Most jurisdictions protect the confidentiality of communications between the lawyer and the client, which is commonly referred to as legal privilege. However, in the field of international arbitration, the resolution of issues of privilege has become unpredictable and hard to navigate due to differences in the scope and nature of privilege in common and civil law jurisdictions, as well as the lack of clarity on the applicable rules on privilege. The following will elaborate on the challenges of privilege claims in arbitration and provide an overview of the first-ever comprehensive set of transnational rules that bridge the common and civil law divide on privilege: the Inter-Pacific Bar Association Guidelines on Privilege and Attorney Secrecy in International Arbitration (IPBA Guidelines). The authors of this article focus on the scope of application of the IPBA Guidelines, the types of privileges they provide for, and exceptions to this privilege.
While the scope of privilege in national litigation is well-established under applicable national laws, things are not as easy in international arbitration. This is largely because civil and common law jurisdictions treat privilege issues very differently, which leads to challenges in international arbitration proceedings that involve parties, party representatives, and arbitrators from a number of jurisdictions.
Specifically, there is variation regarding the types of legal privilege between common and civil law. Due to extensive disclosure and discovery processes, common law jurisdictions generally cover broad categories of legal privilege such as legal advice privilege, litigation privilege, and joint and common interest privilege. However, civil law jurisdictions generally limit disclosure obligations only to the lawyer secrecy obligation, the violation of which results in criminal sanctions.[i]
The variance between the two systems exists with respect to the holders of privilege as well. In common law countries, privilege can generally be invoked by a lawyer or their client and extends to in-house counsel. On the contrary, attorney secrecy can only be invoked by an attorney when ordered to testify in court or to produce documents. It cannot be invoked by a client and does not apply to in-house counsel.[ii]
As a result, the issue of privilege has become imbalanced in the field of international arbitration, where parties have differing conceptions and interpretations on issues of privilege. Major arbitration laws and rules are silent with respect to which privilege rules apply or which conflict rules should be applied by the tribunal in determining the applicable privilege rules. [iii] Moreover, stipulation of the law of the seat of arbitration and the law of contract in the arbitration clause does not automatically mean that they apply to privilege, since there is no consensus on whether privilege is procedural or substantive in nature.[iv] Thus, absent express party agreement on the law applicable to privilege, tribunals are expected to conduct their own assessment regarding the applicable law to every issue where privilege is invoked. The arbitrators’ task in this context is a complicated one, since they are expected to ensure procedural fairness for parties that may have different expectations on the protection standards of evidentiary privilege.[v]
Thus far, the practice of arbitral tribunals on privilege and attorney secrecy obligations has been anything but consistent. In particular, while some tribunals have conducted a conflict of laws analysis to resolve the issue of the law applicable to privilege, other tribunals have not even identified the applicable law, rather opting to independently determine whether certain information is protected from disclosure or not.[vi] There have also been tribunals who have gone as far as to create their own “international law of privilege” without explaining how they identified the applicable standard[vii] or who determined the rules applicable to privilege by relying on commonalities of privilege in different jurisdictions.[viii]
This status quo has led to the sphere of privilege in international arbitration being described as a “pernicious legal void”[ix] where “the only thing that is clear is that nothing is clear. [x] Arbitrariness in the sensitive process of privilege is alarming, not least because document production is an intrinsic part of arbitral proceedings where one document may be outcome-determinative.[xi] Understanding the need for better regulation, practitioners have been calling on the international arbitral community to “rethink” the rules of privilege[xii] and adopt transnational standards.[xiii]
Finally, in 2019, after 5 years of review of the prevailing positions on privilege and attorney secrecy in different jurisdictions, the working group assembled by the Inter-Pacific Bar Association (IPBA) compiled a uniform standard on privilege in international arbitration: the IPBA Guidelines on Privilege and Attorney Secrecy in International Arbitration.[xiv] Being the first ever uniform framework on privilege, the IPBA Guidelines are specifically aimed at resolving competing differences between parties coming from different jurisdictions in international arbitration and ensuring procedural efficiency.[xv]
Unfortunately, because of its limited regional reach and the outbreak of the pandemic after its release, the IPBA Guidelines have not yet spread on a global scale.[xvi]
The IPBA Guidelines apply to all matters of privilege and attorney secrecy in arbitration on the basis of mutual agreement of parties (Article 1.1). By extension, parties may agree to apply the IPBA Guidelines
- in the arbitration clause; or
- once the dispute has arisen, in the written contract.
However, it is best to include IPBA Guidelines in the arbitration clause so as to mitigate the potential risk that the parties fail to collaborate once the dispute arises.
Absent party agreement, arbitrators may draw inspiration from the IPBA Guidelines in determining issues of privilege (Article 1.3).
The IPBA Guidelines provide the following protections from disclosure:
- Legal advisor privilege: information created or communicated in the course of providing or obtaining legal services (Article 3);
- Legal proceedings privilege: information created or communicated for the purpose of an anticipated or pending legal, civil, administrative, regulatory, or criminal proceeding, investigation, or inquiry, including litigation, mediation, adjudication, and arbitration (Article 4);
- Settlement privilege: communications and admissions made during settlement negotiations except
- where there is a dispute on whether a settlement has been concluded; or
- where all parties to the actual or intended settlement have consented to the disclosure (Article 5).
