Privilege in the UK – a landmark decision
A High Court decision limiting privilege in relation to advice prepared for a company regarding claims of fraud and corruption has recently been overturned by the Court of Appeal in London. The decision widens the scope of protection for disclosing documents created by internal investigations and should give comfort to organisations facing such allegations.
The basic facts were as follows – a mining company, called Eurasian Natural Resources Corporation Limited ("ENRC"), sought and received external legal advice after a "whistle blowing" email was sent in relation to alleged potential corporate wrongdoing in one of their subsidiary companies. ENRC was later placed under formal investigation by the Serious Fraud Office ("SFO") in the UK. In the course of this investigation, the SFO issued notices trying to compel ENRC to disclose some of the external legal advice which they had received in relation to allegations. ENRC resisted this disclosure and the matter came before the English Courts.
At first instance, the Court found that legal advice privilege extended only to one limited category of documents (this being presentations made by lawyers to committees and boards within ENRC) and so found that the majority of the documents should be disclosed to the SFO.
The Court of Appeal, following the ruling in Three Rivers , found that litigation privilege protected a wider range of ENRC's documents. The Court of Appeal, disagreeing with the judge at first instance, found that criminal legal proceedings were in reasonable contemplation before the documents were created. In particular, they found that notes taken by ENRC's lawyers and materials generated by forensic accountants were protected by litigation privilege.
The Law Society of England and Wales, which intervened in the appeal, has said: 'Our involvement wasn’t about the underlying case, but about the principles at stake. If the High Court ruling had been upheld, any organisation facing a prosecution – not just multinationals, but charities, newspapers, small businesses or local authorities – could have to turn over private communications with their lawyers. The rule of law depends on all parties being able to seek confidential legal advice without fear of disclosure.' This makes sense. When ENRC heard about the allegations, they instructed external lawyers to carry out an investigation. In circumstances such as these, it is plainly very important that companies are not placed at a disadvantage for behaving prudently and are able to ask external lawyers to carry out an investigations without having to disclose all the results of that investigation to the authorities.
It is understood that the SFO will consider an appeal to the Supreme Court. In the meantime, as explained above, this is a very significant decision for all commercial organisations whose compliance officers and in-house counsel should take particular note.