Case report: SFO v ENRC [2017] EWHC 1017

Said to be the first reported case in which the Court considered a claim for litigation privilege against the background of potential criminal litigation, this case is essential reading for those involved in the conduct of internal corporate investigations or in prosecuting or defending serious fraud.

The SFO sought a declaration that documents generated during investigations by solicitors and forensic accountants were not subject to legal professional privilege. This claim was against the background of an ongoing criminal investigation by the SFO into the activities of ENRC, focussing on allegations of fraud, bribery and corruption in two foreign jurisdictions. As part of the investigation, the SFO exercised its section 2 powers to compel the production of a number of documents generated before the SFO formally began its investigation.  ENRC claimed that the disputed documents were subject to litigation privilege, legal advice privilege, or both. The disputed documents fell into four categories and included notes taken by their solicitors of evidence given in the course of internal investigations by individuals (including employees and former employees; officers of ENRC and its subsidiaries; suppliers; and other third parties), as well as material generated by forensic accountants instructed by ENRC to identify controls and systems weaknesses and potential improvements.

The full scope of the case is too broad to be addressed in a single article, but two points of clear importance can be addressed. First, litigation privilege is not engaged simply by an active or anticipated criminal investigation. Secondly, the collation of information or statements from employees within a client company has no special protection and is generally not protected by legal advice privilege.

Litigation privilege is not engaged simply by an active or anticipated criminal investigation

Litigation privilege

The Court rejected the proposition that an investigation by the SFO should be treated as adversarial litigation.  Such an investigation is a preliminary step taken prior to any decision to prosecute. The policy that justifies litigation privilege does not extend to enabling a party to protect itself from having to disclose documents to an investigator. Documents that are generated at a time when there is no more than a general apprehension of future litigation cannot be protected by litigation privilege just because an investigation is imminent. The question whether the person anticipating a criminal investigation also contemplates that prosecution is likely to follow the investigation must be considered on a case by case basis. In particular, in respect of investigations conducted in the course of, or with a view to, self reporting, such investigations, almost by definition, are unlikely to be protected by litigation privilege because their dominant purpose is to avoid litigation, rather than to conduct it.

Legal advice privilege

The Court considered whether communications between lawyers and employees of the instructing corporation are covered by legal advice privilege. It held that in order to warrant protection the communication with the lawyer must be to or from a person who is authorised to seek and receive legal advice on behalf of the corporation, and the communication must be for the purposes of, or in the course of, that person giving or receiving legal advice.  Therefore, communication concerned with the preparatory work of compiling information from employees for the purpose of allowing the corporate client to receive such advice is not covered by legal advice privilege.

Practical application

The case is a further example of the trend towards a narrow definition of privilege.  Parties engaged in internal investigations, and particularly in the context of self-reporting, must be aware that the fruits of their own investigations are likely to come into the hands of the prosecuting agency.  Advisors must therefore ensure that their clients are fully aware of the ramifications of beginning such an investigation.