Volume 12, Issue 1 - January 2014

Current Issue

Lead Article

Article Summary

Case Summary

Student Spotlight

Archives

JDR Home

VOLUME 12, ISSUE 1: LEAD ARTICLE

It’s Been a Privilege: Protecting the Attorney-Client Relationship in International Arbitration

Syane A. Roy* 

I. Introduction

 A dispute arises between an American and a German. They agree to resolve their problem over a “football” game officiated by a neutral referee. Both disputants arrive at a field with ten friends in tow and the goal of scoring the most points. However, their commonalities end when they realize they are playing different games[1]: Why do the Americans keep using their hands? Why are the Germans disregarding the line of scrimmage? Tackling? Red card! What exactly is a red card? Faced with these challenges, how should the officiator proceed?

The task of the arbitrator can be much the same as our hapless referee. When international arbitration involves parties from differing legal traditions, they may bring with them expectations for the resolution of their conflict based on legal norms from their home nations. While experience with these differences has led to convergence in some arbitral practices,[2] there are still conflicts between legal systems that raise complicated problems.

This paper will look at the issue of the role of the attorney-client privilege during fact-finding in international arbitration. The scope of this important privilege varies widely between nations. Yet, the major arbitral institutions have chosen to leave recognition of these privileges up to the discretion of the arbitrator. A better path would be for arbitral institutions to explicitly detail the procedures regarding the attorney-client privilege in order to ensure the efficiency of  the arbitration process, respect for party expectations and party equality. The uniform application of the privilege standard of the party whose home nation most robustly protects the attorney-client relationship would best realize these goals.

II. Background: The Attorney-Client Privilege and Arbitration

The attorney-client privilege has played an important role in the legal profession since ancient Roman times.[3] However, as the world becomes increasingly interconnected, the mooring formerly provided by national legal systems is becoming increasingly frayed. In particular, international arbitration raises many questions about the application of the privilege because of its distinct approach to resolving disputes and inherently inter-jurisdictional nature. The following section will provide some background on the attorney-client privilege, the practice of international arbitration, and describe some of the ways arbitration institutions have sought to address the intersection of these issues.

A. The Attorney-Client Privilege Around the World

The widespread international acceptance of the attorney-client privilege reflects an understanding that while uncovering the truth is a primary aim of an adjudicatory system, it is not a goal to be pursued at all costs. Although most countries recognize some form of the privilege, there are many potential points of conflict in international civil disputes because of the varying scope of the privilege from country to country.[4]

In general, the two dominant legal traditions, common law and civil law,[5] base their approach to the question of the attorney-client privilege on fundamentally different approaches to fact-finding. In the common law system, broad discovery rights allow each party to compel opponents to produce relevant adverse information.[6] By contrast, fact-finding in civil code countries takes place primarily through party presentation, whereby each party bears the burden of preparing its own case without the benefit of compelled discovery.[7] These differences have shaped the corresponding attorney-client privileges. Since parties in common law systems can be required to hand over evidence adverse to their case, the privilege has special significance.[8] Candid discussions between an attorney and client often contain probative information, but the value of promoting access to fully informed legal advice has historically rendered these conversations immune from discovery.[9] Although civil law systems also protect attorney-client communications, the lack of mandatory information production has led to statutorily-enforced codes of professional conduct rather than evidentiary rules.[10]

The differing sources of the privilege have important consequences for how they are applied in practice. First, it affects waiver of the privilege. In common law schemes the client generally controls the privilege and therefore may affirmatively waive the protection it affords.[11] Alternatively, in some civil law countries criminal sanctions attach for breaches of the privilege and cannot be waived by a client.[12] Second, the nature of the privilege in differing legal systems has implications for its categorization as either substantive or procedural law.[13] This distinction is important because while there is broad consensus across legal systems that procedural rules are displaced by forum practice and substantive issues are governed by choice-of-law principles,[14] there is little consensus of which rules are substantive and which rules are procedural.[15]

Conflicts can also arise in determining whether the attorney-client privilege is even implicated. For example, the professional status of in-house counsel differs widely between jurisdictions, creating the potential for problems as companies increasingly rely on advice from in-house legal counsel for international deals.[16] The U.S. has broadly construed the attorney-client privilege to extend to legal communications between corporate employees and in-house counsel.[17] By contrast, the highest court in the E.U. has held that the privilege does not extend to communications between in-house counsel and a company with regard to E.U. law.[18] A company with cross-border operations must be cognizant that communications protected in certain countries may not necessarily be privileged in others.[19]

The foregoing discussion is not an exhaustive review of privilege issues. It merely highlights some of the problems the attorney-client privilege can pose in disputes between parties from countries with divergent legal traditions. The remainder of Part II will discuss some of the defining features of arbitration proceedings and their handling of the attorney-client privilege issue before turning to an analysis of the issues this poses for a increasingly important field of dispute resolution in Part III as well as a possible solution.

