Maybe its just me; but the result in Loewen, a major decision by a distinguished NAFTA Tribunal, is not so remarkable, other than its length. Indeed the facts of the Mississippi trial are scary and outrageous. But as long as a State provides due process which including a meaningful internal system of review in the judiciary, the matter is not an international wrong redressable by treaty and persons not accounted for by the electorate.

First posted on LinkedIn 14th February 2018

 

Texas, I am sad to say, has low grades in its obligations of Child Find. Child Find is a legal requirement that schools find all children who have disabilities and who may be entitled to special education services. Child Find covers every child from birth through age 21. The school must evaluate any child that it knows or suspects may have a disability.

The recent findings in a report and letter from the Dept of Education’s Ruth Ryder, Special Education Director states : “OSEP’s monitoring demonstrated that TEA did not ensure that all ISDs in the State properly identified, located, and evaluated all children with disabilities residing in the State who were in need of special education and related services, as required by 34 CFR §300.111, and consequently, failed to make FAPE (Free Appropriate Public Education) available to all eligible children with disabilities residing in the State, as required by 34 CFR §300.101.” I believe that this report is telling Texas to get with the program and the Feds are watching thankfully.

DMS letter to the Honorable Mike Morath, Commissioner, Texas Education Agency

First posted on LinkedIn 12th January 2018

A recent arbitration case decided by the Seventh Circuit: Hyatt Franchising v Shen Zhen seems remarkable in two respects. One the author is Frank Easterbrook, one of the best in our judiciary so any opinion of his deserves close attention. Second is the court’s construction of the FAA and the standards of vacatur, under 9 USC sec 10. 

Specifically, Shen Zhen asserts he was entitled to subpoena his former attorney to take a deposition regarding a defense that he was not competently represented in his negotiations with Hyatt. The arbitrator denied his request for a subpoena and refused the deposition. Shen Zhen asserted the award should be vacated under Sec 10(a)(3) as the arbitrator “refused to hear evidence pertinent and material to the controversy.”

While the district court focused mainly on whether the evidence of the attorney would be material (ruling it would not be), the Seventh Circuit in affirming and in rather broad (overly so?) language stated there is nothing in the FAA requiring an arbitrator to allow ANY discovery and “(a)voiding the expense and discovery under the (Fed R Civ P) and their state law equivalents is among the principal reasons why people agree to arbitrate.” Evidently the arbitration was administered per AAA rules.

First Posted on LinkedIn 16th December 2017

After the US election, it was a certainty that in my inbox every morning there was at least one, if not more, email with a discussion on the future of arbitration in our changing society today. And this debate has continued in halls of university law schools to GAR events to law firm seminars. I am reluctant to write more, but the events strike me a little differently, at least as I try to consider present day events in an historical context or some larger big picture.

Recent government pronouncements on trade and immigration can ultimately, if not sooner, have an impact on the “right to arbitration,” a right some may see, as do I, embedded in the freedoms of contract and association. The Trump Administration seems to have some inherent distrust of anyone deciding disputes other than its own handpicked people as the US has walked away from multilateral agreements such as the Trans Pacific Partnership and the Paris Accord, and stating that in renegotiating NAFTA, foreign NAFTA country investors in the United States “are not accorded greater substantive rights than domestic investors,” a shout-out to the Calvo Doctrine. This may eventually not bode well for NAFTA ISDS.

Extraordinarily, in the past few days we have seen the likes of Nobel-laureate Joseph Stiglitz and Trump critic Robert Reich leading a swell of 200 academe to protest the use of ISDS in NAFTA as undermining the rule of law, outsourcing the judiciary, and giving short shrift to “checks and balances.” As well, protectionism and the current America First climate has certainly placed what we have known as globalization in the back seat. The soundings from such arbitration leaders as Gary Born and John Beechey have been well publicized, that economic nationalism or retrenchment and the negative concerns of free trade and globalization on both sides of the Atlantic, could very possibly signal further distrust for the general concept of investor state arbitration. ISDS is under the microscope and under some criticism, possibly with some merit in part, but overall the criticism is unfounded at least in my judgment.

