Blog - Commentary

By Mark Srere and Robert Dougans on 20 March 2017

English High Court decision causes concern over privilege for internal investigations

The decision of Mr Justice Hildyard in the long-running RBS Rights Issue litigation emphasises the care that needs to be taken in appreciating the English courts rather different approach to privilege from the approach taken in US jurisdictions.

The RBS Rights Issue litigation involves claims brought by investors who bought shares in a rights issue of the troubled RBS Group in 2008. The investors lost almost all of their investment and claim that the prospectus for the rights issue was not accurate or complete. It is listed to go to trial in March 2017.

The claimants sought disclosure of i) interview notes/transcripts for an internal investigation to answer two SEC subpoenas regarding RBS’ sub-prime exposure, and ii) interview notes/transcripts regarding an internal investigation into RBS’ marketing of various CDOs. These interviews (and indeed the investigations) were carried out by or on behalf of RBS’ external counsel.

English privilege law 

English privilege law is generally similar to the law in US jurisdictions, but important differences can arise. In general both English and U.S. privilege laws protect documents only if they come under either “legal advice privilege” (“attorney-client privilege” in the U.S.) or “litigation privilege” (“work product” in the U.S.).  Yet, as demonstrated below, the English version is much narrower in application than the U.S. law.

  • In England, legal advice privilege relates to confidential communications passing between lawyer and client for the purpose of obtaining legal advice. It does not cover communications other than between lawyer and client (i.e. to a third party), nor communications other than for obtaining legal advice.  As will be seen below, this scope is much narrower in England when applied to a corporate than in the scope of a corporation’s privilege in the U.S.
  • In England, litigation privilege covers communications between clients, lawyers and third parties, but can cover communications only for the dominant purpose of litigation, and can apply only when there is a real likelihood – not just a possibility – of litigation. Litigation is fairly strictly defined as court litigation, formal arbitration, or analogous proceedings. This is much more restrictive than the corresponding work product doctrine in the U.S., which protects materials generated by the attorney (or at the attorney’s direction) in an internal investigation because it is almost always anticipated that some sort of litigation may ensue.

Case details 

In the RBS case it was accepted that the various interview notes and transcripts were not covered by litigation privilege, as they concerned either internal investigations or regulatory enquiries which did not count as “litigation” under English law.  As noted above, much of the materials generated by attorneys in an internal investigation in the U.S. will be protected under the work product doctrine, which just requires that they be generated “in anticipation of litigation.”

The Court in RBS therefore addressed whether the documents could be protected by legal advice privilege. In the U.S., the Supreme Court in Upjohn Co. v. United States, 449 U.S. 383 (1981), answered this question in the affirmative.  The Court held that in an internal investigation, the interviews of corporate employees would be covered by the attorney-client privilege because those are communications between the client and the attorneys for the purpose of rendering legal advice. 

High Court ruling 

In the English case, the High Court found the opposite.  RBS argued as follows:

  • The various notes were made for the ultimate purpose of claiming legal advice and should therefore be privileged.
  • The various notes were lawyers’ working papers and should therefore be privileged.
  • The High Court ought to apply U.S. Federal law under which the interview notes were said to be privileged. 

Mr. Justice Hildyard rejected RBS’ claim to privilege.

  • Considering the decision of the Court of Appeal in Three Rivers (No. 5) he considered that legal advice privilege under English law applied only to those employees authorised to seek and receive legal advice from a lawyer. It applied to the relevant directing mind of the corporation, not to each employee of that corporation. Accordingly these notes were not privileged.
  • They could be considered lawyers’ working papers for the purpose of legal advice privilege only if they contained material likely to disclose the thrust of the advice (e.g. if they were first drafts of advice memos or summaries/conclusions as to the state of the evidence. Notes of interviews would not meet this standard.
  • The English court should apply English law (as the lex fori) when considering any claim to privilege involving communications with foreign lawyers. It was therefore not relevant whether the position would be different under U.S. Federal law or the law of any other jurisdiction.

The effect of this decision is that in litigation in England (or any jurisdiction such as the BVI, Caymans or DIFC which will follow English law) privilege is highly unlikely to attach to interviews for internal investigations of the sort that are very common in the U.S.

The message has to be simple -- be careful what you write down.

Mark Srere is partner and leader of the White Collar Defense & Investigations/Securities Enforcement and Litigation Client Service Group in the Washington office of the international law firm Bryan Cave LLP.

Robert Dougans is partner in the Commercial Litigation and International Arbitration team in the London office of the firm.