Court of Appeal overturns the controversial and narrow approach to the application of litigation privilege taken by the High Court in SFO v ENRC


On 5 September 2018, in The Director of the SFO v Eurasian Natural Resources Corporation Limited[1], the Court of Appeal ("CA") overturned the controversial and narrow approach taken by the High Court[2] regarding the remit of litigation privilege ("LP") in the context of a contemplated criminal investigation. The CA also provided some interesting thoughts on the definition of a "who is a client" with regard to the application of legal advice privilege ("LAP"), although it ultimately declined to decide the issue, saying this was a matter for determination by the Supreme Court.


The Claimant (the "SFO") is a non-ministerial Department of State whose functions include the investigation and prosecution of crimes involving serious or complex fraud. The Defendant, ENRC, is part of a multinational group of companies operating in the mining and natural resources sector. ENRC mainly operated in Kazakhstan until around 2010, and then following a series of acquisitions, also began operating in Africa from 2010 onwards.

In 2009/10 ENRC became aware of allegations of criminality on the part of certain African companies it was seeking to acquire, including a company called Camrose. In December 2010 ENRC received an email from an apparent whistle-blower alleging corruption and wrong-doing within its Kazakhstani subsidiary. In response to this the Board of ENRC engaged outside lawyers to investigate the allegations the email contained. By April 2011 there were media reports that the SFO had been asked to investigate ENRC in connection with the Camrose deal. ENRC instructed their forensic accountants to carry out a books and records review to identify any issues that might have exposed the company to liability and to support another external law firm with work on reviewing ENRC's compliance programme. Shortly thereafter the outside lawyers advised ENRC that adversarial proceedings may occur as a result of the internal investigation being conducted by them and that in their view, both criminal and civil proceedings can be said to be in reasonable contemplation at this point.

The SFO first wrote to ENRC about the allegations on 10 August 2011 referring to claims of corruption and urging ENRC to consider carefully the SFO's July 2009 Self-Reporting Guidelines. The SFO and ENRC then either met in person or carried out their discussions by way of correspondence until 25 April 2013 when the SFO announced that ENRC was the subject of a criminal investigation. This led to ENRC asserting legal professional privilege in relation to documents created between 2011 and 2013. In February 2016 the SFO issued a Part 8 claim against ENRC for a declaration that those documents were not subject to legal professional privilege and therefore should be produced to the SFO. The four categories of documents that the High Court was asked to consider were:

  • Category 1- notes taken by ENRC's external lawyers of evidence given to them by employees and ex-employees of ENRC and other third parties in connection with the matters under investigation.
  • Category 2- Materials generated by the forensic accountants as part of the books and records review
  • Category 3- documents indicating or containing the factual evidence presented by ENRC's external lawyers to its Nomination and Corporate Governance Committee and / or the ENRC Board in March 2013
  • Category 4- documents referred to in a letter sent by a subsequent firm of external lawyers for ENRC to the SFO including the forensic accountant's reports, e-mails or letters containing those reports, and e-mails from ENRC's head of mergers and acquisitions ( qualified Swiss lawyer) to to a senior ENRC executive.

Judgment of the High Court

Our previous briefing on the decision of the High Court considers the judgment in full. A summary of the decision, made by Andrews J, is set out below.

In the High Court,  Andrews J made an order in favour of the SFO declaring that the documents in the first, second and fourth categories were not privileged and should be produced to the SFO. The judge did allow the claim for LAP to succeed in relation to category 3 documents which were slides and meeting notes presented by ENRC's external legal counsel, to the ENRC Board on 2 occasions as they were prepared for the specific purpose of giving legal advice to ENRC.

In her judgment, Andrews J had held that that the claim for LP fell at the first hurdle in respect of all the categories of documents because ENRC was unable to establish on the evidence that litigation between itself and the SFO was a 'real likelihood rather than a mere possibility' in accordance with the test in USA v Philip Morris. However, even if ENRC had been able to satisfy that test "the documents for which litigation privilege is claimed were not created with the dominant purpose of being used in the context of such litigation"[3]. The judge made a distinction between civil and criminal proceedings indicating that whereas civil proceedings (even if without foundation) could be commenced at any time, criminal proceedings could only be commenced where the prosecutor was satisfied that the test for bringing a prosecution was met; criminal proceedings cannot be in reasonable contemplation unless the defendant knows enough about the investigation to expect a prosecutor to be satisfied that it had sufficient material to satisfy that test. It rejected the submission by ENRC that a criminal investigation by the SFO should be treated as adversarial litigation for the purposes of this privilege. ENRC appealed.

