Privilege and Disclosure in Arbitration (Chapter 4)

• This chapter goes into how knowledge and understanding of privilege and disclosure can affect evidence use, and how this can assist the arbitrator
• This chapter specifically explains, privilege, and its implications for written evidence along with document disclosure
• Privilege and disclosure can impact evidence exclusion due to extrinsic considerations outweighing evidence value at trial
• Court cases do not need to be studied in detail, but are used as illustrations

Learning Objectives

• Explain privilege, covering the complexities of legal professional privilege
• Describe rules for 'without prejudice' documentation
• Describe the importance of written evidence and its role in arbitrator fact finding
• Explain disclosure and how it varies between civil and common law jurisdictions

Background

• In most jurisdictions, the concept of privilege is present, this is a fundamental right providing that a client and attorney can communicate in confidence, and cannot be forced to share these discussions

• Documentary evidence relating to facts will be present in nearly all civil disputes like arbitration

• Contractual documents are likely in a construction contract arbitration dispute such as quotations, orders, delivery notes, standard terms etc

• Privilege becomes relevant when parties use documents to help their case, and some documents and communications may be privileged.

• Common law jurisdictions require parties to give advance notice to their opponents of all documents in their possession, including unfavorable ones, this is disclosure

• Privileged documents must be disclosed in the list of documents prepared, but need not be made for inspection

• Privileged documents are listed separately and the party objecting to inspection must state their grounds

• Arbitrators need a clear understanding of privilege and how it operates indifferent jurisdictions, especially in disclosure

Legal Professional Privilege

• Two types of legal professional privilege exist:

• Arising out of the relationship of attorney and client, even if no litigation is contemplated

• Confidential communications that are connected with contemplated or pending litigation

• The privilege belongs to the client, not the attorney, but the attorney has a duty to assert it unless waived

• There are limits on the type of advice given in arbitration that attracts legal professional/advice privilege

• General principles of privilege might apply to arbitration

Attorney and Client (Legal Advice Privilege)

• Legal advice privilege attaches to confidential communications/evidence between a client and its lawyer created to give/obtain legal advice

• This principle states that clients can obtain confidential legal advice

• This includes presentational/strategic advice relating to a client's legal rights/obligations

• Advice of a purely strategic/commercial nature does not apply

• Internal memoranda prepared by employees/third parties are not protected by legal advice privilege as the definition of 'client' is narrow

• Communications with third parties does not apply, and the existence/contemplation of litigation is wholly relevant for privilege

• The communication must be confidential, if not made in the course of the attorney/client relationship, must be made to establish that relationship e.g. Minter v Priest [1930]

• Privilege is not restricted to specific requests for advice, and applies if information is passed between parties as part of a continuum aimed at keeping parties informed for advice later e.g. Taylor LJ in Balabel v Air India [1988]

• If communications are made to give/receive legal advice professionally, the whole communication is privileged, even if parts originate from a third party consulted by the attorney e.g. Re Sarah C Getty Trust [1985]

• Privilege covers client instructions to an attorney, counsel's opinion for an attorney/solicitor and documents brought to instruct the attorney

• It also extends pre-existing documents obtained by the client/third party for the attorney which, would betray the trend of the solicitor's advice e.g. Dubai Bank Ltd v Galadari [1974]

• Legal professional privilege applies equally to in-house lawyers: Alfred Crompton Amusement Machines Ltd v Commissioners of Customs and Excise (No 2) [1974]

• Investment/patent/estate agent advice is not covered by privilege

• Advice on the commercial wisdom of entering a transaction may be privileged if it is directly related to the solicitor's performance as legal advisor e.g. Nederlandse Reassurantie Groep Holding NV v Bacon & Woodrow (a firm) [1995]

• Advice form claims consultants is not covered by legal privilege e.g. Walter Lilley & Company Ltd v Mackay and DMW Developments Ltd [2012] EWHC 649 (TCC)

