When any firm uncovers potential illegality by its staff, it often engages lawyers to find out what, if anything, has happened.  But can the result of this internal investigation be used against them in the event of a criminal investigation?

In a recent case, Serious Fraud Office (SFO) v ENRC [2017] ECHR 1017, the High Court dramatically scaled back the extent to which Legal Professional Privilege (LPP) can be claimed in relation to the products of internal investigations.

In 2010, ENRC become aware of criminal allegations about a company it sought to acquire in Africa.  Later, there followed whistle-blower allegations about a Kazakhstan subsidiary.  ENRC sought to engage the SFO's overseas corruption self-reporting regime, and the SFO began a Bribery Act 2010 investigation.

Moving to a more contentious approach, the SFO issued a notice under section 2(3) of the Criminal Justice Act 1987 against ENRC to compel the production of documents.  That extended to material arising out of the lawyer's investigations, including interview notes with witnesses and forensic accountant reports about ENRC's financial controls.  ENRC resisted disclosure on the basis of LPP.

The court first considered litigation privilege (protects communications between clients and lawyers about litigation currently in progress or reasonably contemplated), where the court distinguished between criminal proceedings and a criminal investigation.

The court decided that although ENRC feared an investigation, not every investigation would lead to a prosecution.  Further, the court reasoned that the internal investigation was part of a fact-finding exercise to see if there was substance to the allegations, and to dissuade the SFO from taking criminal action, rather than forming part of a defence to criminal proceedings.  The LPP claim therefore failed.

The court moved onto consider legal advice privilege (protects communications between client and lawyer concerning the provision of legal advice), which includes communications that would give away the nature of the advice.  The court stressed that LPP only applied to communications between lawyers and those authorised to give them instructions, and to receive their advice.

The court decided the ENRC employees gave their statements in the capacity as a witness, and the forensic accountant reports were provided to assess and remediate ENRC's compliance regime.  In both situations, the communications did not amount to instructions and could not attract LPP.

The court refused permission to appeal.  However, it is worth keeping a close eye on whether the Court of Appeal hears and upholds an appeal, not least because of the effect that it is likely to have on the internal investigations of potential allegations of illegality.