The IPBA Guidelines also protect disclosure of information based on any non-waivable legal impediment or mandatory provision of law (Article 6). Any party seeking to rely on such protection should notify the other party as soon as it has reasonable grounds to believe that it will rely on the protection. If, as a result of a failure of a party to comply with its notification obligation, the other party makes a disclosure in spite of its right to withhold, the tribunal may exclude such disclosure.
The IPBA Guidelines specify parties, legal advisors, or any third party involved in arbitration to be the holders of privilege.
The term “legal advisor” applies to lawyers in various capacities, such as private practitioners, public officers, trainees, and their assistants. In-house counsels also fall under this category, independent of whether they are or have been admitted to the bar, as long as their position within an organization identifies them as legal counsel. Notably, the extension of privilege to in-house counsel is a significant feature of IPBA Guidelines since as mentioned earlier, in-house counsels are generally not covered by attorney secrecy in civil law countries.
Third parties involved in arbitration may include experts, litigation service providers, and third-party funders.
In What Instances Do the IPBA Guidelines Not Provide Protection from Disclosure?
Waiver: The holder of the privilege may partially or totally waive the privilege by disclosing the privileged information (Article 8).
However, partial or total disclosure shall not amount to a waiver if
- the disclosure is obviously inadvertent; and
- reasonable steps are taken to rectify the disclosure.
Reasonable steps to rectify inadvertent disclosure of protected information might involve timely notification to the receiving party with (i) sufficient specification allowing the receiving party to identify the relevant Information, and (ii) an appropriate explanation why the disclosure was inadvertent.
Illegal or fraudulent information: If information was created and/or communicated in furtherance of any illegal or fraudulent purpose, privilege does not apply. Notably, illegal and fraudulent behavior is to be proven by the party alleging such behavior (Article 9).
For the reasons detailed above, the matter of privilege is a very delicate issue in international arbitration. In the absence of party agreement on the applicable rules to privilege, arbitrators may be seen to have nearly unlimited power to determine the rules applicable to privilege.
The IPBA Guidelines present a practical and uniform solution for resolving the matters of privilege in arbitration and may help parties to avoid unpredictability over the standard of disclosure obligations in their disputes. For this reason and depending on the circumstances of the dispute, reliance on the IPBA Guidelines may be an option to add legal certainty and avoid disputes over the law applicable to issues of privilege for parties, party representatives, and arbitrators involved in an international arbitration.
[i] Richard M. Mosk and Tom Ginsburg, ‘Evidentiary Privileges in International Arbitration’ (2001) 50(2) The International and Comparative Law Quarterly 345, 347-351.
[ii] Ibid, 351-352.
[iii] One exception in this respect it ICDR Rules of the American Arbitration Association (‘AAA’) which advocate for the application of the most favoured nation approach in resolving privilege disputes.
[iv] Thomas Stouten and Denise Jansen, ‘Legal Privilege Issues: At the Mercy of The Arbitral Tribunal’ (Ibanet.org, 2022) https://www.ibanet.org/legal-privilege-arbitral-tribunal accessed 19 July 2022.
[v] Klaus Peter Berger, International Economic Arbitration (1993) 502.
[vi] Libananco Holdings Co. Ltd. v. Republic of Turkey, ICSID Case No. ARB/06/8, Decision on Preliminary Issues (June 23, 2008; Ballentine v. Dominican Republic, CAFTA-DR (UNCITRAL Rules), PCA Case No. 2016-17, Procedural Order No. 16 (Oct. 2, 2018).
[vii] In Vito Gallo v. Canada, NAFTA tribunal created a four-step test for privilege purportedly on the basis of “international law”. Subsequent tribunals have applied this four-step step referring to Vito Gallo tribunal. Vito Gallo v. Gov’t of Can., PCA Case No. 55798, Procedural Order No. 3, 47 (Apr. 8, 2009); Lion Mexico Consol. LP v. United Mexican States, ICSID Case No. ARB(AF)/15/2, Procedural Order No. 6, 5 (Sept. 3, 2018); Pawlowski AG & Projekt Sever s.r.o. v. Czech Republic, ICSID Case No. ARB/17/11, Procedural Order No. 2, 6 (Aug. 14, 2018).
[viii] Glamis Gold, Ltd. v. United States, Decision on the parties’ request for production of documents withheld on the grounds of privilege, 19 (Nov. 17, 2005).
[ix] Susan D. Franck ‘International Arbitration and Attorney-Client Privilege—A Conflict of Laws
Approach’ Ariz. St. L.J 936, 948.
[x] Klaus Peter Berger, ‘Evidentiary Privileges: Best Practice Standards versus/and Arbitral
Discretion’ (2006) 22 ARB.INT’L 501, 501.
[xi] Franck, (n ix) 936.
[xii] Douglas Tomson, ‘White & Case Partner Calls For Privilege Rethink’ (Globalarbitrationreview.com, 2022) https://globalarbitrationreview.com/article/white-case-partner-calls-privilege-rethink accessed 19 July 2022.
[xiii] Berger, (n x) 513-515.
[xiv] IPBA Guidelines on Privilege and Attorney Secrecy in International Arbitration (Inter-Pacific Bar Association 2019).
[xv] Ibid, Foreword.
[xvi] International Bar Association. (Producer). 2022. A practical guide to the 2020 Revision of the IBA Rules on the Taking of Evidence in International Arbitration (Part 2) [Video] https://www.ibanet.org/conference-details/CONF2127