Susan Rosser 14 Sep 2018 10:04am

The Serious Fraud Office vs the Eurasian Natural Resources Corporation: What it means

Court of Appeal ruling on legal privilege welcome news for corporate clients under investigation

In a keenly awaited judgment, the Court of Appeal has clearly signalled that it will not allow the boundaries of legal professional privilege to be chipped away, unanimously overturning a ruling of the court below that documents prepared during an internal investigation in the context of potential self-reporting to the Serious Fraud Office were not protected by litigation privilege (Director of the Serious Fraud Office [SFO] (Claimant) v Eurasian Natural Resources Corp LTD (Defendant) & Law Society (Intervener) [2018] EWCA Civ 2006).

Alerted by a whistle-blower to possible fraud, bribery and corruption in its business in late 2010, London-headquartered mining company Eurasian Natural Resources Corporation Limited (ENRC) instructed lawyers and forensic accountants to conduct investigations between 2011 and 2013. A lengthy period of dialogue between ENRC and the SFO commenced in August 2011, culminating in the SFO opening an ongoing criminal investigation against ENRC in late April 2013. It issued notices compelling the production of documents, including notes of interviews taken by ENRC's lawyers with the company's employees and former employees and materials generated by forensic accountants as part of a "books and records" review. ENRC resisted disclosing these documents on the basis that they were protected by legal professional privilege.

In English law legal professional privilege has two heads: legal advice privilege covers communications between a lawyer and their client soliciting or giving legal advice, while litigation privilege applies to documents created for the dominant purpose of conducting litigation that is either ongoing or reasonably in prospect. Litigation privilege extends to documents created by non-lawyers, such as reports prepared by external consultants and forensic accountants. A document may be protected by either head of privilege or by both. Documents which are privileged can be withheld from third parties to whom disclosure obligations are otherwise owed, including both parties to civil litigation and law enforcement bodies.

Regulatory and law enforcement agencies, such as the Financial Conduct Authority and SFO, encourage those under investigation to be as open as possible with them, which may include voluntarily sharing privileged documents. Although they cannot compel such disclosure, the SFO often encourages parties to disclose such material as a sign of cooperation as part of a company's efforts to be offered a Deferred Prosecution Agreement.

In this case, the judge below had ruled that the claim for litigation privilege failed at the first hurdle because, in her view, ENRC was unable to establish that a prosecution was in reasonable contemplation. The Court of Appeal disagreed with both the judge's interpretation of the facts and her application of the relevant legal principles, concluding that not only was a criminal prosecution reasonably in ENRC's contemplation when it initiated its investigation but that the judge ought to have determined that the documents sought by the SFO were brought into existence for the dominant purpose of resisting or avoiding action by the SFO or some other proceedings.

The appeal judgment makes it clear that legal advice given to head off, avoid or even settle reasonably contemplated proceedings is as much protected by litigation privilege as advice given for the purpose of resisting or defending such contemplated proceedings.

While the Court of Appeal found that the documents in question were not protected by legal advice privilege, it is noteworthy that the three eminent appeal judges were critical of a controversial 2003 appeal case known as Three Rivers (No. 5) which, in the context of a corporate client, confines legal advice privilege to communications between a lawyer and those employees within a company specifically charged with dealing with external lawyers to give instructions and receive legal advice. Because of this ruling, which can be overturned only by the Supreme Court, lawyers' fact-finding interviews with company employees do not attract legal advice privilege.

The ENRC appeal judgment highlights the fact that large corporations need to be able to seek and obtain confidential legal advice without fear of disclosure just as much as individuals and small companies. If legal advice is confined to communications between lawyers and the instructing individual or those employees authorised to seek and receive legal advice on the company's behalf, this is no problem for individuals and small businesses but does not work for large and multinational corporations, where the information upon which legal advice is needed is unlikely to be in the hands of the main board or in-house legal team. The Court of Appeal noted that on this issue English law is also out of step with other common law jurisdictions, such as Hong Kong, Singapore and Australia.

It remains to be seen whether the SFO will seek, or obtain, permission to appeal this case to the Supreme Court. In the meantime, this judgment is to be welcomed as an important clarification on the law of privilege and a robust defence of corporate clients' rights.

Susan Rosser is a partner in the litigation and dispute resolution group at Mayer Brown International.