Articles

José-Miguel Judice and Ana Coimbra Trigo are members of the ICC Institute of Word Business Law (‘ICC Institute’). Twice a year, a selection committee within the ICC Institute Council, composed of Council members Horacio Grigera Naon, Julian Lew and Pierre Mayer, invites the Institute members to submit articles for publication in the Bulletin. The selected articles are published in the section ‘From the ICC Institute’. For more information: www.iccwbo.org/icc-institute.

Introduction

Privilege claims in arbitration have attracted much discussion, in particular with regard to the varying level of protection available in different jurisdictions. Lawyers are bound to obey the ethical rules provided by the bar association or law society in which they are registered. Legal privilege enshrines the sacred duty to protect a client’s information. Of course, each jurisdiction regulates this matter differently (for example in terms of the categories of information protected, the extension of professional secrecy to non-lawyers and the means and legitimacy of a waiver), based on the evolution of the concept, the general extent of codification and the values that are comparatively considered more or less relevant.¹

If one considers that trust is a non-waivable condition of the relationship between a client and counsel, the exclusion of a certain number of documents from the outset might harm the case, just as much as excessive evidence production might overburden proceedings.² When choosing arbitration over court litigation, parties are not, in principle, waiving their right to privilege.³ The joint consideration of equality of parties and procedural fairness and efficiency, along with the variety of standards and applicable laws regulating evidentiary privilege, raises concern and uncertainties within the arbitral community.⁴

Counsel in international arbitration is increasingly globalised. It is also not uncommon for arbitrations to be seated in a dissimilar jurisdiction to where counsel is registered to practice. The list of potential applicable laws continues to grow as we picture how international arbitral proceedings become more complex and involve stakeholders from multiple jurisdictions. However, the impact of legal privilege claims on the availability and admissibility of evidence in international commercial arbitration calls for clarification.

Party autonomy allows parties to specify the law applicable to privilege claims in their arbitration agreement, the regime to be followed by parties and the arbitral tribunal if such claims arise, and even to determine which documents or communications they wish not to disclose. Unfortunately, in practice, parties rarely clarify such matters in the arbitration agreement.

Alternatively, and in order to obtain a more predictable organization of the proceedings, parties and/or the arbitrators may choose to address these issues early in the proceedings, as suggested by the UNCITRAL Notes on Organizing Arbitral Proceedings.⁵

If the void remains, and a privilege claim arises, the arbitrators must decide. Pursuant to the parties’ agreement to arbitrate, soft laws, such as the IBA Rules on the Taking of Evidence,⁶ and institutional rules,⁷ arbitrators have broad powers to manage the proceedings as they see fit and to determine the admissibility, relevance, materiality, and weight of the evidence produced or to be produced. In such situations, arbitrators may have to consider how to choose the relevant applicable law.

To resolve this ‘conundrum’ and provide some possible pragmatic solutions, we will provide a comparative introduction of legal privilege (I), look into existing guidance available to arbitrators (II), and analyse the conflicting applicable laws (III), or direct application of standards by arbitrators (IV), and (hopefully) provide a useful set of conclusions for the international arena (V).

I. Dealing with privilege and professional secrecy

A. Common law jurisdictions

In common law jurisdictions, the right to withhold certain documents or witness testimony from legal proceedings is considered as an exception to the general and broad scope of discovery proceedings, where even unfavourable communications and documents must be disclosed to the other party.⁸ Statutes and case law specifically protect confidential communications between a lawyer and its client with regard to legal advice or judicial proceedings; legal privilege belongs to the client, who has the right to claim or waive privilege (explicitly or implicitly) before the court.⁹

In the United States of America, rules of professional conduct for lawyers establish the ‘lawyer-client confidentiality’ duties, prohibiting the revelation of information relating to client representation.¹⁰ Rules of evidence provide for ‘attorney-client privilege’ that protects documents and communications (but not all information) exchanged between a lawyer and a client with the aim of providing or obtaining legal advice; such privilege may also be raised when an attorney is called to testify in judicial proceedings. Furthermore, ‘attorney work product’ is also protected in court and includes the materials prepared by an attorney in the course of its contacts with third persons in preparation for litigation.¹¹

