UK fraud office backs down in ENRC privilege battle (UPDATE 2)

The UK Serious Fraud Office (SFO) said on Tuesday it would not appeal a landmark judgment that allows ENRC, a mining company it is investigating over allegations of fraud, bribery and corruption, to keep documents out of the hands of authorities.

In a ruling welcomed by anxious corporate legal departments, ENRC last month won a London appeal in a dispute about the scope of the legal professional privilege, which ensures the advice lawyers give clients remains confidential.

London's Court of Appeal partially overturned a court decision that had dismayed companies and lawyers because of fears that internal investigations into allegations of wrongdoing could unwittingly create a document trail that could be handed to prosecutors in future legal proceedings.

The SFO said at the time that the facts of the case were complex and that it was exploring whether to seek a further appeal at the Supreme Court. But on Tuesday, new SFO director Lisa Osofsky decided to drop the case.

"The director has decided not to seek to appeal the judgment...," the SFO said in a statement.

The agency noted, however, that it would continue to assess the merits of all privilege claims and "remains prepared to challenge those it considers to be ill-founded".

Lawyers argue that legal professional privilege is a fundamental right and an important check on the power of the state.

"This is a welcome recognition from the SFO that the Court of Appeal's decision is correct in law and that the approach they were advocating for earlier in the case was misguided," said Judith Seddon, a partner at law firm Ropes & Gray.

Michael Potts, a lawyer at Byrne and Partners, said the SFO had correctly concluded that any application to appeal further was bound to fail because the original court judgment had been "flawed".

The SFO had fought the ENRC over access to documents such as notes of interviews with employees and former staff conducted by Dechert, the miner's former law firm, and documents produced during a "books and records" review by forensic accountants.

The SFO's ENRC investigation, which began in 2013, is focused on the miner's acquisition of mineral assets in Kazakhstan and Africa. The company has denied any wrongdoing.

ENRC did not immediately respond to a request for comment.

The miner was taken private by its three founders and the Kazakh government in 2013 following a series of boardroom battles, six years after listing on the London Stock Exchange.

It has been renamed ERG (Eurasian Resources Group), is registered in Luxembourg and has ferrochrome, aluminium, iron ore and energy operations in Kazakhstan, copper and cobalt assets in Africa and iron ore mines in Brazil. 

(With inputs from agencies.)