Through a glass darkly: plumbing the depths of privilege in corporate internal investigation interviews
February 2017 | SPECIAL REPORT: CORPORATE FRAUD & CORRUPTION
Financier Worldwide Magazine
The days that unfounded or exaggerated claims to legal professional privilege in UK corporate investigations into economic crime pass unchallenged are well and truly over. Alun Milford, UK Serious Fraud Office (SFO) general counsel, has emphasised this point, noting that the SFO will “view as uncooperative”, any “false or exaggerated claims of privilege” – and the SFO will be prepared to litigate over them, as “to do otherwise would be to fail in our duty to investigate crime”.
One important part of any lawyer-led investigation into economic crime is the interview of a corporate’s employees and executives. In the sights of the SFO, when it rightly expresses concern over “false or exaggerated claims of privilege”, is not the legal advice provided by such lawyers per se, but rather how a corporate seeks to assert privilege over records of facts provided at interviews.
The purpose of this article is to set out the considerations in this area, including: why a corporate may be advised to structure its interviews to attract legal professional privilege; when a claim to litigation privilege may apply; and the complex issues in determining when a claim to legal advice privilege may also or otherwise apply. The law on this third point is currently in a state of flux, following a recent and potentially far-reaching decision in the ‘Rights Issue Litigation’ involving The Royal Bank of Scotland plc (RBS), which is currently subject of an appeal to the UK Supreme Court.
Before tackling the issues surrounding legal professional privilege, including the recent RBS decision, it is worth considering why a corporate might wish to ensure that its internal investigation, including the interview process, is subject to privilege. Especially in complex cases involving a multijurisdictional angle (such as the investigations into various financial institutions’ conduct in respect of benchmark rates), there is a real risk that an investigation in one jurisdiction is only the start of a series of civil and criminal investigations in multiple jurisdictions. Preserving privilege is a pragmatic decision in many respects, to guard against the inadvertent creation of documents which a corporate might otherwise be minded not to disclose in future litigation.
As to what privilege may apply, there are two forms of legal professional privilege in England: litigation privilege and legal advice privilege. Litigation privilege is broader in scope than legal advice privilege, most particularly in the sense that it extends to communications with third parties. However, litigation privilege can only be claimed in a narrower set of circumstances: whereas there is no requirement for litigation in respect of legal advice privilege, litigation privilege can only apply if litigation is existing, pending or in reasonable contemplation. It is of some real importance that the English courts treat legal professional privilege as a substantive right, which means it can be used to protect a party from disclosure of relevant documents to another party unless a statutory provision provides otherwise.
For litigation privilege, ‘litigation’ means adversarial proceedings, which essentially means no less confrontational than ordinary civil proceedings – if proceedings are merely investigative or inquisitorial in nature, it is unlikely that litigation privilege will arise. Litigation being in ‘reasonable contemplation’ means there must be a real likelihood that litigation will arise, rather than a mere possibility.
In a case involving Tesco and the UK Office of Fair Trading (OFT), the Competition Appeal Tribunal held that there was no doubt litigation privilege would apply after a formal accusation of wrongdoing had been made by the OFT ( CAT 6). Whether litigation privilege will apply at an earlier stage will be highly fact-specific, but the seriousness of the allegations, and the potential reputational and financial consequences, will be important factors which would make a claim to privilege stronger.
In the context of a corporate facing the prospect of charges for economic crime, the circumstances of self-reporting matters to the SFO, and arguably earlier, when the corporate first becomes aware of the circumstances of the criminal offence, are likely to give sufficient rise to a claim to litigation privilege. If investigation interviews are indeed subject to litigation privilege, then anything discussed during them will be protected from being revealed or produced. The same will apply to any documents generated as a result of the interviews, including any attendance notes.
Legal advice privilege covers communications between lawyers and their clients for the purpose of giving or obtaining legal advice. ‘Legal advice’ is not confined to telling the client the law, but includes advice as to what should prudently and sensibly be done in the relevant legal context. There are two issues for corporates to consider here: first, are any of the interviews subject to the privilege (with the consequential effect that all confidential documents surrounding the interviews will likely be privileged); or secondly, if the interviews are not subject to the privilege, might any resultant documents still attract the privilege?
