Protecting your position in an investigation: a pan-European overview of privilege

LPP applies in both civil and criminal proceedings such as in proceedings (in relation to an offence under the Bribery Act 2010) and in regulatory investigations by the Competition and Markets Authority in the UK ("CMA") or by the European Commission. The protection of LPP often becomes an issue in the highly charged situation of a "dawn raid" carried out by investigating and/or prosecuting authorities (such as the Serious Fraud Office ("SFO"), the CMA and the Financial Conduct Authority ("FCA"). These authorities have developed guidance and procedures (in conjunction with the office of the Attorney General ("AG")) to help ensure that such material remains confidential and protected.

In France, communications between a lawyer and its clients or between lawyers are protected by article 66-5 of the Law of 31 December 1971. This prohibits disclosure of lawyer/client communications in French civil disputes ('legal secrecy'). The French Supreme Court extends this protection to criminal investigations provided that the communication is “related to the exercise of the rights of defense”. For example, an investigating officer cannot proceed to the seizure of correspondence between a client and a lawyer relating to the execution of a previous criminal conviction (Cass. 13 décembre 2006, n°06-87.169). It is possible, however, to seize documents in order to establish the participation of the lawyer in a criminal offence or if they constitute by themselves a separate criminal offence (e.g. Crim. 18 juin 2003, n°03-81.979; Crim. 9 févr. 1988, n° 87-82709). The protection also applies in the context of seizures made by tax and competition law authorities. In all cases, this raises the question as to who determines, how, when and whether the documents fall within the scope of legal secrecy. This issue is currently highly debated.

The English position

Recently, the English Divisional Court considered the legality of some of the English guidelines in The Queen (on the application of Colin McKenzie) v SFO [2016] EWHC 102 (Admin). The main issue was whether the procedure set out in the Operational Handbook of the SFO ("the Handbook") for dealing with material potentially subject to LPP within electronic devices such as mobile phones, laptops and tablets, which had been seized using statutory powers, was lawful. The claimant submitted that it was not on the basis that the approach taken would give rise to a risk that the SFO investigative team would gain access to the LPP material. The court disagreed.

The case arose from the arrest of the claimant on suspicion of an offence contrary to s.1 of the Bribery Act 2010. At the time of the arrest, and in the days which followed, the SFO lawfully seized various items of electronic equipment. A few weeks later the SFO notified the claimant's solicitors that it believed that some of these items may have contained LPP material but that this had been 'quarantined' within the SFO's computer system. The claimant's solicitors responded by confirming that all the devices contained some LPP material and sought to apply for judicial review that the SFO procedure was unlawful. They contended that the relevant equipment containing the LPP material should be sent to an outside body independent of the SFO who could delete any LPP material and return the equipment to the SFO shorn of that material.

The court considered the procedures set out in the Handbook in relation to digital material which were considered to be consistent with the AG's Guidelines on Disclosure ("the Guidelines"). In essence the Handbook states that an in-house technical team will process and load onto its Digital Review System the digital material which may contain LPP material but that this will be isolated from the investigations team. The Digital Review System Team will then initiate an electronic search of the content of the electronic devices in accordance with search terms provided by the owners of the devices to isolate material containing LPP and that material will then be provided to an independent external lawyer for review. Following that review any material identified as LPP will be extracted from the non-LPP material and only the non-LPP material will be made available to the investigations team. The AG's Guidelines mirror this approach, although with less detail, and they state only that "a person independent of the investigation" should examine the material. The claimant submitted that this meant someone independent of the prosecuting authority and thus the procedure in the SFO Handbook was unlawful. The Court disagreed. The Guidelines apply to all UK investigating bodies that use statutory powers to seize or secure documentary material, whether hard copy or in electronic form. The Court stated that if it were the intention of the AG that all such material should be transferred to a third party for preliminary examination, the Guidelines would have stated this. They do not, and therefore the Handbook is not inconsistent with the Guidelines.

In an interesting development the Court held that the previous test for withholding material subject to LPP set out in Prince Jefri Bolkiah v KPMG [1999] 2 AC 222 did not apply in this context. In Bolkiah the maintenance of LPP was in danger as there was a 'real risk' of disclosure to KPMG. However, the present case did not involve a relationship between a solicitor and client (or former client as in Bolkiah), but rather between a criminal investigating body and the subject of its investigation from whom material had been taken using statutory powers. It is in the exercise of these powers that material subject to LPP may come into the possession of the investigating authority but both the Handbook and the Guidelines recognise the importance of safeguarding the right to LPP and seek to ensure that the material is not read by anyone in the investigation. Although the investigating authority will never be able to say that material covered by LPP will never be seen by anyone in the investigation the court was satisfied that the procedures in the Handbook ensure that there is not a 'real risk' of this happening.

