Corruption Suspects Win Landmark Appeal in London
(Bloomberg) -- A U.K. appeals court on Wednesday overturned a decision forcing a Kazakh mining company to hand over documents to prosecutors who are investigating the firm for corruption, marking a decisive victory for law firms helping firms manage fraud and bribery cases.
The ruling means that Eurasian Natural Resources Corp. no longer has to provide the files, which it claims are subject to attorney-client privilege, to prosecutors. A London judge had ruled in May 2017 that three of four categories of documents sought by the U.K. Serious Fraud Office must be turned over.
The case sets a precedent with implications for companies and lawyers beyond ENRC and pulls the U.K. closer to U.S. rules. The privilege could protect communications containing confidential advice between a client and attorney -- and other materials prepared for possible litigation -- from being disclosed.
"Lawyers and clients investigating the most serious criminal issues will sleep a little easier in their beds," said Julian Acratopulo, a lawyer with Clifford Chance and the president of the London Solicitors Litigation Association.
The SFO opened an investigation officially into ENRC in 2013 over allegations that bribes were paid to win business relating to the acquisition of mineral assets in Kazakhstan, Zambia and Democratic Republic of Congo. The company has since delisted from the London Stock Exchange and put its operations into a separate company.
‘Likelihood of Prosecution’
The three appellate judges ruled that because the SFO was already informally scrutinizing ENRC when the firm’s lawyers started the internal investigation, there was always a reasonable expectation of a prosecution. This meant that the attorney-client privilege already applied.
"The judge was wrong to conclude that a criminal prosecution was not reasonably in prospect," the judges said Wednesday. "It seems to us that the whole sub-text of the relationship between ENRC and the SFO was the possibility, if not the likelihood, of prosecution."
The appeals court decision applies to interview notes conducted as part of ENRC’s internal probe, but the SFO will be able to look at a pair of emails that were written by an in-house deals specialist.
While most lawyers cheered the ruling, a public-interest group that seeks to expose bribery and corruption said it will “will help companies hide their criminality.”
"This will make it much harder for the SFO to get to the bottom of corporate wrongdoing," said Sue Hawley, a transparency advocate with Corruption Watch. "We hope the SFO can find grounds to appeal it to the Supreme Court."
The SFO said in an email that it will study the judgment and consider its implications.
ENRC lawyer Michael Roberts, of Hogan Lovells in London, said the ruling allowed companies that are suspects in fraud and bribery investigations to conduct internal investigations without the fear of prosecutors getting access to all of their documents.
"It is critical that companies are not penalized for acting responsibly," Roberts said in an email. "Following this ruling, it will remain for the company to decide whether, and to what extent, it is prepared to waive privilege."
The SFO is investigating whether ENRC paid bribes and committed fraud while acquiring mining operations. The law firm that ENRC hired to conduct the internal investigation, Dechert LLP, has hinted at some of its findings in a civil lawsuit involving its former client.
Dechert said in the London case that it had found proof that the company paid a friend of Congo’s president $40 million in cash, at least some of which was probably used to pay bribes. The law firm also said it has proof that ENRC’s three billionaire owners personally pocketed $300 million from the sale of a Zambian copper mine, at the expense of shareholders. ENRC refutes the allegations.
The SFO is under the new leadership of Lisa Osofsky, a former federal prosecutor in Chicago, who is keen to extend a run of high-profile cases pursued by her predecessor. While the ruling is a set-back, Osofsky is unlikely to be overly concerned by it, according to Ben Ticehurst, a lawyer with Rahman Ravelli.
"Given the fact that Lisa Osofsky comes from an American background it may not be seen as such a big blow to the SFO than it may have," Ticehurst said. "The U.S. tradition is a bit more accepting of legal privilege. The SFO was taking a very hard line on this."
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