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Shifting Sands: Protecting Your Information in Cross-Border Regulatory Investigations
Matthew Axelrod, Partner, Washington, D.C. Satindar Dogra, Partner, London Adam S. Lurie, Partner, Washington, D.C. 3 May 2017
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Consulting Editor Global Investigations Review Just Anti-Corruption
GIR Moderator Mary Jacoby Consulting Editor Global Investigations Review Just Anti-Corruption
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Linklaters Matthew Axelrod Satindar Dogra Adam S. Lurie
Partner, Washington, D.C. Matt is a partner in the firm’s Dispute Resolution practice, focusing on the defense of institutions and individuals who are under investigation by the U.S. Department of Justice or other regulators, as well as conducting internal investigations. Matt has nearly twenty years of litigation experience, having been both a federal prosecutor and a defense attorney and serving as the Principal Associate Deputy Attorney General, one of DOJ's highest ranking officials and a member of the senior leadership team. Matt also took the lead in advising on crisis management within DOJ, working closely with the White House, Congress, the FBI, and the media on DOJ’s most sensitive and high-profile matters. Satindar Dogra Partner, London Adam S. Lurie Partner, Washington, D.C. Satindar is the National Practice Head for Dispute Resolution. He has over twenty years of experience in fraud investigations and corporate crime work. In recent years, Satindar has led the criminal investigation work stream for News Corporation in connection with the phone hacking and police corruption allegations. He also has represented Bayern LB in connection with claims of alleged corruption against Bernie Ecclestone and advised BAE Systems in connection with its DOJ and SFO settlements and related investigations, as well as advising Lehman Brothers in connection with the interpretation of the FSA's client money rules and the return of client assets from outside the UK. Adam is the Head of Linklaters' Washington, D.C. office and the Head of the Litigation and Government Investigations Practice in Washington, D.C. An accomplished trial lawyer and corporate counselor, Adam serves as lead counsel for clients in their most important disputes – civil, criminal, and regulatory. He has particular experience in cross-border and other matters involving considerable reputational, financial, and regulatory risks. Adam draws on his prior experience as a U.S. Department of Justice white-collar prosecutor and senior official, and as a top lawyer for the U.S. Congress, to provide outstanding advocacy, judgment, and service to clients.
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Roadmap & Disclaimer Part I. Navigating Multi-Jurisdictional Privilege Issues Part II. Data Protection Issues in Regulatory Investigations Part III. Practical Steps to Protect Your Information Part IV. Q & A This event is intended merely to highlight issues and not be comprehensive, nor to provide legal advice. Should you have any questions on issues discussed here, or on other areas of law, please contact one of your regular Linklaters contacts, or contact the presenters.
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Part I. Navigating Multi-Jurisdictional Privilege Issues
Legal privilege exists in most jurisdictions, but the application and scope of the privilege vary widely Multinational companies must understand privilege in the jurisdictions in which they do business Many EU jurisdictions do not recognize privilege with respect to in-house legal advice As both litigation and regulatory investigations become increasingly international, these differences (and their potential consequences) present a significant risk for companies and their legal advisers
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Privilege – U.S. The U.S. recognizes several types of privilege, with two being the most common: Attorney-client privilege: Protects confidential communications between an attorney and his or her client which are made: (i) in the course of legal representation, and (ii) for the purpose of rendering legal advice to the client by the attorney Protects only the communication, not the underlying facts Work product doctrine: Protects materials prepared in anticipation of litigation by an attorney or an attorney’s agent Protection is not absolute “Fact” vs. “Opinion” work product
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Privilege – UK The UK also recognizes two principal types of legal privilege: Legal advice privilege: Applies to confidential communications, written and oral, between a lawyer and his client made for the dominant or sole purpose of giving or receiving legal advice in a relevant legal context The “client” is narrowly defined, and may not include its employees Litigation privilege: Once litigation is reasonably anticipated, applies to confidential communications between a client or its lawyer and a third party if they are made for the dominant purpose of use in, or obtaining evidence or information for, litigation Protection extends to confidential preparatory/working materials created dominantly for that purpose In the UK, documents that are protected by legal privilege are not disclosable to an opposing party in court litigation
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Privilege – Other Jurisdictions
France Germany EU “Professional secrecy,” as distinct from legal privilege, is a public policy concept primarily encountered in civil law countries There may be criminal penalties for divulging confidential information “Professional secrecy” does not belong to the client, so client cannot release this obligation Legal privilege, as it is known in U.S. and UK, does not exist in Germany Attorney-client relationship protected by a number of professional confidentiality regulations Breach of confidentiality is a criminal offense Client can release attorney from this duty In EU regulatory proceedings, written communications are privileged if they: Are between external EEA-qualified lawyer and client, for the purpose of defense; Report only the content of such a lawyer’s advice, and not widely shared; OR Were prepared exclusively for the purpose of seeking legal advice from such a lawyer
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Are Communications with In-House Counsel Privileged?
