Marc J. Goldstein Arbitrator & Mediator NYC
October 21, 2010

Some Thoughts on Arbitral Choice of Law Regarding the Attorney-Client Privilege

International arbitrators are regularly called upon to resolve disputes over the application attorney-client privilege between parties from different countries that have fundamentally different rules concerning the existence and scope of the privilege. When one of the parties is a corporation from a civil law jurisdiction in Europe, or from an Asian nation, the legal function within the corporation may be carried out by lawyers or non-lawyers, or persons with legal training but who have a different professional status and are subject to different regulations than lawyers in private practice.


As a result, when international arbitrators are called upon to resolve privilege issues, the first question to be considered often will be what law governs the particular privilege issue presented.  The law chosen by the parties to govern their contract may bear no particular relationship to the jurisdictions implicated in the process of obtaining legal advice. Nor does the privilege law of the place of arbitration appear to be a uniformly attractive candidate, as at least one of the parties will usually have its internal legal department and its regular external counsel elsewhere.


Recently such issues were the subject of an elaborate analysis by a United States Magistrate Judge sitting in the Southern District of New York, in a litigated trademark infringement case between Gucci and Guess?, the denim purveyor. (Gucci America, Inc. v. Guess?, Inc., 2010 U.S. Dist. LEXIS 101219 (S.D.N.Y. Sept. 23, 2010)).    At issue were documents prepared by an in-house legal counsel for Gucci in Italy, an individual who was not trained or admitted as a lawyer but who was an expert in intellectual property and was responsible for Gucci trademark investigations that might lead to litigation.   


The U.S. law approach to this choice of law question, dating back at least to the mid-1970s and evidently developed mainly in cases involving the work of foreign patent agents, has been to ask whether the attorney-client communications of the foreign lawyer “touch base” with the United States — in the sense that the communications concern prosecution (actual or prospective) of a U.S. judicial or administrative proceeding, or the issuance of a U.S. patent, trademark or copyright. Under this approach, if an in-house counsel in Paris for the European affiliate of a U.S.-headquartered multi-national discusses by e mail with the affiliate’s CEO issues germane to the commencement of legal proceedings in a U.S. court, then American privilege law should apply.


This was the approach followed in the recent Gucci v Guess? case. The Italian non-lawyer working as an intellectual property counsel for Gucci’s affiliate in Italy gathered information for and communicated with the affiliate’s general counsel in Italy, an admitted to practice lawyer, and also sent messages to the Gucci group general counsel in London, also an admitted lawyer. The communications contained information and legal analysis for the purpose of evaluating= prospective trademark infringement actions in the courts of both Italy and the United States. His communications were considered to “touch base” with the United States in view of the contemplated American legal proceedings relating to alleged trademark infringement in the U.S., and so the Court applied U.S. privilege law.


What relevance might such case law have to an arbitrator sitting in the United States to decide a dispute between two foreign parties? An initial instinct might be to discount it, on the basis that the parties’ choice of New York as the place of arbitration does not imply the embrace of rules of evidence including rules of privilege that are features of litigation in U.S. courts. On the other hand, if the communications claimed to be privileged were had with a specific view toward the prosecution or defense of a New York-seated arbitration, especially if the contract is governed by New York law, then there is a respectable argument that the attorney or client who made the communication did so with a reasonable expectation that New York privilege rules would apply.


Another scenario in which the “touch base” choice-of-privilege-law formulation might come into play in a New York-seated international arbitration is if the communications were held for the purpose of evaluating claims or defenses that might eventually be asserted in wither an arbitral or a judicial forum.  It would be very common for an in-house counsel to have several communications about a brewing commercial dispute before checking to see if the contract contains an arbitration clause. If a mistaken but innocent assumption was made that there could be judicial proceedings in New York, but the dispute then goes to arbitration, there is good ground for protecting the expectation that confidentiality of attorney-client communications would be governed by U.S. principles. One could also imagine that communications might occur without certainty about the scope of arbitrable disputes, or about who the parties might be and whether some of them could be non-signatories who could not be brought into the arbitration.


Still, all the scenarios described above, in which the “touch base” formula could lead to applying U.S. privilege rules to foreign counsel’s entirely foreign-based communications, involve a common thread: the perceived possibility of litigation in U.S. courts on the part of the legal professional involved in the communications. If the communicators fully expected that forthcoming proceedings would be entirely in an arbitral forum, the fact that the arbitral tribunal would have a New York seat does not give rise to a justifiable expectation that the tribunal would apply New York privilege rules, as those rules are an attribute of the US judicial process and not such an important aspect of US public policy more generally that they could be expected routinely to trump less prophylactic privilege rules prevailing in the jurisdiction where the involved legal professional plies her trade.


When the foreign lawyer-client communication occurs before the contract is made, or before the dispute arises, and its subject matter is not a prospective litigation or other US proceeding, the arbitrator may find little justification for applying U.S. privilege rules to those communications — at least if choice-of-privilege-law is based on the same “grouping of contacts” principles that would apply to other choice-of-law issues.  But there remains the important question of equality of the parties. If the adverse party has U.S. counsel, and the tribunal applies U.S. privilege law to its communications, then there is a strong argument that fairness requires equal protection for the other side even though this may grant greater coverage than the foreign party and its counsel would enjoy in their own courts.


One Response to “Some Thoughts on Arbitral Choice of Law Regarding the Attorney-Client Privilege”

  1. Marc, one can try looking at the logical implication of two primary characteristics of arbitration:
    1. That it is not a process at law;

    2. That the Arbitral Tribunal has a duty to treat the Parties evenhandedly.

    It follows that what is disclosable by one is disclosable by the other, mutatis mutandis. It isn’t withn an arbitrator’s gift to grant privileges to one party that he or she is not prepared to grant to the other.
    Morover I argue that, because the Tribunal is not a Court but the creation of the parties, the representatives, be they or be they not lawyers of a particular Jurisdiction, have no in personam privileges.
    Thus, if confidential material of any kind is required to be disclosed by one party, the corresponding material must be disclosed by the other.
    I once had an attorney (an Englsh solicitor) for the Claimant apply for an Order that the opposing representative (a Quantity Surveyor) disclose all correspondence with the Respondent. My solution was to say that I could make such an Order if the Claimant agreed to disclose all correspondence with his Solicitor. (Note that the Arbitrator has powers over the Parties only.) The Claimant’s application was withdrawn, I made no Order. It was open to the solicitor to seek an Order from the Court under S.43 of the Arbitration Act 1996, but only with the consent of the Tribunal or the agreement of both Parties. Sadly, the solicitor didn’t take this to the Court, so there was no Ruling.

Leave a Reply