Attorney-Client Privilege in Anti-Corruption Enforcement Actions

ABA Model Rules of Professional Responsibility Article 1: Client-Lawyer Relationship Article 2: counselor Article 3: Advocate Article 4: Transactions with Persons Other than Clients Article 5: Law Firms and Associations Article 6: Public Service Article 7: Information About Legal Services Article 8: Maintaining the Integrity of the Profession ABA Model Rules of Professional Responsibility

Background on Privilege Privilege can be important in internal investigations because it facilitates the corporation to gather facts about potential misconduct in order to secure legal advice Privilege can be unclear during Internal investigations, which create questions such as: Who is the client? Will information remain confidential? If it is shared with regulators will it no longer be privileged? Jurisdictions with legal privilege often have some form of “discovery” i.e. parties to a legal dispute may demand the opposing side to produce documents and/or answer questions related to the dispute Background on Privilege

Elements of Attorney-Client Privilege (1) A communication between attorney and client (2) Confidential (3) For the purpose of obtaining legal advice In certain circumstances the right to assert the privilege can be “waived” Elements of Attorney-Client Privilege

Elements of Attorney Work Product (1) Written or oral materials (2) Prepared by or for an attorney (3) In the course of legal representation (4) In anticipation of litigation One main distinction between attorney-client privilege and attorney work-product protections is that the privilege only applies to communications between client and her lawyer, while the attorney work-product protection applies to work product created by an attorney even if never communicated to his client Elements of Attorney Work Product

Rule 1.6: Confidentiality of Information Rules of Professional Conduct Rule 1.6 (a) A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b) Rule 1.6: Confidentiality of Information

Rule 1.6: Confidentiality of Information (b) A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary:          (1) to prevent reasonably certain death or substantial bodily harm;          (2) to prevent the client from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer’s services; Rule 1.6: Confidentiality of Information

Rule 1.6: Confidentiality of Information         (3) to prevent, mitigate or rectify substantial injury to the financial interests or property of another that is reasonably certain to result or has resulted from the client’s commission of a crime or fraud in furtherance of which the client has used the lawyer’s services;         (4) to secure legal advice about the lawyer’s compliance with these Rules; Rule 1.6: Confidentiality of Information

Rule 1.6: Confidentiality of Information      (5) to establish a claim or defense on behalf of the lawyer in controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer’s representation of the client;       (6) to comply with other law or a court order; or Rule 1.6: Confidentiality of Information

Rule 1.6: Confidentiality of Information  (7) to detect and resolve conflicts of interest arising from the lawyer’s change of employment or from changes in the composition or ownership of a firm, but only if the revealed information would not compromise the attorney-client privilege or otherwise prejudice the client     (c) A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client Rule 1.6: Confidentiality of Information

Rules of Professional Conduct: Exceptions to Privilege Client waives confidentiality -- 1.6(a) Disclosure needed to represent client -- 1.6(a) Threatened physical harms -- 1.6(b)(1) Threatened or continuing client fraud or other economic crime using lawyer -- 1.6(b)(2) Past client fraud or other economic crime if client used lawyer -- 1.6(b)(3) Lawyer needs to obtain ethics advice from another lawyer -- 1.6(b)(4) Rules of Professional Conduct: Exceptions to Privilege

Rules of Professional Conduct: Exceptions to Privilege Lawyer needs to prove work done to collect fee or defend against misconduct charge – 1.6(b)(5) Court orders disclosure – 1.6(b)(6) Client gave materially false testimony to a court -- 3.3(a)(1) Client is business organization that committed certain frauds – 1.6(b)(2),(3); 1.13 Rules of Professional Conduct: Exceptions to Privilege

What is Privilege? Common law rule Privilege is different from the duty of confidentiality. It can protect information from disclosure which may otherwise be required to be produced to others The purpose of privilege is to allow open and honest communication between clients and counsel What is Privilege?  

What is Privilege? Waiver of privilege can occur : By the client By the lawyer By putting communication into issue By disclosure of part of conversation By court order What is Privilege?

