News Business Crime & Financial Services 10th May 2017

SFO v Eurasian Natural Resources Corporation Ltd: internal investigations under threat

On Monday the High Court ruled in a landmark case brought by the SFO that the Eurasian Natural Resources Corporation [‘ENRC’] must hand over documents generated by an internal investigation.

ENRC began an internal investigation in 2011 following whistleblower allegations of corruption, bribery and fraud in its operations in Kazakhstan and reports of similar misconduct in its African mining operations. Over the next two years, ENRC met regularly with the SFO, which launched its own criminal investigation in 2013.

The SFO sought to compel production of documents from the internal investigation under section 2 of the CJA 1987. ENRC resisted on grounds of  litigation privilege and/or legal advice privilege  The SFO accepted that any legal advice within the documents might be redacted but disputed the general claims to privilege.

Andrews J held that legal advice privilege did not attach to communications by a party’s lawyer with third parties in the course of gathering evidence and making inquiries. Factual findings with a solicitor carrying out investigations are not privileged, only any advice given about them. Nor did legal advice privilege attach to lawyers’ working papers unless they betrayed the tenor of legal advice given.

In relation to litigation privilege, Andrews J held that litigation privilege cannot protect documents produced to enable advice to be taken about litigation, or to avoid litigation. Perhaps surprisingly, she held that “the reasonable contemplation of a criminal investigation does not necessarily equate to the reasonable contemplation of a prosecution… The question whether the person anticipating a criminal investigation also contemplates that prosecution is likely (though not more likely than not) to follow the investigation, rather than just possible, must therefore be considered on a case by case basis.”

She further held that litigation privilege did not apply to documents prepared during ENRC’s internal investigation because they were not prepared with the sole or dominant purpose of conducting reasonably anticipated adversarial litigation. The investigation was a fact-finding exercise to establish the truth of the allegations. “Avoidance of a criminal investigation cannot be equated with the conduct of a defence to a criminal prosecution”.

ENRC considered but decided against self-reporting following the internal investigation, a fact relied on by Andrews J. “ENRC repeatedly promised that it would give full and frank disclosure of the results of its internal investigations to the SFO, but then changed its mind,” Andrews J held. “[D]ocuments created with the specific purpose or intention of showing them to the potential adversary in litigation are not subject to litigation privilege.”

ENRC intend to seek permission to appeal what their solicitor, Graham Huntley of Signature Litigation, describes as an “unprincipled and illogical” decision. It is likely that the Court of Appeal will take this opportunity to give a definitive ruling in this controversial area.

If the ruling stands, it may have a chilling effect on internal investigations. Any documents so generated could potentially be seized by the SFO and other regulatory and investigatory bodies. Corporate clients will no doubt want to follow the appeal process carefully to see how matters now progress.

The judgment is available to view here

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