Comply with Demands by Regulators and “Waive” Goodbye to Privilege? New Alberta Guidance on Scope of Regulatory Requests

In CNOOC Petroleum North America ULC v. ITP SA (Decision), the Alberta Court of Appeal (ABCA) revisited the principles of privilege and waiver of privilege in the context of two reports that arose from an internal investigation. The Decision provides important factors to consider when facing a demand from a regulator for investigative reports.

Background

A pipeline operated by CNOOC Petroleum North America ULC (CNOOC) failed after only 10 months in service. An investigation was initiated to address several interconnected issues, including legal and regulatory issues. CNOOC's Associate General Counsel concluded that, as a result of the pipeline failure, civil litigation was a real and distinct possibility and requested the investigation reports in contemplation of litigation and to provide legal advice to CNOOC. 

The Alberta Energy Regulator (AER) and the Association of Professional Engineers and Geoscientists of Alberta (APEGA) requested that CNOOC provide them with copies of the reports. The AER’s request was pursuant to its statutory powers in accordance with the Pipeline Rules. The reports were provided to APEGA to comply with what CNOOC understood its obligations to be pursuant to the Engineering and Geoscience Professions Act (EGP). 

When providing the reports to the AER and APEGA, as requested, CNOOC maintained that the reports were privileged, confidential, and should not be disclosed to third parties.

Civil litigation resulted from the pipeline failure, and several parties to the litigation sought to compel the production of the reports. One of those parties, Wood Group Canada Inc. (Wood) also sought the reports in the context of companion proceedings involving APEGA and Wood. This was after APEGA refused to disclose the reports to Wood due to privilege. The Alberta Court of King's Bench refused to order the production of the reports in the companion proceedings on the basis of procedural fairness.  

The Decision 

While the approach that the lower court used to determine the privilege of the reports was potentially flawed, the ABCA did not revisit the determination of privilege. It ultimately found that there had been an unintentional waiver of privilege because: 

• Notwithstanding the statutory request from the AER for the Reports, the AER did not compel CNOOC to provide the reports. The power of a regulator to demand the production of records does not override privilege unless the statute specifically so provides, which the Pipeline Rules do not. 
• While CNOOC did not state “privilege” in disclosing the reports to APEGA, CNOOC referred to “potential regulatory prosecutions” and “civil proceedings,” which indicated a claim of privilege. However, because APEGA advised CNOOC that it would disclose the reports when “required by law” and that it could use the reports “without any restrictions, and if needed to the full extent allowed by the [EGP],” there was a loss of privilege. 

While not intentional, and done in order to comply with requests from regulators who were actively investigating the pipeline failure, CNOOC's disclosure of the reports in response to demands from the AER and APEGA resulted in a waiver of the privilege.  

Implications of the Decision 

The Decision highlights that despite a statutory request from a regulator, unless the statute specifically provides that its powers of compulsion override privilege, the provision of privileged records is likely to be considered a waiver of privilege. This will likely be the case even where a party intends that the record remain privileged and provides it to the regulator on that condition.   

In addition, this Decision provides helpful insights for internal investigations, the use of privileged records, and the use of those records to respond to requests from regulatory bodies:

1. “Dominant purpose” does not mean “exclusive purpose.” Multiple uses of a privileged record do not necessarily remove privilege. 
2. Litigation privilege does not prevent the use of underlying information. Information that is developed during an investigation does not have to be quarantined. Investigatory information that privileged records are based on can be used for multiple purposes without eroding the privilege of certain records, if the privilege of those records is maintained. 
3. Privilege is a question of substance over form. The failure to mark a record as privileged will not deprive it of its otherwise privileged status absent an overt intention to waive privilege. Importantly, the failure to label a record as privileged will not generally demonstrate an intention to waive that privilege.
4. Other uses of records are permitted. The use of information in a way that is consistent with the fundamental purposes of the privileged records does not amount to a loss of privilege by operation of law.
5. Subsequent uses of a privileged record are not determinative of privilege. The subsequent use of a privileged record after its creation may be relevant to a determination of whether there was a waiver of privilege but does not necessarily say anything meaningful about the dominant purpose for which the record was initially created. 

The Decision highlights the importance of taking adequate steps to properly establish privilege. It is prudent to engage internal and external counsel early when an internal investigation is contemplated and there is the potential for civil litigation or regulatory proceedings. 

Blakes was counsel to CNOOC in the companion proceedings.  

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