Court of Appeal hand down landmark ruling in SFO v ENRC

There will be a sigh of relief from law firms after the Court of Appeal decision in SFO v ENRC [2018] EWCA Civ 2006. Unusually, the Court of Appeal felt able to disagree with the first instance judgment on the facts. Litigation privilege can cover legal advice given to head off, avoid or settle reasonably contemplated proceedings.

There has long been concern about the status of material obtained in the course of internal investigations. The ENRC first instance judgment hugely restricted when litigation privilege would apply, to the dismay of corporates and law firms alike.

The Court of Appeal has, at least partially, set their minds at rest. The first instance decision was overturned for two main reasons:

Issue 1: Was the judge right to determine that, at no stage before all the Documents had been created, criminal legal proceedings against ENRC or its subsidiaries or their employees were reasonably in contemplation?

Answer: No. The whole sub-text of the relationship between ENRC and the SFO was the possibility, if not the likelihood, of prosecution if the self-reporting process did not result in a civil settlement. An individual suspected of a crime will, of course, know whether he has committed it, but an international corporation is in a different position. The distinction between civil and criminal proceedings was illusory.

Issue 2: Was the judge right to determine that none of the Documents were brought into existence for the dominant purpose of resisting contemplated criminal proceedings against ENRC or its subsidiaries or their employees?

Answer: No. In both the civil and the criminal context, legal advice given so as to head off, avoid or even settle reasonably contemplated proceedings is as much protected by litigation privilege as advice given for the purpose of resisting or defending such contemplated proceedings.

The Court spelled out the policy considerations on this point. It is in the public interest that companies should investigate allegations prior to going to a prosecutor such as the SFO, without losing the benefit of legal professional privilege over the fruits of their investigation. If privilege did not apply, companies might be tempted not to investigate at all, for fear of being forced to reveal what had been uncovered.

Legal Advice Privilege

The Court of Appeal concluded that it could not finally resolve long-standing concerns about the definition of a ‘client’ and the ambit of Three Rivers (No. 5). That will have to wait until addressed by the Supreme Court. But yesterday’s judgment explicitly states that, had they not been bound to follow Three Rivers (No.5), they would not have done so. The narrow definition of “client” in this context unfairly disadvantaged large and/or multinational corporations, where the information upon which legal advice is sought is unlikely to be held by a small body of individuals.

Implications

The Court emphasised that decisions on the applicability of litigation privilege in this context are highly fact-sensitive and much of the judgment is devoted to an analysis of the facts, the Court commenting that, unusually, it was in no worse a position than the court of first instance to make relevant findings. Nevertheless, the decision provides some reassurance to companies and their advisers to the effect that the fruits of internal investigations, especially those generated in the context of ongoing engagement with the SFO, will not necessarily have to be disclosed.

That said, the decision is not all bad for the SFO. The judgment explicitly references Deferred Prosecution Agreements, and the importance of ‘cooperation’ with the SFO. The DPA regime is such that there remains a real incentive for companies to waive any privilege that does apply to employee interviews and the like. In practice, therefore, this judgment, while protecting privilege as a wide concept, may also assist in persuading companies that ‘cooperation’ with the SFO involves waiving it.

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