At the beginning of her judgment of 9 May 2017 in the case between the Serious Fraud Office and Eurasian Natural Resources Corporation, the Honourable Mrs Justice Andrews described legal professional privileges (LLP) as ‘a fundamental human right guaranteed by the common law, and a principle which is central to the administration of justice.’ Some might say that she spent the next ten pages of her judgment chipping away at that ‘fundamental human right'.
In a partial victory for ENRC and regulatory and compliance practitioners, the High Court has granted ENRC the opportunity to appeal the judgment of Andrews J. It remains to be seen whether this is a temporary reprieve or the start of a reversal of fortunes for LPP, which has recently seen a number of judgments restricting its scope significantly.
A person’s right to claim LPP has come to be rightly accepted as a central pillar of justice system, affording them fair access to the legal justice system by protecting their, potentially prejudicial, disclosures to their lawyers from future disclosure against their wishes. Its importance grew over the centuries, but some question whether, in the judgments of Andrews J and Hildyard J in the RBS Rights Issue Litigation, the judiciary interpreted the boundaries of the right correctly for the modern age.
Both judgments sprung out of investigations by respectable law firms at the behest of companies worried about potential, internal wrongdoing. Both were done in the shadow of regulatory investigations. And in both instances the courts found that LPP did not extend over transcripts or note of interviews that those respectable law firms carried out with employees of the companies at their request.
The purpose of LPP is to afford a person protection where they have made detrimental disclosures to lawyers from whom they have sought advice. Without its assurance, participants of the justice system may find or perceive that they are at a disadvantage. From this perspective, both ENRC and RBS’s claims to privilege seem entirely justified – their respective law firms created the documents during investigations, the purpose of which was clearly to provide them with legal advice on their (tricky) positions.
However, Andrews J and Hildyard J both found that LPP did not apply: firstly because the employees who participated in those interviews were not ‘emanations’ of their companies and were therefore not ‘clients’ of the lawyers interviewing them; and secondly because the regulatory investigations in whose shadow the interviews were undertaken did not qualify as ‘litigation’.
So, is this simply a case of literal interpretation of the rules gaining a victory over the purposive approach? The background to the SFO’s investigation into ENRC suggests that there is more at play in this situation than that. It is true that the threat of an SFO (or SOCA) investigation was the prompt for ENRC to initiate an internal investigation. However, though the company denies it, it is also clear that ENRC intended for that investigation to develop into a Deferred Prosecution Agreement. As such, the company was preparing to self-report as the first step on that path.
The Self-Reporting Guidelines make it clear that companies wishing to avail themselves of the potential benefit of self-reporting must make full and frank disclosure to the investigating authority. Under those circumstances, whilst its obligations to its client remains paramount, the independent law firm could be said to play a twin role advising its client and ensuring that the investigating authority remains satisfied about the ‘fullness’ and the ‘frankness’ of the company’s disclosure. In the case of ENRC, the firms originally appointed to walk this potentially treacherous path were DLA Piper and then Dechert (the transfer a result of a change of employment by the relevant partner, Neil Gerrard).
It is perhaps an understatement to say that ENRC and Dechert have had a falling out. They are currently locking horns in litigation over Dechert’s £11 million invoices. ENRC has raised various issues in those proceedings, and it remains to be seen which, if any, the court upholds, but one of them is that Mr Gerrard had a close relationship with the SFO. In particular, ENRC complains about a number of meetings that Mr Gerrard conducted with representatives of the government department without it.
It appears that the potential Deferred Prosecution Agreement was a victim of the falling out between ENRC and Dechert. Was that because ENRC was unwilling to provide the level of cooperation that Dechert advised was necessary or because it concluded that Dechert’s £11 million was excessive? In any event, to what extent was the order to give disclosure influenced by the fact that, it appears, the parties’ intentions were always to provide the documents to the SFO voluntarily under the Self-Reporting Guidelines? Certainly, Andrews J highlights this fact at several points in her judgment.
Ben Pilbrow is a senior associate in the Commercial Disputes and Regulation Department of Shepherd and Wedderburn