On September 5, 2018, the compliance departments and outside counsel of large corporations operating in the UK breathed a collective sigh of relief. In a much anticipated ruling, the Court of Appeal of England and Wales overturned a trial judge’s order that would have compelled a London-based international mining company, Eurasian Natural Resources Corporation Limited (ENRC), to hand over documents to UK prosecutors investigating the enterprise for bribery in Kazakhstan and Africa. Those documents were the product of an investigation that ENRC’s outside legal counsel had conducted following an internal whistleblower report that surfaced in late 2010. In conducting that internal investigation, lawyers from the law firm interviewed witnesses, reviewed financial records, and advised ENRC’s management on the company’s possible criminal exposure. Though the company tried to keep everything quiet, the UK’s Serious Fraud Office (SFO) came knocking in mid-2011. The SFO agreed to let ENRC and its lawyers continue to investigate on their own, periodically updating the SFO on their progress. In 2013, ENRC’s legal counsel submitted its findings to the SFO in a report arguing that, on the basis of the facts presented, the company should not be charged. The SFO disagreed and launched a formal criminal investigation. But the SFO then also demanded that ENRC turn over all of the files and documents underpinning its report—including presentations given by the lawyers to ENRC’s management and the lawyers’ notes from their interviews with 184 potential witnesses.
ENRC refused to comply, claiming that these documents were covered by two legal privileges under UK law: the “litigation privilege,” which guarantees the confidentiality of documents created by lawyers for the “dominant purpose” of adversarial litigation (including prosecution) that is “in reasonable contemplation,” and the “legal advice privilege,” which protects communications between lawyers and clients exchanged for legal advice. The trial court rejected ENRC’s privilege claims, a decision that sent shockwaves through the English defense bar and spurred much criticism on legal and policy grounds. But the Court of Appeal reversed, holding that ENRC’s lawyers didn’t have to share the documents. The Court’s ruling relied on the litigation privilege, holding, first, that documents created to help avoid criminal prosecution counted as those created for the “dominant purpose” of litigation, and, second, that criminal legal proceedings were in “reasonable contemplation” for ENRC once the SFO contacted the company in 2011.
Many commentators have hailed the Appeal Court’s decision (which the SFO declined to appeal) as a “landmark ruling” and a “decisive victory” for defense lawyers. The reality is a bit more nuanced. The Court of Appeal’s fact-specific ruling was very conservative in its legal conclusions, and it’s unlikely that its holding regarding the litigation privilege is sufficient to create the right incentives for companies and their lawyers. It’s also unlikely that further judicial tinkering with the scope of the litigation privilege will resolve the problem promptly or satisfactorily. The better solution would involve a different institutional actor and a different privilege: Parliament should step in and expand the scope of the legal advice privilege to cover all communications between a company’s lawyers and the company’s current and former employees.Before proceeding, it’s important to explain the fundamental policy argument for treating documents created as part of an internal investigation into corruption allegations as legally privileged. In the multi-front fight against corporate corruption, an increasingly important government strategy is to encourage companies to conduct internal investigations and (the government hopes) to report violations to the authorities. And self-disclosure is indeed a significant source of corruption prosecutions. For example, in the 40 years that the U.S. Foreign Corrupt Practice Act as been in effect, 44 percent of the companies sanctioned by U.S. authorities self-reported violations. Moreover, even in cases where companies investigate and discover violations but ultimately decide not to disclose them to the authorities, society benefits from the company’s efforts to halt any ongoing illegal behavior and add new safeguards to prevent future wrongdoing. But companies rely on the fact that what their legal investigators find will stay private until the company decides to self-report or to cooperate with any ongoing government investigations. Unsurprisingly, then, the expected scope and strength of privilege protections is one of the main factors companies consider in deciding both whether to conduct a thorough internal investigation and whether to self-report. If a company expected that much of what it finds in an internal investigation could be seized without its consent by waiting prosecutors, then, as the Court of Appeal in the ENRC case warned, “the temptation might well be not to investigate at all, for fear of being forced to reveal what had been uncovered.”