Communications Connected to Litigation (Litigation Privilege)

• Litigation privilege attaches to confidential documents created for the dominant purpose of pending/actual legal proceedings, covers documents prepared by employees/third parties

• The distinction between confidential and privileged documents is important, not all communications between a client and its lawyers are privileged

• Privilege will no longer apply if a document loses its confidential status and maintaining confidentiality in all privileged documents is important

• Statements from potential witnesses, including experts may be needed

• The leading case is Waugh v British Railways Board [1980]

• A plaintiff sought internal reports discovery prepared by the defendant about a railway accident

• The defendant claimed privilege, but the HOL held that the reports could not attract privilege because the dominant purpose was not to supply legal advisors for use in litigation

• Only one of the purposes was litigation, but not the dominant one, another purpose was informing the board about the accident causes to prevent recurrence

• The Court of Appeal has to decide the dominant purpose is not always easy identify in such cases

• For accident cases like Waugh, reports are generally for recurrence prevention

• In Re Highgrade Traders Ltd [1984], an insurer instructed fire investigation experts in a suspected insurance arson case and the CoA held that the insurer was primarily concerned with liability

• In Guinness Peat Properties Ltd v Fitzroy Robinson Partnership (a firm) [1987], building developers notified the defendants (architects) of a design fault

• The architects wrote to the insurers to comply with the conditions of an insurance policy stating their views on the merits of the claim

• Litigation commenced, the COA had to look beyond the defendant's intention to the intention of the insurers who had procured the letter for submission to their lawyers for advice

• As such, the letter was regarded as privileged

• Disclosure obligation relates to new documents created even after lists have been exchanged, and internal documents discussing the merits of proceedings should be created with care, as they may be disclosed unless covered by privilege

• Caution must be taken over what is said in internal reports, board minutes and emails about the subject matter of the dispute

• Reports about proceedings and merits should be by internal/external lawyers, else reports should do more than pass on legal advice

• Documents recording discussions between parties to reach a compromise/settle the dispute will be 'off the record', and cannot be used in evidence by either party, they are defined as 'without prejudice' communications

Restrictions to Privilege

• 'Without prejudice' communications
• Oral/written communications made with the intention of seeking settlement are privileged from disclosure
• This rule supports negotiations by removing the embarrassment of concessions being used against the party who made them at trial, this applies even if the words are not used, if the purpose was settlement e.g. Chocoladefabriken Lindt & Sprüngli AG v Nestlé Co [1978]
• Parties enter ongoing, without prejudice negotiations, communications continue to be privileged until a party makes it clear to the other side that the without prejudice basis is at an end
• Merely stating that the negotiations are over will not suffice e.g. Cheddar Valley Engineering Ltd v Chaddlewood Homes Ltd [1992], an open offer over the telephone was made, not mentioned during subsequent negotiations, and negotiations were held to be without prejudice
• Without prejudice negotiations that result in settlement are admissible to prove the terms of the settlement
• If no settlement arises, the communications are inadmissible, but may be used in interlocutory applications like striking proceedings for want of prosecution

Waiver of Privilege

• Legal professional privilege belongs to the client and may be waived
• Privilege attached to without prejudice communications belongs to both parties, waiving requires both parties' consent
• Waiver may be given expressly or implicitly by disclosing a privileged document to the other side, by using it to refresh a witness

Secondary Evidence

• Secondary evidence, like a copy of a privileged document, is admissible at trial
• It is immaterial how a privileged document was obtained, even if by theft
• Claiming privilege still have the right to apply for an injunction to restrain use of such material e.g. Goddard v Nationwide Building Society [1987]
• Possession of documents may be important because the party claiming privilege may have waived it inadvertently
• This was the case in Guinness v Fitzroy, where a privileged letter was inadvertently left in a file inspected and copied by the plaintiff

