The case that rescued the internal investigation. For several years, a High Court ruling had made companies genuinely afraid to investigate their own possible wrongdoing, on the basis that doing so thoroughly would simply hand a prosecutor a ready-made case. The Court of Appeal reversed that ruling and restored the orthodox, and far more workable, understanding of litigation privilege.
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Full name: Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd
Citation: [2018] EWCA Civ 2006
Court: Court of Appeal (Civil Division) (Sir Brian Leveson P, Sir Geoffrey Vos C, McCombe LJ)
Judgment: 5 September 2018
Subject: Whether documents generated during an internal investigation into suspected criminality attracted litigation privilege
Result: Appeal allowed. The High Court’s refusal of privilege was reversed; the disputed categories of document were held to be protected by litigation privilege.
The Facts
Eurasian Natural Resources Corporation Ltd (ENRC) was part of a multinational mining and natural resources group. In late 2010 it received, among other things, an email from a purported whistle-blower alleging corruption and financial wrongdoing connected with its operations and acquisitions in Kazakhstan and Africa. ENRC instructed external solicitors, who in turn instructed forensic accountants, to investigate.
The Serious Fraud Office made informal contact in 2011, encouraging ENRC to consider self-reporting under its published policy on corporate self-reporting, which itself signalled that a failure to self-report honestly could increase the risk of prosecution. ENRC's lawyers continued the internal investigation over several years, including interviewing employees and reviewing books and records, while maintaining a dialogue with the SFO. In April 2013 the SFO opened a formal criminal investigation, and ENRC declined to hand over the work product of its internal investigation, asserting privilege over three categories: solicitors’ notes of interviews with employees and third parties, materials generated by the forensic accountants during their books-and-records review, and documents reflecting reports to the ENRC board and its nominated committee overseeing the investigation.
Procedural History
- High Court (Andrews J) [2017] EWHC 1017 (QB): held that none of the three categories attracted litigation privilege. The judge found that, at the relevant times, adversarial criminal litigation was not in reasonable contemplation (ENRC was still at the stage of finding out whether there was anything to disclose, not yet resisting a prosecution), and that, in any event, the documents had not been created for the dominant purpose of litigation but for the purpose of finding out what had happened.
- Court of Appeal [2018] EWCA Civ 2006: allowed ENRC’s appeal on all three categories (save for a small number of specific documents remitted for further consideration), holding that the judge had erred both on when a criminal prosecution was reasonably in contemplation and on the dominant purpose analysis.
The Issues
- At what point, if at all, was a criminal prosecution of ENRC reasonably in contemplation?
- Were the disputed documents created for the dominant purpose of that reasonably contemplated litigation, or for the different purpose of finding out what had happened so ENRC could decide whether to self-report?
- Whether the High Court's earlier decision in Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2004] EWCA Civ 218 had, correctly or otherwise, narrowed the scope of legal advice privilege for corporate clients, and whether the Court of Appeal should revisit that question.
The Litigation Privilege Framework
Litigation privilege protects confidential communications between a lawyer and client, or between either of them and a third party, made for the dominant purpose of obtaining information or advice in connection with existing or reasonably contemplated adversarial litigation. Two elements must be satisfied: litigation must be reasonably in contemplation (a mere general apprehension of future litigation is not enough, but litigation need not be a certainty), and the document must have been prepared for the dominant, not merely a, purpose connected with that litigation.
The Ratio: Reasonable Contemplation and Dominant Purpose
On dominant purpose, the Court of Appeal held that the judge had wrongly separated "finding out what happened, so as to decide whether to self-report" from "obtaining evidence and advice for reasonably contemplated litigation," treating them as mutually exclusive. In reality, investigating the facts in order to decide how to respond to, avoid, or settle contemplated criminal proceedings is a litigation purpose. The Court restored the position established in Re Highgrade Traders Ltd [1984] BCLC 151, that material gathered with a view to avoiding litigation, not just fighting it, can still be created for the dominant purpose of that litigation, provided the litigation is reasonably in contemplation at the relevant time.
Authorities Considered
Re Highgrade Traders Ltd [1984] BCLC 151
The foundational authority the Court of Appeal restored to primacy: a report obtained to determine the cause of a fire, with a view to advising on and potentially resisting an anticipated insurance claim, was privileged even though its immediate purpose was investigative rather than adversarial, because the anticipated claim was reasonably in contemplation and the investigation was for the dominant purpose of dealing with it.