Despite recognizing this problem, the Court of Appeal’s narrow ruling, focused on the litigation privilege, doesn’t provide companies or their lawyers with sufficient assurances of confidentiality. For starters, though the Court of Appeal overturned the trial court’s aggressive circumscription of the traditional litigation privilege, the Appeal Court’s ruling left the bounds of the litigation privilege rather nebulous. For example, it’s unclear when, over the course of an internal investigation, criminal proceedings are in “reasonable contemplation” such that the privilege attaches. The Appeal Court held that this threshold had “certainly” been crossed at the moment when the SFO contacted ENRC in August 2011, but the Court left unclear if and for how long the privilege attached before this point. In addition, because the litigation privilege is triggered by the contemplation of criminal proceedings rather than a criminal investigation, the applicability of that privilege depends at least in part on the incriminating nature of any evidence already uncovered. But just how much trouble a company is in—and if it could lead to criminal proceedings—is something a large company is unlikely to know prior to an internal investigation (unless management is complicit). This puts a corporation in a bind: documents created by its lawyers during an internal investigation are protected once criminal prosecution is on the radar, but any incriminating documents generated during preliminary steps—before the company knows enough to anticipate that it might be the subject of criminal proceedings—are still not protected by the litigation privilege. In such an environment, should investigators try to uncover only some of the incriminating evidence at the outset of an investigation, perhaps holding off on interviewing key witnesses or reviewing the hottest documents? Should law firms investigating corruption first have a goal of establishing a risk of prosecution, and only after that standard is established move toward getting the full picture?
Given all this uncertainty, and the need to provide sufficient protections to encourage companies to conduct prompt and thorough internal investigations, the contours of privilege under UK law should be re-examined. And given the unlikelihood of a legal challenge with sufficiently relevant facts making its way up the court system again any time soon, Parliament should step in to clarify and expand the privilege protection as a way to encourage more corporate investigations into corruption. In particular, Parliament should extend the legal advice privilege to cover all of a company’s current and former employees.
Under the current understanding of the legal advice privilege in the UK, “client” communications are limited to those between the company’s lawyers and those employees specifically authorized to seek legal advice on behalf of the company (typically management). Shifting the law to permit lawyers’ communications with all employees to fall under the umbrella of “client” communications would sweep the products of any internal investigation under the umbrella of the legal advice privilege, thereby sidestepping the uncertain line-drawing currently required by the litigation privilege. This shift would also allow large and small corporations to enjoy similar privilege protections: as UK law currently stands, small companies enjoy greater protection over conversations with lawyers because a higher proportion of their employees count as “clients” under the legal advice privilege.
Some might object that such a change to the law is too bold a step. But defining the legal privileges between attorneys and their clients is not some political minefield into which Parliament would never venture. In fact, Parliament has expanded the legal advice privilege (albeit slightly) in 1985, 1988, 1994, and 2007. While the change I propose could be seen as more drastic, the dominant effect would be to clarify currently uncertain protections. As noted above, documents created by lawyers managing internal investigations can already receive protection under the litigation privilege once criminal proceedings are “within contemplation,” although the lines are hazy. My proposed extension of the legal advice privilege would overlap to some degree with protections already granted, but it would substantially increase clarity and certainty, thereby giving companies greater confidence to launch internal investigations when the prospect of criminal liability is still uncertain. It would also promote investigative efficiency by allaying concerns over where to investigate first, as well as encouraging interviews with lower-level employees at the outset of such investigations—precisely the individuals who may know the most relevant information in foreign bribery cases, for example.
