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Challenges to Privilege in International Investigations

There has been more talk than usual of late about the attorney-client privilege, particularly after the FBI executed a search warrant on the offices of President Trump’s personal lawyer, Michael D. Cohen. Putting that extraordinary situation aside, there have been a few slightly more run-of-the-mill developments over the last year that have reminded us that privilege can be a fragile thing, and one we must work hard to protect. In the United States, we are accustomed to working within the safeguards of legal privilege and attorney work product protections. We value the ability to think through issues relating to anticipated litigation on the blank page, safe in the comfort that our thoughts and impressions will be protected from adversarial eyes. When conducting investigations, we create binders of key documents and draft interview memos that give us the ability to pore over our understanding of, and reaction to, what each witness said. This is essential to our job. But as recent case law shows, we must always be alive to the risk that, under certain circumstances, the privileged status of these memos may not hold up. We must be careful to structure our investigations to maximize all available protections. For international practice, the situation is more perilous. Recent developments in the UK and Germany suggest that it may not always be easy to preserve the confidentiality of privileged materials, including interview memos. This makes it all the more important that practitioners conducting global investigations have a plan in place to manage the differences in how privilege is treated across jurisdictions.

Limitations on the Privilege: A Brief Recap

As has been widely covered, in SEC v. Herrera, No. 17-20301 (CIV), 2017 WL 6041750 (S.D.Fla. Dec. 5, 2017), a magistrate judge in the Southern District of Florida held that a law firm waived work product protection over interview notes and memoranda when it voluntarily provided oral downloads of witness interviews to the SEC. The court found these briefings to be the “functional equivalent” of sharing the underlying interview notes with an adversary, thereby waiving any protections from disclosure. Although the fundamental principles outlined by the court’s ruling in Herrera are nothing new, the case garnered attention. That is because it addressed a situation that is closely related to what has become common place for the white-collar bar: providing summaries of facts discovered during witness interviews to regulators in the name of cooperation. While Herrera does not hold that all such cooperation will lead to a waiver of attorney work product protections, it reminded us that we must be careful to preserve the privilege when sharing factual information. Around the same time, the English High Court handed down a decision that sent chills downs the spines of international practitioners, SFO v. Eurasian Nat’l Resources Corp., [2017] EWHC 1017 (QB). In that case, ENRC had conducted an internal investigation regarding foreign accounting practices, retaining outside counsel to conduct witness interviews. ENRC was also in dialogue with the UK Serious Fraud Office (the SFO), the primary UK agency responsible for investigating and prosecuting criminal matters involving complex fraud, bribery, and corruption. Later, the SFO sought disclosure of documents generated in the internal investigation, including outside counsel’s notes of witness interviews. The High Court rejected ENRC’s claims to privilege, holding that neither of the principal types of privilege recognized in English law applied. It held there was no legal advice privilege because the individuals interviewed (although current and former employees of ENRC) were not ‘clients’ of the interviewing lawyers. It also held that there was no litigation privilege because a criminal investigation was not “adversarial”—such privilege could only arise where a decision to prosecute had been made by the SFO or was in the reasonable contemplation of the defendant (and could be demonstrated as such to the court). English courts apply English privilege rules, including where documents are created for English companies by U.S. lawyers in the United States. The ENRC decision creates a dilemma for international companies that face exposure before the SFO and, for example, DOJ. In order to gain cooperation credit, the company must conduct an investigation and share relevant facts with, for example, DOJ. But it also faces the specter of losing control over those memos if it operates in the UK and faces exposure vis-à-vis the SFO. These risks should be factored into any investigative plan, with appropriate steps taken to maximize the privilege, including by putting protocols in place to govern how interview memos are generated. And in Germany last year, the Munich prosecutor’s office generated headlines when it conducted a raid to seize materials from the German office of a U.S. law firm. While German authorities (particularly prudential regulators) are less open to the privilege than their counterparts in the United States, the raid pushed the boundaries on what had been accepted practice. In an interim decision, Germany’s federal constitutional court recently held that Munich prosecutors could not use materials seized during the raid. It remains to be seen what the court will say in its final decision. Nonetheless, when conducting a multijurisdictional inquiry that touches on Germany, counsel would be wise to take into account the more limited scope of privilege in Germany and the possibility of a raid.

Pressure on the Privilege: What to Do About It

Given that major investigations are often followed by class actions in the United States or follow-on litigation abroad, companies under regulatory scrutiny can find themselves in a difficult position, weighing the risk of future disclosure against the need to cooperate with authorities in the near-term. Particularly in global investigations, it is crucial to have a strategy in place to manage these potentially conflicting interests (and to ideally ensure that they align). Depending on the jurisdictions at issue, the ability to maintain the privilege will depend on a number of factors. This includes factors we would ordinarily consider, such as who attends and conducts the interview and whether it is in anticipation of litigation. When results are presented to regulators, at a minimum counsel should avoid providing an oral recitation of written privileged work product. When drafting public settlement documents, counsel should take care if they describe their cooperation in those documents, to make it clear that they have not simply read privileged materials to the other side. For global matters, there are a number of additional factors that must be considered, which may be inconsistent with or out of the mainstream of standard practice in the United States. These may include who is being interviewed and whether they are part of the “client group,” whether the regulator has opened a formal investigation and where the documents were generated. Practitioners should also consider who generated the documents, to what bar that person is admitted and whether they are practicing law as an in-house or external counsel. The availability of the privilege may turn on where the documents are stored and even what the terms of the client’s engagement letter are. These and other factors should be evaluated within the context of the privilege law of each country at issue. Navigating the diverse standards applicable to the privilege in both domestic and multijurisdictional investigations is critical. Particularly for international matters, it is essential that counsel put in place a strategy that accounts for risks stemming from different legal systems and approaches at the outset, so that actions taken in one jurisdiction do not lead to unintended or unanticipated consequences in another. Attention to these issues must remain front and center for any effective practitioner. Olivia Radin is a partner in the white-collar and complex litigation group at Freshfields Bruckhaus Deringer in New York.