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The balance between open justice and protection of witnesses against self-incrimination in foreign criminal proceedings

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Published 15 July 2017

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The recent case of the Libyan Investment Authority v Société Générale[1] has raised issues concerning the principle of open justice and the protection of witnesses in civil cases against self-incrimination in foreign criminal proceedings. Although witnesses do not have a right to such protection under English law, the court exercised its discretion to take into account their 5th Amendment rights in the US and granted them the privilege of giving their evidence in private.

Background

The Libyan Investment Authority (“LIA“) issued proceedings against Société Générale SA (“SocGen“) and others, alleging that, during the Gaddafi era, SocGen had paid intermediaries millions of dollars to induce the LIA to enter into investments. Those investments subsequently failed and the LIA claimed losses of $2.1 billion against SocGen.

The issue of potential self-incrimination arose as a result of a decision by the US Department of Justice (“DOJ“) to investigate SocGen’s dealings with the LIA. This investigation could lead to a criminal prosecution of individuals under the US Foreign Corrupt Practices Act 1977 (“FCPA“).  The FCPA potentially has extra-territorial effect and the perceived risk of prosecution was increased since the DOJ issued guidance on 9 September 2015 directing that prosecutors should prioritise investigating and prosecuting individuals for corporation-related crime (the “Yates Memo“). The Yates Memo is widely reported to have had a “chilling effect” on the willingness of both individuals and companies to co-operate with DOJ investigations. One of the reasons for this is that although the 5thAmendment of the US Constitution entitles individuals to refuse to testify in any civil proceedings where they have reasonable grounds to believe that their statement might tend to incriminate them, the right to that privilege can be lost if an individual makes statements voluntarily.

As a direct consequence of the DOJ investigation, some witnesses in the LIA case refused to provide witness statements in support of SocGen. SocGen then applied for and obtained orders entitling it to serve witness summaries instead of witness statements.[2] The witness summaries were either statements of what SocGen believed the witness would say or the lines of questioning which would be put to the witness at trial.[3]

Some of the witnesses then applied at the pre-trial review to have their witness summonses set aside on the grounds of oppression and/or for a ring-fencing order to hold their evidence in private. This was on the basis of authority that a witness summons may be set aside where it is irrelevant, fishing, speculative or oppressive[4]. In this case, the argument was that the summonses were oppressive because of the risk of self-incrimination in foreign proceedings which might arise if the witness was compelled to give evidence.

Privilege against self-incrimination is a well-established right for a witness in English civil proceedings, but only in respect of UK criminal proceedings.[5] There is no such right in respect of foreign criminal proceedings, but the courts have a discretion to allow a witness to refuse to answer questions. The risk must be “real and appreciable” and the “mere possibility” of an offence being disclosed is insufficient.  However, there is very little case law in this area, especially on the question of oppression. Most of the case law relates to disclosure of documents[6], although ring-fencing has been approved where it was necessary to provide protection against incrimination in ongoing foreign criminal proceedings.[7]

Both SocGen and the LIA engaged US legal experts but neither could conclusively say that compelled evidence could not be used in US criminal proceedings. The current state of US law is unclear on the extent to which testimony provided by individuals may deprive them of their 5th Amendment rights. In a recent US case, two UK citizens working for Rabobank were tried in a US federal court for their alleged involvement in the manipulation of USD and Yen LIBOR rates.[8] The defendants claimed that evidence at their trial had been tainted by the testimony they had earlier been compelled to give to the FCA, but the US court held that the prosecutor had discharged his duty to prove that the evidence was derived from a legitimate source wholly independent of the compelled testimony.[9]  However, that ruling has been appealed and a decision is awaited which could clarify this question.

The application to set aside the witness summonses was refused by Mr Justice Teare, but he accepted that the existence of the DOJ investigation raised a real and appreciable risk of future US criminal prosecution.[10] Even though none of the witnesses at the time had been charged in the UK or the US, the risk was sufficient to persuade the Judge to grant a ring-fencing order, thereby overriding the general principle of open justice in England.  He ordered safeguards to be put in place in respect of the witnesses’ evidence. The witnesses were to be allowed to give evidence in private and the information derived from such evidence could not be disclosed to third parties, including the DOJ. Ultimately, however, these safeguards were not required as the case settled before trial.

Comment

It could be argued that the principle of open justice was overridden by the Court with relative ease to allow the ring-fencing order. Some US lawyers have expressed surprise at the decision, saying that in the US, the courts would not allow evidence to be given in private.

Given the DOJ’s continuing interest in prosecuting individuals connected with corrupt practices and the potential extra-territorial effect of the FCPA, this issue may be expected to arise more frequently in the English courts and the decision of Mr Justice Teare may be revisited by the courts for guidance in future cases.

