Privilege is a perennial issue in investigations and compliance conversations within companies. Given the challenges posed by increased regulatory activity in relation to issues of anti-corruption, money laundering, sanctions, cybercrime, crypto, and ESG enforcement, already touched upon in our previous post, it is now increasingly important for companies to understand both when privilege does and does not apply, and how privilege is best protected and leveraged in an investigations context. Here, we focus on some recent developments in the law of privilege and consider their impact for investigations and compliance issues more generally.
At the outset, it is important to remember that in many jurisdictions, including in the EU and UK, privilege is regarded as more than a rule of evidence. In France and Belgium, for example, violation of legal privilege constitutes a criminal offence. In the UK, the constitutional status of privilege has recently been reiterated by the Court of Session in Scottish Legal Complaints Commission v Murray [2022] CSIH 46, meaning that, unless legislation expressly or by absolutely necessary implication overrides privilege protections, such protections will be implied into the regulatory scheme.
The scope of legal advice privilege
Under English law, legal advice privilege protects confidential communications between a lawyer and a client for the dominant purpose of giving or receiving legal advice, irrespective of the context. By way of example, this applies regardless of whether the advice relates to litigation or a transactional matter. However, not all information and documents generated by lawyers will be protected by privilege, and this is especially the case in transactional matters. In particular, a distinction must be drawn between legal advice (including advice as to what should prudently and sensibly be done in the relevant legal context), which is privileged, and non-legal (e.g., business) advice and transactional documents, which are not privileged. This distinction was recently reiterated by the Tax Tribunal in HMRC v Third Party [2023] UKFTT 00071. The same applies in other contexts. For example, while in-house lawyers at common law enjoy the same privilege as lawyers in private practice, the courts are more likely to question whether an in-house lawyer in a particular communication was truly acting “qua” lawyer (as opposed to in a commercial role). In investigations contexts, legal, business, and reputational issues often arise at the same time, so this distinction is highly relevant to lawyers performing dual or multiple roles.
In the US, the attorney-client privilege similarly protects confidential communications between a lawyer and a client made for the purpose of giving or receiving legal advice. The US Supreme Court was recently asked to clarify the scope of attorney-client privilege protection afforded to communications that include both legal and business advice (‘dual purpose’ communications). See In re Grand Jury, 23 F.4th 1088 (9th Cir. 2021), cert. granted, 143 S. Ct. 80 (2022), cert. dismissed as improvidently granted, 143 S. Ct. 543 (2023) (per curiam). In re Grand Jury had the potential to affect privilege rules for attorneys nationwide in the US, but given the dismissal, the US Supreme Court will leave for another day the resolution of any conflict among US courts regarding the appropriate legal test for determining whether dual purpose communications are protected by the attorney-client privilege: (a) under the ‘primary purpose’ test, a court would protect as privileged those communications between a lawyer and client made primarily for the purpose of seeking or providing legal advice; (b) under the ‘significant purpose’ test, a court would protect as privileged those communications where legal advice was one of the significant purposes for the communication, even if not the primary purpose (and a non-legal purpose was more significant). While it might be surprising to read that there is some difference in how US courts might determine whether dual purpose communications are disclosable or protected by the attorney-client privilege, it was not until 2020 that the English courts in R (Jet2.com) v Civil Aviation Authority [2020] EWCA Civ 35 came down in favour of a dominant purpose test for legal advice privilege. We explore the in re Grand Jury decision in greater detail here.
The Court of Justice of the European Union (CJEU) has recently handed down a substantive decision on the scope of legal advice privilege applicable to all areas of EU law. In C-694/20 Orde van Vlaamse Balies and others v Vlaamse Regering, the CJEU held that privilege applied beyond the right of defence to the seeking and giving of legal advice even in a non-contentious context. While this has long been recognised in the common law (the leading English decision of Greenough v Gaskell (1833) 1 My. & K. 98 dates from 1833), the CJEU’s jurisprudence to date had concerned contentious competition proceedings. The CJEU annulled amendments to a directive that required lawyers prevented by privilege rules applicable in their jurisdiction from disclosing certain ‘aggressive’ cross-border tax planning mechanisms, to make a disclosure to another intermediary instead of a tax authority. The CJEU regarded this as a disproportionate interference with the right to privilege, which enjoyed an enhanced protection under Article 7 of the Charter of Fundamental Rights and Article 8(1) of the European Convention on Human Rights.
The scope of litigation privilege
English litigation privilege protects communications between a lawyer or their client (or a litigant acting on their own account) and third parties (such as factual or expert witnesses) for the dominant purpose of conducting adversarial legal proceedings which are existing, pending or reasonably contemplated, i.e., obtaining advice, evidence, or information in relation to the merits of litigation. In the recent decision of Al Sadeq v Dechert LLP [2023] EWHC 795 (KB), the High Court found that a party need not necessarily itself be a party to the litigation to claim litigation privilege, provided they have a sufficient interest in the litigation such that they are motivated to seek legal advice and communicate with third parties in that context. Although this decision concerned the victim of an alleged crime, it is conceivable that the principle could be applied equally to a company with the status of a witness in criminal enforcement proceedings or investigations.
