Privilege and ethics in cross-border litigation- Litigation Committee newsletter article, April 2020
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Matthew D Heins
Williams & Connolly, Washington, DC
Ana C. Reyes
Williams & Connolly,Washington, DC
Imagine the following scenario. A lawyer at a law firm’s headquarters in Washington DC sends a legal memorandum to a client’s general counsel in New York, advising about developments in antitrust law. The general counsel forwards the email to the company’s CEO and senior leadership in South Korea, Germany, and China. The CEO responds by email asking a follow-up question about whether the group thinks it would make strategic sense to attempt to merge with a competitor, and general counsel replies that the legal risks identified in outside counsel’s memo suggests such a merger would be costly and unlikely to succeed. Executives in each foreign office print the emails and attached memorandum and file them away with related business documents.
Rapid digital communication and changing norms of legal representation have made what might have been unusual 20 years ago – and almost unheard of 30 or 40 years ago – common and routine in the modern relationship between lawyers and their foreign or multinational clients. These developments have created a world of new possibilities for cross-border representation, litigation, and dispute resolution.
They’ve also exponentially multiplied the privilege and ethics issues that can place lawyers and their clients at risk, and created complex and confusing questions about how best to protect confidential documents or information. Is outside counsel’s legal memo privileged? Is the general counsel’s legal advice to the CEO? What about the general counsel’s legal advice to senior leadership in foreign jurisdictions? And does who’s asking the question – a US court, or a court in Asia or the European Union (EU), or an arbitral panel somewhere else – change the answer?
US privilege laws protect confidential communications between a lawyer and their client, and the privilege rests with the client. A lawyer’s email and memo to a client conveying legal advice is privileged unless the privilege is waived, and if the material is prepared in anticipation of litigation, it is also protected attorney work product. Communications between American executives and a New York-based general counsel, where the primary purpose of the communications is legal advice, are also privileged and can be work-product protected. And, of course, any communication back to general counsel or outside counsel asking a legal question enjoys privilege protection.
But not all privilege laws are alike. In South Korea, for example, privilege rests with the lawyer, not the client. In the EU, an in-house lawyer’s communication conveying legal advice about antitrust liability would plainly not be covered by legal professional privilege in the event of a dawn raid; in fact, even communications with outside counsel might be seized and reviewed by authorities if an EU antitrust investigation is not commenced until after the communications are made. German law establishes criminal liability for lawyers who disclose confidential client information, but does not protect documents located on the client’s premises if those documents aren’t related to the client’s defence of criminal or regulatory offenses; in-house counsel’s communications are privileged only if they provide legal, and not business, advice, and if they maintain separate offices that other company officials cannot access. In China, lawyers may keep certain confidences during a criminal representation, but in civil cases the government may compel their testimony as to confidential matters.
Given the differences in scope and power of privilege in the US and abroad, understanding and predicting choice of law issues is critical. US courts typically apply a traditional ‘contacts’ test to determine which country has the ‘predominant’ or ‘most direct and compelling interest’ in whether and to what extent communications should remain confidential.[i] The test is easy to apply when outside counsel and the client are both US residents conducting business in the US. It’s also easy when both outside counsel and the client are located and operate in the same foreign jurisdiction: the foreign jurisdiction’s privilege will rules control. When client and counsel reside in different jurisdictions, or when one or each of them is a multinational entity, the task is considerably more complicated.
The cost of miscalculation can be as extreme as complete waiver of privilege: disclosure in a foreign jurisdiction, whether by choice or by compulsion, can defeat privilege even in US proceedings. A client may be found to lack a reasonable expectation of privacy in lawyer-client communications sent to a jurisdiction that does not recognise a privilege. Even absent a finding of waiver, these issues can present thorny questions for US courts to grapple with, and litigating them can be like walking a tightrope. In one recent case in the Southern District of New York, for example, a court allowing clawback of an inadvertently disclosed confidential document emphasised the fact that the document had not been ordered disclosed by a foreign court with the authority to issue such an order; it was not at all clear that the court would have reached the same decision under different circumstances.[ii]
Lawyers engaged in international practice should consider taking preventative steps to avoid potential privilege pratfalls. For example, each of us is well aware of the benefits of having knowledgeable and capable local counsel even for domestic litigation: sensitive matters in foreign jurisdictions are especially demanding of local counsel that understands the ins and outs of the relevant privilege laws. Vigilant lawyers engaged in cross-border practice should also develop good habits that help to protect privilege. Always mark privileged files clearly and keep them separate from other files to protect them from dawn raids, circulate sensitive materials among as small a group as possible, and ensure that contracts include choice-of-law provisions that specify preferred privilege rules. And changing the way one thinks about in-house counsel can make an enormous difference when complex privilege questions arise; especially when working with clients in the EU, lawyers can improve the chances that sensitive material remains confidential by warning in-house counsel against summarising or annotating outside counsel communications and by minimising written communications on matters that have previously been the subject of Commission investigations.
Notes
[i] Wultz v Bank of China Ltd, 979 F. Supp. 2d 479, 489 (SDNY 2013).
[ii] In re: Interest Rate Swaps Antitrust Litigation, No. 16-MD-2704, 2018 WL 5919515 (SDNY 13 November 2018).
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