BSQ Briefing – Legal Privilege for Corporate Clients in Criminal Investigations Following SFO v ENRC

In an important precedent the Court of Appeal have strongly defended the principle that companies facing a possible criminal investigation can rely on legal professional privilege to preserve the confidentiality of their communications with the professional advisers.

SFO v ENRC concerned the application of the principle of “litigation privilege’ which applies to communications between a client and a third party who is not the clients lawyer.

ENRC began an internal investigation after they became aware of the allegations of corruption made by a whistleblower. The company asked external lawyers and forensic accountants to carry out an internal enquiry. During the course of the enquiry, their external advisers interviewed a large number of employees and collated a large body of material interview notes as a result of their enquiries.

In 2011 the SFO approached ENRC asking to inspect this material. ENRC declined the SFO’s request. The SFO then applied to the High Court for a declaration that the documents they wished to examine were not covered by litigation privilege and should therefore be disclosed.

The Court of Appeal reversed a previous High Court decision to grant the declaration. It held that litigation privilege did apply to ENRC’s communications with the accountants and lawyers they had instructed to conduct an internal enquiry.

The Appeal Judges held that “both criminal and civil proceedings (could)…reasonably be said to be in contemplation” at the time ENRC instructed their professional advisers to assist them in an internal investigation.

In support of this the Court referred to the fact that the SFO had contacted the company raising their concerns by the time the external advisers had begun their interviews and enquiries. The Court also said that a company could contemplate litigation in theory even before the authorities contacted an organisation. In this scenario, once contact had been made by the SFO, there were clear grounds to suggest that ENRC acted in contemplation of a criminal prosecution.

Secondly, the Court held that litigation privilege did extend to communications with the purpose of heading off, avoiding or settling contemplated proceedings. These matters were covered by litigation privilege in the same way that advice on resisting or defending proceedings were.

Taking what it described as a realistic and commercial view of the flats, the Court found that there was a clear public interest in companies relying on LPP when investigating allegations of wrongdoing before approaching prosecutors. This was especially the case for large and medium-sized companies where a company board or legal officers may not know the full extent of the underlying facts.

The approach taken by the Court of Appeal will provide some assurance for companies thinking of undertaking internal investigations using external advisers. These normally arise when allegations of unlawful conduct are made – normally concerning allegations of bribery and corruption – by contractors or staff. Following the SFO v ENRC decision companies taking legal advice will be protected by the cloak of privilege that applies to the product of these enquiries.

You can read more about our previous successes in defending clients accused of fraud here.

If you require advice and assistance in relation to a company or corporate fraud investigation please contact our London offices.