B. International Arbitration as a Means of Resolving Disputes

Arbitration has emerged as an important tool for companies conducting cross-border trade because it promises dispute resolution that is efficient, accurate, fair and customizable. The realization of these goals is a primary reason why companies decide to arbitrate,[20] but in practice these values exist in tension with each other. As the following discussion will show, the proper balance between these underlying conflicts is an important part of the arbitrators task.

1. Efficient Resolution of Conflict

In choosing to arbitrate, parties to a contract agree to submit their disputes to binding arbitration to avoid the “complex, time-consuming and costly alternative of litigation.”[21] In many circumstances, these private proceedings can be both faster and cheaper than court-based mechanisms involving the law of multiple jurisdictions; these benefits are likely the primary reason that business entities choose to arbitrate.[22] The New York Convention, a treaty signed by 148 nations, requires the general recognition and enforcement of foreign arbitral awards by the courts of signatory nations and thus obviates many of the legal concerns surrounding the development of a transnational system of private international law.[23] In a narrow set of circumstances, the treaty allows national courts to vacate egregious arbitration decisions that violate due process or that contravene a country’s public policy.[24] In practice, this authority is exercised only sparingly by national courts in favor of upholding arbitration decisions.[25]

2. Accurate Resolution of Conflict

Although arbitration is desirable for its relative efficiency vis-a-vis litigation, an equally important competing goal is the rendering of a result which is accurate.[26] Accuracy is promoted by fact-finding through the presentation of evidence, though one of the chief tasks of the arbitral tribunal is to balance its truth-seeking role with the efficiency goals of the parties.[27] However, as parties to international arbitration agreements have increasingly sought to avoid unpredictable results during the resolution of their claims, the fact-finding procedures of arbitration have come to more closely resemble those of court-based proceedings. [28] Arbitration has thus assumed some of the increased costliness and delay associated with litigation.[29]

3. Fair Resolution of Conflict

The fairness of the proceedings is also of fundamental concern. Indeed, one large survey of participants in international arbitration found that fairness was the single most important attribute valued in the resolution of a dispute – even more than winning.[30] Indeed, particularly for repeat players, getting the results the “right way” may be more important to a participant’s long-term goals than merely prevailing in a single dispute.[31] Further, fairness concerns are important for the legitimacy of the private proceedings themselves. For this reason, the twin concepts of equal treatment and the right to be heard have been called the “Magna Carta” of international arbitration[32] and are of fundamental concern to arbitrators in ensuring the disputes they settle between parties are not subject to being set aside by national courts.[33]

4. Customizable Resolution of Conflict

Another defining feature of arbitration is the idea of party autonomy. Contracting parties may define nearly the entire scope of a tribunal’s proceedings by choosing both the substantive law and procedural rules to be applied.[34] However, since the primary purpose of an international business contract is generally the commercial transaction, and not the method of dispute resolution, parties rarely take advantage of the opportunity to customize the rules governing the arbitration.[35] In order to fill this void, private institutions have prefabricated rules in an attempt to “codify” the principles of transnational business law and provide parties with consistency.[36] The challenges of creating an ad hoc arbitration process mean that parties generally name one of these private organizations to administer their proceedings.[37] Thus, while theoretically arbitration agreements can take an unlimited number of forms, in reality their features are controlled by a few major institutional and model arbitration rules.

C. The Attorney-Client Privilege in International Arbitration

Since parties generally rely on arbitration institutions, the recognition afforded to the attorney-client privilege tends to be based on the rules promulgated by these institutional arbitration organizations. As the following survey will show, the primary commonality between some of the major rules is the delegation of significant discretion to the arbitrator when determining a claim of privilege.

1. The International Bar Association Rules

The International Bar Association (“IBA”) provides a set of model rules as a “resource to parties and arbitrators to provide an efficient, economical and fair process for the taking of evidence in international arbitration.”[38] The IBA Rules are intended to provide guidance to arbitration institutions and can also be contractually adopted by parties as a supplement to the rules used by an institutional arbitrator.[39] They employ a tribunal-led discovery system, through which parties can request specific information from the opposing party.[40] Regarding the question of evidentiary privilege, the IBA Rules state: “The Arbitral Tribunal shall, at the request of a Party or on it’s own motion, exclude from evidence or production any Document, statement, oral testimony or inspection [that serves as a] … legal impediment or privilege under the legal or ethical rules determined by the Arbitral Tribunal to be applicable.”[41] In providing further guidance, the IBA Rules state the tribunal may take into account the need to protect the confidential communications made in connection with receiving legal advice, the expectations of the parties, and the need to maintain fairness and equality between the parties.[42] While the IBA Rules recognize that conflicting privilege issues can arise in international arbitration, they leave significant discretion to the arbitrator in determining how to apply the privilege.