One has to consider not only the benefits and importance of investment treaties as encouraging trade flows, but also that when disputes arise, these might not be particularly suitable to be in local courts. Nimble thinking is required. The pragmatic flexibility, evidently overlooked by Stiglitz’s group and required in any system with a robust rule of law has been described as “[t]he range of interventions…in the rule of law encompasses not only institutional reform within the branches of government, but also experiments that entail partnerships with a variety of stakeholders and the public outside government.” [Lisa Blomgren Bingham, Reflections on Designing Governance to Produce the Rule of Law, 2011 Journal of Dispute Resolution 67 at 73.] Furthermore “initiatives also include private justice systems, such as commercial arbitration and independent arbitrators in response to concerns over a lack of independence in the judiciary, as in the case of bilateral investment treaty arbitration intended to protect private property from expropriation.” (p 87).

The scarier proposition, to me at least, is that the very underpinnings and floor on which arbitration sits may themselves begin to shake with the onset of the above retrenchment thinking leading the charge or setting the stage. It is the arrogation of power in the Executive that has historically led to a failure in the rule of law and the elimination of checks and balances, not private arbitration. History has clearly shown when governments move to centralize power away from democratic individual autonomy, people’s rights are of necessity going to be adversely affected; and it follows that their individual rights to decide how they want their disputes resolved are taken away. This is what happened in the time of Napoleon, and famously in Germany in the 1930s. Moving down to the Mideast, I read recently where the Qatari Court of Cassation has recently decided the national courts are now in charge of arbitration matters, to the degree that it has stripped the arbitrators of the right to decide their own jurisdiction via competence-competence. I have not even addressed Poland, Latin America or other parts of the world.

Furthermore, arbitration, somewhat paradoxically is getting a populist’s black eye, especially in consumer circles, with the latest defeat of the CFPB proposal to curb the banks’ preference for mandatory arbitration in disputes. (This in spite of some evidence the consumer actually does better in its claims in arbitration than in a class action in court). And should US and international lawyers be able to rely on the US federal judiciary, and its own Supreme Court, for continuing pro arbitration pronouncements such as the BG Group decision, when it is very possible a great percentage of the federal bench will change in this Administration? Not likely. (I refer you to the sage remarks of VV Veeder QC on the BG case, long before Trump, in April of 2014, wherein he essentially said “not so fast” on arbitration catching on as the people’s cudgel).

What is at bottom causing this concern and ill feeling? It is likely to be the convergence of the rise of national determinism in the US and abroad as well as the growing distrust of the institution of the arbitral process (an example being the Tapie case in France, where the process was tainted by otherwise respected figures). Chief Justice Roberts eloquently wrote in dissent that it is no small matter when a “state permits private adjudicators to review its public policies and effectively annul the authoritative acts of its legislature, executive, and judiciary.” [BG Group plc v. Republic of Argentina, 134 S. Ct. 1198, 1220 (2014).] And it is a tough sell when a sovereign’s efforts to achieve a clean environment or provide essential services for healthy communities are alleged as violating an investor’s rights in contract, and huge taxpayer moneys are awarded by tribunals not even indirectly accountable to any electorate. This fits right into what we heard from the Stiglitz-Reich group (outsourcing the domestic legal system, losing the checks and balances, no accountability, weakening the judicial branch). Furthermore across the pond in England, much has been written and said about arbitrators not having the same robust effect to law development as do the national courts. Even, the Chief Justice of England and Wales, Lord Thomas, has weighed in with some notoriety, and recently spoken of the need and suitability for courts, not arbitrators, to develop the rule of law.