The Judge rejected the claim for LAP in relation to Category 1 documents on the basis that none of the persons interviewed were authorised to seek and receive legal advice on behalf of ENRC and were not therefore the "client"  as considered by the Court of Appeal decision in Three Rivers (No.5)[4]. Further, although these notes were the "working papers" of the lawyers they merely reflected the evidence that the lawyers were given by the witnesses and did not betray the trend of legal advice

The issues dealt with by the CA

The CA approached the appeal on the same basis as that taken by the trial judge; that the issue before the CA was primarily the application of LP to the facts. Issues relating to the application of LAP would naturally flow from the conclusions found by the CA with regard to whether LP applied.

The CA considered nine issues, The four core issues are considered below;

Litigation privilege

i) Issue 1: Was the judge right to determine that, at no stage before all the documents had been created, criminal legal proceedings against ENRC or its subsidiaries or their employees were reasonably in contemplation?

ii) Issue 2: Was the judge right to determine that none of the documents was brought into existence for the dominant purpose of resisting contemplated criminal proceedings against ENRC or its subsidiaries or their employees?

iii) Issue 3: In the circumstances, which if any of the Category 1, 2 or 4 documents are protected by litigation privilege?

Legal advice privilege

iv) Issue 4: What did Three Rivers (No. 5) actually decide?

Litigation privilege

The CA undertook a careful review of all the documents and the factual evidence and held that the judge had been wrong to conclude that ENRC was unable to establish that litigation between itself and the SFO was a real likelihood. The CA held that the contemporaneous documents and evidence of factual witnesses (although hearsay) actually showed the reverse of the judge's findings and "that the whole sub-text of the relationship between ENRC and the SFO was the possibility, if not the likelihood, of prosecution if the self-reporting process did not result in a civil settlement"[5]. The CA acknowledged that further investigations may need to be made before it can be said with certainty that proceedings are likely, but that did not in itself prevent proceedings being in reasonable contemplation.

The CA held that the judge's distinction between criminal and civil proceedings regarding the application of LP was "illusory". The evidence showed that ENRC was informed by the SFO that if it did not co-operate and allow its professional advisers to undertake an investigation, a prosecution may be more likely. The CA said that the judge "was not right to suggest a general principle that litigation privilege cannot attach until either a defendant knows the full details of what is likely to be unearthed or a decision to prosecute has been taken[6]". The CA concluded that criminal legal proceedings were reasonably in contemplation by April 2011 and certainly by the SFO's August 2011 letter.

The next issue the CA considered was whether the documents were created with the dominant purpose of obtaining legal advice relating to the defence or settlement of the contemplated legal proceedings. The judge held that they were not. The CA disagreed with both her factual and legal determination of the issue[7]. It stated that "in both the civil and the criminal context, legal advice given so as to head off, avoid or even settle reasonably contemplated proceedings is as much protected by litigation privilege as advice given for the purpose of resisting or defending such contemplated proceedings"[8]. It held that even if litigation was not the dominant purpose of the investigation at its inception (in December 2010), it became so by April 2011. By this time a criminal prosecution was in ENRC's reasonable contemplation and the documents were brought into existence for the dominant purpose of resisting or avoiding those proceedings[9]. In relation to the documents generated by the forensic accountants, the CA determined that the Judge's conclusion that the dominant purpose of their review was compliance and remediation (rather than resisting or avoiding proceedings) could not stand on the evidence.

The CA therefore concluded (under Issue 3) that documents in Categories 1,2 and 4 (with the exception of the emails in Category 4 for which LP was not claimed) were covered by LP.

Legal advice privilege

ENRC's appeal of the decision of Andrews J in relation to LAP regarded a submission that she had misinterpreted the CA's decision in Three Rivers (No.5) concerning the kind of documents that could be the subject of LAP. To attract privilege all that should be necessary was for an employee to be authorised by the client to provide information to the company's lawyer.

