ENRC and Glencore cases hold legal privilege lessons for in-house counsel

Recent cases including ENRC v SFO in the United Kingdom and Glencore in Australia have explored the nature of legal advice privilege. Margaret Taylor looks at what in-house counsel need to know about whether communications are covered by legal advice privilege.

When the UK High Court ruled in 2017 that documents produced as part of an internal bribery and corruption investigation were not covered by legal professional privilege it was thought so controversial that the Law Society of England & Wales was moved to intervene in the subsequent appeal.

The original case had been brought because the Serious Fraud Office (SFO) believed that mining company ENRC should hand over all the documents its lawyers and forensic accountants had produced after being tipped off about allegations of bribery and financial wrongdoing at its Kazakh subsidiary.

The High Court agreed, dismissing ENRC’s claims that the documents should be protected by privilege simply because the company had produced them in the expectation that litigation between itself and the SFO would ensue. It also dismissed ENRC’s claims that all the documents should be covered by legal advice privilege, noting that only updates produced to enable the company to take a view on whether further advice was required would qualify.

Though it made clear that its decision turned very specifically on the facts of the case, the Court of Appeal reversed the original decision on litigation privilege, finding that ENRC had produced the documents with the specific aim of resisting or avoiding proceedings against it. It upheld the High Court’s decision on legal advice privilege, though made clear that, as that definition is out of step with international common law, it would be in favour of broadening its scope. Whether that might happen is moot for now as the SFO chose not to appeal the decision to the Supreme Court.

Regardless of the continuing questions about legal advice privilege, the decision was widely welcomed when it was handed down in 2018. Jonathan Pickwick, a partner at White & Case, said at the time that the original decision had ‘dramatically narrow[ed] the scope of legal professional privilege in internal investigations’. He considered though that the Court of Appeal decision ‘will give comfort to corporations wishing to conduct an internal investigation’.

However, while the decision brings clarity to the position on litigation privilege, Sara Chisholm-Batten, Publications Officer of the IBA Litigation Committee and a partner at Michelmores, says both the ENRC case and one involving pharmaceuticals giant Glaxo Wellcome UK and generics business Sandoz – where the court found that emails between an in-house lawyer and an employee are not privileged, even if their purpose is to gather information for an external lawyer – mean that parties are ‘still walking a tightrope as far as legal advice goes’.

‘In-house counsel need to be aware that communications may not be covered by legal advice privilege, especially if they are gathering information for external lawyers,’ she says.

For Chris Toms, a partner at Brown Rudnick, the implication of these cases is clear: to ensure any kind of written communication within an organisation is covered by privilege it is vital that the parties ‘make sure the communication is inextricably linked with legal advice’. ‘That’s more likely to be protected,’ he says.

Chisholm-Batten agrees, though notes that even under those circumstances trying to prove legal advice privilege may be easier said than done.

‘You could, as a way round that, ask your external lawyer to go direct to your employee to get information from them,’ she says.

‘The issue is that the retainer has to be drafted in terms that define the client to enable them to fall within the definition of client,’ adds Chisholm-Batten. ‘You can’t make that definition too wide because it would make it meaningless.’

While these cases will all help organisations come to a view on the disclosure of documents that are not already in the public domain, a recent judgment handed down in the Australian courts makes clear where parties stand when ostensibly privileged information has already been made public.

Mining giant Glencore raised an action in the High Court of Australia with the aim of preventing the country’s tax authorities using privileged information in a case against it. The documents, which related to the restructure of Glencore’s Australian business entities, had been made public as part of the Paradise Papers leak, which saw 13.4 million documents relating to offshore investments sent to a number of journalists before being circulated around the world.

Though the decision confirmed that the documents in question were covered by legal professional privilege, the court ruled that because they had been so widely disseminated they could no longer be seen as confidential and so their use could not be restrained.

For Graeme Slattery, a Perth-based partner at Squire Patten Boggs, that should serve as a wake-up call that taking action to ensure privilege is in place may not always be enough. The decision is a timely reminder to businesses to act quickly if documents that may be subject to legal professional privilege fall into the hands of a third party, either inadvertently or by nefarious means,’ he says.

Chisholm-Batten notes that the Glencore case highlights how important robust cybersecurity should be to all businesses. She believes the Glencore ruling will be instructive when it comes to cases involving high-profile leaks such as the Paradise Papers.

‘It’s a judgment that would have pretty persuasive authority in other common law jurisdictions,’ she says. ‘Ordinarily if you want to protect confidential information and are seeking an injunction you would claim breach of confidence, but these documents had lost their confidential status because they had been published very widely.’

‘Glencore needed to try to pursue an injunction on the basis of legal professional privilege, but the court found that that can be used as a shield and not a sword,’ she adds. ‘Her Majesty's Revenue & Customs is intending to make full use of Paradise Papers documents; the Glencore decision is very interesting.’