Global Investigations Review - The law and practice of international investigations

The Asia-Pacific Investigations Review 2018

Protecting privilege in Asia investigations

Herbert Smith Freehills

Introduction

Corporate investigations in Asia almost inevitably involve multi-jurisdictional elements. It is rare to have a matter where the evidence falls within the borders of a single country and is subject to only that country's regulators or enforcement agencies. Rather, a corporate that uncovers potential misconduct will typically need to assess its regulatory and criminal exposure in a number of jurisdictions and, in turn, deal with the regulators and law enforcement agencies from those same jurisdictions.

Corporates and lawyers involved in cross-border investigations need to be mindful whether documents created during the investigation (such as interview notes, legal advice, etc) will need to be produced to regulators or authorities in different jurisdictions. Lawyers in common law countries will be familiar with the protection against production afforded by legal professional privilege, but that type of protection is not universal. Legal professional privilege entitles a party to resist producing certain lawyer-client and lawyer-third party documents to third parties, including enforcement agencies and regulators.

The majority of Asian jurisdictions are civil law countries. Accordingly, they do not recognise legal professional privilege. Corporates operating in those jurisdictions may not be able to resist producing evidence collected or prepared during an internal investigation. Confidentiality rights may apply in limited circumstances, but those rights are not the same as privilege and should not be confused with it.

In contrast, common law jurisdictions recognise privilege. Notable examples include Hong Kong and Singapore, as well as major enforcement jurisdictions like the US and the UK. Indeed, the jurisdictional reach of statutes such as the US Foreign Corrupt Practices Act 1977 and the UK Bribery Act 2010 means that conduct in Asia is often at the heart of enforcement actions by UK and US authorities, making the rules of privilege in the UK and US particularly important to multinational corporates.

Because documents prepared in one jurisdiction will frequently be subject to the rules of privilege in another, it is essential for both corporates and lawyers to familiarise themselves with relevant rules in order to ensure any privilege protection is maintained.

This article sets out the key aspects of this protection in relation to the major jurisdictions, and highlights practical considerations drawn from our experience in conducting multi-jurisdictional investigations.

Asian civil law countries and duties of confidentiality

Civil law countries in Asia - such as China, Japan, Korea, Indonesia, Thailand and Vietnam - do not recognise privilege. Those jurisdictions do, however, recognise that lawyers owe a duty of confidentiality over documents provided to them by their clients.

Confidentiality rights apply only to evidence in the possession of the lawyer and can be overridden by the authorities. As such, they are of limited assistance in enforcement actions. In the absence of an express statutory or procedural provision, the authorities are entitled to demand that the client grant access to confidential documents or communications and the client is required to supply the requested information in a prompt, full and accurate manner.

Asian common law countries and rights of privilege

Some countries in Asia, including Hong Kong, Singapore, India, Malaysia and the Philippines, have retained the traditional common law concept of legal professional privilege. Companies under investigation in these jurisdictions may avail themselves of the privilege and its protections, although it is important to note that privilege will not usually apply where documents are generated to further fraudulent or illegal acts.

Hong Kong

Hong Kong's rules of privilege stem from English law. As a result, there are two heads of legal professional privilege: legal advice privilege and litigation privilege.

Legal advice privilege

In Hong Kong, legal advice privilege applies to confidential communications between a lawyer and his or her client where the dominant purpose of the communications is to seek or give legal advice. This departs from the English law test in that it applies a ‘dominant purpose' threshold. This generally means that the protection is wider than it would be under English law. What constitutes ‘legal advice' has been widely defined as anything done by a lawyer (including foreign lawyers and in-house counsel acting in a legal capacity) with a relevant legal context.

As to who is the ‘client', Hong Kong takes an expansive approach. The Hong Kong Court of Appeal in Citic Pacific Ltd v Secretary for Justice (No. 2)1 rejected the narrow interpretation of client adopted in England2 where only a small sub-set of (senior) individuals within an organisation qualified as the client for privilege purposes. Instead, the Court of Appeal held that communications made by the client company's employees for the dominant purpose of seeking legal advice were covered by legal advice privilege. In the investigatory context, this means that documents such as interview notes between lawyers and employees should be privileged, provided they were created for the dominant purpose of seeking legal advice.

Litigation privilege

Litigation privilege is wider than legal advice privilege. It covers confidential communications between a lawyer and his or her client, or a lawyer or client and a third party (such as a witness of fact, an expert witness or a consultant) where the dominant purpose is advising on, or obtaining evidence in relation to, actual or contemplated litigation. This would cover criminal investigations and most regulatory investigations, but not investigative inquiry tribunals.

Waiver

A client can waive privilege over a document, either expressly or impliedly. Waiver can raise thorny issues in the investigatory context, typically where a corporate wishes to cooperate with a regulator or law enforcement authority's request for documents. In disclosing the document, the client may waive privilege as confidentiality is lost.

However, Hong Kong recognises a doctrine of partial or limited waiver, which allows a client to disclose privileged documents to a third party (such as a regulator or authority) without causing a general waiver of privilege in all related documents. Any corporate seeking to rely on this doctrine should provide written terms that disclosure is made (i) in confidence; (ii) for a limited purpose only; and (iii) on the basis that it is not to be shared with others.