This criticism, in my judgment, fails to strike the correct balance of interests and account for the bigger picture where “pragmatic flexibility” on our rule of law should prevail to allow such values as individual freedom of contract and allow for free investment flows across borders as well as the allowance of disputes to be heard in arbitration when they are not suitable in local courts. US Laws such as the FAA and treaties such as the New York Convention seem to have understood this balance as well as the real checks and balances as have academics such as Prof Blomgren Bingham. Moreover simply put, in the international transaction, when a border is crossed, the advantages of a neutral forum seem to be compelling, and this greatly outweighs any negative to my thinking. Stephen Breyer has an excellent discussion on this latter point in his recent book, The Court and The World, pp 179 et seq.

In closing, consider the hopefully extreme case. One of the countries’ leading thinkers on modern history and totalitarianism, Prof Timothy Snyder at Yale, has recently written that “(h)istory can familiarize, and it can warn.” Expansion of global trade in modern times, as it did in the 19th and 20th centuries, leads to heightened expectations of the people and also “perceived inequalities.” Leaders then emerge and put a “face on globalization” as resulting from a “conspiracy against the nation.” Professor Snyder’s short book, On Tyranny, offers twenty lessons from the 20th century to keep our liberty and freedom and combat tyranny. Institutions do not “protect themselves” Snyder notes. They fall “one after the other unless each is defended from the beginning.” So it is and, as stewards of the institution of the arbitral process, a process which embraces freedom, we should be ever so mindful.

Further references: S. Breyer, The Court and the World, (2016). T. Snyder, On Tyranny, (2017). Lisa Blomgren Bingham, Reflections on Designing Governance to Produce the Rule of Law, 2011 Journal of Dispute Resolution 67 (2011). Remarks of VV Veeder, QC at Wilmer Hale Seminar, at 37:30.

First Published by Kluwer Arbitration Blog November 8th 2017

It is as inevitable as the sun also rising that Artificial Intelligence is on a collision course with traditional IP principles. AI has not only become part of our daily life, but also we cannot live without it, consider transportation, vehicle or aviation. In copyright law, there is now inconsistent protection in different countries for independently (not human) developed output resulting from an artificial intelligence algorithm, work developed by a “neural network” inside a computer program. Fascinating work and experimentation on AI in the art world is being conducted in the Netherlands where a computer created a new “ Rembrandt,” after a detailed analysis of the works of the Dutch Master. Art, music and business methods are now generated frequently with uncertain protection, thereby perhaps creating a chilling effect on the desire for investment in this cutting edge sector. We may not be at the point when Stars Wars-like “personages” (eg R2-D2) need to be given copyrights, but the new article from the WIPO magazine suggests the system in the UK is again at the vanguard of this phenomena, granting copyright “to the person who made the operation of AI possible.”

Read: http://www.wipo.int/wipo_magazine/en/2017/05/article_0003.html?utm_source=WIPO+Newsletters&utm_campaign=c3bf857c67-EMAIL_CAMPAIGN_2017_09_29&utm_medium=email&utm_term=0_bcb3de19b4-c3bf857c67-256643981.

Also published on LinkedIn on 6th October 2017

This last Term, the US Supreme Court spoke unanimously through Chief Justice Roberts of the necessity for a disabled child’s individualized education program (IEP) to set forth a robust and challenging endeavor and objective for the child. The IEP is the education “delivery system” for the Individuals with Disabilities Education Act (IDEA), passed 35 years ago. IDEA establishes a substantive right to a free appropriate public education for disabled kids. Chief Justice Roberts stated: “When all is said and done, a student offered an educa­tional program providing “merely more than de minimis” progress from year to year can hardly be said to have been offered an education at all. For children with disabilities, receiving instruction that aims so low would be tanta­mount to “sitting idly . . . awaiting the time when they were old enough to ‘drop out.’” . The IDEA demands more. It requires an educational program reasonably calculated to enable a child to make progress appropriate in light of the child’s circumstances.” Endrew v Douglas County School District, 580 US ___ , 137 S Ct. 988, 1001.  (2017).

