UK: Privilege (War And Peace): ENRC Wins Appeal

Last Updated: 12 September 2018
Article by Felicity Ewing, Thomas Leyland, Natalia Fludra and Daren Allen

In a much-awaited judgment handed down on 5 September 2018 the Court of Appeal has clarified the scope of litigation privilege, systematically overturning the first instance findings of Mrs Justice Andrews in Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd [2017] 1 W.L.R. 4205.

Controversy followed the May 2017 decision of Andrews J, which severely pared back the protections of litigation privilege, particularly in the context of criminal investigations. Such was the alarm that the Law Society gained permission to intervene on appeal, noting that the rule of law depended on all parties being able to seek confidential legal advice without fear of disclosure.

Andrews J had ruled that ENRC must disclose various documents generated during internal investigations undertaken by solicitors and forensic accountants, in the context of a fraud and anti-corruption investigation. These included external lawyers' notes of interviews with employees and suppliers, and materials generated by the forensic accountants in their "books and records" review.

In a 50 page judgment the Court of Appeal found that, on the facts, all categories of documents the subject of the appeal were protected from disclosure by litigation privilege. In so doing it addressed several principles of scope and application, and re-unified the civil and criminal positions.

Shedding light on its rationale, the Court emphasised that it was obviously in the public interest that companies should be prepared to investigate criminal allegations prior to going to a prosecutor such as the SFO, without losing the protection of privilege for the work product and consequences of their investigation. Were privilege to be lost, the Court acknowledged that companies might well be tempted not to investigate at all, for fear of being forced to reveal what had been uncovered to a prosecuting authority.

For most clients and in-house lawyers conducting internal investigations this decision may not transform their working practices, but it restores the availability of privilege to a somewhat more practical footing, recognising the realities of operating in a regulated corporate environment.


Adversarial proceedings in contemplation

It is a necessary ingredient of litigation privilege that adversarial proceedings must be reasonably in contemplation.

At first instance Andrews J distinguished between civil and criminal process, holding that criminal proceedings could only be reasonably contemplated once the defendant knew enough of what the investigation was likely to unearth to realistically expect a prosecutor to secure a conviction. This led to widespread concern that clients would have to effectively self-incriminate in order to claim litigation privilege in a criminal context.

The Court of Appeal disagreed, confirming that litigation privilege can attach before either a defendant knows the full details of what is likely to be unearthed or a decision to prosecute has been taken. A party will often need to make further investigation before it can say that proceedings are likely, and that uncertainty does not in itself prevent proceedings from being in reasonable contemplation.

The Court also held that Andrews J had drawn an "illusory" distinction between civil and criminal proceedings, and noted that while not every SFO manifestation of concern would properly be regarded as adversarial litigation, nonetheless where the SFO specifically made clear to the company the prospect of its criminal prosecution, and legal advisers were engaged to deal with that situation, there was a clear ground for contending that criminal prosecution was in reasonable contemplation.

Dominant purpose: avoiding contemplated litigation

A further necessary ingredient of litigation privilege is that the relevant documents have been prepared for the sole or dominant purpose of the conduct of litigation. Andrews J considered that while documents created for the defence of contemplated proceedings, or to settle litigation already in train, could attract litigation privilege, documents created in order to obtain advice on how to avoid contemplated litigation could not.

The Court of Appeal overturned this finding, holding that in both a civil and criminal context legal advice given so as to head off, avoid or settle reasonably contemplated proceedings is as much protected by litigation privilege as advice given for the purpose of resisting or defending such contemplated proceedings.

Dominant purpose: compliance and remediation

It is in practice notoriously difficult to assess the extent to which a company's internal investigation is conducted for the purpose of fact-finding in accordance with its own compliance requirements, as opposed to for the purpose of proceedings that will likely result if the investigation unearths wrongdoing.

At first instance Andrews J found that documents produced in the course of ENRC's investigation had been produced for the dominant purpose of ascertaining the facts to see what had happened and dealing with compliance and governance, and not for the defence of contemplated proceedings.

The Court of Appeal determined that, on the facts of this case, the need to investigate corruption for compliance and governance reasons was just a subset of the defence of contemplated proceedings, and not a distinct dominant purpose.

It noted that: "Although a reputable company will wish to ensure high ethical standards in the conduct of its business for its own sake, it is undeniable that the 'stick' used to enforce appropriate standards is the criminal law and, in some measure, the civil law also."

As such, where a criminal investigation and prosecution are reasonably in contemplation at the time of undertaking a fact-find, the reason for the company's investigation of allegations can be "brought into the zone where the dominant purpose may be to prevent or deal with litigation." In-house counsel may draw some cautious comfort from the pragmatic acknowledgment that a corporate's investigation is in reality generally addressing both compliance and litigation imperatives.


Respective Counsel for ENRC and the intervening Law Society sought to persuade the Court of Appeal to address and overrule the controversial finding in Three Rivers District Council and others v The Governor & Company of the Bank of England (Three Rivers No 5) [2003] EWCA Civ 474 (Three Rivers (No.5)) that the "client" for the purposes of legal advice privilege constitutes only those individuals within a company authorised to seek and receive legal advice on its behalf.

The Court did not consider it was open to it to ignore the clear determination of the Court of Appeal in Three Rivers (No.5), and said that if the ambit of Three Rivers (No.5) was to be differently decided, that decision would have to be made by the Supreme Court.

Nevertheless, the Court set out its views on the effects of Three Rivers (No.5) as currently interpreted. The decision presents no problems for individuals and small businesses since, as was the position in most 19th century cases, the individual or Board are themselves likely to have information about a case to provide to their lawyer. However, the modern world must cater also for legal advice sought by large corporations, in which the relevant information is unlikely to be in the hands of the Board or in-house legal. The Court considered that if a multi-national corporation cannot ask its lawyers to obtain necessary information from those employees with first-hand knowledge of it, it will be in a less advantageous position than a small entity, and emphasised that, "whatever the rule is, it should be equally applicable to all clients, whatever their size and reach."

The Court also noted the Law Society's submissions that English law on this particular issue is out of step with international common law, despite legal professional privilege being "a classic example of an area where one might expect to see commonality between the laws of common law countries, particularly when so many multinational companies operate across borders and have subsidiaries in numerous common law countries."

As such, the Court noted that, had it been open to it to do so, it would have been in favour of departing from Three Rivers (No.5). It is not yet known whether any party might appeal to the Supreme Court, presenting that opportunity.


Without that further Supreme Court appeal, legal advice privilege remains broadly where it has been for 15 years. With respect to litigation privilege the position is also restored to a more familiar state, with consistency between civil and criminal process, and no distinction drawn between the purposes of defending, settling or avoiding proceedings. Importantly, the Court has signposted how to reconcile the realities of dual-purpose investigations, where both compliance and litigation defence play a part.

Nonetheless, the tests themselves remain stringent. Counsel will remain live to the need to keep under ongoing review and carefully document when adversarial process comes into reasonable contemplation. It is very clear that this will be scrutinised on the evidence, on the specific facts of each case.

The judgment can be found here

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