2. The UNCITRAL Arbitration Rules

The United Nations Commission on International Trade Law (“UNCITRAL”) Arbitration Rules are a comprehensive set of model rules regarding the arbitration process.[43] These rules were designed for use by private parties during contracting, as well as to provide guidance for arbitral tribunals.[44] They provide that “[a]t any time during the arbitral proceedings the arbitral tribunal may require the parties to produce documents, exhibits or other evidence ….”[45]The rules make no specific mention of any issues of evidentiary privilege, merely stating that “[t]he arbitral tribunal shall determine the admissibility, relevance, materiality and weight of the evidence offered.”[46] The UNCITRAL Rules leave the admissibility of evidence solely up to the discretion of the tribunal and provide no guidance as to how to deal with a party’s assertion of a privilege.

3. The International Chamber of Commerce Rules

The International Chamber of Commerce (“ICC”) is a major provider of institutional arbitration services.[47] The ICC Rules of Arbitration detail how arbitrations submitted to the organization will be handled.[48] As one commentator has noted, the ICC Rules of Arbitration provide almost no governing standard for the production of documents or other evidentiary information.[49] Indeed, under the rules, the tribunal is empowered to question witnesses in the absence of a party and to sua sponte request additional evidence from parties.[50] The ICC grants its tribunals nearly absolute discretion on establishing the facts in a dispute, and in according such wide latitude offers no guidance on the recognition of evidentiary privileges.

4. The International Centre for Dispute Resolution Rules

The International Centre for Dispute Resolution (“ICDR”) is the international dispute division of the American Arbitration Association and directly administers arbitration services.[51] The ICDR’s rules state that “[e]ach party shall have the burden of proving the facts relied upon to support its claim or defense … [but] [a]t anytime during the proceedings, the tribunal may order parties to produce other documents, exhibits or other evidence it deems necessary or appropriate.”[52] It further provides that “[t]he tribunal shall determine the admissibility, relevance, materiality and weight of the evidence offered by any party [taking] into account applicable principles of legal privilege, such as those involving the confidentiality of communications between a lawyer and client.”[53] This language explicitly directs the tribunal to account for the issue of privilege, specifically noting the attorney-client privilege, but as noted earlier these determinations can be fairly complex.[54] The following section will look at some of these complexities and the issues they raise for arbitrators.  

III. The Case For A Uniform Rule

As Part II discussed, the rules of many arbitral organizations accord arbitrators significant discretion regarding the recognition of privileges, but provide little guidance on how that discretion should be employed when the parties have not spoken directly to the issue.

A. The Current Problem

Imagine the following scenario.[55] An American company enters into a business agreement to purchase the subsidiary of a German company. During the negotiations, in-house counsel for the American company conducts its due diligence and issues a report to management detailing possible scenarios, including a potential breach of E.U. law. After properly weighing its options, the board decides the risk of breach is slight and agrees to go through with the deal. The American company enters into a contract with the German company agreeing to submit disputes to an institutional arbitrator. The relationship goes sour and the parties seek arbitration. During the fact-finding period the Germans ask that the communications between the management and in-house counsel of the Americans be produced for review believing a knowing breach of the E.U. law to form an important part of its case.[56] The American company invokes the attorney-client privilege.[57] The German company argues that neither German nor E.U. law recognize a privilege for in-house counsel and that its own in-house reports are open for review.[58] How should the tribunal proceed? Even in this fairly straightforward hypothetical,[59] a litany of questions arise for which there are no easy answers.

As often happens, the parties to the arbitration agreement detailed above neglected to mention the applicable choice-of-law principles governing their agreement to arbitrate.[60] In these cases, many arbitration rules leave the determination of the law to be applied to the discretion of the arbitrator.[61] Thus, the tribunal must first determine if it should apply the law governing the underlying contract, presumably either U.S., German or E.U. law in this hypothetical, or if it should apply some other law, perhaps the law of the seat of the arbitration or some non-national lex mercatoria.[62] The resolution of this problem is certainly possible through the application of conflict-of-law theories, however this can be time-consuming and possibly offer no guidance on the question facing the arbitrators.[63]

Assuming the relevant law can be chosen, a tribunal must determine the implications of that choice for the attorney-client privilege. While it is generally agreed that the decision to apply a particular law necessarily dictates disregarding certain rules from other legal systems, few have argued that the choice of law decision implies a unilateral waiver of privileges not recognized by the chosen law.[64] Indeed, such a waiver could pose distinct problems for attorneys in countries where the attorney-client privilege cannot be waived by a client and breach of confidence is punished by criminal sanctions.[65] Parties cannot have expected this when agreeing to arbitrate.

