The High Court has rejected a mining company’s claim for litigation privilege in a test case which for the first time involves potential criminal, rather than civil, litigation.
Accepting that the Eurasian Natural Resources Corporation (ENRC) believed an investigation by the Serious Fraud Office (SFO) was imminent, Mrs Justice Andrews said such an investigation was not “adversarial litigation”.
She went on: “The policy that justifies litigation privilege does not extend to enabling a party to protect itself from having to disclose documents to an investigator.
“Documents that are generated at a time when there is no more than a general apprehension of future litigation cannot be protected by litigation privilege just because an investigation is, or is believed to be imminent.”
Andrews J said the investigation and the start of a prosecution could not be characterised, as “part and parcel of one continuous amorphous process”, as counsel for ENRC contended.
“It is always possible that a prosecution might ensue, depending on what the investigation uncovers; but unless the person who anticipates the investigation is aware of circumstances that, once discovered, make a prosecution likely, it cannot be established that just because there is a real risk of an investigation, there is also a real risk of prosecution.”
Andrews J said that in this case prosecution only became a “real prospect” once it was discovered that there was “some truth” in the allegations, or “some material to support the allegations of corrupt practices”.
The court heard in SFO v ENRC  EWHC 1017 (QB) that the director of the SFO sought a declaration that four categories of documents generated during investigations by solicitors and forensic accountants into the activities of ENRC were not subject to legal professional privilege.
Andrews J said the criminal investigation into the mining company was focused on “allegations of fraud, bribery and corruption in two foreign jurisdictions, one being Kazakhstan, the other, a country in Africa”.
The judge said she was told by Richard Lissack QC, counsel for ENRC, that the case was the first “in which the court has had to consider a claim for litigation privilege against a background in which the adversarial litigation said to have been reasonably in contemplation by the party claiming privilege was criminal, rather than civil”. Andrews J did not dispute this.
However, she said that one “critical difference” between civil and criminal proceedings was that there was “no inhibition” on launching civil proceedings where was “no foundation for them, other than the prospect of sanctions being imposed after the event”.
Andrews J said: “A person may well have reasonable grounds to believe they are going to be subjected to a civil suit at the hands of a disgruntled neighbour, or a commercial competitor, even where there is no properly arguable cause of action, or where the evidence that would support the claim has not yet been gathered.
“Criminal proceedings, on the other hand, cannot be started unless and until the prosecutor is satisfied that there is a sufficient evidential basis for prosecution and the public interest test is also met.
“Criminal proceedings cannot be reasonably contemplated unless the prospective defendant knows enough about what the investigation is likely to unearth, or has unearthed, to appreciate that it is realistic to expect a prosecutor to be satisfied that it has enough material to stand a good chance of securing a conviction.”
Andrews J ruled that the claim for litigation privilege failed in respect of all four categories of documents. However, she allowed a claim for legal advice privilege in respect of the five documents that made up the third category.
“It must be borne in mind that information which would not ordinarily be privileged, even information which is already in the public domain, may fall under the umbrella of legal advice privilege if it is part and parcel of the continuum of confidential communication between lawyer and client whose purpose is the giving or receiving of legal advice.”
A spokesman for ENRC said the company was “very surprised” by the ruling and would appeal.
Graham Huntley, founding partner of Signature Litigation, which acted for ENRC, added: “The effect of this decision is that it is much harder to claim litigation privilege in the criminal context than in a civil one. This is unprincipled and illogical.”
Andrew Smith, a white collar crime lawyer at London firm Corker Binning, said: “This a notable victory for the SFO, which will have profound implications on the practice of corporate internal investigations. Companies can no longer afford to assume that interview records with its officers and employees can lawfully be withheld from the SFO and other prosecuting agencies.
“The SFO’s Director David Green QC has waged a long war against what he sees as unjustified claims of legal privilege. Today’s judgment is a vindication of his approach.”
He said that even if the key finding – that the launch of criminal investigation does not automatically mean that adversarial litigation is in reasonable contemplation – was successfully appealed, “the more intractable challenge facing companies will be to show that documents created during an internal investigation, such as interview records, were created for the ‘dominant purpose’ of future litigation”.
Mr Smith said: “In many investigations this will be impossible to achieve – companies will be unable to assess the prospects of future litigation without conducting interviews or instructing experts, which means that this work is necessarily conducted for a purpose other than its use in potential future litigation.
“The court can easily characterise this work – as many investigations lawyers do – as ‘fact-finding’, which means it will fall outside the scope of litigation privilege.”