In England and Wales and Australia¹² legal professional privilege is divided into two categories: ‘legal advice privilege’ and ‘litigation privilege’. The first category protects confidential communications between a lawyer and a client which arise when giving or obtaining legal advice. The second category protects all communications between a lawyer and a client (and a lawyer and third persons) that take place during the provision of legal advice and collection of evidence relating to existing or contemplated adversarial judicial proceedings.¹³ Third persons are typically experts (in the United Kingdom, legal communications with experts fall under the ‘joint defence privilege’) but increasingly involve the phenomenon of third-party funding, and any privilege arising out of contracts and documents exchanged with third party funders.¹⁴

B. Civil law jurisdictions

Civil law jurisdictions tend to approach this issue differently as (i) the duty of professional secrecy is regulated by professional ethical entities – usually regulatory bodies empowered by the state to exercise delegated public powers – and (ii) the respective breach may be sanctioned not only in disciplinary terms but also by the rules of criminal procedural law.

For example, pursuant to the Statutes of the Portuguese Bar Association (which is a law in Portugal, and not a regulatory text or guideline), all information and related documents that a lawyer obtains when performing his or her professional functions and during the provision of legal services are protected by the duty of professional secrecy. This also includes facts relating to professional matters revealed by the client or by colleagues, facts communicated by co-litigants or their representatives, and facts revealed during settlement negotiations.

Under Portuguese law, this duty also binds all employees and collaborators of the lawyer. Furthermore, a waiver may only be requested by the lawyer (and not the client or any other party to a contract) from a competent body within the bar association and will only be authorized in cases where this is absolutely necessary to uphold the client’s or its lawyer’s dignity, and legitimate rights and interests.¹⁵ This is for example the case where there is no other evidence to prove a point essential to a case, save for the testimony of a lawyer who attended a specific meeting where that point was discussed.¹⁶

Portuguese procedural law excuses all those bound by professional secrecy from testifying in court.¹⁷ In addition, the Portuguese Criminal Code sanctions the revelation of information protected by professional secrecy.¹⁸

Countries like France, Spain, and Brazil take similar approaches.¹⁹

C. In-house lawyers

In-house lawyers’ communications with their companies are typically included in attorney-client privilege of common law jurisdictions, when these communications relate to the provision of legal advice (but not business advisory services). Case law is not unanimous regarding whether a foreign registered lawyer acting as in-house counsel is bound (and consequently protected) by the privilege rules in effect in the jurisdiction where the company is headquartered.

Australian courts recognize that in-house counsel are bound by such privilege rules. American courts have not always followed this position: in one case involving a French-qualified lawyer acting as in-house counsel in an American company, it was held that the legal communications were protected; one more recent decision however concluded that privilege only applies if the company has a reasonable expectation of confidentiality under the foreign country’s privilege laws.²⁰

Civil law jurisdictions have taken different approaches on this issue.²¹ European case law, in the course of European Commission investigations in competition and anti-trust matters, has excluded in-house lawyers from the personal scope of professional secrecy, taking into account their hierarchical integration and economic dependence on their employer-companies.²²

D. The Code of Conduct for European Lawyers

In the European context, the Code of Conduct for European Lawyers (the ‘CCEL’) must also be considered. Developed in the framework of the continued EU integration and increasing cross-border activities undertaken by lawyers, it is a ‘statement of common rules which apply to all lawyers from the European Economic Area whatever Bar or Law Society they belong to in relation to their cross-border practice’ and aims to mitigate any difficulties arising from any ‘double deontology’.²³

Accordingly, the CCEL establishes that lawyers registered in the bar association of one Member state acting in another Member state may be bound to comply with the rules of the bar or law society of this host state.²⁴ This text includes provisions on confidentiality and professional secrecy, ranking it as a ‘primary and fundamental right and duty of the lawyer’, and sets forth the relevance, scope, duration, and extension of said obligations – with no provision on waiver. The CCEL also, and more importantly, provides that ‘the rules governing a lawyer’s relations with the courts apply also to his relations with arbitrators and any other persons exercising judicial or quasi-judicial functions, even on an occasional basis’.²⁵

