Privilege in Internal Investigations

Transcription

1 Privilege in Internal Investigations UK and US privilege developments July 12,

2 Presenters Amanda N. Raad Partner London Kim B. Nemirow Partner Chicago (312) Marcus Thompson Partner London

3 AGENDA Basics of Legal Privilege in the UK and US The impact of the decision in SFO v ENRC What now? Practical steps Questions 3

4 Executive Summary what happened and what does it mean? SFO successfully challenged ENRC s assertion of privilege over documents generated during ENRC s internal investigation The result of the High Court s decision is that it will now be more difficult for a company to claim privilege over fact-based investigations in the UK that relate to potential criminal proceedings The decision is likely to be appealed BUT This is not the end of legal privilege in the UK The facts of the ENRC case are quite unusual and there are steps that can be taken to strengthen claims of privilege in internal investigations in the UK There is now a greater divergence between the UK and US in relation to legal privilege both in terms of the law itself and the approach taken by the SFO and DOJ 4

5 Privilege in the UK and US: the basics UK Legal advice privilege (LAP) Confidential communications between a client and the lawyer for the purpose of giving or receiving legal advice. Strict definitions of client (i.e. not entire company) US Attorney client privilege Similar to UK s legal advice privilege, but can also apply to communications with third parties (including a company s employees) Litigation privilege (LP) Confidential communication between a lawyer and client, or between either of them and a third party, made for the dominant purpose of preparing for reasonably contemplated or existing adversarial litigation. Attorney work-product Similar to UK s litigation privilege. Applies when documents prepared in anticipation of litigation 5

6 Privilege and internal investigations in the UK Verbatim interview notes, even if taken by counsel, not subject to privilege. Must contain legal advice if privilege is to be successfully asserted UK authorities expect some degree of waiver of privilege as part of a company s full cooperation Concerns expressed by SFO about bogus privilege claims Previously assumed that SFO investigation would satisfy adversarial litigation test for litigation privilege 6

7 Privilege and internal investigations in the US Interview notes may be privileged subject to appropriate warnings Authorities prohibited from seeking waiver of privilege as an indicator of cooperation Touch base approach of some courts i.e. English privilege principles may be applied Work product 7

8 ENRC: what happened Whistle-blower allegations at ENRC : fraud, bribery and corruption in Kazakhstan and Africa ENRC launched internal investigation early 2011 Meetings and discussions held between ENRC and SFO between September 2011 and March 2013 (Self-reporting by ENRC?) SFO launched its own investigation in April 2013 SFO used s2 notices to compel production of certain documents generated by accountants and lawyers during ENRC s internal investigations ENRC asserted litigation privilege and/or legal advice privilege over some documents SFO made successful application for disclosure (challenging ENRC s claim of privilege) to High Court, May

9 ENRC: key findings on Litigation Privilege Criminal investigation by the SFO is not adversarial litigation for privilege purposes. Investigation is a prelude to prosecution Dominant purpose test not met. Judge found that fact-finding by ENRC aimed at obtaining legal advice on how to avoid a prosecution is not covered by litigation privilege. Even if there was a dual purpose (fact finding + mounting a defence) no evidence of such a dual purpose in this case Litigation privilege does not extend to third party documents created in order to obtain legal advice on how to avoid contemplated litigation 9

10 ENRC: key findings on Legal Advice Privilege ENRC case re-stated earlier decision in an unrelated case that LAP attaches only to communications between a lawyer and those individuals within a client entity who are authorised to obtain legal advice on that client s behalf (i.e. not all the employees who are being interviewed for fact finding purposes) Lawyers working papers, as a sub-category of LAP, will attract LAP if, and only if they would betray the tenor of the legal advice Accordingly, interview notes of employees/witnesses must contain some legal advice if they are to benefit from LAP 10

11 ENRC: key findings by document category Nature of documents Interview Notes Notes taken by ENRC s lawyers of investigative interviews with employees and third parties Third-Party Forensic Documents Documents created by accountants as part of a booksand-records review Investigation Summaries and Reports Documents presented by lawyers to ENRC s Committee and Board Third Party Forensic Documents Documents comprising the forensic accountants reports referred to in letter sent to the SFO by ENRC s lawyers Nature of ENRC s privilege claim Litigation privilege Legal advice privilege Litigation privilege ENRC retains the right to claim legal advice privilege in respect of any individual document which falls within this category. Litigation privilege Legal advice privilege Litigation privilege Ruling and reasoning Denied because ENRC was not aware of circumstances which rendered litigation between itself and the SFO a real likelihood rather than a mere possibility. Even if a prosecution had been reasonably in contemplation, the documents were not created with the dominant purpose of conducting litigation. Rather, the dominant purpose was to avoid prosecution. Denied because there was no evidence that any of the persons interviewed were authorized to seek and receive legal advice on behalf of ENRC, or that those communications conveyed instructions or advice. Additionally, the interview notes formed part of the preparatory work of compiling information for the purpose of enabling the corporate client to seek and receive legal advice and therefore are not privileged. Denied because the dominant purpose of the documents was to meet compliance requirements or obtain accountancy advice, not to prepare to defend a prosecution. These proceedings did not determine this issue. Denied because ENRC did not establish that at the time it was aware of circumstances which rendered litigation between itself and the SFO a real likelihood rather than a mere possibility. Even if a prosecution had been reasonably in contemplation, the documents were not created with the dominant purpose of being used in the conduct of such litigation. Rather, the dominant purpose was to avoid prosecution. Allowed because the lawyers presentation contained legal advice even though it made reference to the investigation s factual information and findings which would not otherwise be privileged. Denied because the dominant purpose of the documents was to meet compliance requirements or obtain accountancy advice, not to prepare to defend a prosecution. 11

12 What now? Practical Steps Have a clear understanding at the outset of an investigation of what materials will be privileged and why. (Engagement Letters, scope and purpose of investigation, identity of true client ) Records of witness interviews must contain some legal advice to strengthen claim of privilege and should be confidential Claim for privilege is likely to be stronger if the fact-finding and advice-giving functions of counsel are combined Understand the nature of possible claims (criminal investigation, criminal prosecution, civil claims, non-uk investigations/prosecutions) 12

13 Final thoughts An appeal is likely in the ENRC case The facts and the evidence which gave rise to the judgement are unusual Should not deter good faith efforts by companies to conduct fact-finding investigations and receive legal advice which will be privileged Fact-finding without interviews is difficult Privilege should not be assumed 13

14 Interactive Questions Please select one or more answers, as directed, and press submit The polling results will be displayed and discussed 14

15 Question Question Who normally conducts internal investigations for your organisation? Compliance Legal Outside counsel 15

16 Answers Answers Show voting scores 16

17 Question Question How might you change your investigative practices in light of the ENRC decision? Will not change Reduce the number of fact-finding witness interviews Conduct fewer investigations More wary of self-reporting to authorities 17

18 Answers Answers Show answers 18