The Deferred Prosecution Agreement (DPA) regime may have been saved from the brink of disaster today by the release of the Court of Appeal's judgment in the case of The Serious Fraud Office v Eurasian Natural Resources Corporation Ltd. The DPA has been lauded as providing corporations with the incentives needed to investigate and report themselves. However, how powerful these incentives are has been brought into sharp focus recently. The incentive to self-report was the first to take a blow at the beginning of last year when the SFO entered a DPA with Rolls Royce in circumstances where it hadn't self-reported, but instead its wrongdoing was discovered by the SFO. This begged the question as to why corporations would self-report if the SFO is willing to enter into a DPA on cooperation alone.
The incentive to internally investigate and cooperate with the SFO received a similar battering in the High Court judgment of the above case. Andrews J found that documents created in the course of internal investigations conducted by ENRC's forensic accountants and solicitors did not attract legal professional privilege. This was because it had been indicated that the outcome of the investigations would be provided to the SFO by way of a report. This had serious repercussions for the attractiveness of the carrot of a DPA in the eyes of corporations already wary of investigating suspected wrongdoing.
However, all is not lost for the DPA. Today the Court of Appeal handed down its judgment in the above case finding that, while ENRC had agreed to provide a copy of its eventual report to the SFO, it had, at no point, indicated any formal intention to provide any of the underlying documents generated in the course of the investigations. The court specifically pointed to DPAs as benefitting from legal professional privilege as it offers a degree of protection to corporations who do voluntarily put their heads above the parapet in conducting internal investigations and self-reporting. Without the comfort of that protection, the court said, "the temptation might well be not to investigate at all, for fear of being forced to reveal what had been uncovered…". The court also pointed to a waiver of privilege as the appropriate method by which corporations could safely agree to disclose certain materials to a prosecuting authority.
In our view, the timing could not be better for Lisa Osofsky, the new Director of the SFO who mentioned, in her speech on Monday at the Cambridge International Symposium on Economic Crime 2018, her previous involvement in the biggest monitorship in the world under a DPA imposed by the Department of Justice in the US. She also commented that DPAs are part of her strategy for the SFO for the upcoming years and that "DPAs are spreading across the globe". The Court of Appeal's mention of the necessity of protecting legal professional privilege specifically in relation to allowing the DPA regime to operate effectively correlates reassuringly with that which Ms Osofsky envisages for the SFO's future.
The High Court's ruling had knocked a number of other holes into legal professional privilege and the Three Rivers test which the Court of Appeal's judgment has largely repaired. This firm will be publishing a more in depth analysis of the Court of Appeal's treatment of the High Court's ruling in ENRC in relation to legal professional privilege shortly.