It is noteworthy that these rules dictate that if communications between lawyers are not marked as confidential, they will be subject to disclosure before state courts and arbitral tribunals.²⁶ Some jurisdictions go further and do not require these formalities.²⁷ In Portugal, the confidentiality of correspondence between lawyers cannot be waived.²⁸

II. Existing guidance in arbitration-related laws and rules

A. National arbitration laws and institutional arbitration rules

Domestic bar associations and law societies usually include legal privilege in ethical codes or other general legal texts, but typically fail to include any arbitration specific rules. Similarly, legal privilege is absent from most national arbitration laws.²⁹

The UNCITRAL Model Law on International Commercial Arbitration (Article 19(2)) provides that, failing a determination of the applicable procedural law by the parties, the arbitral tribunal may conduct the arbitration in such manner as it considers appropriate. For that purpose, the arbitral tribunal has, among others, the power to determine the admissibility, relevance, materiality, and weight of any evidence.

Similarly, Portuguese Arbitration Law also provides that the powers granted to the arbitral tribunal include determining the admissibility, convenience and weight of any evidence produced or to be produced.³⁰

Arbitration institutions’ rules typically do not touch upon this issue, with some exceptions:

• The London Court of International Arbitration (LCIA) introduced General Guidelines for Parties’ Legal Representatives in an effort to ensure a level playing field for the parties.³¹ Even though the Guidelines establish in paragraph 5 the duty not to conceal evidence when a party is ordered to produce it, legal privilege is not mentioned. Sanctions are provided for the breach of these guidelines.³²
• The International Arbitration Rules of the International Center for Dispute Resolution (ICDR-AAA) provide for the duty of the arbitral tribunal to admit as grounds for refusal of production of evidence any privilege protecting the communications between lawyers and clients.³³ These rules establish the ‘highest level of protection’ as choice of law criteria when different laws on privilege may be applicable – an approach we will analyse below (III. B).
• The China International Economic and Trade Arbitration Commission (CIETAC) has also established Guidelines on Evidence, which provide that the tribunal may not admit evidence based on a privilege claim pursuant to the law it considers applicable. These guidelines also identify and expressly exclude from disclosure in arbitration proceedings a specific category of information: the information obtained in related mediation proceedings.³⁴ This is relevant in the context of CIETAC in order to ensure the integrity of the arb-med proceedings administered pursuant to its rules.³⁵
• The Singapore International Arbitration Centre (SIAC) expressly provides that the arbitral tribunal has the power to decide on any ‘claim of legal or other privilege’, unless parties agree otherwise or as prohibited by the mandatory rules of law applicable to the arbitration.³⁶

B. Soft law

Arbitrators can also turn to existing soft law rules, either when adopted by the parties or as guidance.

In a purported attempt to establish some middle ground or a pragmatic compromise between different legal cultures, the IBA Rules on Taking of Evidence in International Arbitration (2010) clearly list several grounds to object to requests for evidence production. Besides commercial or technical confidentiality, and political or institutional sensitivity, Article 9(2)(b) also provides for an objection to document production based on ‘legal impediment or privilege under the legal or ethical rules determined by the Arbitral Tribunal to be applicable’. This provision is understood to include ‘attorney-client privilege, professional secrecy or the without prejudice privilege’, specifically because the drafters of this soft law instrument thought it was ‘important that such privileges be recognized in international arbitration’.³⁷

Article 9(3) offers additional guidance with regard to the applicable privileges under 9(2)(b), and allows the arbitral tribunal to consider ‘insofar as permitted by any mandatory legal or ethical rules that are determined by [the tribunal] to be applicable’, the following:

(a) any need to protect the confidentiality of a Document created or statement or oral communication made in connection with and for the purpose of providing or obtaining legal advice;

(b) any need to protect the confidentiality of a Document created or statement or oral communication made in connection with and for the purpose of settlement negotiations;

(c) the expectations of the Parties and their advisors at the time the legal impediment or privilege is said to have arisen;

(d) any possible waiver of any applicable legal impediment or privilege by virtue of consent, earlier disclosure, affirmative use of the Document, statement, oral communication or advice contained therein, or otherwise; and

(e) the need to maintain fairness and equality as between the Parties, particularly if they are subject to different legal or ethical rules.

