Navigating privilege in global investigations

Privilege is a fundamental right and powerful tool under both English and US law, granting individuals and corporate entities the right to resist disclosure of confidential and potentially sensitive material to third parties, including regulators and prosecutors. Privilege protection is not, however, available for every communication, even when the communications involve lawyers, and inappropriate claims of privilege are viewed unfavourably in both England and Wales and the US. For example, in recent months there have been a number of pronouncements from both the Serious Fraud Office and the Financial Conduct Authority denouncing improper claims to privilege and making clear that individuals and entities making erroneous claims may not receive cooperation credit.

That being the case, it is important that individuals and entities understand the scope of privilege, especially in the context of investigations. There is no such thing as ‘investigation privilege’ in either England or the United States, and it cannot be assumed that all communications and documents prepared during the course of an investigation will benefit from privilege protection. In global investigations, there is the added complexity that material that is granted privilege protection in one jurisdiction may not be granted privilege protection in another.

When an issue or investigation first arises, companies respond in a number of ways. Some will choose to address the matter internally, usually through the in-house legal and/or compliance teams or through a dedicated investigations function. Others will appoint external advisers to assist, for example by instructing accountants or lawyers to carry out forensic reviews or to conduct the investigation or discrete aspects of the investigation such as interviews. The extent to which materials prepared during the course of an investigation will be privileged will depend on the privilege rules that apply, as well as the conflict of law rules on privilege of the jurisdiction examining the question.

There are two main types of privilege under English and US law that serve to protect communications arising in the context of investigations. Broadly, these privileges protect communications between lawyer and client (legal advice privilege/attorney-client privilege) and documents prepared for litigation (litigation privilege/work product protection). There are strict rules for when each of these types of privilege apply. There are also some important differences between the English and US approaches that corporates should take into account when conducting an investigation involving both jurisdictions.

Legal advice privilege/ attorney-client privilege

Legal advice privilege under English law protects written or oral confidential communications between a lawyer and a client for the purpose of giving or receiving legal advice, as well as documents which reflect such a communication.

Similarly, the attorney-client privilege under US law generally protects communications between in-house or external counsel and their clients that are intended to be confidential and made for the purpose of seeking or obtaining legal assistance or advice.

‘‘... a man must be able to consult his lawyer in confidence, since otherwise he might hold back half the truth. The client must be sure that what he tells his lawyer in confidence will never be revealed without his consent. Legal professional privilege is thus much more than an ordinary rule of evidence ... It is a fundamental condition on which the administration of justice as a whole rests ...’  (R v Derby Magistrates, ex p B [1996] 1 AC 487).

Legal advice privilege under English law protects written or oral confidential communications between a lawyer and a client for the purpose of giving or receiving legal advice, as well as documents which reflect such a communication.

Similarly, the attorney-client privilege under US law generally protects communications between in-house or external counsel and their clients that are intended to be confidential and made for the purpose of seeking or obtaining legal assistance or advice.

Requirement for a lawyer?

Under English law, there must be a ‘lawyer’ on the communication for legal advice privilege to apply. While this is defined widely to include solicitors, barristers, and foreign lawyers admitted to practice in their home jurisdiction, ‘lawyer’ does not extend to other professionals, such as accountants, even where they are purporting to provide legal advice, or to a non-legally-qualified compliance officer or investigations function – whether internal or external. Although English law does not draw any distinction between in-house lawyers and lawyers in private practice, the European Court of Justice has held that communications between a company and its in-house lawyers in the context of EU competition investigations are not protected by legal advice privilege on the basis that, unlike external lawyers, in-house lawyers are not deemed sufficiently independent.

The definition of lawyer for the purposes of attorney-client privilege under US law is also defined widely. In contrast to the English law position, attorney-client privilege can also protect communications with non-legal advisers if the purpose of the communication is to facilitate the rendering of legal service by the attorney. For example, communications and materials created during an investigation have been found to be privileged even if they are the result of interviews by non-attorneys so long as the non-attorneys are serving as ‘agents’ of the attorneys in the investigation.

Who is the client?

Under English law, only communications between a lawyer and a ‘client’ will be protected by legal advice privilege, and the frequently-posed question of ‘who is the client?’ for these purposes continues to cause unease. Not all communications that the lawyer has with employees at the corporate client will be privileged. Instead, ‘client’ is narrowly construed under English law to refer only to those individuals who, as a matter of fact, are authorised to give instructions to and receive advice from the lawyer in relation to the issue at hand. Who is the ‘client’ should be kept under review given that the individuals at the corporate client dealing with the lawyers will change over time.