The law in this area is currently in a state of uncertainty, following a decision handed down in December 2016 in RBS’s Rights Issue Litigation. Regarding the first question of whether the interviews might be privileged, since the landmark decision of Three Rivers (No. 5) in 2003, there has been a great deal of debate as to what constitutes a corporate “client”, and how far it extends throughout a corporate’s employees. As is well known, the Court of Appeal in Three Rivers (No. 5) held that the “client” is narrowly construed to include the internal team within the corporate client responsible for providing instructions ( EWCA Civ 474).
This decision has been the subject of extensive commentary; and it had been hoped that clarification might be provided in the intervening years. In the recent decision of Mr Justice Hildyard in the Rights Issue Litigation, Three Rivers (No. 5) was considered by the High Court, and applied with the following conclusion: “the client for the purposes of privilege consists only of those employees authorised to seek and receive legal advice from the lawyer and … legal advice privilege does not extend to information provided by employees and ex-employees to or for the purpose of being placed before a lawyer” ( EWHC 3161 (Ch)). This puts a large corporate client in a significantly different (and worse) position with regard to privilege. The importance of this decision was recognised by Hildyard J, and it is currently under appeal to the Supreme Court for much-needed clarification.
What is clear is that legal advice privilege cannot apply to interviews with third parties – where only litigation privilege can provide protection. However, legal advice privilege may still apply to documents or communications generated as a result of such non-privileged interviews. The English courts have held that it is not appropriate to inquire into what a lawyer has communicated to his client concerning conversations with a third party, despite the fact that the third-party conversations were not themselves privileged (Re Sarah C Getty Trust  QB 956).
Unfortunately, the decision in the Rights Issue Litigation has caused further confusion in this respect as well, holding that RBS’s lawyers’ interview notes (where the interviews were not subject to legal advice privilege for the reasons given above (or indeed litigation privilege, which was not considered)) were not privileged. The rationale for this decision appears largely to be an evidential one – based on the inadequacy of RBS’s evidence – but the content of the discussions in the judgment muddies somewhat what is already a very grey area.
The focus of the submissions put before Mr Justice Hildyard concerned whether the interview notes contained lawyers’ “mental impressions” which would betray the trend of legal advice. However, the leading House of Lords decision on this point (Three Rivers (No. 6)  UKHL 48) made clear that documents can be privileged notwithstanding that they contained no legal advice, provided they formed part of a “relevant legal context” (which will not be difficult to establish for an internal criminal investigation).
The common misunderstanding is the thinking that the source of the information contained in a document is the defining feature in determining whether it is privileged. What is more pertinent is the document’s form and purpose. A transcript of a non-privileged meeting may well not be privileged (having been created solely as a record of what was said at a non-privileged interview, whether in whole or in part); but other documents might be privileged, depending on the circumstances of their creation.
This analysis has been applied in another recent case involving RBS, where Mr Justice Snowden held, in the context of documents that by and large contained references “to information concerning public events” and to “dealings with regulators” (which, in and of themselves, are not privileged) that: “the communication of information between a lawyer and client can be privileged, provided that it is information that is communicated in confidence for the purpose of the client seeking, and the lawyer giving, legal advice. The test is one of relevance and purpose: the source of the information makes no difference” (emphasis added) ( EWHC 3187 (Ch)). There is no logical reason why the same should not apply to any documents created by the lawyer for the purposes of advising the client (i.e., the lawyer’s working papers), even if not communicated.
These are difficult questions, and the law is uncertain – the Supreme Court’s consideration of legal advice privilege issues will be especially welcome so far as it concerns, in particular, the definition of the “client” and therefore the scope of legal advice privilege over interviews undertaken in corporate internal investigations.
If a corporate is minded to preserve privilege – and as stated above there may be good reasons for doing so – it will first need to consider whether litigation privilege is likely to apply. If litigation is not in prospect, then the challenges of creating documents and determining legal advice privilege will require careful consideration, to ensure that any claim to privilege is “well-founded” – to protect what should be protected; and to avoid any costly, public and potentially damaging disputes over privilege before the courts.
Matthew Cowie is a partner and Richard Hodge is an associate at Dechert LLP. Mr Cowie can be contacted on +44 (0)20 7184 7417 or by email: firstname.lastname@example.org. Mr Hodge can be contacted on +44 (0)20 7184 7630 or by email: email@example.com.
© Financier Worldwide
Matthew Cowie and Richard Hodge