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Attorney-at-Law, Partner, Head of White-Collar Crime, Arzinger
Legal Privilege in Cross-Border Investigations
In March 2017, the legal community was agitated by news about a search that had taken place in the German office of Jones Day, a well-known US law firm.
As it turned out, the search was closely linked to a client project. Thus, Jones Day was retained by Volkswagen after the so-called “diesel gate” scandal had erupted about the installation of special devices that distorted the results of emission tests. The law firm had, since Autumn 2015, been working on conducting a proper internal investigation into the allegations that had been brought.
The case was specific due to the fact that the above circumstances were investigated by both US law-enforcement agencies and the German prosecutor’s office (Munich).
According to the press, Jones Day had prepared a preliminary report as early as Spring 2016. It was expected that the internal investigation report would be made public. At the same time, it appeared that the client chose not to release that report because of a number of sensitive issues but provided a summary of the facts and findings of the respective internal investigation to the US Department of Justice. German law-enforcement agencies decided to obtain access to the relevant materials through a series of searches, including those at the German office of US law firm Jones Day.
The search gave rise to lengthy court proceedings regarding the further possibility to use the documents seized by law-enforcement agencies at Jones Day in Germany, until Germany’s Federal Constitutional Court ruled on 6 July 2018 that the search at the German office of the US law firm as well as the seizure of a number of documents were not unconstitutional.
Implications for Cross-Border Investigations
It is worth noting that a move like a search at a law firm whose employees are not suspected of complicity in a crime is not typical for such jurisdictions as EU countries or the US. At the same time, this situation has raised debate on professional secrecy in internal investigations, especially in cross-border internal investigations.
Thus, after the mentioned events, the legal community began to increasingly discuss professional secrecy, including legal privilege, in internal investigations. Thus, there has been separate panel discussion on legal privilege in cross-border investigations at almost every white-collar crime and anti-corruption international conference I have visited since then. I have also had the privilege of presenting the specifics of legal privilege regulation, or rather attorney-client privilege, in Ukraine at several international conferences.
In addition, when working with colleagues from foreign jurisdictions on internal investigations with a Ukrainian element, one of the first issues discussed is the regulation and protection of legal privilege in Ukraine. Advisors understand that an internal investigation can bring to light many sensitive facts. Accordingly, there are concerns that investigation results may get to third parties, including local law-enforcement agencies.
Protection of Legal Privilege in Ukraine
The concept of legal privilege is widely used in Anglo-Saxon law jurisdictions to protect client-advisor communications. The basic idea behind it is to enable the client to fully disclose information to its legal advisor without being afraid that the information may be disclosed to third parties in future and, therefore, harm the client.
Prior to the searches at Jones Day, the US and UK lawyers felt protected by the concept of legal privilege, even when working in other jurisdictions. However, the developments described have shown that it is far from it.
Thus, Germany’s Federal Constitutional Court issued a rather broad press release regarding its decision. In the document, in the context of the ban on using the material, which the US and UK lawyers considered to be protected by legal privilege, the court stated that it “considerably restricts effectiveness of law enforcement as required under constitutional law”. The court further noted that “such absolute prohibitions are only feasible in exceptional cases, such as, in particular, where an investigative measure would constitute an interference with the scope of protection of human dignity”.
There has so far been no plan in Ukraine that addresses the issue of protecting the legal privilege of information and documents obtained by US and UK lawyers. However, we can try to address this situation in terms of the criminal process of Ukraine within which Ukrainian law-enforcement agencies operate.
In this regard, our legislation is quite conservative. Thus, in terms of the client-advisor relationship, it actually protects only client-attorney privilege, i.e. the secret between a client and an attorney admitted to the Bar in Ukraine. We discuss this in more detail below.
In other words, a client’s correspondence with US or UK lawyers, the results of their work kept for certain reasons in Ukraine (at a subsidiary’s or client’s place) or other received information that is subject to legal privilege, will not be protected against access by Ukrainian law-enforcement agencies. This means that the concept of legal privilege is not sufficient for the protection of information, including the results of internal investigations, in Ukraine.
We often see in practice that audit firms are retained for internal investigations. In particular, audit firms provide inter alia forensic services. But will they receive the documents and the work results protected in terms of the criminal process?
On the one hand, Article 11 of the Law of Ukraine No. 2258-VIII On Audits of Financial Statements and Auditing Activity obliges auditors to maintain confidentiality of information and not to disclose the information received in the course of their activities. On the other hand, the current Criminal Procedure Code of Ukraine does not contain any guarantees for audit secrecy.
For instance, Article 65 of the Criminal Procedure Code of Ukraine provides for the impossibility of carrying out interrogation on information that constitutes notarial secrecy, attorney-client privilege, confidential professional information of journalists, secrecy of confession, etc. However, no such rule is enshrined in the law for auditors.
In practice, we know of cases of temporary access to the possessions and documents of audit firms within criminal proceedings. This is practical proof of the fact that audit secrecy, as a form of professional secrecy, does not give protection from the unwanted attention of law-enforcement agencies in Ukraine.
Therefore, information and documents, including the results of internal investigations that will be kept at audit firms in Ukraine, can be quite easily accessed by Ukrainian law-enforcement agencies.
Attorney-Client Privilege in Ukraine
In the above context, it is worth paying attention to the regulation of attorney-client privilege in Ukraine.
In particular, Article 22 of the Law of Ukraine No. 5076-VI On the Bar and Practice of Law contains a fairly broad definition of attorney-client privilege, which includes any information about the client “that has become known to an attorney, attorney’s assistant, trainee, a person who has a working relationship with an attorney as well as issues on which the client (a person who has been denied a legal assistance agreement on grounds stipulated by this Law) turned to an attorney, law firm, Bar association, the content of advice, consultations, attorney’s clarifications, documents drawn up by the latter, information stored on electronic media, and other documents and information obtained through the practice of law.”
This definition alone shows how broad the concept of attorney-client privilege is. After all, the attorney-client privilege regime protects not only the information provided by the client and the documents drawn up in the course of the attorney’s work, but even the client’s own information that was provided to an attorney.
Furtherwore, the current Law On the Bar and Practice of Law and the Criminal Procedure Code of Ukraine establish a number of guarantees that protect attorneys and attorney-client privilege. As stated above, an attorney may not be interrogated as a witness regarding any information that constitutes attorney-client privilege. As mentioned above, this is a fairly broad scope of information.
Talking of searches, special rules apply to an attorney, unlike to other persons. Thus, an attorney’s search can be initiated by a very limited number of individuals. In particular, according to Article 23 of the Law On the Bar and Practice of Law an attorney may be searched only with the permission of a court at the request of the Prosecutor General, his deputies, the prosecutor of the Autonomous Republic of Crimea, region, the city of Kyiv, and the city of Sevastopol. At the same time, the article expressly prohibits the examination, disclosure, obtaining on demand or seizure of documents related to the practice of law.
In this regard, it is important to note that attorney-client privilege applies to attorneys. Therefore, if an internal investigation is conducted by lawyers who have no certificate as an attorney, and are not employees of an attorneys association, then the above guarantees do not apply.
The issue of protecting information through professional secrecy is extremely important in conducting cross-border internal investigations. Thus, before deciding on where and how to transmit and process information, it’s important to determine the rules for protecting such information in each jurisdiction involved at the very outset of an internal investigation. In Ukraine, the information obtained through internal investigations as well as the results of such investigations is protected by attorney-client privilege. Therefore, it is important to involve attorneys in this process.