Privilege is a tortuous subject in international arbitration. Parties must not only contend with the factual issues surrounding whether a communication is privileged, they must also confront the prior legal issue of what privilege rules the tribunal should use to decide those claims of privilege. Should they use the law of the seat? The substantive law? The law of the place where the lawyer is qualified or where the advice is given? Or perhaps an international standard like the IBA Rules on the Taking of Evidence?
Most national laws and international guidelines recognise some form of attorney-client privilege. However, they differ on the precise contours of that privilege. One such difference concerns the treatment of communications between companies and in-house counsel. Common law jurisdictions tend to view such communications as privileged; civil law jurisdictions, in general, do not.
There are several reasons why some civil law jurisdictions do not attach privilege to communications with in-house counsel. For instance, it is sometimes said that the purpose of the legal advice privilege is to encourage a client to candidly disclose all relevant facts to their lawyer. However, if a lawyer is subject to directions from senior corporate officers, there is little concern that a lack of privilege will preclude those officers from seeking legal advice. Likewise, an in-house lawyer may carry out more executive functions than external counsel, raising the question of whether their communications should be privileged per se.
Another reason concerns the ethical duties (or lack thereof) that pertain to in-house counsel. Some local laws do not require in-house counsel to be members of the local bar or otherwise subject to regulation. Should they be classed as “lawyers” and should their communications with clients benefit from the attorney-client privilege?
In PJSC Tatneft v Gennady Bogolyubov and others, the English High Court sought to clarify the English law position on this issue. The facts are as follows. In 2014, a Paris-seated tribunal found that Ukraine had seized Tatneft’s shares in a company which operated Ukraine’s largest oil refinery in breach of the Russia-Ukraine bilateral investment treaty. Some of those shares had been passed to a company controlled by the Ukrainian oligarch, Igor Kolomoisky.
After prevailing in the arbitration, Tatneft brought fraud proceedings against Kolomoisky and his alleged associates. During the document production process, Tatneft asserted that certain communications between employees and officers of Tatneft, on the one hand, and its in-house legal department, on the other, were covered by legal advice privilege. This is a form of attorney-client privilege in English law, which covers confidential communications between a lawyer and its client for the giving or obtaining of legal advice.
Kolomoisky contested Tatneft’s claims of privilege. He argued that, in English law, the legal advice privilege does not protect communications with in-house counsel who are not “appropriately qualified” foreign lawyers. On the facts, he claimed Tatneft’s in-house lawyers were not appropriately qualified in Russia. They are not “advocates”, that is, independent legal advisors who are admitted to the Russian legal bar, nor are they kept on the register of advocates maintained by the Ministry of Justice of the Russian Federation. Further, as they are not advocates, their communications do not benefit from the Russian law concept of legal professional privilege, termed “advocates secrecy”.
The court sided with Tatneft. It concluded that, in English law, legal advice privilege extends to communications with foreign lawyers whether or not they are in-house. On grounds of fairness, comity and convenience, the court would not enquire into how or why the foreign lawyer is regulated or what standards apply to the foreign lawyer under the local law. Instead, the only requirement is that they should be carrying out the functions of a lawyer, that is, acting in their professional capacity in connection with the provision of legal advice.
Crux of the case: a focus on “function” over “status”
In one sense, the Tatneft judgment is a good one because it focuses on the “function” that a lawyer carries out rather than their “status.” In doing so, it is consistent with one of the underlying rationales of the legal advice privilege: to ensure that clients may have candid conversations with their lawyers without fear of scrutiny from others. It should not matter whether a lawyer is in-house or external.
This focus on upholding the rationale of the attorney-client privilege is evident in the arbitration authorities as well. As Marghitola writes:
“Companies have a great need for frank communication with their internal legal advisors, which should be respected in international arbitration. Otherwise, in arbitration between civil law parties, both parties could have access to highly confidential legal analyses of the counterparties. As a consequence, privileges need to be extended to in-house counsel.”
Arbitration case law reaches the same conclusion, though the reasoning is not always as clear. Cases like Reineccius v Bank for International Settlements, Apotex Holdings v USA and Burlington v Ecuador are examples.
However, the Tatneft judgment is not really about whether in-house counsel should be entitled to rely on the legal advice privilege. It is more fundamental than that. It goes to the question of what is a lawyer. Is it someone who is called to the local bar? Is it someone who is subject to ethical rules of conduct? What are the basic attributes of a “lawyer” such that their communications with a client merit privilege?
The judge in Tatneft took a pragmatic view. The judge took note of evidence to the effect that:
- In-house lawyers in Russia are not typically admitted to the Russian legal bar or similarly regulated.
- Roughly half of the representatives in civil disputes (including those in arbitrazh courts) are not advocates.
- Employees of law firms in Russia (including international law firms) are typically not advocates either.
Yet, despite their status, whether at a law firm, in an arbitrazh court, or in-house, a non-advocate acts in their professional capacity in connection with the provision of legal advice. The focus on function over status should be applauded.