UK Court of Appeals upholds litigation privilege for internal investigation documents

Eversheds Sutherland (US) LLP

In a much-anticipated appellate decision, the Court of Appeal of England and Wales has clarified English law regarding litigation privilege applicable to internal investigations, which has significant implications for US companies that have ties to the United Kingdom. The Court of Appeal found that interview memoranda and other materials prepared by an English company’s external lawyers are covered by litigation privilege, as was the work conducted by a forensic accountant at the direction of counsel in connection with the internal investigation. The case reversed a decision from April 2017, in which the High Court had ruled in favor of the UK’s Strategic Fraud Office (SFO) and found that interview memoranda and other materials prepared by outside counsel were not protected from disclosure to the SFO on the grounds of privilege. This decision brings the UK application of privilege for documents produced during internal investigations more in line with the privilege doctrines that apply under US law.  

The following is an analysis from Eversheds Sutherland (International) LLP attorneys in the United Kingdom:

The Director of the Serious Fraud Office V. Eurasian Natural Resources Corporation Ltd 
Judgment of the Court Of Appeal

1. First Instance Judgement of the High Court

On 8 May 2017, the High Court rejected ENRC’s claims to Legal Professional Privilege in relation to three of the four categories of the documents (the “High Court Judgment”), namely copies of investigation interview notes produced by ENRC’s external counsel and materials and reports generated by forensic accountants appointed to conduct a books and records review (the “Documents”). Specifically, it held that ENRC failed to satisfy two of the three critical elements comprising the test for Litigation Privilege, as set out in Three Rivers District Council v Governor & Company of the Bank of England (No. 6) ("Three Rivers (No. 6)"). This test provides that Litigation Privilege only applies where:2

(a) litigation is in progress or is in contemplation;

(b) the relevant communication was made for the sole or dominant purpose of conducting that litigation; and

(c) the litigation is adversarial, and not investigative or inquisitorial.

The High Court determined that criminal legal proceedings against ENRC (its subsidiaries or their employees) were not reasonably in contemplation at any material time prior to the creation of the Documents. In any event, the High Court further found that three of the four categories of the Documents were not created for the dominant purpose of litigation as the information contained in the Documents was not produced to form part of a defence brief. Andrews J drew a distinction between the avoidance of a criminal investigation and the conduct of a defence to a criminal prosecution, deciding that the former did not satisfy the ‘dominant purpose’ element of the test.

Permission to appeal the High Court Judgment was granted by the Court of Appeal on 2 October 2017. The hearing took place in early July 2018.

2. Litigation Privilege

The Court of Appeal articulated the issues before it as comprising nine questions, falling under the two broad heads of Legal Professional Privilege: Litigation Privilege and Legal Advice Privilege. In relation to Litigation Privilege, the Court of Appeal focused on the High Court’s findings of fact and its legal reasoning in relation to: (1) “contemplation” of litigation; and (2) “dominant purpose”.

2.1  Reasonable Contemplation of Litigation: When did the ENRC consider that criminal legal proceedings against it (its subsidiaries or their employees) were reasonably in contemplation?

The Court of Appeal concluded that the High Court was wrong in its determination that a criminal prosecution was not reasonably in prospect once the SFO had written its original letter of 10 August 2011 to ENRC encouraging ENRC to consider the SFO’s self-reporting guidelines whilst undertaking its internal investigation into allegations of bribery and corruption in respect of certain overseas group companies.3 The Court examined the evidence that had been put to Andrews J, and decided that the contemporaneous evidence submitted by ENRC showed that, as at 19 August 2011, ENRC was “aware of circumstances which rendered litigation between itself and the SFO a real likelihood rather than a mere possibility”.4

The Appellant submitted that the High Court’s Judgment that litigation was not in ENRC’s ‘reasonable contemplation’ was wrong in law in four key respects, arguing that:

(a) the High Court erred by failing to find that an SFO investigation is properly regarded to be adversarial litigation;

(b) the High Court failed to understand that once an SFO criminal investigation was reasonably in contemplation, so too was criminal prosecution;

(c) a party cannot be precluded from satisfying the test on the basis that further facts are required before it can say with certainty that proceedings are likely; and

(d) the distinction drawn by the High Court between criminal and civil litigation was at odds with both the weight of legal authority, and also at odds with the fact that the SFO Guidelines demonstrate that a corporate may have a reasonable fear of prosecution even if it does not yet have concrete evidence of its own wrongdoing.

The Court was not sure that “every SFO manifestation of concern would properly be regarded as adversarial litigation”,5 or with the Appellant’s interpretation of legal authority that it necessarily follows that “once a SFO criminal investigation is reasonably in contemplation, so too is a criminal prosecution”.6 However, the Court did approve the legal reasoning for the third and fourth arguments, declaring that the High Court’s distinction between civil and criminal proceedings to be “illusory.”. The Court of Appeal held that the High Court:

[W]as not right to suggest a general principle that litigation privilege cannot attach until either a defendant knows the full details of what is likely to be unearthed or a decision to prosecute has been taken. The fact that a formal investigation has not commenced will be one part of the factual matrix, but will not necessarily be determinative.7

2.2 Dominant Purpose: What was the dominant purpose for the creation of the Documents?

For the Court of Appeal, the issue to be determined was whether it would have been reasonable to regard ENRC’s dominant purpose as being to investigate the facts to see what had happened and: (a) to deal with compliance and governance; or (b) to defend against the prospect of the criminal litigation. The High Court had found that the dominant purpose was the former; namely, to find out the facts and report them to the SFO as part of a self-reporting exercise. The Court, however, disagreed with this reasoning holding that:

(a) the fact that solicitors prepare a document with the ultimate intention of showing that document to the opposing party does not automatically deprive the work undertaken of Litigation Privilege;8

(b) “in both the civil and criminal context, legal advice given so as to head off, avoid or even settle reasonably contemplated proceedings is as much protected by litigation privilege as advice given for the purposes of resisting or defending such contemplated proceedings” and9

(c) Litigation Privilege would be engaged whenever the factual circumstances are such that “where there is a clear threat of a criminal investigation, even at one removed from the specific risks posed by the SFO should it start an investigation, the reason for the investigation of whistle-blower allegations must be brought into the zone where the dominant purpose may be to prevent or deal with litigation.”10

The Court of Appeal also found that the High Court had in any event misinterpreted the evidence before it as showing that ENRC always intended or agreed to share the findings from its interviews and investigations with the SFO.11 It further observed that although the SFO believed that ENRC might in the future waive privilege over such material, there was no formal agreement to that effect.12 The Court concluded therefore that the Documents had been brought into existence for the dominant purpose of resisting contemplated criminal proceedings against ENRC.13

3. Legal Advice Privilege

The Appellant sought to persuade the Court of Appeal to clarify its 2003 decision in Three Rivers District Council and Others v. Governor and Company of the Bank of England (No. 5) [2003] QB 1556 (“Three Rivers (No. 5)”), which has since been generally interpreted by courts as authority that where the client is a corporate entity, Legal Advice Privilege only protects those communications as between the legal adviser and those employees of the corporate client authorised to seek and receive such legal advice (the “Narrow Interpretation”).

The High Court had adopted the Narrow Interpretation in reaching its decision, and the Appellant submitted that the Court of Appeal should overrule this on the basis that a wider interpretation of Three Rivers (No. 5) was, in fact, the correct one. The Court of Appeal considered that it would be “highly undesirable for us to enter into an unseemly disagreement” with the Court of Appeal in Three Rivers (No. 5), noting that the House of Lords had expressly declined to hear an appeal on the matter in Three Rivers (No. 6). Instead, it decided that this question of Legal Advice Privilege fell beyond the scope of the present appeal and that it would, in any event, require final determination by the Supreme Court:

“If the ambit of Three Rivers (No. 5) is to be authoritatively decided differently from the weight of existing opinion, that decision will, in our judgment, have to be made by the Supreme Court rather than this court.”14

After giving an overview of Three Rivers (No. 5), the Court of Appeal proceeded to affirm the Narrow Interpretation:

“As we have said, we are not sure that it is necessary for us to determine whether this reasoning was the ratio decidendi, but if that did have to be decided, we would hold that it was.15

It is worth noting that the Court of Appeal appears to have done so reluctantly. Towards the end of the Judgment, having considered the submissions of the Law Society, intervener in the appeal, the Court added that “[i]f it had been open to us to depart from Three Rivers (No. 5), we would have been in favour of doing so. (i.e. adopting a wider interpretation of the definition of the client).16

4. Additional Points

4.1 Impact on Self-Reporting

The Court of Appeal stressed:

For the avoidance of doubt, nothing in this analysis should be taken to impact adversely on the operation of the scheme … in relation to deferred prosecution agreements …17

The Court considered that it would be in the public interest that companies should be prepared to investigate allegations of wrongdoing before approaching the prosecutor, without then losing the benefit of Legal Professional Privilege for the work product and consequences of the investigation. Here, the Court reasoned that: “the temptation might well be not to investigate at all, for fear of being forced to reveal what had been uncovered whatever might be agreed (or not agreed) with a prosecuting authority.”18

4.2 Legal Advice Privilege

The Court of Appeal also set out what its views would have been in relation to the balance of the questions had it been required to address them, but which no longer required determination in light of its findings as to the scope of Litigation Privilege and its applicability to the Documents. The outstanding issues included whether or not Legal Advice Privilege:

(a) requires a dominant purpose equivalent to that of Litigation Privilege;19

(b) covers information contained in documents not communicated to the legal adviser:

(i) by those authorised to give or receive legal advice on behalf of the corporate;20

(ii) for the purpose of obtaining legal advice, but rather for the purpose of that legal adviser’s investigation of the facts;21

(c) covers information contained in documents where there is evidence of an intention and/or agreement to share such information with authorities;22

(d) covers interviews by lawyers of both current and former employees of a corporate entity;23 and

(e) covers lawyers’ working papers.24

The views expressed by the Court of Appeal offer an important insight into how English courts might approach similar issues in future cases, and so are relevant to all corporates generally, but are of particular importance to those engaged in internal investigations.

We will consider the impact of the Judgment in greater detail in further updates.


1The Director of the Serious Fraud Office v. Eurasian Natural Resources Corporation Ltd [2018] EWCA Civ 2006. 

2 Lord Carswell in Three Rivers (No. 6) at paragraph 102. 

3 Paragraph 91.

4 Paragraph 92.

5 Paragraph 96.

6 Paragraph 97.

7 Paragraph 100.

8 Paragraph 102.


10 Paragraph 109.

11 Paragraph 118.


13 Paragraph 119.

14 Paragraph 59. 

15 Paragraph 81.

16 Paragraph 130.

17 Paragraph 115.

18 Paragraph 116.

19 Issue 5.

20 Issue 6(a).

21 Issue 6(b).

22 Issue 6(c).

23 Issue 7. See paragraphs 138 to 140 of the Judgment.

24 Issues 8 and 9. See paragraphs 141 to 143 of the Judgment.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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