Credit: ACC Docket (Jan/Feb ‘14) Exemptions to Privilege: Example of Some Jurisdictional Differences What is Privilege? Table: https://www.accmeetings.com/am17/faculty/files/ACC_1707_2AA0_A-Closer-Look-at-Confidentiality-and-Privilege-When-Doing-Business-Abroad.pdf Credit: ACC Docket (Jan/Feb ‘14)

Confidentiality v. Privilege Scope: Ethical Duty (1.6) Scope: Relating to representation and client Enforcement: Discipline Privilege Source: Common law rule Scope: Communication between lawyer Enforcement: Quash subpoena or otherwise exclude Confidentiality v. Privilege

Multi-Jurisdiction: Choice of Law (Overview) What privilege law applies? ABA Model Rule 8.5: Choice of Law The ethical rule of the forum or tribunal applies in litigation. For transactions and everything else, the ethics law of the jurisdiction in which the lawyer’s conduct occurred controls unless the “predominant effect” of the lawyer’s conduct occurred in a different jurisdiction. In that case, the rules of that jurisdiction to the conduct It is still not always clear what law does apply But what is clear is that foreign ethics law can apply to a business transaction, or an international arbitration or court litigation Multi-Jurisdiction: Choice of Law (Overview)

Multi-Jurisdiction: Choice of Law (Overview) What privilege law applies? When a case crosses jurisdictional lines, courts will generally apply its own state laws Roberts v. Carrier Corp., 107 F.R.D. 678 (N.D. Ind. 1985), citing Palmer v. Fisher, 228 F.2d 603 (7th Cir. 1955), cert. denied, 351 U.S. 965 (1956), abrogated on other grounds, Carter Products, Inc. v. Eversharp, Inc., 360 F.2d 868 (7th Cir. 1966)) Parties are usually required to do their own jurisdictional analysis first In Federal Court – Federal Rule of Evidence 501 applies Rule 501 states that except in civil cases, if a claim or defense is to be resolved under state law, then “state law governs privilege.” Question remains which states’ law? Some courts will just apply the federal common law privilege and ignore Rule 501 When diversity of citizenship gives the court jurisdiction then it will look to the privilege law of the state in which the court sits Multi-Jurisdiction: Choice of Law (Overview)

Multi-Jurisdiction: Choice of Law (Overview) What privilege law applies? In the United States, generally, if the communications bear any reasonable relationship to the United States the Court will apply U.S. law U.S. Federal Courts generally apply the “touching base” test Government Interest Analysis: when a court examines the interests of the competing jurisdictions and applies the substantive law of the state with the more compelling interest “Touch Base” Test Under this test, if the communications have not “touched base” with the United States, the court will apply the law of the country with the strongest interest in the communications or most important contacts Generally, courts apply American law if the communication relates to legal proceedings in the United states or constitutes advice regarding American law Typically, U.S. courts apply foreign law only when evaluating communications that relate solely to foreign legal proceedings Basically, U.S. courts only require that the communications have more than an incidental relationship to the United States If foreign law is being applied, courts look to where the privileged relationship was entered into or where the relationship was centered Even if the question involves the United States or the United States has the most compelling interest, often courts will still consider the context of the situation, including whether the result might offend principles of comity or public policy. See Astra Aktiebolag v. Andrx Pharmaceuticals, Inc., 208 F.R.D. 92 (S.D.N.Y. 2002).  Multi-Jurisdiction: Choice of Law (Overview)

Multi-Jurisdiction: Choice of Law (Overview) Attorneys should not expect to have the benefit of privilege laws from their own jurisdiction when engaged in multi-jurisdiction litigation Characterizations of privilege vary (although it is generally understood as a rule of evidence and a procedural right) Example: In Canada, attorney-client privilege has gone from a rule of evidence to a substantive right and a principle of fundamental justice If the communications have any connection with the forum, the court is likely to opt for its own privilege law If the law of a foreign jurisdiction is unclear, a court is more likely to apply its own privilege law to the communications at issue Multi-Jurisdiction: Choice of Law (Overview)