The Court stated further the critical importance of the IEP and its directives: “The IEP must aim to enable the child to make progress. After all, the essential function of an IEP is to set out a plan for pursuing academic and functional advancement. This reflects the broad purpose of the IDEA, an “ambitious” piece of legislation enacted “in response to Congress’ perception that a majority of handicapped children in the United States ‘were either totally excluded from schools or [were] sitting idly in regular classrooms awaiting the time when they were old enough to “drop out.”’”. A substantive standard not focused on student progress would do little to remedy the pervasive and tragic academic stagnation that prompted Congress to act.” 137 S Ct at 999. The Court, of course, relied on the seminal case Bd of Education v Rowley, 458 US 176 (1982).

The IEP is developed in a meeting with school teachers and administrators, the child’s parents, and sometimes, if requested, counsel and other advocates representing the child as well as the school district. I have represented a number of kids in these IEP meetings and, as one would expect, some meetings turn out very successful, and some not as much; pre Endrew, some meetings turn out not too differently than Congressional budget deliberations; ie to “kick the can” down the road and agree to take another look in the future—not grab the problem at hand and deal with it constructively. A child can appeal this type of result through set procedures administratively and ultimately to the courts and hopefully after Endrew, the IEP’s themselves will indeed be more robust.

As a “delivery system” of special education services, The IEP document itself, resulting from the meeting, is a complex and detailed form setting out measurable goals for the student, behavior issues, extended year services, and most important, a schedule of the services provided and where they will take place (example in a general ed regular class room, a special ed class room, a home, a gym, a clinic at school etc). The “where” the services take place is so critical because it will distinguish between isolation/segregation and inclusion/integration of individuals with disabilities. At least to me, this is the primary issue in special ed law and social issues; the “where” the services take place hits the very foundation and the goal of special education. There is no question and empirical research supports resoundingly the concept that a regular general classroom is the setting of first choice to teach a disabled student. The Supreme Court in Endrew as much confirmed this fact stating: “IDEA requires that children with disabilities receive education in the regular classroom whenever possible.” 137 S Ct at 999.  The system is not meant to create a second class of citizens starting with their education at an early age.

The law (IDEA) and implementing regulations deal with this whole concept in the phrase “Least Restrictive Environment.” The IEP must schedule services to the student in the least restrictive environment (LRE). There is still a debate among experts as to what that is; removal from the general ed classroom or inclusion. Of course, while much depends on the severity of the disability, there is now a strong push for inclusion such that LRE is the regular education environment for all students; at least it is the starting point for discussion in the IEP meetings. For a kid with behavioral issues for example, the IEP meeting participants should presume at the outset of the meeting the regular classroom will be the place for services, and develop goals in accordance with that placement; only if those goals cannot be accomplished in a regular classroom setting, should an alternative setting be considered. The presumption for all kids should be they will learn in a regular classroom. A very innovative concept is that the regular classroom be taught by co teachers with both general and special ed teachers collaborating inside the classroom. See Causton and MacLeod, All Together Now: Essential Ideas for Co Teaching and Inclusion, Tash Connections, Vol 42, Issue 1 (2017). I think it is a wonderful idea and their thesis is that the classroom driven by co-pilots will direct the greatest number of kids with or without disabilities to a more fulsome, inclusive education. Their excellent article deals with how to do issues and how to interrelate between the two teachers to create the parity necessary for an effective collaboration.

Also published on LinkedIn on 23rd August 2017

The law of privilege as relating to in-house counsel (especially in civil law jurisdictions) is indeed a controversial and much debated issue. Well-spoken advocates from the “internal” as well as “external” bar have written and spoken on this this issue forcefully. In reading DLA Piper’s Legal Professional Privilege Global Guide (2017), it is absolutely mind boggling how the world’s attorney/client privilege rules are so different, with many nuances that attach to each country, such as competition investigations and dawn raids in the EU (Akzo Nobel), in-house counsel rules of no privilege, professional secrecy, advocate secrecy, business secrecy, commercial secrecy, the English rules, the US rules, and the lack of rules in China and other countries. I tend to very much agree with the eminent Phillip Capper that privilege is an area that needs more guidance in an international arbitration context, perhaps from the Institutions themselves.

