Lawyers have become increasingly concerned that Legal Professional Privilege (LPP) is being undermined by the Serious Fraud Office (SFO): they are anxious that this fundamental common law right may become further diminished as the SFO increasingly challenges companies which claim LPP while under investigation. But are they right to be concerned, and if so, why is the SFO making them so anxious?
LPP is an ancient common law right - an absolute right - which belongs to the client, either as an individual or as a company, and not the lawyer. There is an obligation on lawyers (a professional duty) to advise clients of their LPP rights, which they can assert whenever appropriate.
However, according to the SFO, companies being investigated by the agency can be asked to waive those rights relating to any information that it might want to access. And if any internal investigation is conducted, the SFO requires that it should be arranged so that LPP does not apply. The quid pro quo is that companies will receive ‘cooperation credit’ from the SFO, which may prove beneficial when it considers any potential prosecution.
What information is privileged, and to what extent, is far from straightforward: each case is different. And waiving LPP carries risks. Information can subsequently be used as evidence against the company showing its hand, while it can also become public during court proceedings and then published by the media if there is no restriction in place. This can have enormous adverse consequences for a company’s brand, share price and reputation.
SFO investigations are routinely complex with myriad regulatory, civil and criminal law issues, often in multiple jurisdictions. Understandably, any company which believes that it might become subject to an external investigation may choose to conduct its own internal investigation first, and consult its lawyers. Problems arise later when the SFO wants to access the investigation records made by that company’s lawyers.
It is therefore unsurprising that most disputes relating to LPP claims have their genesis in requests by the SFO for information which was originally part of an internal investigation - often completed before any SFO investigation has begun. David Green QC, the SFO’s director, has repeatedly expressed concern that such LPP claims are misused to frustrate SFO investigations, and he has said that the SFO will litigate over “false or exaggerated” claims, although this has not yet happened.
Naturally, the SFO wants the maximum possible disclosure to assist in any investigation that it might undertake. Cooperation is important because a company that is seen to be fully cooperative has a much better chance of not facing a courtroom following an investigation.
But further problems potentially arise when witnesses who are interviewed as part of an internal investigation then become witnesses at trial, should the investigation proceed that far. Even so, the SFO is battling to force companies to give up their LPP rights.
According to a recent article by Bankim Thanki QC, Hodge Malek QC, and Colin Passmore, senior partner at Simmons & Simmons: “Alun Milford, SFO General Counsel, recently confirmed that the SFO does not regard itself as constrained from asking for first witness accounts even if they are privileged. He further noted that the SFO will view as a “significant mark of cooperation” any decision to (i) waive a well-made-out claim to privilege and disclose witness accounts sought; or (ii) structure an internal investigation in such a way as not to attract privilege claims over interviews of witnesses.”
In May, Matthew Wagstaff, Joint Head of Bribery and Corruption at the SFO, outlined what the agency regards as proper cooperation. The deal is that ‘cooperation credit’ will be given in return for a waiver of privilege. Genuine claims to privilege are fine, but the SFO does expect to be able to see first witness accounts, which it regards as “factual narrative” and not privileged. Wagstaff also said that companies are expected to provide the SFO with any independent investigation report that it has undertaken.
But there might be a discernible undertone of duress in this arrangement: companies feeling pressured to comply with requests with the implication that they might even be denied the chance of negotiating a Deferred Prosecution Agreement (DPA) with the SFO - only two have so far been agreed since they were introduced last year - and will instead face trial. It also flies in the face of the well-established principle that ‘no adverse inference may be drawn’ when LPP is properly asserted.
Any decision by a company to waive its privilege manifestly needs to balance the risks against the preferable option of cooperating with the SFO and being fully transparent. Indeed, it may sometimes be pragmatic to waive privilege, even taking account of the risks. But such a decision must be made without the prospect of any undue pressure from the SFO. Regrettably, this might not always be possible.
The new DPA arrangements might offer a compromise solution that can be further developed: giving the SFO a brief oral summary of the findings, without any written notes from the internal investigation being handed over. This approach received a sanction from the court in both of the DPAs so far agreed. It may allow companies to co-operate with the SFO without losing their LPP.
For now, it is only an idea. The Law Society of England and Wales launched a consultation about its new guidance on LPP in July, noting that ‘it is of particular significance as LPP has faced threats from several directions of late.’ Its findings have yet to be made public.
In balancing the need to prosecute fraud properly and vigorously, the SFO also has to consider the importance of LPP and the longstanding principle that it is the client’s right. However urgent the imperative to remove potential obstacles to access relevant information relating to a company’s internal investigation, the SFO cannot simply strike at LPP as if it were some kind of Gordian Knot that can be cut through with one blow. Attacking LPP in this way undermines the very basis of the relationship between lawyers and their clients.
In pursuit of justice, the baby should not be thrown out with the bathwater.
(Source: Journalist Dominic Carman Twitter: @CarmanDominic)