Multi-Jurisdiction: Choice of Law (Overview) Attorney-Client Privilege Goals: The goals of attorney-client privileges are similar across jurisdictions—to promote honest and open communication Common understanding that privilege rules are not substantive law, but rather a matter of evidence and procedure Many countries still apply different laws Civil Law Jurisdictions: the limited scope of discovery in these jurisdictions helps to preserve attorney-client confidentiality Example: Many civil law jurisdictions do not view privilege as a right of the client like in common law jurisdictions. Rather, these communications are protected by secrecy laws, requiring lawyers to maintain confidentiality over communications with clients. Example: In-house Counsel and Attorney-Client Privilege in Europe Privilege Exists: Germany, Netherlands, Spain, and United Kingdom No Privilege Exists: Belgium, France, Italy Multi-Jurisdiction: Choice of Law (Overview)

Multi-Jurisdiction: Choice of Law (International) Efforts to standardize procedural rules: Hague Convention on Taking Evidence Abroad in Civil or Commercial Matters Hague Evidence Convention: Has almost 50 signatories (including the US, UK, and many European countries) Countries implement the Convention by incorporating its rules of procedure into domestic laws Evidence may be obtained from a foreign signatory state by sending a letter of request to the appropriate authority of that state (avoiding the need to use diplomatic or other channels to obtain the evidence) Multi-Jurisdiction: Choice of Law (International)

Multi-Jurisdiction: Choice of Law (International) Conflicting privilege rules under the Hague: Article 11 In the execution of a Letter of Request the person concerned may refuse to give evidence in so far as he has a privilege or duty to refuse to give the evidence – a) under the law of the State of execution; or b) under the law of the State of origin, and the privilege or duty has been specified in the Letter, or, at the instance of the requested authority, has been otherwise confirmed to that authority by the requesting authority. A Contracting State may declare that, in addition, it will respect privileges and duties existing under the law of States other than the State of origin and the State of execution, to the extent specified in that declaration Article 21 Where a diplomatic officer, consular agent or commissioner is authorized under Articles 15, 16 or 17 to take evidence – e) a person requested to give evidence may invoke the privileges and duties to refuse to give the evidence contained in Article 11 Example: Renfield Corp. v. E. Remy Martin & Co., 98 F.R.D. 442 (D. Del. 1982) held that the communications of an in-house counsel in France were protected by the attorney-client privilege, despite the fact that French law does not have this privilege Multi-Jurisdiction: Choice of Law (International)

Multi-Jurisdiction: Choice of Law (International) In House Counsel Concerns: Attorney-client privilege does not exist in many countries (many of E.U. continental countries v. common law/Commonwealth countries) Example: EU’s highest court (the Court of Justice) held that corporate client’s communications with in-house counsel are NOT privileged because these lawyers are not independent from their clients Applies to EU courts, not courts of EU member states Question: If an attorney’s case includes EU participants, do counsel need to worry about EU privilege laws? Answer: Yes Question: If counsel’s litigation touches the EU, what should a counsel do to ensure their communications are privileged? Ask all questions about competition law issues to external counsel or mark work prepared for the purpose of seeking external legal advise Keep all privileged communications separate and clearly marked as ”privileged and confidential.” This includes electronic and physical communications Multi-Jurisdiction: Choice of Law (International)

Multi-Jurisdiction: Choice of Law (Case Law) Evaluating Communications Between Jurisdictions Within the United States: In re Yasmin and Yaz (Drospirenone)Marketing, Sales Practices and Products Liability Litigation, 2011 WL 1375011 (S.D. Ill. April 12, 2011) The court held that under 7th Circuit authority, Illinois choice of law rules apply to cases that originated in Illinois The Yasmin court canvassed all 50 states and concluded that most states would apply the privilege law of the state with the most significant relationship to the communication (this is also the test used under the Second Restatement, Section 139) Evaluating Communications Between Clients and Foreign Lawyers: Renfield Corp. v. E. Remy Martin & Co., 98 F.R.D. 442, 444 (D. Del. 1982) The Court took a functional approach and looked at “whether the individual is competent to render legal advice and is permitted to do so by law” Honeywell, Inc. v. Minolta Camera Co., 1990 US Dist. LEXIS 5954/1990 WL66182 at*2-3 Held that communications between a company and foreign attorneys are only privileged when there is an expectation of confidentiality over the communications Wultz v. Bank of China Ltd., 979 F. Supp. 2d 479 (S.D.N.Y. 2013) Applied the “touch base” test to an internal investigation carried out in the United States and China. In2008 a demand letter was sent to the Bank of China’s New York office claiming that the bank provided material support to terrorist groups by transferring money via wire transfers. The bank conducted an internal investigation in both China and New York but ran the investigation out of its compliance department, not by licensed attorneys, and the investigation served multiple purposes The court found that American privilege law applied to documents created after the demand letter and pertaining to it, while Chinese law governed documents created beforehand and those created later that did not relate to the demand letter The court also held that U.S. privilege law applied to all documents created after the letter “that do in fact relate to [it] and the subject matter that gave rise to this lawsuit, because those documents pertain to American law ‘or the conduct of litigation in the United States” Multi-Jurisdiction: Choice of Law (Case Law)

