Shifting Sands: Protecting Your Information in - PowerPoint Presentation

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Shifting Sands: Protecting Your Information in Cross-Border Regulatory Investigations

Matthew Axelrod, Partner, Washington, D.C.Satindar Dogra, Partner, LondonAdam S. Lurie, Partner, Washington, D.C.3 May 2017

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GIR Moderator

Mary Jacoby

Consulting

EditorGlobal Investigations ReviewJust Anti-Corruption

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Linklaters

Matthew Axelrod

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

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 S. Lurie

Partner, Washington, D.C.

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 IssuesPart II. Data Protection Issues in Regulatory InvestigationsPart III. Practical Steps to Protect Your InformationPart IV. Q & AThis event is intended merely to highlightissues and not be comprehensive, nor toprovide legal advice. Should you have anyquestions on issues discussed here, or onother areas of law, please contact one ofyour regular Linklaters contacts, or contactthe 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 widelyMultinational companies must understand privilege in the jurisdictions in which they do businessMany EU jurisdictions do not recognize privilege with respect toin-house legal adviceAs 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

“Professional secrecy,” as distinct from legal privilege, is a public policy concept primarily encountered in civil law countriesThere 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 GermanyAttorney-client relationship protected by a number of professional confidentiality regulationsBreach of confidentiality is a criminal offenseClient 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;ORWere prepared exclusively for the purpose of seeking legal advice from such a lawyer

France Germany EU

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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

Defendants may elect to waive privilege in some instancesGenerally, no “selective” waiver option is available when disclosing to regulatorsPrivilege 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 actionsCan 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 surrenderedPrivilege protections are available in context of dawn raids

U.S. UK EU

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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 16

th

, 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 privilegeIn 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 AdministrationIn relation to obtainingcooperation credit,“prosecutors shouldnot ask for such waiversand are directed notto 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., emails, 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 emails 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 problematicDisclosure to regulators outside the EU is restricted and can be difficultDisclosure is permitted (1) for the purpose of legal proceedings; or(2) where it is in the substantial public interestIt 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: +1 202 654 9264

matthew.axelrod@linklaters.com

Satindar Dogra

Partner, London

Tel: +44 20 7456 4316

satindar.dogra@linklaters.com

Adam S. Lurie

Partner, Washington, D.C.

Tel: +1 202 654 9227

adam.lurie@linklaters.com

A downloadable version of this webinar, along with these slides, will be emailed to you in the next few days. It will also be accessible on the GIR website.

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