The tribunal’s characterization of the nature of the attorney-client privilege invoked by the parties is also an important consideration. Because some legal systems view the attorney-client privilege as a substantive right and some see it as an issue of procedure, applying them even once the law is determined can be complicated.[66] If a tribunal deems privileges to be substantive, they are subject to the choice-of-law determinations of the arbitrator.[67] However, as one scholar has noted, there are few established choice-of-law principles governing privileges in international arbitration, and thus the arbitrator is given very little guidance on how to proceed.[68] If privileges are deemed to be procedural, they are subject to a tribunal’s rules, which similarly provide little guidance on the application of the privilege.[69] It is unclear what a tribunal should do if it determines that privileges are somewhat substantive and somewhat procedural.

This assumes that the privileges asserted by the parties have the same general “character.” Further complexities are introduced when a tribunal is faced with parties ascribing very different meanings to their attorney-client privilege. The civil law Germans and the common law Americans in the hypothetical will assuredly disagree on this point. Further, in these kinds of situations, the parties may not even agree that the privilege is claimed by an individual entitled to invoke it, such as cases of in-house counsel.[70] The indeterminate nature of these types of questions do very little to promote efficiency, fairness or customization.

B. Discretion Undermines Arbitration’s Goals

In the absence of specific guidance, arbitrators are forced to undertake the types of circuitous inquiries described above. Although unbridled discretion may allow arbitrators to uncover more probative information, it also introduces real risks of undermining the efficiency of arbitral proceedings, frustrating a party’s reasonable expectations and treating the parties unequally. Thus, arbitral institutions should adopt a clear and easy to apply default rule regarding the question of the attorney-client privilege.

1. Promoting Efficient Arbitration

Parties agree to arbitrate their disputes because the process promises to be less onerous than litigation.[71] While arbitrator discretion is sometimes held out as promoting efficient arbitral processes, in the case of the attorney-client privilege discretion can require arbitrators to consider overly complex issues.[72] Extensive briefing on relevant choice-of-law principles and unfamiliar privilege standards may be necessary and could bog down a proceeding specifically meant to be quicker and cheaper than litigation.[73] Arbitral tribunals face some pressure to make sure these questions are decided correctly to avoid jeopardizing the enforceability of the award if a national court determines either due process or local public policy requires application of the privilege.[74] An easy to apply rule that obviates the need for these types of inquiries may in fact increase the efficiency of arbitration proceedings.

2. Effectuating Party Expectations

Since the decision to arbitrate is a creature of contract, one of the primary goals of the process is to respect party autonomy by honoring the intent of the parties.[75] Although a party may have sought to bypass the cumbersome process of litigation in the courts by agreeing to arbitration, generally parties do not deem a decision to arbitrate as effecting a waiver of the attorney-client privilege.[76] Indeed, it is unlikely that the issue is even given much thought until a dispute regarding privileged information arises.[77] Without a clearly stated rule from the outset, parties may be surprised to learn that an arbitrator, at its discretion, has determined certain privileged evidence must be produced.

Parties relying on a well-established attorney-client privilege have a legitimate expectation that information subject to the privilege will be kept confidential. Under these circumstances, requiring disclosure seems manifestly unjust and contrary to the party’s reasonable expectations at the time of contracting. Thus, a party is put in the position of having to choose between waiver of national privilege protections it appropriately relied upon to its detriment, an adverse arbitral inference or, more radically, court ordered production from the local judicial system.[78] A clearly stated rule from the outset, as opposed to leaving these questions up to an arbitrator’s discretion, would better enable parties to structure their affairs prior to a dispute and better effectuate the intent of the parties to an arbitration.

3. Equality Between Parties

A limiting factor on the effectuation of party intent is the idea that the parties to an arbitration proceeding should be treated equally.[79] Thus, allowing parties to assert their respective privilege protections risks treating the parties differently in contravention of this basic tenet of arbitration.[80] To take the example outlined above,[81] allowing an American company to assert the privilege for communications with in-house counsel while denying the same privilege to its German opponent treats the parties differently. While the German party may not have had any expectations that those communications would be shielded from review, there is something unfair about allowing the American party to benefit from information it would simultaneously deny to the German party. On the other hand, the principle of equal treatment should not be taken too far. Although an arbitral tribunal may literally be treating the parties “equally” if it simply denies recognition of the in-house privilege to both parties, the differing reliance interests of the parties render this a false equality. In particular, this punishes parties from nations that provide broader attorney-client privileges than their opponents. Certainly, these types of considerations currently guide arbitrator decision making on fact-finding issues, but this is just to note that any rule should take these considerations into account.