Uncertainty in the Forum: Protecting Privilege Steps to take to protect attorney-client privilege: Clarify in writing who owns the privilege so there is no confusion later This can be a common defense and confidentiality agreement that clarifies who owns the privilege and who can share information with the authorities Example: China Confidentiality agreements are important so that in-house counsel can refer back to it if there is a problem. In China, you cannot assert in- house privilege under foreign law. As such, make sure you have a panel of outside counsel, and include confidentiality clauses in any engagement letter. Include arbitration in writing, as Chinese courts tend to respect such clauses Potential Issues With Technology Email When using email to correspond with someone in another jurisdiction, stop and consider the implications related to that privilege. In-house counsel must ask themselves: where is the next issue likely to arise? Remember each jurisdiction has different protections and consider that when deciding what to send Uncertainty in the Forum: Protecting Privilege

Uncertainty in the Forum: Protecting Privilege Steps to take to protect attorney-client privilege continued: Engagement Letters: Outside counsel should be clear in their engagement letter about not only whom they represent, but also whom they do not represent The letter should explain that all work will be directed and supervised by counsel and should further require the experts to mark all documents created within the scope of the engagements as being done at the direction of counsel and protected by the attorney work product doctrine Uncertainty in the Forum: Protecting Privilege

Uncertainty in the Forum: Protecting Privilege (Investigations) Begin an investigation with Privilege in mind Example: The English High Court applied English privilege law to an international investigation (including responding to two subpoenas issued from the US), held that interview notes compiled by both in-house and external lawyers of interviews with current and former corporate employees were not privileged Court’s Rationale: Communications did not occur between the lawyers and the “client,” because the “client” was defined narrowly to include only the person or persons authorized by the company to deal with specific legal issues Consider who will make decisions regarding outside counsel representation, who oversees the investigation, and whether and how to involve non-lawyers To maintain privilege be clear who the client is and who is overseeing the investigation If cross-border conduct is involved, that jurisdiction may apply its own privilege law which could also destroy the privilege within the US Be careful about outside counsel involvement in investigations The US is generally more protective of a privilege between in-house counsel and their client; however, other jurisdictions may not recognize such a privilege or may have a more narrow definition of it Uncertainty in the Forum: Protecting Privilege (Investigations)

Uncertainty in the Forum: Protecting Privilege (Investigations) When disclosing findings be careful to consider the audience and the method of reporting When reporting to the U.S. government be careful of the possibility of a broad subject-matter waiver of privilege To guard against this waiver, limit the disclosure of investigative findings to material that is not privileged, to audiences, with a need to know, and be clear that such communications are confidential Oral proffers: frequently used to provide U.S. government enforcement with factual information gathered in an internal investigation Still has a danger of making of subject matter waiver External Auditors: Generally, disclosure of privileged information to external auditors constitutes a subject- matter waiver of the attorney-client privilege Uncertainty in the Forum: Protecting Privilege (Investigations)

Uncertainty in the Forum: Protecting Privilege (Experts) Retention of experts should be done by legal counsel rather than company management Management's involvement may be viewed as evidence that the experts’ work is to provide business, rather than legal, advice Mark all documents shared with experts as privileged Engagement letter should require that experts agree not to disclose any confidential information relating to the engagement without the express consent of the attorney Such disclosure would constitute a waiver of the attorney- client privilege If internal investigation is conducted by outside counsel, outside counsel, rather than the client company, should pay the experts directly, The company should be billed through counsel Uncertainty in the Forum: Protecting Privilege (Experts)

