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Susan Hawley: UK court limits legal privilege under DPA to protect individual’s right to fair trial

A UK High Court ruled on April 19 that if it had jurisdiction to do so, it would have found unlawful the SFO’s failure to require full witness accounts from a company subject to a Deferred Prosecution Agreement in order to ensure a fair trial for individuals.

The ruling is a crucial judicial intervention ahead of a hearing in July by the UK’s Court of Appeal which will establish whether such interviews, among other documents, should be subject to legal privilege.

The ruling relates to a judicial review challenge brought by individuals charged by the SFO with wrongdoing for which a company, XYZ (which hasn’t yet been named publicly in order to avoid prejudice to two upcoming trials of the individuals), received a DPA. The individuals argued that the SFO should have brought proceedings against the company for breach of the DPA when the company failed to provide the SFO with first accounts of witness interviews (the interviews undertaken by companies during an internal investigation into potential wrongdoing). The individuals argued that the SFO should have sought disclosure of the interviews in order to assess whether there was anything in these interviews that should duly be disclosed to them in order to get a fair trial.

The ruling is compelling on many levels. It goes to the heart of how much a company must disclose in order to be deemed cooperative, what is legitimately covered by legal privilege from an internal investigation, how much ongoing cooperation it should provide under a DPA, and what prosecutors need to require from companies in order to ensure a fair trial for individuals charged with the wrongdoing for which companies receive a DPA.

The issues are as the judges rightly say, “novel.” The UK’s DPA regime is still in many ways in its infancy and the UK has yet to successfully prosecute an individual as a result of a DPA. 

While the ruling quashed the judicial review on the grounds that the High Court did not have jurisdiction as there were remedies still available to the individuals in the Crown Court where the trials are being heard, it was highly critical of the SFO’s approach in its DPA with XYZ stating that it had “real reservations” about the agency’s position.

The judges laid out a long and detailed ruling about what they would have said if they had had jurisdiction, and made clear that if the SFO did not take action to remedy the situation, and if the Crown Court did not have the power to act, it would still be open to the High Court to quash its decision not to seek full witness accounts. The ruling:

  • Criticized the practice of the SFO of allowing ‘oral summaries’ of first witness interviews as “highly artificial”
  • Reiterated that legal privilege does not apply under current case law in the UK to first witness interviews from internal company investigations and that the SFO should consider itself bound by current case law
  • Affirmed that the prosecutor has a higher duty to ensure that individuals charged with wrongdoing get a fair trial than to providing finality through a DPA for the benefit of shareholders or of the SFO itself
  • Made clear that the “express contractual duty” on a company to provide ongoing cooperation laid out in a DPA should be robustly enforced by the SFO, and that finality only applies once the DPA has expired
  • Made clear that the right to a fair trial under the ECHR Article 6 requires the SFO to procure documents from third parties and that the SFO had arguably breached its duties under the Attorney General’s Guidelines on Disclosure by failing to do so in this case.

Oral summaries — the SFO’s inconsistent position. The Code of Practice on DPAs lays out clearly that “co-operation will include identifying relevant witnesses, disclosing their accounts and the documents shown to them.” Various senior SFO staff including the outgoing Director of the SFO and general counsel have said on various occasions that it is crucial for the SFO to see first witness accounts taken down by companies in internal investigations, and that waiving privilege over these accounts would be seen as a sign of cooperation.

However, the SFO’s first two DPAs set a very low bar for what cooperation meant in this area. In both the Standard Bank DPA and the XYZ DPA, the SFO allowed the companies to provide oral summaries of interviews with witnesses. This approach was approved by the judge overseeing the DPAs, Sir Brian Leveson, who noted that oral summaries had been given by the company and confirmed that this amounted to “genuine cooperation” which militated in favour of the DPA being in the interest of justice.

In the XYZ case, the High Court ruling shows the SFO had a considerable dispute with the company over these first witness accounts, disagreeing that legal privilege applied to them. The SFO asked the company no less than four times to reconsider its position and provide the full interviews, twice after it had received the DPA and particularly after a request for these documents from the individuals who had been charged. Each time the company refused, and the SFO took no further action. The company even refused to allow an independent counsel, jointly approved by both the SFO and the company, to review the witness accounts.

