Privilege in regulatory investigations: UK Court of Appeal supports a broad approach

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Last week, the UK Court of Appeal released its much-anticipated judgment in ENRC v SFO[1], a decision with significant implications for the scope of legal professional privilege in the context of regulatory investigations.

judgment adopts a flexible approach to privilege, and is likely to inform (and
possibly broaden) the New Zealand courts’ approach to assertions of privilege
over documents sought by regulators.


2010, global mining group Eurasian Natural Resources Corporation Limited
(“ENRC”) was notified of various corruption allegations by a whistle-blower
within a Kazakh subsidiary. In 2011, it appointed external lawyers (Dechert) to
investigate, to interview ENRC staff about the matter, and to prepare a report.

report was finalised in 2013 and submitted to the UK Serious Fraud Office
(“SFO”), who had approached ENRC following media reports about the alleged
wrongdoing in 2011. Shortly afterwards, the SFO announced a criminal
investigation and issued statutory notices seeking various documents, including
Dechert’s notes of interviews with staff. ENRC withheld those notes and other
documents on the grounds of privilege, which was duly challenged by the SFO.

High Court heard that challenge last year.[2] At issue was whether the disputed
categories of documents attracted:

  1. litigation privilege,
    i.e. whether they were prepared for the dominant purpose of preparing for an
    apprehended proceeding; or

  2. legal advice
    privilege, i.e. whether they constituted communications with a lawyer for the
    purpose of giving or receiving legal advice.

High Court judge ruled that litigation privilege did not apply to the relevant
documents because ENRC had failed to show that it was aware of circumstances
which rendered litigation a real likelihood. The judge found that an
investigation by the SFO does not amount to 'adversarial litigation' and viewed
it as merely the first stage in assessing whether further steps would be taken,
such that litigation could not have been in reasonable contemplation. The judge
also held that, in any event, the documents were not prepared for the dominant
purpose of constructing a defence in future proceedings.

High Court also held that legal advice privilege did not apply. It referred to
the seminal decision in Three Rivers (No. 5) [3] as authority for the
proposition that, where a lawyer communicates with their client’s employees or
agents (as Dechert had done, for its factual investigation), that could only
attract legal advice privilege if those employees or agents were specifically
tasked with seeking and receiving advice on the corporation’s behalf. As the
interviewees did not meet that test, the interview notes were not privileged
and ENRC was required to provide them to the SFO.

Court of Appeal

Court of Appeal disagreed with the High Court’s finding in respect of
litigation privilege. On the basis of a careful analysis of the available
documents, it found that “the whole sub-text” of the SFO’s enquiries of ENRC
was the possibility of criminal prosecution if it did not achieve a civil

the Court also rejected a distinction the High Court had drawn between civil
and criminal proceedings, noting:

“It would be wrong for it to be thought that,
in a criminal context, a potential defendant is likely to be denied the benefit
of litigation privilege when he asks his solicitor to investigate the
circumstances of any alleged offence.”

Court commented only briefly on legal advice privilege (having already established
that litigation privilege applied) although its comments are significant. The
Court accepted that it was bound to follow the position in Three Rivers No.
, i.e. that an employee or third party must specifically be tasked with
seeking and receiving legal advice for privilege to apply.[4] However, it
expressed dissatisfaction with that approach, and stated “if it had been open
to us to depart from Three Rivers (No. 5), we would have been in favour
of doing so”.

this regard, the Court observed that the narrow approach to legal advice
privilege would disproportionately hinder large corporations and did not cater
for “the modern world”.

result is that, while the narrow approach to legal advice privilege – as
opposed to litigation privilege – continues for now (at least until the issue
can be determined by the Supreme Court), the judgment signals strong support
for a widening of legal advice privilege to cover lawyers’ communications with
those beyond a client’s “main board or those it appoints to seek and receive
legal advice”.

New Zealand takeaways

Court’s comments in ENRC v SFO may influence the development of the law
of privilege in New Zealand, as codified in the Evidence Act.[5] The decision
supports a flexible approach to litigation privilege, confirming that it can
arise before a regulator has taken a formal decision to litigate[6] and holding
that it should arise equally readily in both civil and criminal contexts.

for legal advice privilege, the decision supports the view that privilege
should apply to communications with employees or agents, for example where
lawyers assist in gathering facts from the business regarding a possible
regulatory breach. This is helpful because, while the Evidence Act confirms
that legal advice privilege extends to communications with a client’s
“authorised representatives”,[7] it is not yet clear how far that term
stretches. Some cases have taken a narrow approach on the basis of earlier
English authorities,[8] requiring express authority to seek legal advice, while
other cases suggest a more flexible view.[9] In view of ENRC v SFO, it
is expected that the courts will lean increasingly in favour of the latter.​

decision will give comfort to businesses, although it remains important to
consider carefully how to ensure documents stay protected in internal
investigations. It is often helpful to involve external legal advisers early
on, so they can assist in both the investigation itself and the review and
development of appropriate safeguards.

you would like to discuss the ENRC v SFO case’s potential relevance to
you or your business, please contact the lawyers featured or your usual Bell
Gully adviser

Serious Fraud Office v Eurasian Natural Resources Corp Ltd [2018] EWCA
Civ 2006.

Serious Fraud Office v Eurasian Natural Resources Corp Ltd [2017] EWHC
1017 (QB).

Three Rivers District Council and Others v Governor and Company of the Bank
of England (No. 5)
[2003] QB 1556.

Noting that the Supreme Court had previously declined to revisit the narrow
approach (Three Rivers District Council and Others v. Governor and Company
of the Bank of England (No. 6)
[2004] UKHL 48).

The Evidence Act expressly provides that it may be interpreted having regard to
the common law (section 10(c)).

Commerce Commission v Caltex CL33-97.

Section 51(4) of the Evidence Act.

See Robert v Foxton Equities Ltd
[2014] NZHC 726 where Kos J (citing Wheeler
v Le Marchant
(1881) 17 Ch D 675 – a decision which was central to Three Rivers No. 5) held that to be an
authorised representative, or agent, for the purposes of privilege, an
individual must be given authority to communicate with the solicitor to obtain
legal advice and actually do so. In an agency context, his Honour indicated
that the agent must be operating under an actual agency agreement that
encompasses the acquisition of legal services on behalf of the principal. See
also Aquaheat New Zealand Ltd v Hi Seat
Ltd (in liq and rec)
[2014] NZHC 1173 where Associate Judge Sargisson held
that the interpretation of “authorised representative” in s 51(4) “should be as
narrow as its principle necessitates​.”

[9] E.g. Brandlines v Central Forklift HC WN CIV-
2008-485-2803, which was sympathetic to the view that a “less restrictive
approach” applies in New Zealand – though also holding that an authorised
representative “must have been authorised to assume – and must have assumed –
the role of the client in communicating the information to the solicitor.”

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