Furthermore, sub-paragraph g) of this Article – a catch-all provision – allows the arbitral tribunal to exclude evidence based on considerations of procedural economy, proportionality, fairness, or equality of the parties. Relevant to the present analysis, the Commentary on the Rules provides as follows:

[D]ocuments that might be considered to be privileged within one national legal system may not be considered to be privileged within another. If this situation were to create an unfairness, the arbitral tribunal may exclude production of the technically non-privileged documents pursuant to this provision.³⁸

The IBA Guidelines on Party Representation in International Arbitration (2013) were also drafted to promote standards of conduct for counsel appearing in international arbitration proceedings with different and potentially conflicting expectations with regard to applicable ethical standards. They regulate communications with the arbitral tribunal, witness preparation and document production, among others.³⁹ Guidelines 1 and 3 dictate that if adopted by the parties, these guidelines do not purport to displace any applicable mandatory laws, or professional or disciplinary rules, and do not seek to vest arbitral tribunals with powers reserved to bars or other professional bodies. The Commentary to these Guidelines provide as follows:

Arbitral Tribunals need not, in dealing with such issues, and subject to applicable mandatory laws, be limited by a choice-of-law rule or private international law analysis to choosing among national or domestic professional conduct rules. Instead, these Guidelines offer an approach designed to account for the multi-faceted nature of international arbitral proceedings.

Legal privilege is only mentioned residually, and Guideline 15 merely establishes the duty to advise clients and assist them in taking reasonable steps to ensure that a search for documents is conducted and all non-privileged, responsive documents are produced, should they be produced.

The 2018 Inquisitorial Rules on Taking of Evidence in International Arbitration (the ‘Prague Rules’) aim to enhance the arbitrators’ active role and increase efficiency in international arbitration. The Prague Rules provide that the arbitral tribunal must avoid extensive production of documents and include several requirements for document production requests and legal privilege is not addressed as a ground for refusal.

Outside the arbitration landscape, other soft law instruments may be considered for guidance:

• The Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (1970), seeks to improve mutual judicial co-operation between signatories. When addressing the refusal to adduce evidence pursuant to the execution of a letter of request issued from a competent authority from one state to another, one of the grounds that can be invoked by the person concerned is privilege, be it under the law of the state of execution or under the law of the state of origin.⁴⁰
• The Inter-American Convention on the Taking of Evidence Abroad (1975), which was negotiated by Inter-American states to establish procedures for taking evidence in one state Party for use in civil or commercial litigation in another state Party, provides for a similar provision.⁴¹
• The Council Regulation (EC) No 1206/2001 (28 May 2001) on Cooperation between the courts of the Member States in the taking of evidence in civil or commercial matters, which provides for similar provisions but regarding the execution of a hearing of a person that argues to have the right to refuse to provide evidence.⁴²
• The American Law Institute / UNIDROIT Principles of Transnational Civil Procedure (2004)⁴³ expressly provide that effect should be given to privilege and similar protections of a party or non-party concerning disclosure of evidence, including ‘confidentiality of professional communication’, as clarified by the commentary.⁴⁴
• The Hague Principles on Ethical Standards for Counsel Appearing before International Courts and Tribunals (2010)⁴⁵ also propose general principles of conduct (in general and towards the client) for counsel appearing in proceedings before international courts and tribunals, including when one or more parties is a state. These Principles also address specific elements such as conflicts of interest, relations with the court and others, and presentation of evidence. These standards should be complied with cumulatively with the national ethical rules of the place of registration of counsel. However, no reference is made to legal privilege.