There has been some debate about whether legal advice privilege and litigation privilege are mutually exclusive or whether they overlap, notably, whether lawyer/client communications can be protected by litigation privilege in addition to legal advice privilege, if they are made for the dominant purpose of litigation. Given that, at least as a matter of English law, both legal advice privilege and litigation privilege form part of a “single, integral privilege” with the same degree of absolute protection, the issue is less acute than in the US, where the work product doctrine is governed by different (and more qualified) rules than the attorney-client privilege.
That said, in Loreley Financing v Crédit Suisse [2022] EWCA Civ 1484, the English Court of Appeal proceeded on the assumption that lawyer/client communications could be subject to litigation privilege, despite the case law being unclear on this point. That case concerned the issue of whether the identity of persons authorised to give instructions to lawyers in relation to litigation is itself subject to litigation privilege. The Court held that usually, it is not, save where disclosure of those identities would inhibit candid exchanges between lawyer and client. However, the Court also recognised that the identities of factual and expert witnesses do continue to be privileged unless and until deployed in litigation. The point is equally relevant in the investigations context. To give just one example, where a company grants investigators a limited waiver over its witness interviews (assuming that these interviews were made for the dominant purpose of ongoing or reasonably contemplated litigation), the company should continue to receive appropriate cooperation credit for the waiver. Loreley is a complex decision which upturns much of the orthodox thinking on litigation privilege, including its rationale and scope. We analyse these issues in further detail in our previous post and briefing.
Confidentiality and privilege
The English courts have recently had to consider whether privileged material held by employees on their work computers, servers, and email systems remains privileged vis-à-vis their employer. It is likely to be quite common, especially in the post-Covid world and in an age of ‘bring your own device’ policies, for work and private emails and documents to be mixed. The starting point is that a “party who has a document to which privilege attaches is entitled to deploy that document in legal proceedings.” However, the thrust of the recent English cases is that such documents and communications will usually remain privileged as against the employer (and as against the world at large). In Jinxin v Aser Media Pte Ltd [2022] EWHC 2856, the High Court stated that lawyer/client communications are presumptively confidential. Where a third party comes into possession of such communications, the critical question was whether they had been communicated, objectively and on the facts, “in circumstances importing an obligation of confidence.” Company policy permitting the monitoring of communications was not sufficient of itself to destroy that obligation of confidence. Privilege was thus maintained and could be asserted by the holder (e.g., by taking out an injunction). The High Court in Taylor v Evans [2023] EWHC 935 (KB) came to a similar conclusion. In the investigations context, this may become relevant where an employee’s data is seized, or production is ordered by an authority. Companies faced with a production request, such as a “section 2 order” issued by the UK’s Serious Fraud Office, will need to consider whether employees have independent claims to privilege, in addition to the company’s own privilege – although they should already undertake a similar exercise where there is a possibility of a director or employee and the company having a joint retainer or joint interest privilege.
Some US courts may take a tougher stance on issues of waiver and loss of confidentiality. For example, in Fourth Dimension Software v. Der Touristik Deutschland GmbH, 19-cv-05561-CRB (AGT) (N.D. Cal. Sep. 14, 2021), the US District Court for the Northern District of California (applying California law) held that where a company CEO had sent privileged documents to a hotel front desk for printing (using a generic email address that various hotel staff had access to, and without demarcating the documents as confidential or instructing the staff not to read or share its contents), any confidentiality and hence privilege in the documents had been waived. A cautionary tale that should remind companies and those working within them that taking reasonable steps to maintain confidentiality is crucial to protecting the company’s privilege.
Crime-fraud exception
The so-called crime-fraud (or ‘iniquity’) exception, recognised in English and US law, is an important exception to privilege, though properly speaking, it is not an exception at all, since where the exception applies, privilege does not attach in the first place. In the Al Sadeq decision (above), the English High Court was faced with an argument that documents “reporting on” criminal or fraudulent conduct should fall within the exception. The Court disagreed, finding that the crime-fraud exception should apply only in “exceptional” circumstances, and only to documents criminal or fraudulent in themselves, or furthering a criminal or fraudulent purpose.
Conclusion
The law of privilege continues to develop and evolve. Given the importance of privilege to investigations and compliance – in the context of undertaking internal investigations, effecting limited waivers, production orders, raids, shareholder litigation, etc. – companies need to stay abreast of the changes. The differences in approach to privilege across jurisdictions create an additional layer of complexity in cross-border investigations. In each case, there is a way to navigate these issues to maximum effect, provided the differences and nuances are understood from the outset so that an appropriate approach can be adopted taking into account the various issues at play.