Clearly, a tribunal can decide to admit or exclude evidence on the basis of privilege, although few Institutions directly deal with the issue. See IBA Rules on Taking of Evidence in International Arbitration, Art 9. As to which privilege rules generally apply, conflicts rules can encompass a whole myriad of factors: the seat of the arbitration, an agreement of the parties, the provenance of the document (the law applied is the law with the closest connection to the particular document), of course the citizenship of the parties, and more, including especially Institutional rules. Tribunals most frequently seem to apply the law of the seat of arbitration when there are no clear rules. The Institutions should speak to set everything straight, and in an arbitration in which there is the possibility of differing privilege laws applicable, an arbitrator, in my judgment, should apply a ”most-favored nation” approach and apply the privilege law with the most protection equally to all parties.

In an application of the most-favored nation rule, the tribunal will determine which of the potentially applicable rules has the broadest privilege protections and then apply that privilege to both or all parties. This achieves two of the most important central principles in arbitration: fairness and protection of the expectations of both parties. By adopting the same standard for all parties (an “equality of arms”), they are treated fairly during arbitration. Additionally, no circumstance would occur in which a company or party believed a document would be protected by privilege, and prepared with that expectation, only to find out in the arbitration dispute that it was not protected. The ICDR rules (the international arm of the AAA) seem to prefer this approach, with Article 22 indicating that the tribunal should “giv[e] preference to the [privilege] rule that provides the highest level of protection.” In addition, the well-crafted note of the ICDR on the Exchange of Information (Guidelines for Arbitrators) states: “The tribunal should respect applicable rules of privilege or professional ethics and other legal impediments. When the parties, their counsel or their documents would be subject under applicable law to different rules, the tribunal should to the extent possible apply the same rule to both sides, giving preference to the rule that provides the highest level of protection.” And always, a civil law party to an arbitration that employs the most favored nation approach could waive the protection afforded by the tribunal and use the material should it be necessary to do so, just as the common law party could.

Then again the words in the ICDR guideline note “to the extent possible” might lead to some head scratching. A most-favored nation approach, perhaps it could be argued, could lead to public policy or ordre publique concerns should the lack of privilege be embedded in the public policy of the jurisdiction that does not recognize the privilege. I would submit this is unlikely and on balance should not lead a tribunal to apply anything other than the most favored nation approach. For example, I do not think French policy would be implicated on this ordre publique point on the research I have done, but I have not looked at China and other similar countries with no privilege. Thus, any award could be vulnerable in those countries if there are public policy issues.

I would submit, however, there are likely not to be any such public policy issues in those countries. While privileges generally reflect the public policy of the legal system that created them, see Rachel Reiser, Applying Privilege in International Arbitration: The Case For a Uniform Rule, Cardozo J. Conflict Resol., 653, 659 (2012), the primary concern of this policy must be to protect the secrecy of documents thought to be confidential when they are made; that is, applying privilege to documents according to the party’s expectation that they receive privilege. The public policy is that State’s policy directed to protecting the confidentiality of the document or testimony, which is of greater concern or is a higher public norm than even the determination of the truth in the specific case. While some have suggested that Akzo Nobel indicates that the European Union has a general public policy against in-house counsel’s communication being disclosed, the decision is most likely limited to the EU competition proceeding context only.

Thus, I do not think a “least favored nation” approach would be fair or a “most favored nation” approach would trigger any public policy concerns. Fairness in a privilege issue implicates directly the expectations of the parties. A tribunal’s decision to apply no privilege to either party (the least favored nation approach) would of necessity be unfair to the party who created a document or evidence with the expectation that it be kept in confidence. Accordingly, it is unlikely that protecting documents that were not initially thought to be protected by privilege would violate any public policy, especially when ttempting to treat both parties equally, the hallmark principle of arbitration practice. This is not even addressing the policy of the attorney client privilege itself, that by allowing otherwise privileged documents to be disclosed subsequently in an arbitration may have the effect of parties simply not seeking legal advice in the first place. Finally, ethical issues could emerge as a least-favored nation approach (no privilege for either party) might lead to a situation in which a document which was prepared under the expectation of confidentiality, would in turn not be confidential, and thus create ethical issues in some jurisdictions (counsel being required to disclose otherwise privileged material).