III. Conflicting applicable rules

A. Choice of law tests

Qualification in international arbitration has been widely discussed. One controversial issue is whether arbitrators should seek qualification by reference to the lex fori or another law applicable to the arbitration proceedings.⁴⁶

Several commentators argue that, depending on the degree of transnationality of the arbitration, more or less deference should be afforded to the law of the seat.⁴⁷ One position is to disconnect arbitration from any seat (and thus from its conflict of rules).⁴⁸ It can indeed be argued that arbitrators in international arbitration need not be particularly connected to the seat or knowledgeable of its law.⁴⁹ Even if one considers that the courts of the seat will be competent to hear any potential annulment proceedings and that parties have agreed on the seat beforehand – thereby in theory enhancing the predictability of the arbitral proceedings – this is illusory, since parties in fact rarely choose a seat for the respective legislative approach to privilege.⁵⁰ This solution is further unsatisfactory as some parties fail to elect the seat, and the arbitral tribunal or the arbitration institution then take on that role.⁵¹

Another issue is whether, instead of applying a traditional qualification method and considering the underlying policy concerns through a comparative approach,⁵² legal privilege may be characterized as an issue of substantive or procedural nature, and how this qualification may then determine the applicable law.⁵³

It is to be noted that there are many potentially conflicting applicable rules as there are relevant connecting factors to consider.

Arbitrators can employ a ‘voie directe’ to choose the applicable law within their discretion. This direct choice of law method is made with no reference to any specific conflict of law rule,⁵⁴ as opposed to an indirect choice of law method where arbitrators apply such rule.

This is the approach taken with regard to the rules governing the proceedings in the ICC 2017 Rules of Arbitration (Article 19), where arbitrators may apply ‘any rules which the parties or, failing them, the arbitral tribunal may settle on, whether or not reference is thereby made to the rules of procedure of a national law to be applied to the arbitration’.

The IBA Rules on the Taking of Evidence, which provide further guidance to ensure fairness and equality between the parties, do not take an express position on the matter.⁵⁵

It is advisable that even without making any specific reference to conflict of law rules, arbitrators clarify their analytical basis for deciding upon the application of any law, as a matter of justice. This may require looking at national conflict rules or soft law instruments, as the ones previously mentioned.

Since ‘arbitrators, in determining the applicable law, do not operate in a legal vacuum or have limitless discretion without any normative underpinning’,⁵⁶ it is suggested that, in order to at least convince the losing party, arbitrators should use their discretion and identify and apply the law with the ‘closest connection’ to the legal relationship in question, taking into account the existing territorial or functional connecting factors.⁵⁷

This approach is frequently followed in domestic laws,⁵⁸ and it can be argued that support is found in Article 28(2) of the UNCITRAL Model Law, which provides that ‘[f]ailing any designation by the parties, the arbitral tribunal shall apply the law determined by the conflict of law rules which it considers applicable’. Connecting factors such as (i) where the communication was created, sent, or is stored; (ii) where the lawyer is registered to practice; or (iii) where the client resides are relevant to selecting the applicable conflict of law rules.⁵⁹

Some commentators have argued that applying the law of the place of registration of the lawyer with whom the communication took place is:

• in line with the parties’ legitimate expectations;
• more appropriate than choosing the law of the place of issuance of the communication or information – which, besides leading to a potentially random choice, may lead to the application of numerous laws of jurisdictions where the relevant documents were created, sent or stored;⁶⁰
• more appropriate than choosing the law of the jurisdiction where the party claiming the privilege resides.⁶¹

Disadvantages of this method are the high number of potentially applicable laws, depending on the level of internationalization of the client or its counsel, and the consequent application of conflicting privilege standards in the same proceedings.⁶² Commentators argue that there is a risk that parties who perceive they are being treated differently might seek to later challenge the arbitral award based on unequal treatment.⁶³

Naturally, tribunals should defer to parties, who have the burden of arguing which national law applies to the invoked privilege claim, provided this is done in good faith.⁶⁴ Additional rules to supplement this method and ensure procedural equality have also been suggested, such as:

(i) a party that requests disclosure of a certain type of document from the other party shall be precluded from raising a privilege claim with respect to a similar category of document of its own; and (ii) a party that successfully invokes a privilege with respect to a certain document shall not request disclosure of the same category of documents from its counterparty.⁶⁵

