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Cross-Border Internal Investigations & Privilege: English High Court Orders Disclosure of Interview NotesFebruary 21, 2017
The RBS Rights Litigation
The English High Court has recently ruled that transcripts, notes, and other records of interviews with employees/ex-employees created as a result of internal investigations (in part responsive to SEC subpoenas) and which were privileged under US federal law were not privileged from production in English civil litigation.
The decision of Mr Justice Hildyard (The RBS Rights Issue Litigation  EWHC 3161 (Ch)) has major implications for any commercial organisation that is managing an internal investigation where there is also a risk that the subject matter of the investigation will be relevant to subsequent litigation in England and Wales. Banks and other financial institutions with a presence in both the US and the UK should, in light of the decision, be particularly careful not to create discoverable documents during witness interviews conducted in the course of an internal investigation.
RBS initially intended to appeal the decision directly to the UK Supreme Court (bypassing the English Court of Appeal), but the appeal has recently been withdrawn.
The RBS case relates to a rights issue of shares that was taken up in 2008. The shareholders sought to recover investment losses, arguing that the prospectus for the rights issue was neither accurate nor complete. The legal-advice privilege question arose when RBS sought to withhold notes from interviews with employees and ex-employees of RBS. The interviews had taken place as part of internal investigations relating to sub-prime exposures and other matters.
RBS’s Claim for Legal-Advice Privilege
RBS attempted to resist disclosure of the interview notes on the grounds that:
a) the interview notes were subject to legal-advice privilege: RBS contended that the interview notes comprised information gathered from employees or former employees at the instance of RBS’s lawyers for the purpose of enabling RBS to seek legal advice from its external counsel and were therefore protected by the English law doctrine of legal advice privilege. RBS’s claims to privilege did not rely on the interview notes being part of client/lawyer communications in which legal advice was sought or given; nor did RBS suggest that the interviewees were themselves seeking or being provided with legal advice.
b) the interview notes constituted lawyers’ privileged working papers: RBS argued that the interview notes constituted lawyers’ working papers, giving rise to an alternative basis for privilege under English law; and/or
c) the English Court should apply US federal law to determine the issue of privilege: Under US federal law, the interview notes were said to be privileged; and/or
d) the English Court should exercise its discretion to withhold the documents on the basis that they are privileged under US law: RBS argued that the Court should exercise its discretion to order that disclosure should be withheld, even if English law governed the question of privilege.
The Court’s Analysis
Were the interview notes communications between lawyer and client?
One of the key questions for the Court in RBS was whether the interview notes constituted communications between a lawyer and “client.” The Court held that they did not.
In doing so, Mr Justice Hildyard considered the leading Court of Appeal decision on this point, Three Rivers District Council v. Governor and Company of the Bank of England (No.5)  QB 1556. In that case, the Court of Appeal held that the “client” for the purposes of legal-advice privilege was limited to a three-person inquiry unit which had been established to deal with certain legal issues.
Mr Justice Hildyard upheld the narrow definition adopted by the Court of Appeal in Three Rivers and emphasised that information gathered from an employee or an ex-employee was no different than that obtained from third parties. The client for the purposes of privilege consists only of those persons within the corporate entity authorised to seek and receive legal advice from the client’s lawyer. Legal-advice privilege does not therefore extend to information provided by employees (and ex-employees) to, or for the purpose of being communicated to, a lawyer.
Further, Mr Justice Hildyard emphasised that a communication will not benefit from legal-advice privilege where: (i) it does not contain instructions to lawyers; and/or (ii) is the result of a mere fact-gathering exercise which, as a stepping stone, aids the client in obtaining legal advice. Legal-advice privilege is strictly confined to communications between a lawyer and his client for the purpose of giving or receiving legal advice.
Were the interview notes lawyers’ working papers?
The Court also dismissed RBS’s alternative claim that the interview notes were lawyers’ working papers. Mr Justice Hildyard held that RBS had not met the burden of demonstrating that there was some aspect of the interview notes which would betray, or give a clue as to, the nature of the legal advice being given to RBS. The interview notes needed to have offered both a “clue as to the legal advice to be offered” and some kind of genuine analysis by lawyers. Mere “mental impressions” which may shed light on a lawyer’s “train of inquiry” were held to be insufficient.
Which law should apply to questions of privilege? Should discretion be exercised?
RBS contended that it was US federal law, rather than English law, that should apply to the question of privilege. In the case of RBS, the interviewees had all been given an Upjohn warning (a warning given to interviewees at the outset of an investigatory interview). Pursuant to the decision of the US Supreme Court in Upjohn Co. v United States, 449 U.S. 383 (1981), this would mean that a corporation’s attorney-client privilege could cover communications between company lawyers and non-management employees.
Although he did not consider this position to be entirely satisfactory, Mr Justice Hildyard held that it would be too drastic a step, unsupported by authority, as well as being impractical, to alter the practice of the English Court in respect of the application of the lex fori (law of the forum) to questions of privilege. As such, Mr Justice Hildyard held that English law would apply to issues of privilege.
Despite concerns about the assurances of confidentiality that were given to the interviewees, Mr Justice Hildyard held that this was not a special case in which the discretion to prevent disclosure should be exercised.
The RBS decision has major implications for the way in which internal investigations with any connection to the UK are to be conducted and recorded. The decision is of significance to all companies involved in cross-border investigations, not least because the decision may encourage regulatory bodies in the UK (such as the Serious Fraud Office) to challenge claims to privilege more aggressively.
Clients should be alert to the risk that an internal investigation in one jurisdiction will create documents which may have to be disclosed in another jurisdiction. In the event of an investigation which is, or has the potential to become, cross-jurisdictional, corporations are advised to seek specialist legal advice before commencing the investigation.
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