Singapore

Singapore recognises the concept of legal professional privilege in the same way as the UK and Hong Kong, with two limbs: legal advice privilege and litigation privilege.

Legal advice privilege

The test for legal advice privilege stems from the UK test. Unlike Hong Kong, Singapore does not apply a dominant purpose test to legal advice privilege. Nor does Singapore apply an expansive definition of client. Therefore, legal advice privilege is more narrowly interpreted. Interestingly, in 2007, the Court of Appeal left open the possibility in Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore Pte Ltd)3 that a dominant purpose test could potentially apply to a third-party report prepared to enable the client to obtain legal advice. Ultimately, no binding precedent was created. It is unclear whether this more expansive approach, focusing on purpose and encompassing documents created by third parties, would be applied if the issue were to come before the same court again.

Litigation privilege

The test in Singapore accords with that of Hong Kong. As with Hong Kong, the scope of litigation privilege is broader than legal advice privilege.

In practice, investigatory authorities often accept claims of privilege and do not insist on the disclosure of privileged documents. In practice, those who are compelled or who expect a request from an authority should communicate this to the authorities with a view to withholding these from production, or agree a procedure for their handling by the authorities and third parties.

Waiver

Recently, the Singapore Court of Appeal considered in Wee Shuo Woon v HT SRL4 whether privilege still attached to confidential documents published online as a result of a cyberattack on the defendant company. The court stated that there was nothing to suggest that privilege had been waived by the defendant; confidentiality had been lost through no fault of the company. Accordingly, the plaintiff could not rely on the documents. This should provide some comfort to corporates faced with the increasing threat of cyberattacks and what impact this has on the status and security of their documents.

India, Malaysia and the Philippines

India, Malaysia and the Philippines accord broad privilege protection to lawyer-client communications, recognising both legal advice and litigation privilege. Legally privileged documents are generally protected from disclosure to enforcement and regulatory authorities. The circumstances where privilege is waived continues to evolve in these jurisdictions.

Investigations in jurisdictions outside Asia

As previously stated, dealing with corporate investigations conducted solely within one country, or within Asia, is becoming increasingly rare. Many multi-jurisdictional investigations will involve investigations by the authorities in the UK or the US. It is therefore important to understand the rules of privilege as they apply in those jurisdictions. This is because the relevant authorities will apply those rules, and not the rules of the country where the document was created or the communication was made, in assessing any claim to privilege.

United Kingdom

As previously summarised, there are two limbs to legal professional privilege in the UK: legal advice privilege and litigation privilege. Only litigation privilege applies a dominant purpose test. The term ‘client' is narrowly defined under English law, and includes only individuals within a client entity who are authorised to obtain legal advice on that entity's behalf, rather than any and all employees of the client entity.

Recent judgments curtailing privilege

The English High Court recently considered each limb of privilege in respect of documents created during investigations; in particular, notes created by lawyers of interviews with their client's employees. These judgments have endorsed a very limited application of privilege in the context of internal investigations.

In December 2016, the English High Court handed down a decision in RBS Rights Issue Litigation5 in the context of group litigation brought against RBS relating to a rights issue announced in April 2008. RBS claimed legal advice privilege in ‘transcripts, notes or other records' of interviews conducted by or on behalf of the bank with its employees and ex-employees as part of internal investigations after the rights issue, but before litigation was contemplated. The court held that privilege did not apply. These employees were not authorised to act on behalf of the bank in respect of the relevant legal matters, and so could not be properly characterised as the client. This judgment confirms the narrow application of legal advice privilege to internal investigations.

In May 2017, the English High Court examined the issue again, this time in the context of a criminal investigation. In Serious Fraud Office (SFO) v Eurasian Natural Resources Corporation Ltd6 the court held that documents prepared during the course of a criminal investigation were not covered by litigation privilege, even though there was likely to be (and eventually was) a criminal investigation by the SFO into the alleged misconduct. The court held that a criminal investigation could not be considered litigation in this context, as a criminal investigation did not always result in a criminal prosecution. Rather, a criminal prosecution could only be contemplated at the point in time when the company was aware of facts which made a prosecution more likely than not (ie, the misconduct was substantiated).

ENRC's alternative claim based on legal advice privilege also failed. Documents that comprised lawyers' notes of interviews with their client's employees were not privileged as there was no evidence that the interviewees were authorised to seek and receive legal advice on behalf of the client company. The court also rejected an argument that the lawyers' notes were privileged on the basis that they were lawyers' working papers, endorsing previous decisions (including the RBS case) that lawyers' working papers are privileged only if they ‘betray the trend of the legal advice'.

In light of these decisions, information gathered or documents prepared during the course of an internal investigation, even if prepared by a lawyer and even in circumstances where a criminal investigation is imminent or underway, may not be protected by legal professional privilege. Although the findings in these decisions will have the most impact on investigations undertaken in England, the SFO v ENRC decision and the emerging trend to narrow the scope of privilege available to internal investigations will certainly have an impact on how investigations are dealt with in Asia.