The decision by the CA with respect to the application of LP to the documents rendered the issues in relation to LAP largely theoretical. Extensive arguments were submitted to the CA that the judgment in Three Rivers (No.5)[10] was wrong. The CA acknowledged, as the matter had been fully argued before it and the general wider interest the decision of the High Court had garnered, including an intervention by The Law Society in the appeal, that it would consider the issue although not rule on it as this was a matter for the Supreme Court to determine.  

 The CA said that if it had been able to rule on the issue it "would have determined that Three Rivers (No. 5) decided that communications between an employee of a corporation and the corporation’s lawyers could not attract legal advice privilege unless that employee was tasked with seeking and receiving such advice on behalf of the client, as the BIU was in Three Rivers (No. 5)"[11].

But the CA agreed that there was "much force" in the submissions made by ENRC and The Law Society that if this was the correct interpretation of Three Rivers (No.5) it was wrong. The CA acknowledged that in today's world information upon which legal advice is sought can be in many different hands. The issue for a large corporation is that if it cannot ask its lawyers to obtain information from its employees under the protection of legal advice privilege because those individuals will not all be  ‘the client’, it may be at a disadvantage compared to smaller corporations or individuals. The CA agreed, having been referred to decisions of the Singapore and Hong Kong Appeal Courts, that English law was not aligned with other common law jurisdictions and this was not desirable. The CA concluded that if "it had been open to us to depart from Three Rivers (No.5), we would have been in favour of doing so".

What this means for you?

The decision of the CA is very welcome as it closes any dividing line between LP in civil and criminal matters in relation to when those proceedings may be in 'reasonable contemplation'. The CA found that there was sufficient evidence to show that ENRC had considered they were at risk of SFO proceedings as early as April 2011 and therefore, any documents created by lawyers after this time period would be the subject of protection.

The decision of the High Court had called into question the merits of carrying out a detailed documented internal investigation prior to any self-reporting by a company to a regulator / prosecuting authority. This is now no longer the case as the documents created during this type of  investigation should now be protected as long as they are created when a criminal prosecution is reasonably in contemplation.  The CA did however acknowledge that "not every manifestation of concern by the SFO would properly be regarded as adversarial litigation". Further it did not necessarily follow that once an SFO criminal investigation is reasonably in contemplation, so too would be a criminal prosecution. Ultimately each case would turn on its own facts but in the current case the evidence pointed clearly to a criminal prosecution if the self – reporting process did not avert it[12]. Companies should still carefully consider whether a prosecution is reasonably in contemplation and ensure that it documents this internally so that this evidence  can be used  to support any claim of LP or LAP in these types of situations. At first instance an apparent lack of evidence from ENRC showing that they contemplated or considered that the SFO could prosecute appeared to persuade the judge that litigation was not in 'reasonable contemplation'.  This conclusion was overturned by the CA on the basis that the judge had not considered the evidence correctly.

In respect of LAP, the decision is less surprising, as the court considered itself constrained by previous decisions of the Supreme Court and rightly said that it is for the Supreme Court to determine this issue. However, the comments made by the CA showing an understanding of the commercial realities faced by multi-national corporations in relation to trying to navigate the restrictions of LAP in its current form, hopefully indicate that when the Supreme Court eventually is able to rule, a wider definition of "who is the client?" should result and finally resolve the uncertainty that the decision in Three Rivers (No.5) has created

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[1] [2018] EWCA Civ 2006

[2] Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd [2017] EWHC 1017 (QB)

[3] Para 55

[4] Three Rivers District Council and Others v. Governor and Company of the Bank of England (No. 5) [2003] QB 1556

[5] Para 93

[6] Paras 99-100

[7] Para 102 and 118

[8] Para 102

[9] Para 113

[10]  The Court in SFO v ENRC accepted (at paragraph 81) that "because agents and employees, on authority, stood in the same position in relation to legal professional privilege, once it was established that only communications between the lawyer and the client, and not between the lawyer and an agent of the client, could attract legal advice privilege, communications between a lawyer and an employee of the client (other than employees specifically tasked with seeking and receiving legal advice) could also not be privileged ".

[11] Para 123

[12] Para 97