First Published by Kluwer Arbitration Blog August 14 2017

It is a certainty that in my inbox every morning there is at least one, if not more, email with a discussion on the future of arbitration in our changing society today. Further, the debate continues in halls of university law schools to GAR events to law firm seminars. I am reluctant to write more, but the events hit me a little differently. Recent government pronouncements on trade and immigration can ultimately, if not sooner, have an impact on the “right to arbitration,” a right some may see, as do I, embedded in the freedoms of contract and association. The Trump Administration seems to have some inherent distrust of anyone deciding disputes other than its own handpicked people as  the US has walked away from multilateral agreements such as Trans Pacific Partnership and Paris, and stating that in renegotiating NAFTA, foreign NAFTA country investors in the United States “are not accorded greater substantive rights than domestic investors,” a shout-out to the Calvo Doctrine. This may eventually not bode well for NAFTA ISDS. Protectionism and the current America First climate has certainly placed what we have known as globalization in the back seat. The soundings from such arbitration leaders as Gary Born and John Beechey have been well publicized, that with economic nationalism or retrenchment and the negative concerns of free trade and globalization on both sides of the Atlantic, could well signal further distrust for the general concept of investor state arbitration. ISDS is under the microscope and under some criticism, possibly with some merit in part, but overall the criticism is unfounded at least in my judgment.

The scarier proposition, to me at least, is that the very underpinnings and floor on which arbitration sits may itself begin to shake with the onset of the above thinking leading the charge or setting the stage. History has clearly shown when governments move to centralize power away from democratic individual autonomy, people’s rights are of necessity going to be adversely affected; and it follows their individual rights to decide how they want their disputes resolved are taken away. This is what happened in the time of Napoleon,  and in Germany in the 1930s. Today, in Poland, the government has removed the Supreme Court and is evidently walking away from bilateral investment agreements. Poland is still day to day. (Moving down to  the Mideast, I read recently where the Qatari Court of Cassation has recently decided the national courts are now in charge of arbitration matters, to the degree that it has stripped the arbitrators of the right to decide their own jurisdiction via competence-competence, full stop). I have not even addressed South America or other parts of the world.

In Washington DC and elsewhere, arbitration, somewhat paradoxically given its history, is getting a populist’s black eye, especially in consumer circles, with the latest announcement at the CFPB, and how this will out play out in Congress is not clear. (This in spite of some evidence the consumer actually does better in its claims in arbitration than in a class action in court). And should US and international lawyers be able to rely on the US federal judiciary, and its own Supreme Court, for continuing pro arbitration pronouncements such as the BG Group decision, when it is very possible a great percentage of the federal bench will change in this Administration?

What is at bottom causing this concern and ill feeling? It has to be the convergence of national determinism here and abroad and a distrust of the institution of the arbitral process. An example many critics turn to in the investment area is when a sovereign’s efforts to achieve a clean environment or provide essential services for healthy communities are under attack as violating an investor’s rights in contract, and huge taxpayer moneys are awarded by tribunals not even indirectly accountable to any electorate. In this situation, legitimate questions can be raised starting with whether the underlying process is fair, and ending whether the overall result is fair. Furthermore, much has been written and said about arbitrators not having the same robust effect to law development as do the national courts. Even, the Chief Justice of England and Wales, Lord Thomas, has weighed in famously, and recently spoken of the need and suitability for courts, not arbitrators, to develop the common law. However, in the international transaction, when a border is crossed, the advantages of a neutral forum seem to be compelling and greatly outweighs any negative in my judgment. Stephen Breyer has an excellent discussion on this in his recent book, The Court and The World, pp 179 et seq.