When communications do NOT include outside counsel . . . United States: In-house counsel are generally treated in the same manner as outside counsel when acting in a legal capacity (but not in a business advisory role) United Kingdom: Privilege will be granted to internal communications made by in-house counsel when acting in a legal capacity, if the communication was created for the purposes of obtaining or giving legal advice, or made for the dominant purpose of reasonably contemplated litigation EU & France: Communications with in-house counsel are NOT privileged Germany: By virtue of a law introduced in January 2016, in-house counsel largely enjoy equivalent legal status to external counsel. However, this law remains untested, and with respect to privilege: In criminal proceedings, in-house counsel CANNOT claim privilege In civil proceedings, in-house counsel can, in certain circumstances, claim privilege in relation to legal advice and refuse to disclose privileged documents
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Common-Interest or Joint-Defense Privilege
Common-interest or joint-defense privilege is an exception to the rule of waiver, allowing parties to share otherwise privileged documents or information where they share a common interest Example: A company might choose to share its privileged information with individuals or employees who are also involved in an investigation The documents or information must be independently privileged In the U.S., courts have held that the “common interest” must be legal in nature; purely commercial common interests are insufficient In the UK, the concept is not so rigidly defined and would depend on the nature and circumstances of the common interest
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Waiver and Limitations on Privilege
U.S. UK EU Defendants may elect to waive privilege in some instances Generally, no “selective” waiver option is available when disclosing to regulators Privilege may be available when disclosing to third parties assisting with legal advice (but generally not to auditors) Privilege is generally respected by regulators, but there is less certainty after recent enforcement actions Can disclose privileged documents to regulators without waiver (but other jurisdictions may not respect the privilege) Third-party disclosure is permitted where litigation is anticipated, and the communication was made to assist the lawyer in rendering legal advice Privilege is generally respected by regulators Exception: documents involving communications with in-house counsel and non-EU-qualified lawyers must be surrendered Privilege protections are available in context of dawn raids
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Privilege – A Word of Warning
“German Authorities Raid U.S. Law Firm Leading Volkswagen’s Emissions Inquiry” - N.Y. Times, Mar. 16, 2017 The spectrum of regulatory philosophies and approaches to privilege can vary significantly across jurisdictions On March 16th, 2017, German authorities raided the Munich offices of Jones Day in connection with the Volkswagen emissions inquiry A week earlier, Volkswagen had pleaded guilty in the U.S. to emissions deception charges, based on the evidence collected by Jones Day and shared with U.S. authorities Although the attorney-client relationship is protected by a number of professional confidentiality regulations, legal privilege—as the concept is known in the U.S. and UK—does not exist in Germany
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Investigations – U.S. Hot Topics
Common-interest privilege In a minority of jurisdictions, including New York, the disclosure of privileged information must occur in connection with pending or reasonably anticipated litigation for the common-interest privilege to apply (Ambac) Privilege waivers under the Trump Administration In relation to obtaining cooperation credit, “prosecutors should not ask for such waivers and are directed not to do so.” –U.S. Attorney’s Manual
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Investigations – UK Hot Topics
SFO expectations for cooperation in light of case law and enforcement action Disclosure of underlying evidence (e.g., s, documents, etc.)? Disclosure of interview notes? Litigation privilege unlikely to apply to interviews conducted with employees in internal investigations Legal advice privilege—only in limited circumstances Interviewee must be part of the client; OR Interview note must “betray the trend of legal advice” Cross border issues?