In the United States, an employee is usually considered part of the corporate client group as long as four conditions are met:

1. the communication is authorised by company superiors;
2. the employee was aware that the communication related to legal advice;
3. the communication concerns information that cannot be obtained from more senior employees; and
4. the communication relates to the employee’s duties.

Communications between lawyers and employees who are not part of the corporate client group may be privileged under English and US law where litigation privilege or the work product doctrine applies – i.e. where the communication or document was prepared in anticipation of actual or contemplated litigation (see below).

"The purpose of the attorney-client privilege is ‘to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.’ ".(Upjohn Co. v United States, 449 US 383, 389 (1981))

What is a communication?

For legal advice privilege to apply under English law, there must be a communication between a lawyer and a client, or a document that reflects such a communication. This means that any preparatory material of the client that is not communicated to the lawyer may not be privileged under legal advice privilege principles.

By contrast, a lawyer’s preparatory material is privileged; the general rule is that if a lawyer commits to paper, during the course of his retainer, matters that he knows only as a consequence of the professional relationship with his client, those papers will be privileged even if they are not sent to the client.
Similar to English law, US law requires a communication to trigger the attorney-client privilege. The communication can be written or oral and can be to or from a lawyer. While US law protects the communication as long as it is for the purpose of seeking or obtaining legal advice, underlying facts that form part of the communication are generally not protected by the privilege unless they are themselves privileged. Likewise, documents transmitted to a lawyer are not shielded by privilege solely because they were communicated to a lawyer.

What is legal advice?

Legal advice privilege under English law arises in the context of giving or receiving legal advice. This is construed widely to cover advice given in a ‘relevant legal context’, including presentational advice on how to present a case to an inquiry, but may not cover situations where the lawyer is acting as general business adviser and advising on, for example, investment or finance policy or other business matters.

In the recent English case of Property Alliance Group Limited and The Royal Bank of Scotland plc [2015] EWHC 3187 (Ch), the High Court upheld a claim to privilege by RBS in respect of certain factual updates and minutes prepared by Clifford Chance in the context of LIBOR investigations by regulators in various jurisdictions, given that they were part of the ‘continuum’ of communications between lawyer and client in a ‘relevant legal context’ – which in this case was to provide ‘advice and assistance’ in relation to the serious and complex matter of how to deal with and coordinate communications and responses to various regulators whose investigations had potentially serious consequences in terms of penalties and private action.

In the US case In re Kellogg Brown & Root, 756 F.3d 754 (D.C. Cir. 2014), the D.C. Circuit Court held that communications and materials created during a company’s confidential internal investigation are protected by the attorney-client privilege when ‘one of the significant purposes’ of the investigation is to obtain legal advice.

The English law position

Where a lawyer is not involved, legal advice privilege will not apply. Communications with or material produced by external or internal non-legal functions in the course of an investigation will only be privileged as a matter of English law where litigation privilege applies.

Under English law, litigation privilege protects confidential written or oral communications between client or lawyer (on the one hand) and third parties (on the other), or other documents created by or on behalf of the client or his lawyer, which come into existence once litigation is in contemplation or has commenced and the dominant purpose of the communication or document is for use in the litigation.

Litigation privilege is therefore wider than legal advice privilege and can protect communications with and documents prepared by accountants and non-legal investigations functions during the course of an investigation. While investigations can constitute ‘litigation’ for litigation privilege purposes, exactly when litigation can be treated to be in contemplation in the context of an investigation is always a matter of judgment.

The starting position is that the situation must be adversarial. Whether or not investigations and inquiries are sufficiently adversarial to constitute ‘litigation’ for litigation privilege purposes will depend on the nature of the investigation or inquiry and how it is carried out. Litigation will not include processes which are purely administrative or fact-finding. Litigation privilege may, however, be available where the purpose of the internal investigation is to defend claims which are genuinely anticipated.

In practice, the nature of some inquiries and investigations may change over time from being fact-finding to adversarial, allowing litigation privilege to apply to the later stages, if not the earlier stages. The initial or informal stages of a regulatory investigation, where the relevant agency is using its evidence-gathering powers as part of an investigation of the facts giving rise to the concern, may well not be sufficiently adversarial even where regulators have set out suspected breaches and/or offences.

Exactly when an investigation becomes adversarial enough to constitute litigation will vary from case to case. In the course of regulatory proceedings, the point at which the regulator formally states its case against the company in question is likely to signal that litigation is in contemplation.
Even once litigation can be said to be in contemplation, or litigation has commenced, to qualify for protection as privileged material the dominant purpose of the communications must be for use in the actual or contemplated litigation.

