The pressures of increased corporate governance, new whistleblowing requirements (for example, under the Proceeds of Crime Act 2002) and new antitrust and regulatory rules, make companies constantly under scrutiny by governance authorities, prosecutors, Financial Services Authority/Securities Exchange Commission investigators as well as civil litigants. For many large organisations, disputes and lawsuits are today simply a fact of life.
Has the recent approach of the judiciary in
Confidentiality in documents produced or divulged for the purpose of arbitration stem from an implied right of privacy in the arbitration process keeping matters private between the parties involved. The existence, extent and the basis of confidentiality in international commercial arbitration is a matter of scholarly debate and occasionally the focus of decisions of arbitration tribunals and state courts, and should not be automatically assumed. The issue has different dimensions in the context of international investment and trade disputes. Participation of states and state entities in international disputes can be a matter of public interest, shifting the emphasis from privacy and confidentiality to knowledge and accountability.
A recent Court of Appeal decision in
- parties to the arbitration expressly or impliedly consent;
- disclosure is reasonably necessary to protect legitimate interests of an arbitrating party (including requirements of public reporting, fiduciary obligations, auditing requirements, disclosures to insurers and disclosure in court applications);
- a court permits disclosure (by order or leave); or
- the interests of justice require disclosure and (perhaps) where public interest requires disclosure.
Importantly, the court in Emmott decided that “the interests of justice” were not confined to the interests of justice in
Additional uncertainties arise as there is no single international code of commonly accepted principles on privilege though all professional privileges have the same rationale (to encourage frank and open communications between professionals and their clients). Legal privilege is intended to promote law-abiding behaviour by allowing business people to seek legal advice without the risk of it causing them prejudice. The right to proper legal advice is reflected in the principles of ‘legal privilege’, as it is known in common law countries, and the principle of ‘professional secrecy’ of civil law countries. While in common-law countries privilege is a right which also extends to in-house counsel — and it is only the client who can waive the privilege — the general civil law concept of professional secrecy is based on professional ethics, meaning only the lawyer, not the client, can invoke the privilege and only information in the lawyer’s possession created as part of the exercise of their profession is protected. The same information or advice attracts no protection in the hands of the client.
Tricky issues often arise during proceedings involving parties from different jurisdictions or whose businesses span jurisdictions, about what law governs claims for confidentiality or privilege: the law of the contract, the law of the place where the proceedings are being conducted, the law of the place where the communication was created, the law of the place to which the communication was sent, or indeed the law of the place where the record of communication is stored? What happens when the communication/document in question has crossed borders — can the ‘privileged’ status of a document change? What is the scope of any privilege and who ‘owns’ the privilege? Who is the client for privilege purposes? In any given case and in any given jurisdiction these questions are determined well after the communications concerned have occurred.
Having navigated the minefields of domestic privilege or secrecy practices, as a result of the
Allowing the advice of internal counsel to be used against a company goes squarely against the very philosophy of privilege as corporate counsel are useful precisely because they help companies navigate legal risks. The same of course for non-EU qualified counsel. Advice from the best lawyer may not be protected if it is not also from the right lawyer. The very purpose of privilege should be to allow clients to confer openly about issues with the best person for the job both in-house and external counsel and should not be limited by the formality of Bar membership on which the court in AkzoNobel focused.
What then of parties’ and counsel’s expectations about their communications in cross-border deals or disputes? If different rules of privilege are applied than what the parties expect (that they be accorded at least the same privilege rights as in their own domestic proceedings), parties and counsel may find they have to reveal information that was reasonably expected to be protected. Advice that is privileged in the country where it is given or from which it is sent may, however, not be protected everywhere a client operates or everywhere the advice is intended to be received.
The importance of due process and equal treatment in arbitration means arbitrators are likely to look for the widest form of privilege to give parties equal protection. Where one expects to enjoy additional evidentiary privileges before its national courts, a tribunal would allow the other to benefit from such additional privileges, in the sense of “most favoured privilege treatment”. The result is then more predictable, allowing parties to be confident that they would never be required to produce information that is considered privileged under the law of their home jurisdiction.
Most courts have taken a practical approach, with a comity-driven analysis ruling on assertions of foreign privileges but one cannot be certain this will always be so. A balancing of competing national interests is often called into play. In Renfield v Remy Martin [1982] where a
Emmott and AkzoNobel are useful reminders that care is needed when negotiating arbitration agreements or when preparing documents in the context of seeking legal advice from external lawyers or even internal lawyers in connection with investigations, international transactions, international arbitrations and cross-border litigation.
Legal inconsistencies across jurisdictions and different treatment by institutional arbitration rules mean parties to arbitration should not assume that confidentiality is absolute even where a confidentiality obligation is said to exist. Being proactive in preserving confidentiality by incorporating express confidentiality provisions in arbitration agreements, stipulating confidentiality terms in procedural directions or orders from the arbitral tribunal and opting for arbitration rules which provide for confidentiality protection, will help protect the confidentiality of business secrets and ensure their dispute and arbitration remain as confidential as possible. Parties should ensure arbitration agreements contain appropriate confidentiality clauses (covering all aspects they want to keep confidential). Any application to a court to rely on confidential information generated or disclosed in an English arbitration should be dealt with in private by the arbitral tribunal. Where there is reference in a foreign court to an English arbitration, an injunction may be available from the arbitral tribunal or the English courts to prevent any further disclosure.
Managing privilege and confidentiality is also about managing expectations and managing risks. It necessitates negotiating appropriate confidentiality protection at the outset of all transactions where needed and ensuring an awareness of the complexities that questions of privilege protection entail in a globalised world. Safeguards are available to assist in keeping protection where it is expected and maintaining confidentiality and secrecy where possible. While a multinational corporation cannot maintain a firewall between different procedures in different countries, managing interactions and foreseeing the effect of a seemingly prudent communication in one jurisdiction on another, is an important though difficult aspect of modern commercial and legal practice.
Michelle Sindler is a partner at Olswang.
LitigationJuly2008
