Legal Professional Privilege And Regulatory Investigations
Legal professional privilege (LPP) is a vital component when it comes to protecting the interests of an organisation subject to a regulatory investigation or prosecution. However, because LPP and the extent of its cover can be complex, it is easy for in-house counsel and/ or senior management to be forced to hand over documents that could have been protected had the necessary steps been taken. To ensure LPP is applied to sensitive documents, it is imperative to work with an experienced Regulatory Law Barrister who will take the time to understand your business and industry. Although some senior figures may be reluctant to disclose information to external legal advisors, it is only by obtaining a complete understanding of the business and situation that a robust defence to a Regulator’s findings can be created.
What is Legal Professional Privilege?
If evidence (either oral or written) is privileged, the party who holds that evidence is entitled to withhold it from a third party (for example, a regulator) or the Court. Privilege is an absolute right – the Court does not have the discretion to demand the privileged evidence be produced.
There are two types of LPP, legal advice privilege (LAP) and litigation privilege (LP).
The purpose of LAP is to allow a client to place unrestricted confidence in their legal advisor. For LAP to apply, the communication must be:
- Confidential between the legal advisor and their client, and
- Has come into existence for the purpose of giving or receiving legal advice.
It is important to note that not every person in an organisation is a ‘client’ for the purposes of LAP. Only those charged with managing the regulatory request for information or investigation/prosecution and the company’s legal team are considered a ‘client’ for the purposes of LPP.
There is no requirement for litigation to be pending or contemplated before LAP can apply. The opposite is true for LP, which protects communications made for the sole or dominant purpose of litigation sent between legal advisors, the client, and third parties.
Case law is ambiguous as to whether LP can apply to communications sent for the purposes of a regulatory investigation. LP will generally be claimed in proceedings where the Court or Tribunal exercises judicial functions. However, if proceedings are for fact-gathering purposes or take place in the Administrative Tribunal, LP is not likely to arise. Communications between the client and third parties during some types of regulatory investigation may be protected by section 413 of the Financial Services and Markets Act 2000 as being communications “in connection with, or in contemplation of, legal proceedings and for the purposes of those proceedings”.
In Director of the SFO v Eurasian Natural Resources Corporation Limited [2018] EWCA Civ 2006, the Court of Appeal ruled that LP can apply even if the company has to undertake additional inquiries to fully establish the facts. The Court stated:
“Whilst a party anticipating possible prosecution will often need to make further investigations before it can say with certainty that proceedings are likely, that uncertainty, in our judgment, does not in itself prevent proceedings being in reasonable contemplation”.
The Court of Appeal also held that LP would cover internal investigation documents generated before a company self-reported to the Serious Fraud Office (SFO). The Court reasoned:
“Companies should be prepared to investigate allegations from whistle blowers or investigative journalists, prior to going to a prosecutor such as the SFO, without losing the benefit of legal professional privilege for the work product and consequences of their investigation. Were they to do so, the temptation might well be not to investigate at all, for fear of being forced to reveal what had been uncovered.”
The decision in SFO v ENRC illustrates how important it is to instruct expert legal counsel at the beginning of an internal or external investigation. Meticulous consideration must be taken as to whether specific circumstances of the investigation give rise to the prospect of litigation and carefully consider what communications must be privileged.
Can legal professional privilege be lost?
LPP can be lost if the communication is:
- placed before the Court
- loses confidentiality
- came into existence to further a criminal or fraudulent scheme
Your legal team has a duty to protect your LPP and cannot waive it without your express permission.
Final words
The law around LPP continues to be developed. The 2020 Supreme Court’s refusal to grant permission to appeal in Frasers Group Pls (formerly Sports Direct International plc) v The Financial Reporting Council Ltd made clear that although an email may be protected by LPP, unprivileged attachments to that email are not. These cases are also extremely fact sensitive, as illustrated by Kyla Shipping Co Ltd v Freight Trading Ltd [2022] EWHC 376 (Comm), in which auditors called in by shareholders in a dividend dispute discovered mispricing fraud. The Court held that litigation had not been contemplated when the expert auditors were called in to undertake a “ballast exercise“ regarding mismanagement and therefore, LP did not apply.
Instructing a highly experienced Regulatory Law Barrister at the start of a regulatory or internal investigation provides the best chance of LPP and/ or LP applying to relevant communications, thereby protecting your organisation’s best interests.
Get in Touch
Tanveer Qureshi specialises in general crime, white-collar crime and regulatory investigations and prosecutions. If you require legal representation or have a related question, please contact me for free consultation or call me directly on 0203 637 2190.