4. Impact on Probative Information

Although there are benefits to be realized by the articulation of a clear rule, it does bring with it the possibility of excluding some probative information at an arbitration proceeding. By eliminating arbitrator discretion, there may be instances where the information protected by the privilege is otherwise unavailable, and the truth-seeking function of the tribunal is impeded. Indeed, given that it is information between an attorney and a client regarding a relevant legal matter, it may be particularly probative. However, this is precisely the purpose of the attorney-client privilege: to limit the inclusion of potentially probative information to encourage the frank and honest interchange between attorney and client.[82] The attorney-client privilege stems from a public policy determination by nation-states that certain relationships should be fostered.[83] These values are usually considered to be very important and ignoring them can be the basis for setting aside an arbitral award.[84] Thus, while some information might be lost, this possibility is clearly outweighed by the other important interests furthered by the articulation of a clear rule.

C. The Contours Of A Clearly-Stated Rule

The desirability of a clear default rule raises the question of what that rule should look like. In designing a clear rule for arbitrators to apply to the question of attorney-client privilege, there are five possible ways of articulating a rule, ranging from wholesale rejection of all attorney-client privileges to simply enforcing a blanket rule privileging all attorney-client communications. As is often the case, the best answer lies somewhere between these extremes.

The first solution would be to merely disallow any evidentiary privileges in international arbitrations. This has the virtue of being easily applicable and could increase the efficiency of arbitration proceedings by simplifying the arbitrator’s task; these issues will simply not be dealt with. It could also promote arbitral accuracy by allowing the introduction of potentially probative information. However, such a rule would disfavor the party to an arbitration with the strongest privilege rule. While strictly speaking this rule treats the parties equally, in reality this disadvantage would provide a strong disincentive for parties from countries with strong privileges from taking part in arbitrations. It also fails to account for any party’s legitimate expectations while contracting. While this approach promotes arbitral accuracy and efficiency. it leaves the values of party expectations and fairness almost entirely off the table.

The second possible solution would be to simply allow all attorney-client exchanges to be privileged for all proceedings. Once again, this bright line rule is easily applicable and could increase the efficiency of arbitration proceedings by mostly eliminating the need to inquire into these issues. However, this rule is likely to be over-inclusive. In disputes where neither party recognizes a particular privilege, it may leave out probative information that could help ensure the accuracy of a proceeding. In these situations neither party has an expectation that the information would be privileged, and thus this standard serves to further no important fairness or party autonomy goals in these circumstances.

The third possible solution would be to have the tribunal apply the home nation privilege rule for each party. After a proper showing has been made that the privilege is legally established, the tribunal could apply the respective privileges to each party. This approach would have the benefit of effectuating party expectations. This is a more onerous standard to apply than a bright line rule, but the guidance it provides to arbitrators could have the effect of offsetting some of the additional work required when compared to the status quo of unlimited discretion. This standard also places the parties on differing playing fields in contravention of the basic concept of equal treatment. The possibility of reversal by national courts renders this solution undesirable. However, the shortcomings of this approach could be addressed through uniform application of the findings.

The fourth possible solution would be to allow the tribunal to make a determination as to each party’s home nation privileges and uniformly apply the standard that is the least protective. This has the benefit of treating the parties equally, effectuating the expectations of at least one party, and somewhat promoting arbitral accuracy by allowing the admission of more probative evidence. Applying this standard however would systematically treat parties from countries with strong privilege protections less favorably than their opponents, thus frustrating some of the fairness goals of arbitration.

Finally, tribunals can apply the privilege standard put forward by the parties that is the most protective of the attorney-client privilege. This would have the benefit of achieving party-parity, would effectuate the expectations of at least one party and forward the goals of fairness in arbitral proceedings. The shortcoming of this approach would be a possible adverse effect on arbitral accuracy by denying the admission of some probative evidence.

In weighing fairness versus accuracy in solutions four and five, the two tenable solutions, it should be noted that parties to arbitration have stated that “fair and just” proceedings are the trait they value most.[85] When the goals of fairness and accuracy are in conflict, it seems that private arbitration services should defer to the desires of their clients. The uniform application of the standard from the nation which most robustly protects the attorney-client privilege would best effectuate these party goals.

V. Conclusion

International arbitration brings together parties from diverse legal backgrounds to find solutions to otherwise intractable problems. Otherwise they would not have undertaken the expense of dispute resolution. However, the nature of arbitration means that the goals are necessarily different from litigation. Parties often want to continue working relationships together, and thus the proceedings may be far less adversarial. To this end, parties seek services which are efficient, accurate, fair and customizable.