Extending the legal advice privilege would likewise bring the UK more in line with similar jurisdictions—including Commonwealth countries such as Hong Kong, Singapore, and Australia who decided not to follow the UK’s narrow judicial interpretation of “clients”—as well as with the United States, where the attorney-client privilege generally covers all employees of a company (provided that certain formalities are followed). In its decision in the ENRC case, the Court of Appeal noted how “out of step” English law was on this issue, especially when the “legal professional privilege is a classic example of an area where one might expect to see commonality between the laws of common law countries, particularly when so many multinational companies operate across borders and have subsidiaries in numerous common law countries.” Aligning the understandings of the legal advice privilege on both sides of the Atlantic would also allow companies to better understand what materials from a potential internal investigation would be protected, even in cross-border matters. Companies would thus be more confident that an investigation would not mistakenly allow prosecutors to seize their lawyers’ work without the company authorizing an informed disclosure as part of a bid to self-report corrupt activity. Most importantly, this sharper privilege protection may help move the needle slightly on encouraging more companies to investigate, terminate, and, if merited, self-report corrupt activities.
Kees, thanks for this fascinating post. There’s a lot in here, and I immediately have questions about how some of these issues haven’t come up before (U.S. case law on corporate privilege is voluminous), why the trial court might have gone out on a limb with what appears to be a very aggressive decision, why these issues weren’t addressed in the four privilege laws passed by parliament over the past 30 years, etc. This is obviously a fertile topic, but I want to put those questions aside for now and ask you about one aspect of your discussion of the litigation privilege.
You rightly point out that a lack of clarity as to when that privilege attaches may actually disincentivize companies from beginning an internal investigation in the first place (or, at least, disincentivize them from documenting any investigation). You also seem to (gently) suggest that an amendment from Parliament clarifying that the litigation privilege attaches when a criminal investigation is in “reasonable contemplation” might be a better alternative. I’m wondering though if that particular change might be a bit too expansive. I’m wondering about companies operating in high-risk regions or industries (oil companies or medical device manufacturers come to mind or financial services companies); would they have a plausible argument that a criminal investigation is always in reasonable contemplation, given the nature of their business?
This may be a straw man (I’m not wholly sure if this is a real risk myself), but given the legitimate reasons why so many U.S. courts exclaim that privileges are to be narrowly construed, I do wonder if we ought to think carefully about exactly how broad we want the privileges we grant to corporations to be. It’s not completely undisputed that the current model of corporate self-investigation and negotiation with government regulators (often for a deferred prosecution agreement) is an overall social good, and even granting that it is, giving corporations a broader litigation privilege does come with the inevitable side effect of concealing more information from public view. I think I largely agree with you, but just want to raise these issues and speculate that perhaps some of these reservations are what has kept Parliament from awarding corporations broader privileges to begin with.
Thanks, Jason. You’re right to highlight the uncertainty around the *litigation privilege*, particularly as to when a criminal investigation might come into reasonable contemplation. One point of clarification: my suggestion was to sharpen the *legal advice privilege*, which can cover similar information as the *litigation privilege* but which is triggered differently – namely, when a company’s lawyers communicate with a company’s employees to provide legal advice. Even if the courts – or, for that matter, Parliament – definitively say that the *litigation privilege* attaches the moment an investigation is in “reasonable contemplation,” the point of conception for that moment is still very much up for debate. This is especially true in the overseas corruption context, in large part for the reasons you identified in your comment. Precisely because of this morass, I’m encouraging Parliament to look instead to the *legal advice privilege*, which could provide clearer lines and would put the UK on similar ground to its closest international partners (that is, commercial partners and corruption enforcement partners).
As for broadening privileges in general, I definitely take your point about not giving corporations such a long leash that they can escape oversight. My main argument was not to suggest that corporate privilege protections need to be greatly expanded, just that the lines need to be drawn clearer. To be sure, my proposal would involve drawing a slightly bigger circle for the legal advice privilege, but 1) it wouldn’t expand the overall area that much, considering what is arguably covered by the combined privileges right now, and 2) company-friendly policies and corruption enforcement aren’t always zero sum.