The US law position

Where communications with non-lawyers are not protected by attorney-client privilege, they may be protected by the work product doctrine. In many US jurisdictions the work product doctrine functions in a similar manner as litigation privilege under English law—typically protecting documents prepared by the attorney, client or any third party so long as they were prepared in anticipation of litigation or for trial.

Actual litigation is not necessary but there needs to be a threat of litigation. In some jurisdictions, a threat of litigation is present when litigation is imminent. In others, there need only be a credible probability that litigation will ensue. In the context of government investigations, courts generally find that litigation is imminent or that there is a credible probability that litigation will ensue once the investigation has begun.

Even when there is a threat of litigation, the document must generally have been prepared because of the anticipated litigation to warrant protection.

The English law position

There are circumstances where it may be necessary for legal advice to be circulated outside of the ‘client’ group, whether to the board of directors who may not constitute the ‘client’ for legal advice privilege purposes, or externally – perhaps to other professional advisers such as accountants. This is possible under English law, but must be done carefully.

A fundamental component of privilege is confidentiality, and therefore the key is to maintain confidentiality in the privileged material: if the privileged material is circulated too widely, there is a risk that confidentiality – which is a pre-requisite to privilege – will be lost.

It is not just a matter of not communicating privileged advice in a public area, or of not posting privileged material online. Confidentiality, and therefore privilege, may be lost by circulating legal advice to a wide group of people beyond the ‘client’ group. Care must therefore be taken to ensure that the privileged document is not circulated to more people than necessary.

It is also important to make clear when circulating privileged material that the document is marked as confidential and privileged, and that it should be treated as confidential and not be circulated any further. Unless the sender is an in-house lawyer giving legal advice, so far as possible the sender should refrain from providing any written commentary on the advice, as that commentary may not itself be privileged.

The same risks arise when circulating legal advice to third parties outside the corporate client, including to regulators and prosecutors. In addition to the above safeguards, it will be prudent to specify the limited purpose for which the advice is being disclosed and to make clear that no waiver of privilege is intended as against the wider world. Confidentiality agreements may also be appropriate.

As a general matter, it is prudent to avoid, as far as possible, the transmission of particularly sensitive information by email as it is more difficult to control the limits of distribution. IT safeguards should be put in place to ensure that risks are minimised.

The US law position

As a general rule, circulation or disclosure of privileged material under US law – especially documents covered by attorney-client privilege – is more likely to lead to a waiver of privilege than under English law. The waiver can occur through disclosure to government regulators, parties to legal proceedings, or a company’s outside auditors. Privilege can also be waived by broad dissemination within a company. The law varies among US jurisdictions in relation to circulation of privileged material and should be reviewed carefully prior to disclosure. The sharing of information with experts, including accountants, retained for the specific purpose of assisting in-house or external counsel in an investigation may be protected by the attorney-client and work product privileges.

The privilege rules that apply to communications within global businesses will depend on the country in which proceedings are brought. Even where the existence and control of privilege has been established, difficult questions can arise about the extent to which privilege recognised in one jurisdiction will be respected in another.

The English law position

Where proceedings are brought in England, the English courts will apply the English law on privilege to determine the extent to which documents can be withheld. So long as a document satisfies the test for legal advice privilege or litigation privilege under English law, the document will be treated as privileged, and it does not matter that the document would not have been privileged under any other law. This is the case even where foreign lawyers advise foreign clients on foreign law, regardless of the location of client and lawyer.

By the same token, the English courts will not treat a document as privileged simply because it is privileged under another law: it must be privileged under English law.

The US law position

In the United States, courts will often apply the privilege laws of the country in which the privileged communication took place. It is therefore important to understand the context of communications when conducting an internal investigation and the substance of the potentially applicable privilege laws.
Courts are divided about whether US privilege law also applies to foreign communications. Some courts hold that if a document is protected under either the foreign privilege law or US privilege law, then it can be protected from disclosure. Other courts are strict in their adherence to foreign law and hold that if a communication occurs in a foreign country and is not protected by that country’s privilege law, then the communication is not protected from disclosure in the United States even if the communication would be protected by US privilege law.

Privilege is a complex area. There is no ‘cure’ for non-privileged documents or a waiver or loss of privilege, and specific fact patterns may require local law advice. While there are a number of issues to consider with respect to privilege, maintaining the confidentiality of privileged or potentially privileged communications is a key factor in any privilege determination. Increasingly, corporate clients use portals and/or read only documents and restrict access to specified individuals to assist in maintaining privilege, especially when liaising with parties in jurisdictions which may have a wholly different understanding of privilege (or may not recognise the concept of privilege at all).