However, when parties from different legal systems come together, their notions of what constitutes effectuation of these goals may differ. This complicates the task of the arbitrator. In the case of the attorney-client privilege, parties often have no intention on surrendering the protections they enjoy at home. Thus, to give full effect to the expectation of the parties, further the efficient resolution of conflicts, and to ensure the results of arbitration proceedings are fair and equitable, a clear rule applying the privilege protection from the country that most robustly protects the privilege would help further the underlying goals of this system of dispute resolution. The possible effects on arbitral accuracy are worth the cost in this situation.

 


* J.D. Candidate, The Ohio State University Moritz College of Law, Expected 2014.

[1] See Holly Johns, A Comparison of Football and Soccer, eHow, http://www.ehow.com/about_7228224_comparison-football-soccer.html.

[2] See generally Siegfried H. Elsing & John M. Townsend, Bridging the Commercial Law Civil Law Divide in Arbitration, 18 Arb. Int’l 59 (2002) (discussing hybrid practices commonly employed by tribunals arbitrating disputes between civil law and common law parties).

[3] Max Radin, The Privilege of Confidential Communications Between Lawyer and Client, 16 Cal. L. Rev. 487, 488 (1928).

[4] See Joseph Pratt, The Parameters of the Attorney-Client Privilege for In-House Counsel at the International Level: Protecting the Company’s Confidential Information, 20 Nw. J. Int’l L. & Bus. 145, 161 (1999).

[5] There have been criticisms of this dichotomy, see Mirjan Damaska, The Common Law/Civil Law Divide: Residual Truth of a Misleading Distinction in Common Law Civil Law and the Future of Categories 3, 13-15 (Janet Walker & Oscar G. Chase, eds. 2010), but this paper will ignore them and paint with a rather broad brush.

[6] See Urs Martin Laeuchli, Civil and Common Law: Contrasts and Synthesis in International Arbitration, 62-OCT Disp. Resol. J. 81, 82 (2007).

[7] Kuo-Chang Huang, Introducing Discovery Into Civil Law 22-26 (2003).

[8] William Park, Truth-Seeking in International Arbitration, in The Search for “Truth” in Arbitration: Is Finding the Truth What Dispute Resolution Is About? 1, 28-29 (Markus Wirth et al., eds., Swiss Arbitration Association 2011).

[9] See e.g., Fisher v. U.S., 425 U.S. 391, 403 (1976); Baker v Campbell (1983) 153 CLR 52, 120 (Austl.).

[10] See Richard M. Mosk & Tom Ginsburg, Evidentiary Privileges in International Arbitration, 50 Int’l & Comp. L.Q. 345, 349 (2001) French law criminalizes a breach of professional confidence. Id. In the United States, by contrast, attorney behavior is prescribed by state and federal bar associations and not criminal law. See e.g., Model Rules of Prof’l Conduct R.1.6 (Discussion Draft 1983).

[11] See Klaus Peter Berger, Evidentiary Privileges: Best Practice Standards Versus/ and Arbitral Decision, 22 Arb. Int’l 501, 503–04 (2006).

[12] Id. (noting that in some civil law countries the focus is not on the client by the integrity of the legal profession).

[13] See Richard Garnett, Substance and Procedure in Private International Law 234-235 (2012) (noting a divergence between common law countries on the substance/procedure question mostly towards classification as substantive); Mosk, supra note 10, at 368 (noting that civil law countries generally treat privileges as procedural).

[14] See generally Garnett, supra note 13, at 5–43 (discussion of the historic origins of this distinction).

[15] See id. The intricacies of this discussion are largely outside the scope of this paper, but the point is important.

[16] See David B. Wilkins, Is the In-House Counsel Movement Going Global? A Preliminary Assessment of the Role of Internal Counsel in Emerging Economies, 2012 Wis. L. Rev. 251, 252 (noting that some companies have legal departments rivaling large law firms).

[17] See Upjohn Co. v. United States, 449 U.S. 383, 394 (1981).

[18] See Case C-550/07 P, Akzo Nobel Chem. Ltd & Akcros Chem. Ltd. v. Eur. Comm’n, 2010 E.C.R. 791 (2010).

[19] This is not merely an academic concern, but has real world implications. In 1984, John Deere was fined nearly $2.4 million by the E.U. based on information contained within communications from in-house counsel that would have been covered by the privilege in the U.S. J. Triplett Mackintosh & Kristen M. Angus, Conflict in Confidentiality: How E.U. Laws Leave In-House Counsel Outside the Privilege, 38 Int’l Law. 35, 37 (2004). Today, the ease of cross-jurisdictional electronic communication makes this issue even more salient.

