, and confidence in it.’
The SFO v ENRC judgment is subject to appeal. But the Judge’s decision, if upheld, may well make it much harder to claim litigation privilege in a criminal context than a civil one. How much the judgment rests on the facts of the case, or whether the Court of Appeal decides that it has moved the dial on the law remains to be seen.
At a more practical level, the judgment may have wider implications for the SFO with businesses being less likely to engage in the SFO’s leniency regime. According to Tony Lewis, dispute resolution partner at Fieldfisher: ‘This judgment against ENRC may well signal the ultimate demise of business cooperation with the SFO. As a result of the judgment it is clear that cooperation with the SFO may limit businesses’ ability to maintain any claim for litigation privilege, as cooperation with an investigation may be interpreted as the “dominant purpose” for the production of documents rather than contemplated legal proceedings.’
By Dominic Carman