SFO on Cooperation and Privilege: Mutually Exclusive Concepts?
The UK Serious Fraud Office (SFO) published its guidance on corporate cooperation on 6 August 2019. The guidance sets out for the first time, the indicators of good practice which the SFO expects corporates to comply with in order to be seen as cooperative in the context of self-reporting.
According to Elliott Fellowes & Johnny Shearman, respectively associate and Professional Support Lawyer at Signature Litigation LLP, such guidance has been awaited by corporates and their advisors since the inception of the Deferred Prosecution Agreement (DPA) regime in February 2014, which puts cooperation at the heart of any potential agreement with the SFO.
Whilst the question of what “cooperation” means may appear to have been answered by the new guidance, there remain issues which corporates will have to grapple with. One of these which has been left decisively uncertain by the guidance, is how far to progress an internal investigation before engaging with the SFO and whether any privileged materials generated during such an investigation should be provided to the SFO.
The SFO’s guidance notes that cooperation is a public interest factor which tends against prosecution in circumstances where management has adopted a “genuinely proactive approach“. The guidance has clarified this requires providing assistance to the SFO “that goes above and beyond what the law requires“.
This may not provide much incentive to some – cooperation remains only “one of many factors that the SFO will take into consideration” when determining the outcome of any investigation and there is no guarantee that going “above and beyond” the law will lead to a DPA or reduced charging decision being offered (in the event that there has been conduct amounting to a chargeable offence). It may be that corporates will seek to obtain more certainty as to the outcome of their self-reporting before engaging fully with the SFO.
Internal investigations and privilege
Having said this, the guidance indicates that corporates who take their time when it comes to engaging in a dialogue with the SFO will not be looked upon fondly. For example, the guidance states that the SFO should be consulted before a corporate interviews any potential witnesses or takes any other “overt steps“. What could be considered an “overt step” in these circumstances is left unclear, which is likely to benefit the SFO rather than any corporate.
This begs the question: to what extent should corporates conduct internal investigations before contacting the SFO with a view to self-reporting? In most cases, corporates have very good reasons for conducting their own internal investigations, including to determine whether in fact there is any reason to contact the SFO in the first place. It is clear from the guidance however, that the SFO wants to be involved from a very early stage in proceedings, and certainly before potential witnesses are interviewed.
The SFO’s position in this respect may, at least in part, be a reaction to the decision in SFO v ENRC ( EWCA Civ 2006), in which the Court of Appeal confirmed that a corporate was entitled to assert privilege over certain categories of material created during the course of an internal investigation. One such category was notes of interviews carried out by the corporate’s legal team. It appears as though the SFO may be seeking to work around the decision, by requiring early contact from corporates, before any such interviews have been conducted.
Another way in which the SFO seems to trying to side-step the decision in ENRC is by stating that corporates will not attain the corresponding factor in the DPA Code (ie. will not be seen as cooperative) unless they waive privilege over materials generated during an internal investigation. The guidance goes on to say that corporates will not otherwise be penalised for failing to waive privilege. This seems to be a contradictory stance, as the potential of having a DPA taken off the table on the basis that privilege is asserted appears, in and of itself, a penalty for most corporates.
The SFO’s position with regards to privilege may open some unwanted doors for corporates. For example, it is unclear what impact a waiver of privilege in the context of a self-report will have on parallel or follow on civil proceedings. Arguably the documents will no longer be considered confidential, which is a key constituent of them being privileged, and therefore would be up for grabs in civil proceedings.
Broadly, the guidance is a welcome step from the SFO at this time. However, there remains a tension between early cooperation with the SFO and undertaking an internal investigation to determine whether there has been conduct which merits self-reporting, and how any material generated should be dealt with. These are key questions which will have to be considered by corporates and their legal teams when considering cooperation with the SFO.