Seizure of documents relating to internal investigations - legislative changes ahead?

Introduction

The question as to whether and to what extent documents relating to an internal investigation can be seized from lawyers is not new. There is broad consensus that documents relating to an internal investigation and stored in the company are in principle not covered by the privilege of the prohibition on seizure set out in Section 97 of the Code of Criminal Procedure. This also applies if the documents were prepared by an in-house lawyer. The documents of an in-house lawyer are still not considered 'defence documents' within the meaning of Section 148 of the Code of Criminal Procedure.

However, the prohibition on seizure with regard to documents held by a lawyer largely applies if the documents are defence documents within the meaning of Section 148. This usually applies where a company is or is threatened to become a secondary participant or secondary interested party in criminal proceedings.

With regard to classifying documents relating to internal investigations, uncertainty as to when such documents could be regarded as defence documents is common. Therefore, the Federal Constitutional Court's decision, rendered on 27 June 2018 (2 BvR 1405/17, 2 BvR 1780/17, 2 BvR 1562/17, 2 BvR 1287/17 and 2 BvR 1583/17), was eagerly awaited by companies and law firms.

Documents may be seized in individual cases

Against the hope of companies and law firms, the Federal Constitutional Court rejected the general prohibition on the seizure of such documents in its decision. However, it indicated that – just like before – affirming the prohibition on seizure should always be determined on a case-by-case basis. Therefore, the privileged treatment of documents prepared by lawyers still applies.

In its decision, the Federal Constitutional Court ruled that the seizure of documents that were obtained during a dawn raid at the law firm commissioned by the complainant to carry out the internal investigation and that contained findings from this internal investigation was not objectionable under constitutional law. The documents may now be reviewed by the public prosecutor's office.

Future secondary participation of required company

Although the Federal Constitutional Court did not take a clear stance as to the requirements for the applicability of the prohibition on seizure, it nevertheless considered the decision rendered in the previous instance to be reasonable and not arbitrary, especially since the possibility of seizure corresponds to the prevailing opinion in case law and legal commentary.

The Munich Regional Court had ruled in the previous instance that the applicability of the prohibition on seizure requires that the company is, from an objective point of view, considered to become a secondary participant in future. However, a mere concern that this will be the case is insufficient. In this respect, an investigation conducted by the public prosecutor's office pursuant to Section 130 Act on Regulatory Offences against 'parties unknown' – as was the case at the time of seizure – is insufficient.

Further, the question as to whether it is possible from an objective point of view that the company becomes a secondary participant does not depend on the company's procedural position in a preliminary investigation simultaneously conducted by another public prosecutor's office, if – based on the concrete circumstances – the other preliminary investigation deals with a different procedural act.

Moreover, the Federal Constitutional Court clearly positioned itself with regard to the applicability of the absolute prohibition on the collection and use of evidence pursuant to Section 160a(1) Sentence 1 of the Code of Criminal Procedure. The court emphasised that this prohibition does not apply to seizure because it is already covered by the prohibition on seizure set out in Section 97 of the Code of Criminal Procedure.

With regard to the protection of fundamental rights of international law firms, the Federal Constitutional Court surprisingly decided that law firms which – based on their structure and legal form – do not focus on activities in Germany and Europe and do not have an administrative centre in Germany or Europe are not protected by the Basic Law.

Legislative response welcome

The Federal Constitutional Court's decision did not result de facto in significant legislative change with regard to protecting work products produced by lawyers within the context of internal investigations from seizure; instead, it only confirms that this always depends on the individual case. However, based on this decision, it must be expected that the courts will now take a firmer line in this respect.

It remains to be seen whether and how legislators will react to the decision of the Federal Constitutional Court, especially in view of the plan addressed in the government's 2018 Coalition Agreement to create legal provisions and incentives with regard to internal investigations. Legislators should take the court's decision as an opportunity to create clarity and incentives for comprehensive cooperation between companies and authorities in connection with the internal review of compliance incidents.

It would be a positive step if legislators effectively integrated the instrument of internal investigations into the German legal system and thereby created incentives for companies to continue to promote their 'self-cleaning processes' through internal investigations. Otherwise, there is a risk that companies and law firms will look for ways to avoid having investigation results and other documents seized by the authorities.

Considerations such as storing the relevant data in a cloud or on servers abroad in order to prevent German public prosecutors from accessing the data have already been increasingly contemplated after the Federal Constitutional Court's decision. However, such actions could lead to (as yet unknown) problems. In this respect, reference is made only to possible data protection issues, as well as to the risk that such actions could lead to the assumption of a danger of collusions.

For further information on this topic please contact Harald W Potinecke or Sara Ghoroghy at CMS by telephone (+49 89 23807 264) or email (h[email protected] or [email protected]). The CMS website can be accessed at www.cms-hs.com.

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