Author: Azizur Rahman
18 May 2017
2 min read
The Serious Fraud Office (SFO) can force an international mining firm to hand over documents produced during an internal investigation, London’s High Court ruled in a landmark decision on legal privilege.
Eurasian Natural Resources Corporation (ENRC) had argued that documents drawn up by lawyers and forensic accountants between 2011 and 2013 were subject to litigation privilege. But Judge Geraldine Andrews ruled that ENRC’s argument “fell at the first hurdle” because the company was unable to prove that litigation was a “real likelihood” at the time the documents were created.
In the ruling, Judge Andrews said: “The fact that a client believes that it has a viable argument that documents generated in the course of an internal fact-finding investigation will be privileged does not mean that they are privileged.” The ruling is the second landmark High Court decision in six months that is expected to have a wide impact on disclosure by companies carrying out internal investigations. The court ruled in December that certain types of documents produced by Royal Bank of Scotland PLC during the firm’s investigation of its mortgages debt business were not protected by legal privilege.
Judge Andrews’ decision is also apparently the first that applies to privilege in connection with criminal litigation, according to court documents.
A spokesman for the SFO declined to comment on Judge Andrews’ decision. ENRC, which is owned by the Eurasian Resources Group, said in a statement that it was “very surprised” by the judgment and plans to appeal against the decision. The court, however, refused ENRC permission to appeal to the Court of Appeal.
The SFO has been officially investigating ENRC since 2013 over its activities in Africa and Kazakhstan. Court documents show that the SFO began discussions with the firm in August 2011. No charges have so far been brought and ENRC denies it has committed any offence.
ENRC succeed in claiming that documents from a presentation given by its then legal representative to the company board in March 2013 were subject to legal privilege because the firm accompanied the information with legal advice. But Judge Andrews decided that documents produced by a unit of the Forensic Risk Alliance Group (FRA) – a private firm hired to conduct internal investigations - between May 2011 and January 2013 were not subject to privilege. Even though representatives from FRA were told by ENRC that their work would be subject to legal privilege, the judge ruled this was incorrect because they were carrying out work related to meeting regulatory compliance requirements rather than offering legal advice.
Investigators are examining ENRC’s acquisition of mines and prospects in the Democratic Republic of Congo; home to some of the world’s richest stocks of copper and cobalt. The SFO has received special government funding to pursue the investigation.
The court battle was the latest legal confrontation following the SFO’s announcement of its investigation. There have been lawsuits against Dechert, the law firm that ENRC instructed to investigate whistle blower claims. ENRC no longer exists after being taken private by its three founders and the Kazakh government in 2013. The founding trio own 60 per cent of ERG, and the newly restructured group says it has zero tolerance for corruption.
The whole ENRC saga shows how disastrous a weak or non-existent anti-bribery policy can be; wherever in the world business is being done. It also indicates the degree of care that has to be taken by any company when it comes to conducting an internal investigation.
Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.