Privilege And The Conduct Of Internal Investigations

Author:Mr Richard Willis, Michael Twomey and Elizabeth Upton
Profession:Arthur Cox
 
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Corporates undertaking an internal investigation into potential wrongdoing will welcome a recent decision of the English Court of Appeal.

The Court confirmed that, provided all other criteria are met, documents generated during the course of an internal investigation in anticipation of regulatory action or criminal prosecution may be protected by litigation privilege. In other words, the documents may not have to be disclosed to the regulator or prosecutor.

The Court said that it is in the public interest that corporates should be able to investigate allegations of wrongdoing, prior to going to a regulator or prosecutor, without losing the benefit of privilege. Otherwise corporates might not investigate at all for fear of being forced to reveal what their investigations uncovered.

While not binding before the Irish courts, the decision could be of persuasive value should a similar case arise here.

WHAT IS LITIGATION PRIVILEGE?

Communications which are privileged do not have to be disclosed to the court or to the other side in legal proceedings.

Litigation privilege applies to:

confidential communications between a lawyer and a client, or between either of them and a third party; where the communication was for the dominant purpose of litigation; and at the time the communication was made, the litigation was in being or reasonably contemplated. Litigation privilege may also apply in the context of regulatory investigations. (Read our previous article here).

WHAT HAPPENED IN SFO V ENRC?

The English Court of Appeal decision was delivered in The Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd.

ENRC conducted an investigation into practices at its Kazakhstan subsidiary following allegations by a whistleblower of corruption and financial wrongdoing. The UK Serious Fraud Office (SFO) became aware of these allegations and for a period of two years engaged in

a dialogue with ENRC with a view to getting it to self-report. However, the SFO subsequently initiated a criminal investigation and sought various documents generated during ENRC's internal investigation, including notes made by ENRC's solicitors of 184 employee interviews. ENRC asserted that these documents were privileged.

WHAT WAS THE DOMINANT PURPOSE OF THESE DOCUMENTS?

For litigation privilege to apply, the communication must have been for the dominant purpose of litigation.

Somewhat controversially, the English High Court found that none of ENRC's...

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