Privilege Without Borders? Navigating Legal Privilege in International Arbitrations

Parties and their counsel build entire litigation strategies around what they believe is privileged. This belief can shatter without warning in cross-border disputes.

Introduction

Clients share sensitive information with their lawyer with the confidence that the information will not be exposed. Legal privilege shields confidential communication between a lawyer and her client from forced disclosure and forms the bedrock of lawyer-client relationships.

Although the principle seems straightforward, the scope of legal privilege varies significantly across jurisdictions. A conversation that is safe in New York or Singapore may be unprotected in India as in the case of communications between in-house counsel and their employer.

In international arbitrations, these differences often collide. When parties from different jurisdictions engage in an arbitration, which may be seated in yet another jurisdiction with its own distinct privilege rules, each arrives with different expectations regarding what remains confidential. The Arbitral Tribunal then faces a difficult and complex question before it can even reach the merits: Whose privilege rules apply?

Parties and their counsel build entire litigation strategies around what they believe is privileged. This belief can shatter without warning in cross-border disputes. Documents thought to be untouchable may suddenly be ordered into evidence which is a potential game-changer that can topple even the most carefully crafted case.

So how do tribunals navigate this legal minefield? This article explores privilege standards across key jurisdictions, examines how tribunals determine which rules apply and the challenges that come with it.

Standards of legal privilege in different jurisdictions

The first question which comes to mind is what does legal privilege cover? The answer varies by jurisdiction and it is important to understand this difference.

Type of legal privilege and third-party protection

English law recognises two types of privilege: legal advice privilege and litigation privilege.¹ Legal advice privilege covers communications between lawyer and client made for the sole or dominant purpose of providing legal advice. Litigation privilege applies to communications created for existing or anticipated litigation. It also extends to third parties like insurers and litigation funders if the dominant purpose is litigation advice.

Singapore’s privilege law, codified in the Evidence Act, 1893 (Singapore Act), largely mirrors English law. It recognises both legal advice privilege and litigation privilege.² Third-party communications can be protected under both types of privilege, provided that the communication is for the dominant purpose of seeking legal advice or for litigation.³

US law has two similar concepts: attorney-client privilege and the work product doctrine. Attorney-client privilege protects communications for legal advice. The work product doctrine shields materials prepared in anticipation of litigation. The key difference of US law from English law is that the US law does not require a “dominant purpose” test. This is clearly a broader protection of what may be covered under the privilege umbrella than in the UK.

Extension of privilege to third parties in the US is nuanced. All work product protection extends to third parties. Attorney-client privilege is more limited and only applies when the third party is necessary for the Attorney to give advice⁴ (like an accountant) or when parties share a common legal interest⁵ (like co-defendants coordinating defence strategies).

Indian law takes a different approach. Under the Sakshya Adhiniyam, 2023, there is no formal split between legal advice and litigation privilege. Instead, Indian law offers a general protection for confidential lawyer-client communications and courts have applied a dominant purpose test similar to England.⁶ Indian law, however, does not extend privilege to third parties.

Whether legal privilege extends to in-house counsel

There are variances in law as to whether communications between an in-house lawyer and its employer, the company is protected by the legal privilege.

English law extends legal privilege to in-house counsel, provided that the in-house lawyer is acting in a legal capacity and the communications are concerned with legal advice. Legal privilege is not attracted when the communications relate solely to business or administrative matters.⁷ The position is similar in the US⁸ and in Singapore, with the protection being codified in Singapore as Section 128-A of the Singapore Act.

In India, there was uncertainty whether privilege extends to in-house counsels. The Supreme Court has now clarified that communications with in-house counsel are not privileged under Indian law.⁹ The court’s reasoning was that in-house counsel, by virtue of their regular employment with full salaries takes them away from the definition of an “Advocate” as defined under the Advocates Act, 1961. The Supreme Court also held that in-house counsels may be influenced by the commercial and business objectives of their employer and are obliged to protect the employer’s interests. The Court held that communication with in-house counsel is not protected by privilege.

It appears that US law offers the broadest protection with no dominant purpose requirement, coverage for in-house counsel and generous third-party extensions. Indian law is the most restrictive.

Loss of legal privilege

When examining what is covered by privilege, it is also important to consider when a party can lose legal privilege.

Under English law, privilege is lost if a party: (i) expressly waives it, (ii) shares the privileged material with an unprotected third party, or (iii) relies on a privileged document in the proceeding, even partially.¹⁰

US law is similar. Privilege is lost through (i) express waiver, (ii) sharing with unprotected third parties, or (iii) relying on the substance of privileged communications.¹¹

Indian and Singaporean law are similarly worded. Privilege is lost when a party calls their lawyer as a witness or relies upon the privileged document in the proceeding.

The common thread appears to be that privilege is lost when the client, directly or indirectly, volunteers the privileged communication. This is also logical given that as privilege belongs to the client, only the client can give it up.

Whose legal privilege applies in a multi-jurisdiction international arbitration

The fact that privilege rules vary across jurisdictions assumes importance in an international arbitration where parties belong to different legal systems and the arbitration itself may be seated in an entirely different legal system.

The IBA Rules on Taking of Evidence in International Arbitration, 2020 lets tribunals exclude privileged documents but sheds no light on the standard of privilege to apply. So the question remains, which standard of privilege is the Tribunal to apply in such cases? There is no set formula and the Tribunal has to make that determination in each case.

In practice, tribunals often turn to national laws.¹² This approach is logical as privilege is rooted in domestic systems and there is no international standard. However, when parties come from different countries, you hit a conflict of laws problem. Selecting among potentially different applicable legal systems presents significant challenges and the Tribunal is left to decide which standard among the applicable jurisdictions will apply.

One approach is to apply the privilege rules of the seat as it is central to the arbitration and arguably, the seat’s privilege rules should apply. However, this approach carries the risk that the scope of legal privilege may be undermined, particularly where the law of the seat adopts a more restrictive standard. Additionally, if there is a lack of clarity on the seat and applicable law, there may be further confusion on the applicable standard.

Another approach is to apply the rules of where the lawyer practices or where the client is based.¹³ This aligns with what parties expected when they made the communications. However, an issue may pop up in complex disputes that involve multiple entities across jurisdictions. Take the protection of in-house counsel, protected in the UK, US, and Singapore but not in India. So a US company’s in-house advice is privileged but its Indian subsidiary is not protected. This may also lead to different standards of privilege being applied to the parties of the same arbitration which would raise questions of fairness and equal treatment.

Some believe in applying the most protective standard available, the most favoured nation approach.¹⁴ The fairness argument is appealing; why should one party hide documents while forcing the other to disclose? Privilege, however, comes from national law. Giving a party protections it would not have in its own legal system just because the other side has them is hard to justify. It could even expose the award to public policy challenges.

The takeaway is that there is no one size fits all answer as each case is different. The Tribunals have broad discretion and often mix approaches discussed above or custom make a solution for the particular dispute at hand.

Conclusion

Legal privilege is evolving fast. It started simply as protection from forced disclosure of communications between a lawyer and her client in court proceedings. However, with the emergence of complex legal practices such as law firms, in-house counsel, cross-border transactions, international arbitration, and other non-judicial proceedings, legal privilege has been forced to undergo a metamorphosis. Consequently, the question of legal privilege presents a challenging conundrum, straightforward in principle yet complex in practice. It will be interesting to see how the doctrine continues to develop and adapt in response to the evolving demands of modern legal systems and international dispute resolution.