One of the countries’ leading thinkers on modern history and totalitarianism, Prof Timothy Snyder at Yale, has recently written that “(h)istory can familiarize, and it can warn.” Expansion of global trade in modern times, as it did in the 19th and 20th centuries, lead to heightened expectations of the people and also “perceived inequalities.” Leaders then emerge and put a “face on globalization” as resulting from a “conspiracy against the nation.” Professor Snyder’s short book, On Tyranny, offers twenty lessons from the 20th century to keep our liberty and freedom and combat tyranny, everything from making eye contact and small talk to remembering professional ethics to respecting and defending institutions such as “a court, a newspaper, a labor union—and take its side.” The book chillingly recounts the rise of Nazi Germany and how a leading newspaper for German Jews had been totally hoodwinked by the oncoming storm. Institutions do not “protect themselves” Snyder notes. They fall “one after the other unless each is defended from the beginning.” So it is and, as stewards of the institution of the arbitral process, a process which embraces freedom, we should be mindful.

For further reading:  S. Breyer, The Court and the World, (2016).   T. Snyder, On Tyranny, (2017).

– Posted on LinkedIn on 24th July 2017

 

In reading DLA Piper’s Legal Professional Privilege Global Guide (2017), http://www.dlapiperlegalprivilege.com/system/modules/za.co.heliosdesign.dla.lotw/functions/export.pdf?country=all, it is absolutely mind boggling how the world’s attorney/client privilege rules are so different, with many nuances that attach to each country, such as competition investigations and dawn raids in the EU (Akzo Nobel), in-house counsel rules, professional secrecy, the English rules, the US rules, and the lack of rules in China. I tend to very much agree with the eminent Phillip Capper that privilege is an area that needs more guidance in an international arbitration context, perhaps from the Institutions themselves. http://globalarbitrationreview.com/article/1140753/white-case-partner-calls-for-privilege-rethink. As to which privilege rules apply, conflicts rules can encompass a whole myriad of factors: the seat of the arbitration, the provenance of the document, of course the citizenship of the parties, and more, including especially institutional rules. The Institutions should speak, and, as mentioned in a previous post, in an arbitration in which there is the possibility of differing privilege laws applicable, an arbitrator, in my judgment, should apply a ”most-favored nation” approach and apply the privilege law with the most protection equally to all parties.

In an application of the most-favored nation rule, the tribunal will determine which of the potentially applicable rules has the broadest privilege protections and then apply that privilege to both or all parties.  This achieves two of the most important central principles in arbitration,: fairness and protection of the expectations of both parties.  By adopting the same standard for all parties, they are treated fairly during arbitration.  Additionally, no circumstance would occur where a company believed a document would be protected by privilege, and prepared with that expectation, only to find out that it was not protected.  The ICDR rules (the international arm of the AAA) seem to prefer this approach, with Article 22 indicating that the tribunal should “giv[e] preference to the rule that provides the highest level of protection.” In addition, the well crafted note of the ICDR on the Exchange of Information (Guidelines for Arbitrators) states: “The tribunal should respect applicable rules of privilege or professional ethics and other legal impediments. When the parties, their counsel or their documents would be subject under applicable law to different rules, the tribunal should to the extent possible apply the same rule to both sides, giving preference to the rule that provides the highest level of protection.”

“To the extent possible” also might lead to some head scratching. A most-favored nation approach, perhaps, could lead to public policy or ordre publique concerns should the lack of privilege be embedded in the policy of the jurisdiction that does not recognize the privilege. I do not think France would be implicated on the ordre publique point, but China could well be and thus, any award could be vulnerable if there are public policy issues. And on the most-favored nation approach, a French party, for example, could waive the protection afforded by the tribunal and use the material should it be necessary to do so. A least-favored nation approach (no privilege for either party) might lead to a situation in which a document which was prepared under the expectation of confidentiality, would in turn not be confidential, possibly creating ethical issues in some jurisdictions (counsel being required to disclose otherwise privileged material).

 For further reading, see Rachel Reiser, Applying Privilege in International Arbitration: The Case For a Uniform Rule, Cardozo J. Conflict Resol (2012).

– Also posted on LinkedIn 13th July 2017