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A Solution To Issues Of Privilege In International Arbitration? The IPBA Guidelines – Civil Law



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Introduction

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.

The Problem of Privilege in International Arbitration

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.1

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.2

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. 3 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.4 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.5

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.6 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 standard7 or who
determined the rules applicable to privilege by relying on
commonalities of privilege in different
jurisdictions.8

This status quo has led to the sphere of privilege in
international arbitration being described as a “pernicious
legal void
9 where “the only
thing that is clear is that nothing is
clear.
 10 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.11 Understanding the need for
better regulation, practitioners have been calling on the
international arbitral community to “rethink” the rules
of privilege12 and adopt transnational
standards.13

The IPBA Guidelines

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.14 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.15

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.16

When Do the IPBA Guidelines Apply?

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).

What Types of Protections Are Afforded to
Parties?

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.

Who Is Protected by Privilege?

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

  1. the disclosure is obviously inadvertent; and

  2. 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).

Conclusion

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.

Footnotes

1 Richard M. Mosk and Tom Ginsburg, ‘Evidentiary
Privileges in International Arbitration’ (2001) 50(2) The
International and Comparative Law Quarterly 345,
347-351.

2 Ibid, 351-352.

3 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.

4 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.

5 Klaus Peter Berger, International Economic
Arbitration
 (1993) 502.

6 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).

7 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).

8 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).

9 Susan D. Franck ‘International Arbitration and
Attorney-Client Privilege—A Conflict of Laws

Approach’ Ariz. St. L.J 936, 948.

10 Klaus Peter Berger, ‘Evidentiary Privileges: Best
Practice Standards versus/and Arbitral

Discretion’ (2006) 22 ARB.INT’L 501,
501.

11 Franck, (n ix) 936.

12 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.

13 Berger, (n x) 513-515.

14 IPBA Guidelines on Privilege and Attorney Secrecy in
International Arbitration (Inter-Pacific Bar Association
2019).

15 Ibid, Foreword.

16 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

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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