The judges were scathing about this approach: “We do not know why the SFO did not simply demand, robustly, that the written summaries used by the lawyer [acting for XYZ] be handed over. In the course of the SFO’s submissions to this court, no satisfactory answer was provided to that question.” They also highlighted misgivings by the Crown Court judge that in refusing to provide full summaries, the lawyers for XYZ were acting for the company and were not looking at matters from the point of view of a prosecutor with responsibilities towards individuals it was prosecuting. Additionally, they noted that the summaries were “very short” — in one case, a three-day interview with an employee having been synthesized into three pages “in fairly spread out form.”

Privilege issues. The judges summarized that the only point that the company was making in refusing to hand over the longer, contemporaneous written summaries was “a (bad) point on privilege which the SFO itself rejects but now refused to test or pursue” despite the fact that “the law was powerfully in its favor.”

The SFO has not been shy of litigating on privilege as its approach in the Barclays and ENRC case show. In July, the UK’s Court of Appeal will hear a challenge by mining giant, ENRC, against a June 2017 court ruling which held that interviews by a law firm as part of an internal investigation were not covered by legal privilege, as the internal investigation could not be considered to have been carried out in anticipation of litigation.

The Law Society, a UK professional body working globally to support solicitors, has sought permission to intervene in the Appeal on the grounds that were the ruling to be upheld, it would discourage self-reporting by companies, and that corporations’ right to legal privilege must be protected.

To be fair to it, the SFO may well have thought in the XYZ case that with the Court of Appeal on the ENRC case pending, there was only so much litigation on the issue of first witness interviews that it could realistically pursue. On a less generous interpretation, the SFO may have been so keen to show companies that self-reporting would result in a DPA that it was prepared to overlook the company’s aggressive assertions of privilege over documents that the SFO did not believe to be privileged.

The new ruling in this case raises a couple of new and intriguing angles on the issue which the SFO will now have to consider:

First, that the SFO has as an overriding responsibility to ensure a fair trial for individuals it is pursuing and that this must outweigh other factors including any benefit of finality to shareholders gained through a DPA, and

Second, that the SFO should consider whether legal privilege is effectively waived under the “duty to cooperate” clauses of a DPA.

What happens next? The High Court ruling effectively states that the SFO should now bring a witness summons against the company under Section 2 Criminal Procedure (Attendance of Witnesses) Act 1965 to require it to produce the material to the court in the context of the proceedings against the individuals. The ruling states that “the onus is on the prosecutor not to take no for an answer and to take the initiative.The SFO has said it will consider the ruling before taking next steps in this specific case, and will “ensure that our future approach to these matters reflects the Court’s findings and observations.”

So, what should the SFO do now? Arguably the ruling provides the SFO with a lot of ammunition to require full written first witness interview accounts as a true sign of cooperation on the basis that these are going to be necessary to enable them to fairly prosecute individuals.

There is fairly widespread consensus that individuals, particularly senior executives, must be prosecuted where there are DPAs both to achieve real deterrence and to ensure that there is public confidence in the use of DPAs. The implications of this are clear: First, DPAs must be structured in such a way that allows individuals to be prosecuted robustly and fairly, and if that means that prosecutors must have access to the full narrative summaries of first interviews to ensure a fair trial, then so be it. Second, in the hunt for individual liability, companies should not be able to use DPAs to hang lower level employees out to dry while protecting senior management. While companies claim legal privilege over first witness interviews there are always going to suspicions that they could be hiding either further complicity by the company or evidence that more senior executives or other individuals were involved. The bottom line is this: if a company is truly cooperative and has nothing to hide, why wouldn’t it want to hand these accounts over?

But the ruling is also important for what it shows about the nature and importance of judicial oversight. It can’t be healthy to have a situation where only one judge gets to set the case law on DPAs, such as whether oral summaries are enough to constitute “genuine cooperation,” with no review of that judge’s decision available, as is currently the case in the UK.

By bringing a judicial review of the SFO’s behavior in relation to the XYZ DPA, the individual defendants have opened up the landscape of judicial oversight and shown that the judiciary is not a monolith. It raises real questions as to whether the government should look seriously into whether DPAs should be approved by a panel of judges rather than just one.


Susan Hawley is Policy Director of Corruption Watch. She worked for six years at the Corner House on corruption issues, having previously worked in the policy team at Christian Aid on ethics and corruption issues. She was behind the successful judicial review by the Corner House of the Export Credit Guarantee Department (ECGD) for weakening new anti-bribery rules following secret lobbying by defense and aerospace companies.

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