Uncertainty in the Forum: Protecting Privilege (Witnesses) Content of Interviews should cover: (1) the communications are necessary for counsel’s representation, (2) concern matters within the employee’s corporate duties, and (3) are kept confidential. Once the privilege is established, any determination of whether to waive privilege rests with the corporate decision maker(s), which may be senior management or the board of directors Uncertainty in the Forum: Protecting Privilege (Witnesses)

Uncertainty in the Forum: Protecting Privilege (Witnesses) Counsel should give an Upjohn warning to all employees interviewed that explains: (1) counsel represents the company and not the employee; (2) the attorney is there to investigate a particular issue and report findings to the company; (3) the communications are privileged, but the privilege belongs to the company, which at any time may elect to waive the privilege and disclose the contents of the interview to a third party, including government enforcement authorities; and (4) the interview is confidential and disclosure of the contents of the interview may waive the privilege the company is attempting to maintain Uncertainty in the Forum: Protecting Privilege (Witnesses)

Credit: ACC Docket (Jan/Feb ‘14) Question ABC Counsel decides to send assistant general counsel, Abbie Smith, a Virginia-licensed attorney, to Western Australia to investigate alleged bribery at the company’s subsidiary in Australia. Abbie Smith jointly investigates the Australian subsidiary with Dennis Young, the subsidiary’s in-house lawyer. The two lawyers discover multiple bribes and meet in with the Australian government at ABC’s Counsel’s request. During the meeting, the Australian authorities demand that both lawyers disclose everything they know about the alleged bribery at the subsidiary. What are Smith and Young’s ethical obligations? Note: Western Australia is a discretionary disclosure jurisdiction and Virginia is a mandatory disclosure jurisdiction Hypo #1 (Question) Credit: ACC Docket (Jan/Feb ‘14)

Credit: ACC Docket (Jan/Feb ‘14) Answer Dennis Young: Because Western Australia is a discretionary disclosure jurisdiction, Dennis Young could refuse to answer the government’s questions and the Western Australian ethics rules would apply to him Abbie Smith: Smith, who is licensed in Virginia, is a little more complicated. His investigation occurred in Western Australia, where the alleged bribery was occurring and where the government enforcement would occur. Therefore, California’s version of Rule 8.5 on choice of ethics law likely would select the ethics law of Western Australia. So like Young, Smith could remain silent in response to the questions by the Western Australia government even though she is licensed in Virginia—a mandatory disclosure jurisdiction Hypo #1 (Answer) Credit: ACC Docket (Jan/Feb ‘14)

Hypo #2 (Question) Question In a patent case, Plaintiffs seek to compel production of communications between a nonparty Italian licensee and the licensee’s patent agents in Norway, Germany, and Israel. The communications in question occurred between a foreign client and its patent agents relating to patent prosecution in foreign countries. What should the court do? Note: Norway, Germany, and Israel’s laws protect communications between a patent licensee and its patent agents. The United States only protects such communications when the agent is assisting an attorney in the provisions of legal advice Hypo #2 (Question)

Answer This is the facts of Golden Trade, S.r.L. v. Lee Apparel Co., 143 F.R.D. 514 (S.D.N.Y. 1992) Because the communications occurred between a foreign client and its patent agents relating to patent litigation in foreign countries, the court held that they did not “touch base” with America and were thus governed by the respective foreign countries’ laws. Because Norway, Germany, and Israel provide privilege-like protections despite the non involvement of an “attorney at law,” the court found as a matter of comity that they were governed by the privilege law of the country in which the patent application was filed. Therefore, the court treated the communications as if they were protected, although they may have been discoverable had the law of the jurisdiction—American federal common law—been chosen Hypo #2 (Answer)

When involved in multi-jurisdiction litigation an attorney should be prepared to show ways in which the investigation and the attorney’s advice are connected to American law or a possible U.S. lawsuit or official inquiry Memorialize the earliest point in time when this becomes evident Consult early and often with local counsel in foreign jurisdictions to determine what the foreign attorney- client privilege law encompasses and how to handle requests by a foreign government Regardless of the foreign jurisdiction’s laws be prepared to assert the privilege until the foreign government issues an order compelling production Conclusion