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Part II. Data Protection Issues in Regulatory Investigations
The EU Data Protection Directive protects personal information about individuals, including employees, and harmonises data protection laws across the EU The EU General Data Protection Regulation will replace the EU Data Protection Directive in May 2018 The May 2018 Regulation contains: (a) more restrictive rules; and (b) a step change in sanctions, with fines of up to €20m or 4% of turnover Data protection laws typically raise two separate questions: Does the initial collection of personal information comply with data protection laws? Does the disclosure of personal information to regulators comply with data protection laws, particularly where the regulator is outside the EU?
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Data Protection – Initial Collection
EU: In connection with regulatory investigations, differences can arise between Member States due to overlap with employment law and other national law UK: Information gathering must be reasonable and proportionate. Employee consent is normally unnecessary, but be aware: Access to s can be difficult if employees have not been notified in advance (e.g., a monitoring policy) Access to information on personal devices can be difficult Care is needed when instructing private investigators In some other Member States, the law is more restrictive and gathering information more difficult.
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Data Protection – Disclosure to Regulators
The location of the regulator is important: Disclosure to regulators in the EU is generally not problematic Disclosure to regulators outside the EU is restricted and can be difficult Disclosure is permitted (1) for the purpose of legal proceedings; or (2) where it is in the substantial public interest It is not always clear if these exemptions apply; you may have to balance the risks of non-disclosure against the risks of breach of privacy laws Steps, which may involve downside risk, to consider: Local relevance review Redaction / anonymization Direct production by overseas entity Protective orders Route via the local regulator Use of Hague Convention or similar
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Data Protection – Blocking Statutes
Blocking statutes: Designed to restrict the cross-border discovery of information where discovery procedures differ from local laws and procedure Example: France prohibits communication of certain documents or information to be used as evidence outside of France, subject to certain mechanisms such as the Hague Evidence Convention Germany and numerous other civil law jurisdictions have similar statutes
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Data Protection – A Word of Warning
As regulatory investigations become increasingly international, conflicts in local data protection laws can present significant risks Example: In February 2015, the SEC settled an enforcement action it brought against the Chinese affiliates of the “Big Four” U.S. accounting firms (Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers) The SEC requested workpapers from the audit firms, which refused the request, citing Chinese data protection laws prohibiting such disclosure An Administrative Law Judge found that the firms’ refusal to comply with the request—Chinese law notwithstanding—constituted a willful violation of §106 of the Sarbanes-Oxley Act On review, the firms agreed to pay $500,000 each and take certain steps to satisfy future requests from the SEC, but did not admit or deny violating U.S. securities laws
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Part III. Practical Steps to Protect Your Information
Key considerations and practical steps to mitigate risk: Identify the appropriate client Consider the framework for the lowest-common denominator of any potential privileges that may apply Share privileged materials on a need-to-know basis across entities and jurisdictions For highly sensitive matters, involve external counsel Carefully consider any cross-border issues that may arise Be aware of different regulatory philosophies and approaches to privilege across jurisdictions
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Practical Steps to Protect Your Information (Cont’d)
Consider written investigation protocols outlining steps to protect privilege State clearly that an investigation is for the purpose of providing legal advice or otherwise ensuring compliance Be aware of the risks of using non-lawyers (e.g., forensic accountants) to conduct or assist an investigation Because a client may later waive privilege to cooperate with authorities, carefully consider any written conclusions or findings Joint defense agreements are critical in cases involving a joint defense or common-interest privilege
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Part IV. Questions?
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Contact Information Matthew Axelrod Partner, Washington, D.C. Tel: Satindar Dogra Partner, London Tel: Adam S. Lurie Partner, Washington, D.C. Tel: A downloadable version of this webinar, along with these slides, will be ed to you in the next few days. It will also be accessible on the GIR website.
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