Freshfields Bruckhaus Deringer LLP

Global investigations

Dawn raids: how to get through the first 24 hours

Jon LawrenceTobias KloseMachiel LambooijTom Ensign

14 February 2012

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Today’s agenda and speakers

Introduction• Recent practice and trends• Criminal dawn raids

Jon LawrencePartner, LondonT +44 20 7832 7692M +44 7802 822 870E jon.lawrence@

freshfields.com

Key current issues• Legal privilege• IT issues• Simultaneous raids

Tobias KlosePartner, DüsseldorfT +49 211 49 79 228M +49 172 66 48 318E tobias.klose@

freshfields.com

Challenging dawn raids• During the raid• After the raid

Machiel LambooijPartner, AmsterdamT +31 20 485 7608M +31 6 5327 8119E machiel.lambooij@

freshfields.com

Preparing for a dawn raid• Raid procedures – the next level• Other steps you can take

Tom EnsignPartner, Washington, DCT +1 202 777 4527M +1 202 425 2703E thomas.ensign@

freshfields.com

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Introduction to dawn raids

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Steady flow of dawn raids in 2011

Engines

(selected public cases only)

EU Commission US FBI

Container Shipping Natural Gas

Trucks

Banks – Libya Sanctions

UK FSA German FCO

Foam Bedding Products

UK SFO

Tchenguiz Brothers

Train Technology

Porcelain

Castlestone Management

Derivatives

Bearings

Auto components

Seat Belts, Airbags and Steering Wheels

Jan DecFeb Mar Apr May Jun Jul Aug Sep Oct Nov

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What are the trends?

More co-ordination between regulators

• Cross-border co-ordination (eg EU Commission and US DoJ)

• Co-ordination between regulators (eg competition and financial services regulators)

More simultaneous raids in multiple locations

More sophisticated and IT-centric raids

More aggressive officials

• Increase in allegations of obstruction

‘Re-purposing’ of existing dawn raid procedures

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Why it matters to get it right

Avoid allegations of obstruction – some recent examples:

• Polkomtel – €33m fine for delaying start of raid, refusing to provide hard disk and providing incomplete set of documents (Polish competition authority)

• Spanish ferries – €2m fine for delaying start of raid and access to personnel/documents (Spanish competition authority)

• E.ON – €30m fine for breaching seal (European Commission)

Benefit from leniency and other co-operation discounts

• Candle waxes – Sasol saved over €300m through 50% leniency discount

• Laundry detergents – Proctor & Gamble saved over €200m through 50% leniency discount and 10% settlement discount (Henkel reported the cartel and obtained immunity from fines)

• Flat glass – Asahi saved over €100m through 50% leniency discount

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Dealing with criminal dawn raids

Criminal law dawn raids present particular difficulties

More aggressive powers and officials

Dealing with increased PR, shareholder and employee concerns

Dealing with individuals who are implicated

• Conflicts of interest and separate representation

• Employment issues

• Securing co-operation for subsequent investigations and litigation

• Whistleblowers and no action letters

Interaction with parallel administrative raids

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Handling dawn raids: key current issues

• Legally privileged documents

• IT records and related issues

• Simultaneous raids at multiple sites

• Witness interviews on-the-spot

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Legal privilege in dawn raids

The privilege rules vary by jurisdiction and regulator. So, the first step is to confirm:• Where are you being raided, and by which regulators

• Where are the privileged documents stored

• Can the privileged documents be accessed from the site of the raid(s)

What to do if an official tries to access privileged documents:• Be prepared to explain why document is privileged without revealing its

contents (but avoid obstruction under applicable rules)

• Officials will generally refuse to allow the document to be withheld where no explanation is provided to prove it is privileged

If a dispute arises:• Escalate, initially to lead investigator and then within the regulatory body

• The ‘sealed envelope’ procedure as a way-out?

• Consider redactions – is the legal advice truly relevant to the investigation?

Severe penalties for obstruction – privilege claims cannot be used as a delaying tactic

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Dealing with IT records and related issues

Increasingly sophisticated methods of electronic recovery – officials often bring IT specialists with them

Officials typically have powers to:

• Access and search computers and IT servers

• (In some cases) seize IT equipment, including mobile phones, Blackberries

• (In some cases) take forensic ‘images’ of hard disks and servers

• Download records of phone calls, voicemails, faxes sent/received

Key issues:

• How to maintain ‘live’ systems during raid

• Access to overseas servers

• Access to data hosted by third parties

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Co-ordinating response to simultaneous raids

Regulators are more ‘joined-up’, so raid response teams must be

Have mechanisms in place to ensure rapid risk-assessment, consultation and decision-making

• Two team approach – raid management and co-ordination/strategy issues

• Raid ‘hotline’ – an open conference line with member of strategy team always on the line

Assess potential exposure and damage limitation on a global basis

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Challenging dawn raids – principles

Key objective is to protect the company’s position

But, consider tactical position and negative effects of challenges

• PR position

• Impact – higher fines?

Avoid penalties for obstructing investigation eg E.ON; Norris

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Challenging dawn raids – during the raid

Difficulties of challenging raid as a whole ‘on the scene’

How far should you go during the raid?

• Ensure officials don’t go beyond authorisation (scope of raid)

• Legally privileged documents (eg Akzo Nobel)

• Electronic data

• Active co-operation requirements

• Interviewing staff

Techniques

• Discussion

• Negotiation

• Escalation

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Challenging dawn raids – after the raid

Follow-up on objections made during the raid

• Recovering evidence once it has been seized

• Correcting evidence given in interviews

Procedural objections at a later stage – should the whole investigation be struck down?

• Example: Solvay in European competition proceedings

Use of separate judicial review proceedings (or threat of them)

• Deutsche Bahn appeal to the European General Court against European Commission raids

• Alstom and Tchenguiz judicial reviews of UK Serious Fraud Office raids

Challenges on human rights grounds

• ECtHR judgments in the Canal Plus and Primagaz cases

• But note Paris Court of Appeal judgments in Unibeton/Cemex

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Preparing to cope with a dawn raid

• Prevention: compliance systems and training

• Put in place procedures for dawn raids, and train staff

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Dawn raid procedures – the next level

Raid procedures should be fit for purpose

• Many are outdated and leave companies underprepared

Procedures and raid response teams should be updated to

• Meet the intensity and sophistication of modern raids

• Address liability and self-reporting considerations during the raid

• Coordinate strategy across multiple sites in simultaneous raids

• Make better use of technology

• Ensure that predetermined and consistent positions are taken on contentious procedural points eg privilege or data imaging

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Other steps you can take in advance

Decisions to take in advance

• Lines of communication and co-ordination

• Decision-making – authority and process

• Content of communications to staff

• Know your IT systems or know who does

Have pre-determined positions on potentially contentious areas

• Legally privileged documents

• IT searches

• Interviews

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Questions?

SRA authorisation reference: 049/FRS

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This material is for general information only and is not intended to provide legal advice.

© Freshfields Bruckhaus Deringer LLP 2012