[20] Parties may also desire arbitration because it promotes delocalization from undesirable law, forum neutrality, decision-making by experts and decisional finality, values which may be absent from the laws and procedures of particular countries. See Michael Black QC et al, Arbitration of Cross-Border Disputes, 27-SPG Construction Law. 5, 6 (2007). However, this paper will focus on the values of efficiency, accuracy, fairness and customizability.

[21] Hoffman v. Cargill Inc., 236 F.3d 458, 462 (8th Cir. 2001). Parties can enter into binding or non-binding arbitration agreements, either after a dispute has arisen or by ex ante agreement. Christopher H. Drahozal & Raymond J. Friel, Consumer Arbitration in the European Union and the United States, N.C. J. Int’l L. & Com. Reg. 357, 360-62. Post-dispute arbitration is relatively uncontroversial because parties have the opportunity to tailor dispute mechanisms to their conflict. Id. Non-binding arbitration is similarly unchallenged. Id. This paper will focus only on binding pre-dispute arbitration agreements.

[22] See Alan Freeman, Litigation: Arbitration v. Litigation, InsideCounsel, http://www.insidecounsel.com/2012/04/19/litigation-arbitration-v-litigation?t=litigation (noting that in some circumstances arbitration can be both faster and cheaper than litigation).

[23] N.Y. Arb. Convention, The New York Convention, www.newyorkconvention.org.

[24] See United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 21 U.S.T. 2517, art V (1958).

[25] See New York City Bar, The “Manifest Disregard of Law” Doctrine and International Arbitration in New York 1–4 (2012).

[26] See Park, supra note 8, at 2–4. (“Though not so jealous as to exclude all rivals, truth often insists on remaining first among equals.”).

[27] See id.

[28] See id.

[29] See Steven Seidenberg, International Arbitration Loses Its Grip, A.B.A. J. (Apr. 1, 2010), http://www.abajournal.com/magazine/article/international_arbitration_loses_its_grip/ (citing recent reports showing many arbitration proceedings have come to rival the costs of litigation).

[30] See Richard W. Naimark & Stephanie E. Keer, International Private Commercial Arbitration: Expectations and Perceptions of Attorneys and Business People: A Forced-Rank Analysis, 30 Int’l Bus. Rev. 203, 204-05 (2002). When forced to rank important values in arbitration proceedings, 81 percent of participants in a survey of lawyers and parties ranked a “fair and just result” higher than other factors such as speed, cost and monetary award. Id.

[31] See Nana Japaridze, Note, Fair Enough? Reconciling the Pursuit of Fairness and Justice with  Preserving the Nature of International Commercial Arbitration, 36 Hofsta L. Rev. 1415, 1424-27 (2008).

[32] See Patricia Shaughnessy, Dealing with Privileges in International Commercial Arbitration, 51 Scandinavian Studies in Law 451, 452 (2007).

[33] See supra notes 23–25 and accompanying text.

[34] See Rachel Engle, Party Autonomy in International Arbitration: Where Uniformity Gives Way to Predictability, 15 Transnat’l Law. 323, 334–36 (2002). Except in cases where arbitration agreements are used to skirt applicable laws, the general international trend has been towards honoring party choices. Id. at 335-37.

[35] See Daniel M. Kolkey, It’s Time to Adopt the UNICITRAL Model Law on International Commercial Arbitration, 8 Transnat’l L. & Contemp. Probs. 3, 14–15 (1998) (noting that a common arbitration agreement merely states “any dispute arising out of the contract shall be settled by arbitration”).

[36] See Charles N. Brower & Jeremy K. Sharpe, The Creeping Codification of Transnational Commercial Law: An Arbitrator’s Perspective, 45 Va. J. Int’l L. 199, 200–01 (2004).

[37] See Joyce J. George, The Advantages of Administered Arbitration when Going it Alone Just Won’t Do, 57-OCT Disp. Resol. J. 66, 68–70 (2002).

[38] See International Bar Association, IBA Rules on the Taking of Evidence in International Arbitration, Foreword (2010).

[39] Id.

[40] Id. at art. 3, §§ 2-5.

[41] Id. at Art. 9, §§ 1-2 (emphasis added).

[42] Id. at Art. 9, § 3.

[43] See United Nations Commission on International Trade Law, 2010 – UNCITRAL Arbitration Rules, http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/2010Arbitration_rules.html.