Three Rivers District Council v Bank of England (No 6) [2004] EWCA Civ 218
A legal advice privilege case, not a litigation privilege case, but frequently cited (including by the SFO) in support of a narrow, formalistic approach to corporate privilege generally. The Court of Appeal in ENRC confined Three Rivers (No 6) to its own facts and its own species of privilege, declining to extend its narrow reasoning into the litigation privilege context, while noting (obiter, since the point did not strictly need to be decided) that Three Rivers (No 6)’s narrow definition of the corporate "client" for legal advice privilege was itself ripe for reconsideration by the Supreme Court.
Waugh v British Railways Board [1980] AC 521
The House of Lords authority establishing the dominant purpose test itself, replacing the more generous "sole purpose" test that had applied previously and setting the threshold the Court of Appeal in ENRC applied to the disputed categories of document.
Obiter on Legal Advice Privilege
Although the appeal was decided on litigation privilege, the Court of Appeal went out of its way to signal, obiter, that it considered Three Rivers (No 6)’s narrow approach to legal advice privilege (under which only communications with the small group of individuals specifically authorised to seek and receive legal advice on the corporation’s behalf are protected, even though other employees may hold the relevant facts) to be difficult to justify and out of step with the practical reality of how large organisations gather information for lawyers. Because Three Rivers (No 6) is itself a Court of Appeal decision, only the Supreme Court could formally overturn it, and the point remains, strictly, unresolved for legal advice privilege even after ENRC. Companies structuring internal investigations should not assume legal advice privilege will protect fact-finding interviews with ordinary employees; litigation privilege, where the ENRC test is met, remains the safer and broader protection.
Relevance to HMRC Investigations
ENRC is directly relevant wherever a business or individual conducts, or considers conducting, an internal investigation before HMRC formally opens a criminal investigation or issues a Code of Practice 9 letter. The same reasoning applies: once a person is aware of circumstances that indicate a real possibility HMRC will pursue criminal or COP9 civil fraud proceedings, and takes seriously HMRC's own encouragement (mirroring the SFO's) to make a full and prompt disclosure, an HMRC criminal investigation or COP9 process can be reasonably in contemplation well before any formal HMRC step is taken. Investigation materials genuinely created for the dominant purpose of responding to that reasonably contemplated process, including deciding whether to self-report or apply for the Contractual Disclosure Facility, are capable of protection.
Practitioner Application
Structuring an investigation to preserve privilege
- Instruct external lawyers promptly once circumstances indicating possible serious wrongdoing come to light, and record in writing, contemporaneously, why a criminal investigation or COP9 process is reasonably in contemplation at that point, this evidential record matters enormously if privilege is later challenged.
- Keep interview notes and accountants’ work product within the litigation-privilege frame by ensuring the engagement letter and scope of work are expressed by reference to advising on and responding to the contemplated prosecution or regulatory process, not merely "finding out what happened" in the abstract.
- Do not rely on legal advice privilege alone for interviews with employees outside the narrow “client” group as defined by Three Rivers (No 6); structure the investigation so litigation privilege, which has a broader test, is the primary basis relied on.
- Separate primary documents from privileged analysis. The underlying facts and pre-existing business records remain disclosable regardless of privilege; only the lawyer's or accountant's record of interviews and analysis is capable of protection.
Common mistakes
- Waiting until a formal HMRC or SFO investigation opens before instructing lawyers, by which point the earliest and most candid internal accounts may already exist in unprotected form.
- Assuming that because an investigation is "internal" and precedes any charge, nothing created during it can be privileged: ENRC specifically rejects that assumption.
- Conflating legal advice privilege and litigation privilege, and structuring the investigation around the narrower of the two.
Frequently Asked Questions
What did SFO v ENRC decide?
That documents created during an internal investigation, including lawyers’ interview notes and a forensic accountants’ books-and-records review, are capable of being protected by litigation privilege where their dominant purpose was to obtain evidence or advice for actual or reasonably contemplated adversarial litigation, including material gathered with a view to avoiding or settling that litigation rather than fighting it.
When is a criminal investigation "reasonably in contemplation" for privilege purposes?
This is largely a factual question. Where a company knows of circumstances indicating a real possibility of criminal conduct and takes seriously a regulator's published encouragement to self-report, a criminal investigation and prosecution can reasonably be in contemplation from the point wrongdoing first comes to light, well before any formal regulatory involvement.
Does material created to avoid litigation still attract litigation privilege?
Yes. Following Re Highgrade Traders, litigation privilege protects material whose dominant purpose is to obtain advice or evidence in relation to reasonably contemplated litigation, even where the immediate aim is to avoid, settle or manage that litigation rather than to fight it in court.
Are the underlying facts uncovered during an investigation privileged?
No. Privilege attaches to the lawyer's record of an interview or the accountants’ analysis, not to the underlying facts, which a regulator can still seek to establish through its own investigation, witness evidence or disclosure of non-privileged primary documents.