Enforcement authorities worldwide are increasingly confronted with investigations by lawyers of companies under investigation. These investigations sometimes play a significant role in the enforcement approach of authorities. This type of “collaboration” has received a lot of public attention. Companies need to be aware of this in order to make an informed decision about whether to cooperate with enforcement authorities or not. The situation differs from country to country. Last month we discussed the Dutch angle. In this month’s edition, we look at the UK. In the UK, the Serious Fraud Office (SFO) recently issued its Corporate Co-operation Guidance. Even though the guidance summarises the requirements for cooperation, it does not guarantee that the company will receive an invitation from the SFO to enter into DPA negotiations. This is an important aspect to keep in mind when navigating cross-border investigations.
Cooperation according to the SFO
Until recently, the starting point for companies willing to cooperate in the UK were the public statements made by the SFO Director and the Deferred Prosecution Agreements, Code of Practice (DPA Code). According to the SFO, “If you have violated the UK Bribery Act, the SFO expects, as a starting point, full cooperation with us.” In other words, “Tell me something I don’t know.”
Cooperation according to the DPA Code
According to the DPA code, companies that fully cooperate could receive a DPA offer. A DPA is a court-approved settlement between a company and the prosecutor, and is an alternative to criminal prosecution. In 2014, when the Code of Practice was published, we provided our readers with background information about DPAs. A decisive factor in offering a DPA depends on the degree of cooperation. According to the DPA Code, cooperation includes identifying witnesses, disclosing their accounts and the documents they have seen, and making these available and subject to discussion in an interview. In the event of an internal investigation, the company has to provide a report which includes source documents. Finally, the SFO considers self-reporting an important factor when deciding if it is going to offer a DPA. In a statement relating to the GBP 19.2 million DPA that Serco Geografix Limited reached with the SFO in July 2019, the SFO director said it had agreed to issue a DPA largely because of the company’s prompt and voluntary self-disclosure and its substantial cooperation.
New SFO Corporate Cooperation Guidance
In early August 2019, the SFO issued its Corporate Cooperation Guidance. In it, the SFO outlined its expectations around cooperation: companies have to assist the SFO in a way that goes beyond the requirements of the law. Companies must identify suspected wrong-doing together with the people responsible, report this to the SFO, and provide the available evidence.
The SFO lists “indicators of good practice”, a non-exhaustive list of steps which the SFO may ask a company to take. These include, for example, providing material in a useful and structured way, sorted by issue, and providing a schedule of documents withheld on the basis of privilege. Digital material has to be provided to the SFO in a document review-ready format, including passwords, recovery keys and decryption keys. Financial documents and information about the industry and background must also be provided. In terms of individuals, the company has to consult the SFO before interviewing potential witnesses or suspects and has to refrain from tainting a potential witness’ recollection.
Regarding witness accounts, the SFO expects organisations to provide both witness accounts, and the records and notes of any interviews. These documents may fall within the scope of legal privilege. (For more information on legal privilege, see the paragraphs below). This means that it is up to the company to claim or waive its legal privilege. The SFO Guidance requires that the claim be properly established. In addition, independent counsel must certify that the material is privileged. If the company does not waive legal privilege and does not provide witness accounts, it does not meet the requirements for cooperation.
Rights of individuals: Upjohn warning
To protect the employee’s rights before being interviewed, it is good practice for the company lawyer to give the employee an “Upjohn warning”. This warning informs the employee that the lawyer represents only the company and not the employee. The lawyer makes it clear that under English law: (i) the lawyer-client privilege over communications between the lawyer and the employee belongs solely to, and is controlled by, the company; and (ii) the company may choose to waive the privilege and disclose to a government agency or any other third party whatever the employee tells the lawyer.
Under English law, legal professional privilege distinguishes between litigation privilege and legal advice privilege. Each differs in the scope of protection. In a unanimous ruling in SFO v ENRC (2018), documents generated by mining company ENRC during an internal corruption investigation, including interview notes with current and former employees, were protected by professional privilege, they therefore did not have to be disclosed to the SFO. The ENRC decision leaves companies with the right to protect themselves against the risk of unwanted disclosures.
The SFO Guidance clearly states that companies have to waive legal privilege in order to be seen as cooperative. Without waiving legal privilege, the requirements for cooperation are not fulfilled. Before the SFO Guidance was issued, the director of the SFO stated something similar in a speech: “We need to see the ultimate objective of cooperating with law enforcement by preserving vital evidence such as first-hand accounts and witness testimony. This is different from when a company calls in a team of lawyers and then throws the blanket of Legal Professional Privilege over all the material they have gathered […]. That is not cooperation.” “But companies can waive that privilege if they wish to cooperate with the Serious Fraud Office.” About the SFO Guidance, she predicted that importance would be attached to waiving legal privilege: “waiving privilege over that initial investigative material will be a strong indicator of cooperation and an important factor that I will take into account when considering whether to invite a company to enter into DPA negotiations”.
Recent examples show that there are two different possible interpretations. On the one hand, Rolls-Royce (2017) was explicitly rewarded for its “extraordinary cooperation”: It shared 200 interviews and waived any claim of legal privilege on a limited basis. On the other hand, Sweett Group plc (2016) was not offered a DPA because it was considered uncooperative: it refused, inter alia, to hand over witness interview details.
Companies navigating cross-border investigations must keep this Guidance in mind. The SFO makes it clear that “even full, robust co-operation” does not guarantee any outcome, as it takes many factors into consideration when determining whether to offer a DPA. Companies will need to seek counsel on how best to respond to an SFO investigation.
In a future edition of In context, we will look at the impact of collaborating with enforcement authorities from a US perspective.
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