[44] See John Franchini, Note, International Arbitration Under the UNCITRAL Arbitration Rules: A Contractual Provision for Improvement, 62 Fordham L. Rev. 2223, 2223 (1994). The rules have been used in many international privatization contracts, as well as the Iran-United States Claims Tribunal. Id.

[45] UNCITRAL, UNCITRAL Arbitration Rules, Art. 27, § 3 (2010).

[46] Id. at §4.

[47] See ICC, Arbitration, http://www.iccwbo.org/products-and-services/arbitration-and-adr/arbitration/. Since 1923, the organization has overseen more than 19,000 cases with parties from over 180 countries. Id.

[48] See ICC, ICC Rules of Arbitration, http://www.iccwbo.org/products-and-services/arbitration-and-adr/arbitration/icc-rules-of-arbitration/.

[49] See Pedro J. Martinez-Fraga, The American Influence on International Commercial Arbitration 77-80 (2009).

[50] See ICC, ICC Rules of Arbitration, art. 25, §§ 3,5 (2012).

[51] American Arbitration Association, International, www.adr.org/aaa/faces/aoe/icdr. The organization handled 994 cross-border disputes in 2011. See  Press Release, ICDR, International Centre for Dispute Resolution Achieves Significant Caseload Increase for 2011 (Mar. 1, 2012), http://www.adr.org/aaa/ShowPDF?doc=ADRSTG_014036.

[52] See International Centre for Dispute Resolution, International Dispute Resolution Procedures, art. 19, §§ 1,3 (2009).

[53] Id. at art. 20, § 6.

[54] See supra Part II.A.

[55] This is loosely based on a hypothetical arbitration in Michelle Sindler & Tina Wustermann, Privilege Across Borders in Arbitration: Multi-Jurisdictional Night-Mare or A Storm in A Teacup?, 23 ASA Bulletin 1, 7 (2008).

[56] While not available in all arbitration situations, many rules authorize the arbitrators to request additional information from parties. See supra Part II.C.

[57] See supra note 17 and accompanying text.

[58] See supra note 18 and accompanying text.

[59] Indeed once can imagine multi-national businesses with operations in many countries and subject to the conflicting laws of multiple countries. See Shaughnessy, supra note 32, at 458. These types of issues further complicate the already complex questions presented.

[60] See supra note 35 and accompanying text.

[61] See e.g. UNCITRAL Arbitration Rules, supra note 45, at art. 35, §1 (“Failing … designation by the parties, the arbitral tribunal shall apply the law which it deems to be appropriate.”); ICDR Rules of Arbitration, supra note 52, at art. 28, §1 (employing virtually the same language).

[62] See Michael Douglas, The Lex Mercatoria and the Culture of Transnational Industry, 13 U. Miami Int’l & Comp. L. Rev. 367, 374-77 (2006) (noting that while there is a substantial body of law that can help determine the answer in these types of situations, there is no guarantee arbitrators unfamiliar with these laws will apply them correctly).

[63] Id. at 375 (“Whatever results emerge … the commercial community’s certainty and predictability is hindered.”).

[64] See Mosk, supra note 10, at 376 .

[65] See supra note 12.

[66] See supra notes 13–15.

[67] See supra note 61.

[68] See Berger, supra note 11, at 507 .

[69] See supra Part II.C.

[70] See supra note 16–19 and accompanying text.

[71] See supra notes 21–22 and accompanying text.

[72] See supra notes 60–70 and accompanying text.

[73] See Sindler, supra note 55, at 13–14. The need to deal with these kinds of issues has been decried as the “judicialization” of arbitration. Id. at 21. It may also explain why the costs of some arbitrations have come to rival those of litigation. See supra note 29.

[74] See Mosk, supra note 10, at 376 (noting that some U.S. courts have found the failure to apply privilege law may be grounds for vacatur of an arbitral award); see also United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 21 U.S.T. 2517, art V (1958).

[75] See Engle, supra note 34, at 340.

[76] See Shaughnessy, supra note 32, at 452.

[77] Id.

[78] See Mosk, supra note 10, at 348–49.

[79] See supra note 32 and accompanying text.

[80] See supra note 29 and accompanying text; see also Sindler, supra note 55, at 16 (noting that for this reason it is better for privilege standards to be addressed early on in a proceeding before a claim for privilege is made).

[81] See supra Part III.A.

[82] See supra notes 8–9.

[83] Mosk, supra note 10, at 346.

[84] It should be noted that unlike nation states, arbitral tribunals do not have “public policy” goals beyond ensuring the enforceability of their awards. See Mosk, supra note 10, at 380-81.

[85] See supra note 30 and accompanying text.

Posted in: Volume 12, Issue 1

The Ohio State University | Michael E. Moritz College of Law | 55 West 12th Avenue | Columbus, OH 43210-1391