A similar Independent Counsel process is used in relation to competition investigations initiated by the CMA in the UK and this should be used where there are significant quantities of digital material (as is likely to be the case in most investigations). Our own practical experience indicates that the Independent Counsel process will be carried out in a similar way to the process described above.

It is clear that the SFO were successful in the Colin McKenzie case because they had such detailed procedures in place. Other investigating authorities, if faced with a similar application may find that their procedures do not stand up to the same scrutiny.

The French position

Concerns regarding professional secrecy protection also arise in France in respect of seizure under tax law and dawn raids under competition law. As far as the latter is concerned, the French Competition Authority (“the FCA”) benefits from wide search and seizure powers, which can result in global seizure of employees’ electronic mailboxes including legally privileged documents. In 2013, the French Supreme Court ruled in the Medtronic case that the powers of investigators to globally seize electronic mailboxes are limited by professional secrecy (Cass. 24 avril 2013, Société Medtronic France, n° 12-80331). The Court ruled in particular that the violation of professional secrecy occurs as soon as the documents/emails are seized by the FCA and that returning the privileged documents after their seizure does not constitute a suitable remedy. Indeed, even though these documents may not be used by the investigators for the purpose of the on-going investigation they could have been read.

As a result of this decision, the FCA introduced a new procedure in late 2014 which consists in identifying, on the day of the dawn raid, the employees’ mailboxes which may contain legally privileged documents and to place these mailboxes in a temporary closed seal. The raided company is then granted approximately 15 days to provide the FCA with a detailed list of correspondence/documents covered by professional secrecy protection which are contained in the identified mailboxes. The temporary closed seal is then opened by the FCA investigators in the presence of the company’s representatives and their lawyer(s) and the relevant correspondence/documents are subsequently deleted by the investigators. A final version of the seal, cleansed of privileged documents, is then provided to the company. In principle, this new procedure is satisfactory since privileged documents cannot be read by the FCA before deletion. However, in practice, it puts the burden of identifying privileged documents on the company, which can be a difficult task when the mailboxes contain a large volume of emails which may be potentially privileged.

European wide investigations

The European Commission also has wide-ranging powers to investigate suspected infringements of EU competition law. This can cause problems during a dawn-raid where the company under investigation will want to claim privilege in relation to some of these documents. The ECJ in AM&S and Azko Nobel cases clarified the position with regard to this and the procedure to be adopted is set out in the "Commission's Notice on best practices for the Conduct of proceedings concerning Articles 101 and 102 of the TFEU". The Notice suggests that the Commission investigators may be able to satisfy themselves that a document is covered by LPP by taking a "cursory look". However, the party claiming privilege can refuse to allow the Commission to take a cursory look if it considers that would not be possible to do so without revealing the contents of the document and gives the Commission appropriate reasons for that view. If it is able to satisfy the Commission, those documents will be put in a sealed envelope and the Commission must not read the documents until it has adopted a decision that the documents are not covered by LPP and allowed the party claiming privilege to apply to the General Court. The ECJ upheld the Commission's powers to carry out the equivalent of "seize and sift" in Nexans v. Commission, and a useful "Explanatory note on inspections" sets out the process for the review of digital evidence, which involves representatives of the undertaking attending at the Commission's offices to review the seized material in the same way as they would on-site. There is no provision for Independent Counsel – any disputes as to privilege can be referred to the Hearing Officer, a senior Commission official separate from the case team, and his decisions can be challenged before the General Court.

Conclusion

Although investigating authorities, whether in the UK, France or from the European Commission recognise the importance of privilege, the rules as to how those communications will be protected differ depending not only on the jurisdiction involved but also on the relevant investigating authority. If you are subject to such an investigation it is important to obtain legal advice immediately to prevent your privileged communications or those subject to legal secrecy from being disclosed to the authorities.

First for Disputes Conference – Paris 18 March 2016

Jonathan Speed, Marion Barbier, Thomas Oster and Loic Poullain will be speaking at Bird & Bird's First for Disputes Conference in Paris on Friday 18 March 2016.

If you would like to attend the Conference or find out more information about it the Conference and see the programme please click here.