B. Levelling the playing field

In relation to varying standards of privilege, one test to be considered is the most favourable privilege test. In this scenario, the arbitral tribunal will consider the different levels of protection afforded by the competing applicable laws, select the law that is most protective of the refusal to produce evidence based on legal privilege, and apply it to both parties. Analogous to the ‘most favourable nation’ concept of investment arbitration, this aims to create a level playing field by generating an equal standard applicable to all parties in the same way.⁶⁶

The ICDR International Arbitration Rules (2014) adopt this criterion in its Article 22:

(…) When the parties, their counsel, or their documents would be subject under applicable law to different rules, the tribunal should, to the extent possible, apply the same rule to all parties, giving preference to the rule that provides the highest level of protection.

The ICDR Guidelines for Arbitrators Concerning Exchanges of Information also provide:

Privileges and Professional Ethics.

The tribunal should respect applicable rules of privilege or professional ethics and other legal impediments. When the parties, their counsel or their documents would be subject under applicable law to different rules, the tribunal should to the extent possible apply the same rule to both sides, giving preference to the rule that provides the highest level of protection.

The Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (1970) is also deemed to mean that the law which is most protective to the confidential information, either that of the state of execution or of the state of origin, will apply.⁶⁷ This test is commonly praised, as it necessarily satisfies parties’ legitimate expectations in the proceedings, guarantees party equality, and avoids issues with recognition and enforcement of an award.⁶⁸ However, some commentators consider this method inadequate and unfeasible, due to the complexity of the comparative law analysis required and the difficulty in determining which law is in fact more protective with regard to legal privilege,⁶⁹ and the non-alignment of these considerations with the document production rules of the specific case.

Other issues to consider are the dissatisfaction of the party that suffers from the possibly illegitimate application of a more demanding privilege standard,⁷⁰ and the resulting removal of potentially relevant evidence from the proceedings.⁷¹ Finally, some authors mention that this method is rarely employed in practice.⁷²

In contrast with the above, the least favourable privilege test requires that the arbitral tribunal assess the different levels of protection to legal privilege afforded by the possible applicable laws and choose the least protective standard.⁷³

Naturally, such test favours the production of evidence in arbitration and in jurisdictions where privilege may be waived by the client, this approach allows even greater flexibility. However, as can be ascertained from our previous remarks, this test may hurt the expectations of a party that believes certain information to be protected under a certain jurisdiction, to find out that this will not be the case in arbitral proceedings.⁷⁴

Furthermore, complying with an order to produce a legal communication may amount to a breach of the lawyer’s ethical rules, i.e. those in effect at the place of his/her registration,⁷⁵ and trigger criminal and disciplinary liability as in civil law countries. Some commentators also warn that if the rules that regulate legal privilege are considered part of public policy, they cannot be derogated from.⁷⁶ As a matter of fact, this may lead to ‘ethical dumping’ that might jeopardize the rules of legal privilege.

The most or least favourable privilege tests mentioned above have a potential for counsel shopping, whereby clients will look to select legal advisors based in jurisdictions with the broader or narrower protection afforded to privilege by the respective ethical rules, as they may consider more convenient. We argue that, for sophisticated parties/counsel, this can be seen as a tool to level the playing field, as the parties will know, from the get-go, what to expect with regard to privilege.

IV. Application of standards

In some circumstances, arbitral tribunals have applied the IBA Rules on Taking of Evidence as a stand-alone standard, without regard to national laws on legal privilege:

• In Tidewater et al. v. Venezuela,⁷⁷ the claimant objected to produce documents relating to the incorporation of a company of the Tidewater structure and the transfer of shares on the basis of legal privilege. The claimant argued that all communications between a lawyer and a client were protected, even when such communications included business considerations, which the respondent denied. The arbitral tribunal adopted the criteria embedded in the IBA Rules, Article 9(3)(a) (‘made in connection with and for the purpose of providing or obtaining legal advice’) and requested the parties to continue their document production procedure, highlighting the case-by-case analysis to be conducted for each document sought.
• In Apotex v. United States of America,⁷⁸ the arbitral tribunal specifically decided that it would not consider privilege ‘as a matter of any applicable national law or rules of law, but rather as one or more factors falling within Article 9(2) of the IBA Rules’, applicable pursuant to the parties’ arbitration agreement and the ICSID Arbitration (Additional Facility) Rules – both granting the arbitral tribunal full discretionary powers regarding document production.⁷⁹ During the proceedings, the respondent requested that the claimant produce documents relating to communications with its legal advisers and consultants. The arbitral tribunal noted that the parties did not dispute that both ‘attorney-client privilege’ and ‘work product privilege’ were protected categories of documents under the IBA Rules and that the parties’ allegations were largely based on US law. The tribunal considered this an element relevant to ascertaining the parties’ expectations (even though Apotex was a Canadian company, both of its legal advisers and consultants were based in the US) but reinforced that it was only relevant to the extent of maintaining fairness and equality of the parties in the proceedings. The arbitral tribunal’s decision with regard to work product privilege considered the claimant’s expectations at the time the relevant documents were issued (such documents had been specifically produced by the consultants to assist the claimant’s legal advisers regarding a regulatory claim filed by an agency of the respondent).
• In Glamis Gold v. United States of America,⁸⁰ the arbitral tribunal adopted the so-called ‘conceptual analysis’ method.⁸¹ The parties agreed that US law was of guidance for the tribunal to decide on the privilege claims but disagreed as to which jurisdiction’s standards should apply. The claimant argued for D.C. Circuit or federal common law standards, grounding this choice on the parties’ expectations, whereas the respondent defended the application of general principles common to both jurisdictions. The arbitral tribunal in this case recognized that US law was not directly applicable to the arbitration, as it was subject to the UNCITRAL Arbitration Rules, and assessed what were to be considered ‘party expectations’ according to NAFTA-related US case law. On this basis, the arbitral tribunal crafted legal standards applicable to the documents at issue: the party invoking attorney-client and/or work product privileges would have to justify why each document was to be considered protected by privilege, and the other party would present its rebuttal arguments for the tribunal to decide.⁸²

In some cases, other approaches were applied to privilege claims, for instance:

• Following a party’s refusal to produce legal advice provided by a French lawyer on contract negotiation, an arbitral tribunal seated in New York decided to analyse a document in camera and then ordered the production of a redacted version of the document in the proceedings.
• In a case where all players were from civil law countries except the lawyers of one of the parties (who were from common law jurisdictions), an arbitral tribunal seated in Austria applied general principles developed in civil law countries on disclosure and due process. The arbitral tribunal allowed the production of an allegedly confidential letter exchanged between a party and its lawyer, after pondering both the interest of keeping attorney-client communications confidential and procedural truth and administration of justice.⁸³

Some commentators further suggest that in order to avoid a choice of law method altogether, arbitrators exercise their full discretion to determine transnational ad hoc substantive standards on legal privilege.⁸⁴ However, this may result in high unpredictability for the parties, especially if the standard applied does not take into account principles of equal standing of the parties, fairness, and parties’ legitimate expectations.

V. Pragmatic proposals ‘ad usum delphini’

Striking a balance between parties’ expectations, i.e. which law parties think would apply to privilege claims, and the equitable/fair treatment of the parties in the arbitral proceeding is at the core of the issue. Some suggestions towards achieving this balance when there is more than one potentially applicable law are presented below.

A. Preventive advocacy

Lawyers are naturally the first to deal with legal privilege at a pre-arbitral phase. In this respect, we advocate for what is called ‘preventive advocacy’. Teams of lawyers that have studied and are registered all over the world is not only an increasing fact but is rather quite often considered as a manifest necessity from the clients’ point of view. Lawyers with mixed backgrounds can better understand the risks that may potentially arise from the negotiation and conclusion of contracts and consequent document production, and thus how to mitigate them. It has even been said that ‘no counsel should expect that his or her ethics rules will be imposed on the opposing side or even be known by the arbitral tribunal’.⁸⁵ This is a strategic consideration to have in mind when advising and representing clients from different jurisdictions, who operate internationally and might have different expectations.

