In a recent ruling, the UK High Court of Justice found that interview notes (prepared by a company’s external lawyers as part of an internal investigation into allegations of corruption) are not protected by legal privilege. Mining company Eurasian Natural Resources (ENRC) was ordered to hand over certain attorney-produced documents to the Serious Fraud Office (SFO), which is investigating ENRC for alleged fraud, bribery and corruption in Kazakhstan and an unnamed African country. In connection with this criminal investigation, the SFO had requested the production of documents. ENRC refused, stating that the documents were covered by UK litigation privilege, legal advice privilege, or both.
The documents requested by the SFO fell into four categories:
- First: notes, taken by the law firm leading the internal investigation at that time (Dechert), of information given to the law firm by interviewees including ENRC’s employees, former employees and employees of subsidiaries, when asked about the events being investigated.
- Second: material gathered by Forensic Risk Alliance (FRA) as part of its “books and records” review. The main purpose of the review was to identify weaknesses in systems and controls and to focus on potential improvements.
- Third: documents containing information provided by Dechert to ENRC’s board and Nomination Corporate Governance Committee.
- Fourth: 17 documents identified by ENRC’s legal advisors (Fulcrum Chambers, a law firm that succeeded Dechert) and including reports from the forensic accountants FRA, as well as emails and letters relating to FRA’s books and records work and other email correspondence.
In the UK, legal professional privilege is not protected as a general right – UK law differs in this respect from Dutch law. UK law distinguishes between litigation privilege and legal advice privilege. Legal advice privilege only applies to communication between a lawyer and a client, and not to communication with a third party. Litigation privilege protects communication within a broader group, but only applies – in short – in cases of reasonably anticipated, adversarial litigation.
The High Court:
- denied the claim for litigation privilege for all four categories of documents. According to the court, there is a distinction between conduct and communication regarding, on the one hand, the avoidance of a criminal investigation and, on the other hand, the defence to a criminal prosecution. Documents are only protected by litigation privilege if they have been created for the dominant purpose of being used in litigation or obtaining legal advice about litigation. Once ENRC had committed itself to a self-reporting process, any legal advice sought as a result of the internal investigation would have been directed towards finding ways to avoid litigation by pursuing the SFO to go down the route of settlement instead of prosecution, and not towards the conduct of adversarial litigation.
- denied the claim of legal advice privilege for the first category of documents. Interview notes by lawyers are not covered by legal advice privilege, because the information gathered was only intended to be used for presentations in the self-reporting process. They have not been made in the context of legal advice and do not give an indication as to any legal advice given or to be given to ENRC.
- accepted the claim of legal advice privilege for documents that fall under the third category and were properly categorised as confidential dialogue between lawyer and client, for the purpose of giving and receiving legal advice. Results of investigations, witness statements, reports or any other type of fact finding by a legal representative will not be covered by legal advice privilege if they do not record confidential discussions between a lawyer and client in the context of giving legal advice.
- The claim for documents that fall under category 2 and 4 mainly concerned documents generated by Forensic Accountants. The parties agreed that the claim in relation to Category 2 and 4 concerned only ENRC’s claim to litigation privilege.
ENRC is currently seeking to appeal the decision. We will continue to monitor this case and update you on any new developments.
In the Volkswagen/Jones Day case, German prosecutors raided the Munich offices of the law firm conducting Volkswagen’s internal investigation since 2015. According to the New York Times, the German justice department seems to have suspected that the law firm was holding back crucial information.
Volkswagen in a press release responded by stating: “We consider the action of the Public Prosecutor’s Office in Munich to be unacceptable in every respect. In our opinion, a search carried out on the premises of a law firm which has been instructed by a company is a clear breach of the principles of the rule of law laid down in the Code of Criminal Procedure.”
In Juve, Germany’s main online source of legal news, a press officer of the regional court in Munich (Landgericht München), confirmed that the court had ruled on 10 May 2017 that the raid at Jones Day was lawful. The grounds for this decision have not been made public.
In Germany, legal privilege is rather limited and is not a general principle.
In the Netherlands, legal privilege has also been the subject of debate.
In the past few years, the Dutch Public Prosecution Service (DPPS) began stating that it believes legal privilege is too wide in scope and should be restricted. A DPPS spokesperson, in an interview with a Dutch newspaper, said that it was no longer clear which part of legal communication or information falls within the scope of legal privilege. According to the spokesperson, the expansion of “certain tasks” taken on by lawyers has led to uncertainty in this respect. The DPPS does not believe that all “new” tasks fit under legal privilege, and this leads to improper use and abuse.
In February 2017, the Netherlands Bar expressed its concerns in a letter to the Dutch parliament. The reason for this letter was a proposal by the State Secretary of Finance to limit tax-related legal privilege. According to the Netherlands Bar, the general principle of legal privilege cannot be limited for the benefit of just one authority in a particular situation, such as the Dutch Revenue Service. It is incorrect to regard a tax matter as different from any other matter in deciding whether there is legal privilege.
These developments, in the Netherlands and elsewhere, illustrate that legal privilege is increasingly being challenged. This makes the idea of embedding legal privilege in the Netherlands more relevant, and should also prompt companies to properly structure internal investigations to ensure that the investigation is indeed protected by legal privilege. This is all the more relevant in cross-border investigations, where differing rules may apply to legal privilege. The Dutch legislature is currently reviewing the scope of legal privilege and has held meetings with the DPPS, the Netherlands Bar and the Royal Dutch Association of Civil-Law Notaries about its scope. A more detailed procedure will probably be introduced in the Dutch Code of Criminal Procedure.
As also indicated by the Netherlands Bar, we believe it important that legal privilege continue to be guaranteed and that parties be able to communicate freely with each other, especially in situations where criminal investigations and sanctions are to be expected. They should be able to conduct internal investigations without the possibility of attorney-client information being disclosed to authorities.
Please contact us at De Brauw if you have any questions or require further guidance regarding legal privilege.