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Longer Reads

The balance between open justice and protection of witnesses against self-incrimination in foreign criminal proceedings

Published 15 July 2017

Associated sectors / services

  • Banking & financial disputes
  • Financial services

Authors

The recent case of the Libyan Investment Authority v Société Générale[1] has raised issues concerning the principle of open justice and the protection of witnesses in civil cases against self-incrimination in foreign criminal proceedings. Although witnesses do not have a right to such protection under English law, the court exercised its discretion to take into account their 5th Amendment rights in the US and granted them the privilege of giving their evidence in private.

Background

The Libyan Investment Authority (“LIA“) issued proceedings against Société Générale SA (“SocGen“) and others, alleging that, during the Gaddafi era, SocGen had paid intermediaries millions of dollars to induce the LIA to enter into investments. Those investments subsequently failed and the LIA claimed losses of $2.1 billion against SocGen.

The issue of potential self-incrimination arose as a result of a decision by the US Department of Justice (“DOJ“) to investigate SocGen’s dealings with the LIA. This investigation could lead to a criminal prosecution of individuals under the US Foreign Corrupt Practices Act 1977 (“FCPA“).  The FCPA potentially has extra-territorial effect and the perceived risk of prosecution was increased since the DOJ issued guidance on 9 September 2015 directing that prosecutors should prioritise investigating and prosecuting individuals for corporation-related crime (the “Yates Memo“). The Yates Memo is widely reported to have had a “chilling effect” on the willingness of both individuals and companies to co-operate with DOJ investigations. One of the reasons for this is that although the 5thAmendment of the US Constitution entitles individuals to refuse to testify in any civil proceedings where they have reasonable grounds to believe that their statement might tend to incriminate them, the right to that privilege can be lost if an individual makes statements voluntarily.

As a direct consequence of the DOJ investigation, some witnesses in the LIA case refused to provide witness statements in support of SocGen. SocGen then applied for and obtained orders entitling it to serve witness summaries instead of witness statements.[2] The witness summaries were either statements of what SocGen believed the witness would say or the lines of questioning which would be put to the witness at trial.[3]

Some of the witnesses then applied at the pre-trial review to have their witness summonses set aside on the grounds of oppression and/or for a ring-fencing order to hold their evidence in private. This was on the basis of authority that a witness summons may be set aside where it is irrelevant, fishing, speculative or oppressive[4]. In this case, the argument was that the summonses were oppressive because of the risk of self-incrimination in foreign proceedings which might arise if the witness was compelled to give evidence.

Privilege against self-incrimination is a well-established right for a witness in English civil proceedings, but only in respect of UK criminal proceedings.[5] There is no such right in respect of foreign criminal proceedings, but the courts have a discretion to allow a witness to refuse to answer questions. The risk must be “real and appreciable” and the “mere possibility” of an offence being disclosed is insufficient.  However, there is very little case law in this area, especially on the question of oppression. Most of the case law relates to disclosure of documents[6], although ring-fencing has been approved where it was necessary to provide protection against incrimination in ongoing foreign criminal proceedings.[7]

Both SocGen and the LIA engaged US legal experts but neither could conclusively say that compelled evidence could not be used in US criminal proceedings. The current state of US law is unclear on the extent to which testimony provided by individuals may deprive them of their 5th Amendment rights. In a recent US case, two UK citizens working for Rabobank were tried in a US federal court for their alleged involvement in the manipulation of USD and Yen LIBOR rates.[8] The defendants claimed that evidence at their trial had been tainted by the testimony they had earlier been compelled to give to the FCA, but the US court held that the prosecutor had discharged his duty to prove that the evidence was derived from a legitimate source wholly independent of the compelled testimony.[9]  However, that ruling has been appealed and a decision is awaited which could clarify this question.

The application to set aside the witness summonses was refused by Mr Justice Teare, but he accepted that the existence of the DOJ investigation raised a real and appreciable risk of future US criminal prosecution.[10] Even though none of the witnesses at the time had been charged in the UK or the US, the risk was sufficient to persuade the Judge to grant a ring-fencing order, thereby overriding the general principle of open justice in England.  He ordered safeguards to be put in place in respect of the witnesses’ evidence. The witnesses were to be allowed to give evidence in private and the information derived from such evidence could not be disclosed to third parties, including the DOJ. Ultimately, however, these safeguards were not required as the case settled before trial.

Comment

It could be argued that the principle of open justice was overridden by the Court with relative ease to allow the ring-fencing order. Some US lawyers have expressed surprise at the decision, saying that in the US, the courts would not allow evidence to be given in private.

Given the DOJ’s continuing interest in prosecuting individuals connected with corrupt practices and the potential extra-territorial effect of the FCPA, this issue may be expected to arise more frequently in the English courts and the decision of Mr Justice Teare may be revisited by the courts for guidance in future cases.

Associated sectors / services

  • Banking & financial disputes
  • Financial services

Authors

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