Preventing uncertainties with regard to privilege claims might be addressed by including contractual rules that address these issues and guide or impose rules to tribunals. This would at least avoid unnecessary surprises, and strategic or guerrilla-like tactics. Another advantage arising from these transnational teams would be the possibility to inform clients of potential conducts and be aware, as counsel, of conduct of their own that would be considered as waivers of privilege in the eyes of an arbitral tribunal.

B. Avoid ‘ethical dumping’

From counsel’s perspective, the best way to protect a client is to prevent a lower level of legal privilege. However, irrespective of the anticipation of the future, the risk of ethical dumping is to be taken seriously. When there is a clash of standards, the lowest common standard tends to prevail. The case of the ‘plombier polonais’ in trade dumping is illustrative: Polish plumbers were hired in France, instead of French professionals, because the wages of the former were considerably lower.

As happens with trade dumping, an ‘ethical dumping’ would be a threat to the legal profession and/or international arbitration. Legal privilege arises from concerns relating to a client’s trust and ability to confide in their legal representative (with a more substantive or procedural connotation depending on where the lawyer operates) resulting in better-quality legal advice across jurisdictions. As a matter of fact, legal privilege exists as a client’s right, and a right and duty of the lawyer, which should equally apply before arbitral tribunals and state courts. By agreeing to arbitration, the parties voluntarily waive the right to a court, which cannot be tantamount to the waiver of legal privilege.

C. Bon courage, Arbitral Tribunal

If a privilege claim arises, arbitrators must courageously ask the parties what standards or law they would like to see applied to this issue. Party autonomy again plays a key role in the arbitral procedure, by limiting any arbitrary decisions by the tribunal, and ensuring legal predictability.

If the parties fail to choose or reach a joint decision, then the most protective privilege law/standard should apply. This metric will establish a maximum level common denominator between the parties. Ideally, no party that reasonably expects to see a specific piece of information protected at the time the document was issued will have to reveal it during arbitral proceedings. This will ensure a balanced interplay between protecting parties’ reasonable expectations and procedural equality and fairness, which ultimately must prevail.⁸⁶ Even if a party expects that a document be produced, which will subsequently not be the case, this could be considered the lesser of all evils when considering both opposite scenarios. On the contrary, the first scenario is inherently tied to the risk of parties filing set aside actions against the award, or objecting to its recognition and enforcement, on the ground of breach of public policy and due process, which usually encompasses the principles of fair and equal treatment of the parties.⁸⁷

Conclusion

While lawyers are bound by their law of registration, different expectations might arise from the parties with regard to the application of legal privilege in international arbitration. As the parties’ arbitration agreement is usually silent on this issue, arbitrators must decide how to deal with privilege claims, taking into account that equality between the parties is of the essence in international arbitration.

The arbitrators’ discretion in deciding on the applicable law or standard might at first appear as allowing flexibility to the arbitrators to decide legal privilege on a case by case basis, but in fine adds to the confusion and unpredictability of legal privilege claims in international arbitration.

Arbitral tribunals should therefore seek guidance from any rules applicable to the proceedings, such as national arbitration laws, institutional rules, and relevant soft law, and consider applying the most favourable legal privilege test when determining the relevant applicable law to legal privilege claims.

Since ‘tribunals must seek to grapple with conflict of privileges with cultural sensitivity and common sense’,⁸⁸ we believe the proposed solutions are pragmatic and serve the arbitral community. Some authors have further proposed addressing legal privilege in international arbitration in an optional text,⁸⁹ regulating counsel ethics in a broader sense through arbitral institutions, international organizations (such as the PCA, ICSID or UNCITRAL),⁹⁰ or even a ‘Global Arbitration Ethics Council’ created for this purpose.⁹¹

Although the reinforcement of predictability and trust in the applicable rules is the only way to increase in the long run the global level of satisfaction with the system of companies in need of settling disputes, a regulatory approach and attempted ‘legal transplant’ of foreign rules and practice may be counterproductive and risk isolating a legal concept from its cultural background, with its specificities and complexities.

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