Every Board dreads the day when a serious allegation is levied against one of its senior team members, or indeed themselves with the possibility of drawing in unwanted media attention. But my view is that whistle-blowing is sometimes the only means by which a Board can learn about serious issues, such as fraud and significant policy breach, as members can be very distant from the daily operation of its Business and its Officers. Most Boards will welcome a rapid review of the allegation/s by either instructing their Risk and Security Departments or a third party (such as a solicitor or a reputable Audit firm) to undertake an impartial and confidential review of the matter, in order to secure a set of objective findings and recommendations for the Board to act on.

However the recent judgement on The Director of the Serious Fraud Office (SFO) v. Eurasian Natural Resources Corporation Limited (ENRC), in May 2017, raises some very important points for Boards on the matter of protecting its legal privilege during whistle-blowing investigations, either conducted internally or through third parties.

ENRC’s Board instructed an independent law firm, Dechert, to investigate a serious allegation that the business had made corrupt payments to secure mining concessions in Africa. However when the SFO contacted ENRC it demanded access to the investigation documentation as well as normal business documents. ENRC argued the investigation documents were privileged. However the SFO disagreed and received a judgement in its favour. Most materials were found not to have privilege, with the exception of Documents indicating or containing factual evidence as presented by Dechert to ENRC’s Board. ENRC is now seeking to appeal.

Anthony Hilton (Evening Standard) stated “ENRC fell foul of Serious Fraud Office by doing the right thing”. I disagree. ENRC initially did the right thing by commissioning a third party to investigate a serious allegation. However, ENRC and the third party were responsible for ensuring the investigation was well defined from the outset, including aspects of privilege. All internal parties conducting the investigation along with Dechert, should have been made aware of the remit and its relevant parameters. The nominated Board member managing Dechert should have been keeping a close eye on timescales, confidentiality, privilege, costs and emerging actions. Clearly there were errors, and relying on privilege to potentially avoid litigation was not going to wash with the SFO.

ENRC could have considered self- reporting the matter to the SFO in the early stages of its internal investigation, which may, in hindsight, have placed the responsibility of fact finding on the SFO and minimised the grief it subsequently had with Dechert.

There are lessons to be learned. When faced with a serious investigation, Boards need to give careful consideration as to how they should conduct an internal or third party investigation, balancing their appetite to get to the bottom of an issue quickly, with the likely loss of legal privilege. This judgment may encourage Boards to cooperate with the SFO earlier and more fully, thus making data gathering a more precise, well thought out series of actions. There is a downside to this too, sadly, as Companies may be tempted to ignore whistle-blowing and sweep issues under the corporate carpet.