United States

The US recognises the privilege in a broader sense than the UK, Hong Kong and Singapore. To establish what is referred to as the attorney-client privilege, four basic elements must be present: (i) a client; (ii) a lawyer; (iii) a communication in aid of giving or seeking legal advice; and (iv) a reasonable and continuing expectation of confidentiality.7

Similar to other common law jurisdictions, privilege in the US attaches to communications relating to legal advice and documents prepared in anticipated litigation. However, the US position deviates in that:

  • the US adopts a wider interpretation of ‘client'. In Upjohn Co v United States,8 the court held that privilege is not limited to communications made between lawyers and the client entity's employees who are in managerial positions, but also includes any employee capable of making a decision that would substantially affect the corporation's legal position.9
  • third party communications can be covered by privilege in the absence of litigation (existing or potential). In the US, attorney-client privilege may protect reports prepared by third parties, if they are made at the request of the attorney and for the purpose of providing legal advice to the client. This protection applies regardless of whether there is existing or contemplated litigation.10
  • the US does not adopt the dominant purpose test. In In Re: Kellogg Brown & Root, Inc,11 the court held that it is sufficient as long as the purpose of obtaining legal advice is one of the ‘significant purposes' of the communication. It is unclear whether this will make a significant difference in practice, but technically, it is less restrictive than the dominant purpose test, and may provide a greater scope of protection to documents.

Additionally, the work product doctrine in the US protects documents prepared by a lawyer in anticipation of litigation.

In the context of internal investigations, for a communication to be privileged in a US investigation, the lawyer must be: (i) authorised by the client to inquire into the subject matter; (ii) seeking information to evaluate whether the employee's conduct has bound or would bind the corporation; and (iii) assessing the legal consequences, if any, of that conduct or formulating the appropriate legal responses to actions that have been or may be taken by others with regard to that conduct.12

Practical considerations in multi-jurisdictional investigations

Ultimately whether documents prepared or collected for cross-border investigations are privileged will depend on where the investigation is conducted as well as the factual circumstances surrounding the creation of the document. It is important to remember that even if a document is privileged in one jurisdiction, it may not be in another.

In jurisdictions where privilege does not exist, companies should take care to minimise all communications on sensitive or privileged topics as they will not be protected from production. Oral updates and reports are preferable. Any documents evidencing legal advice should, to the greatest extent possible, remain in the sole possession of the lawyer.

In jurisdictions where privilege exists, certain steps can be taken in light of recent case law to maintain privilege over relevant documents. These include:

  • when lawyers are preparing interview notes, they should be sure to record thoughts and impressions. It is clear from SFO v ENRC and the RBS case that records of witness interviews prepared by lawyers will not attract privilege as a right in any UK investigations. If the intention is for the document to remain confidential and privileged, then the document should include the lawyer's thoughts and impressions about the information being provided. Verbatim transcripts or factual records of the information provided by the witness or third party will not be privileged.
  • the creation and circulation of documents should be limited and a communications protocol should be created. As a general rule, documents containing sensitive information or advice should be limited to lawyer-client communications and not be distributed widely or outside the client corporate. Any communications over which privilege will be claimed should be sent to a lawyer by the client, keeping in mind that the English position on who is the client is narrow. Indeed, determining who the client is differs from jurisdiction to jurisdiction but should generally be tightly defined, both to preserve privilege and to limit contagion or waiver issues.
  • internal reports should take the form of legal advice. The reports which are issued following internal investigations should, to the extent possible, be produced in the form of legal advice. If it is the case that the client intends to share the report with an authority, parties should be aware that this may mean privilege does not attach to the report or any of the underlying documents.

Conclusion

Legal professional privilege is a difficult issue to navigate in Asia, particularly in circumstances where some jurisdictions do not recognise privilege, and those which do each apply their own set of rules. It is important that lawyers and corporates involved in cross-border investigations familiarise themselves with not only the rules of the jurisdiction in which the conduct occurred, but also the rules in other jurisdictions that may become relevant at a later point in time. The English High Court has been particularly active in setting boundaries around the availability of privilege to documents created as part of criminal and internal investigations, and it is therefore wise for all companies with cross-border connections to take every precaution available to maintain privilege over lawyer-client documents.

Notes

  1. [2015] HKEC 1263.
  2. See Three Rivers District Council v Governor and Company of the Bank of England (No. 5) [2003] QB 1556.
  3. [2007] SGCA 9.
  4. [2017] SGCA 23.
  5. [2016] EWHC 3161 (Ch).
  6. [2017] EWHC 1017 (QB).
  7. Restatement (Third) of the Law: Law Governing Lawyers Sections 68-72 (2000).
  8. (1981) 449 US 383.
  9. Upjohn Co v United States (1981) 449 US 383, 391-397.
  10. Lluberes v Uncommon Prods., LLC, 663 F. 3d 6, 24 (1st Cir. 2011); United States v Kovel, 296 F.2d 918 (2d Cir. 1961).
  11. 756 F.3d 754 (D.C. Cir. 2014).
  12. Upjohn Co v United States (1981) 449 US 383, 403.

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