September 14, 2018

Court of Appeal Ruling Clarifies Scope of Litigation Privilege in Investigations


On Wednesday 5 September 2018, the Court of Appeal Civil Division delivered its judgment in the much-anticipated appeal of Director of the Serious Fraud Office v Eurasian Natural Resources Corporation [2018] EWCA Civ 2006. In this important case, the Serious Fraud Office's (SFO) contention that internal investigations were not protected by legal professional privilege was successfully challenged.

The earlier ruling by the High Court (See our June 2017 UK Economic Crime Group: Enforcement Update) left companies in the position that, unless they were aware of a reason why a criminal prosecution should result from an investigation into alleged wrongdoing, litigation privilege would not protect work done during an internal investigation into whistleblowing, or the early stages of an investigation by the SFO.

Now the Court of Appeal has restored the protection of litigation privilege for companies undertaking investigations into potential criminality raised by whistleblowers, and indicated that there may be future extensions too of legal advice privilege to take account of how multinational companies operate.

Below we set out the key points of this judgment and their impact on corporate investigations.


When is litigation in reasonable contemplation?

The Court of Appeal concluded that the High Court was wrong to find that a criminal prosecution was not reasonably in prospect once the Eurasian Natural Resources Corporation (ENRC) began investigating allegations of corruption, nor once the SFO had written to ENRC explaining that it should consider whether to self-report. The Court of Appeal also held that the High Court was wrong to find that ENRC, "failed at the first hurdle" of showing that it was, "aware of circumstances which rendered litigation between it and the SFO a real likelihood, as opposed to a mere possibility".

The Court of Appeal held that (at least) at the point when the SFO began investigating ENRC there existed a real likelihood of a criminal prosecution resulting. The Court of Appeal accepted that when ENRC's lawyers instructed forensic accountants to commence its books and records review, the dominant concern was to know whether the company may have contravened anti-corruption legislation or the Companies Act—this too engaged litigation privilege.

The Court of Appeal pointed out that not every "manifestation of concern" by the SFO into a company’s activities would be regarded as "adversarial litigation", but where, as in this case, the SFO repeatedly told a company that it may open a criminal investigation and that the failure to self-report could result in prosecution, then prosecution would be in reasonable contemplation.

The fact that a company needs to engage investigatory lawyers or forensic accountants before being able to know with certainty that a prosecution is likely would not prevent a prosecution from being in contemplation during that internal investigation. On this the Court of Appeal clearly stated that the finding by the High Court that litigation privilege could not attach until either: a suspect knows the full details of what is likely to be uncovered; or a decision to prosecute has been taken, was plainly incorrect.

Were the documents created for the dominant purpose of litigation?

The Court of Appeal disapproved both of the High Court's approach to the legal principles and to its application of those principles. In both a civil and criminal context legal advice given in order to avoid or to settle litigation should be as much protected by litigation privilege as advice given for the purpose of resisting or defending litigation.

The Court of Appeal found that the documents created during ENRC's lawyers' investigation were created at a time when a criminal prosecution was in reasonable contemplation, and that those documents were created for the dominant purpose of resisting or avoiding those proceedings. The fact that ENRC's lawyers indicated to the SFO that they may, in due course, disclose some of these documents to the SFO did not affect that purpose.

In this important part of the judgment, the Court of Appeal explained that the distinction drawn by the High Court between "compliance" and "governance" was an artificial one, and that ENRC's review of its books and records was still capable of feeding into the investigation being carried out by its lawyers with a view to determining how to approach reporting to the SFO, and was created for the dominant purpose of resisting or avoiding criminal proceedings.

As a result of those findings, all of the interviews conducted by ENRC's lawyers during the course of the internal investigation should be protected by litigation privilege. The same applied to the documents created by the forensic accountants instructed by ENRC's lawyers.


The Court of Appeal was unable for procedural reasons to redraw the law concerning legal advice privilege (this would require an appeal to the Supreme Court), but indicated that if it were able to it may have done so.

The Court of Appeal noted that the world in which companies operate today is not as straightforward as it was in the nineteenth century when much of the law concerning legal advice privilege developed. Multinational corporations should be allowed to seek information from employees in order to advise the parent company. Whatever the rule applied, the Court of Appeal observed, it should apply equally to all lawyer-client relationships, however large an entity the "client" may be: multinationals should not be prejudiced by their size.

Whilst this is not binding authority on this particular point, it is indicative of the views of three senior Court of Appeal judges and points to the very real prospect that, when this issue next finds its way before the Supreme Court there is scope for the narrowly-drawn doctrine of legal advice privilege being expanded to keep step with the development of the common law in other jurisdictions.

This is likely to be of interest to multinational companies where the range of personnel who are expected to seek and receive advice from the company's lawyers may be broad.


The Court of Appeal made clear (at paras 115-117) that nothing within its judgment should be read as impacting adversely on the scheme of deferred prosecutions agreements. There remains a clear public interest in prosecutors pursuing deferred prosecutions.

The Court of Appeal correctly identified the risk that depriving companies of legal professional privilege over the work done in internal investigations could cause - if such work were not protected by litigation privilege then companies may simply elect not to investigate allegations at all, which would be contrary to the overall public interest in trying to deal with alleged offending in a proportionate and reasonable manner.

Key points to take from the Court of Appeal's judgment are that:

  • Legal advice given in order to avoid or to settle litigation is protected by litigation privilege.
  • Interviews and forensic accounting work carried out at the direction of lawyers during a corporate investigation into corruption allegations are highly likely to be protected by litigation privilege.
  • To ensure future confusion is minimized, companies and their lawyers should record clearly the investigation's objectives and the investigation's parameters should be kept under review.
  • Whilst the judgment does not re-write the law concerning legal advice privilege and who a "client" can be, there was an indication that when that matter is next before the Supreme Court an extension may occur to reflect current business practices.
  • Whether to waive privilege in lawyer-led investigations and provide that material to the SFO will remain a decision to be taken by the client.

© Arnold & Porter Kaye Scholer LLP 2018 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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