Public Interest Immunity

• This deals with the category of documents that attract public interest immunity
• These documents must be withheld from production because disclosure would be injurious to the public interest
• Two categories of documents to consider:
• Documents that form part of a class of documents that need protecting e.g. cabinet minutes and local authority social work records
• Documents that need protection due to sensitivity of their contents e.g. diplomatic dispatches and documents relating to national security
• In these cases, a minister may provide a certificate stating the grounds for objection and the class to which the document belongs
• The burden of proof rests on the party seeking disclosure
• Certificates are not always conclusive, a court has the discretion to inspect the document to determine if it should have immunity
• Courts must balance concealing the document against public interest in the administration of justice

Conclusions As to Arbitration and Privilege

• Different classes of privilege can cause problems for arbitrators, arbitrators should be aware of classes of privilege and the potential prejudice if such evidence is admitted
• Arbitrators are free to admit what they choose, so long as natural justice are applied as rules providing strict rules of evidence are rare
• Arbitrators would be criticised for not following privilege rules and should follow as good practice
• Judges and arbitrators must consider a document for which privilege is claimed, to decide whether to allow it into evidence, this must be carried out de bene esse
• The tribunal puts documents out of its mind if privilege occurs

Written Evidence and Disclosure of Documents

• Written evidence is critical in arbitration

• Documents are usually the primary evidence on which arbitrators find facts

• Relevant document availability is in the hands of parties

• Issues relating to relevant or material documentation availability are subject to procedural rules known as 'disclosure'

• There are limited categories of documents with limited availability because they are privileged

• Parties in international arbitration come from differing legal backgrounds/cultures, the extent of document disclosure differs

• Civil law jurisdictions usually have very limited disclosure, with common law jurisdictions usually involving extensive disclosure, though differences exist between countries

• International arbitration can provide alternatives, either no disclosure or exhaustive disclosure

'Disclosure' - the Process

• 'Disclosure' requires each party to disclose relevant documents to the other party
• Disclosure happens after each party has set out its position in their statement of a case, and to ensure parties show documentary evidence early
• Disclosure in three stages:
• Undertaking a reasonable and proportionate search for relevant documents, including electronic ones
• Providing the list of documents to the other party, including those once in possession or which are relevant but do not have to be disclosed because they are privileged
• Inspection of documents and data by the other party
• The disclosure exercise is important and can impact the outcome of litigation, especially in common law jurisdictions
• Credibility can be affected at trial from failing to give proper disclosure because of overlooking/destroying documents
• Parties are required to discuss disclosure issues with the other party agreeing on a proposal to meet justice and proportionality

The Disclosure Obligation

• Common law lawyers has an independent duty to ensure proper disclosure, being set out in the Solicitor's Code of Conduct in England and Wales

• Principle 1: ‘to uphold the rule of law and the proper administration of justice’

• Chapter 4 on Confidentiality and Disclosure, says solicitors must keep 'affairs of clients confidential unless disclosure is required or permitted by law or the client consents'

• Obligations to disclose in arbitration through rules or from the parties' agreement

• Most arbitration laws and rules permit the parties/tribunal to decide procedural/evidential matters including document disclosure

• Differences in disclosure rules exist demonstrated by institutional arbitral rules

• Non-prescriptive LCIA, ICC arbitration rules exist, the ICC rules providing no automatic right to disclosure and is left to the tribunal

• LCIA rules provide disclosure of 'essential' documents if statements of case or defenses are directed to be served by each party, thus a very limited disclosure in leading institutional arbitration rules

• Disclosure is of documents one relies on, and only supporting documents need be disclosed in the first instance in circumstances deemed appropriate

• Obtaining disclosure from the other party is through applying to the tribunal for a direction on an express effect

• Tribunals must consider the application by reference to its duties and ensure that the disclosure remains focused and relevant

• Poorly focused or unspecific applications is portrayed by the other party as a 'fishing expedition', or a 'trawling expedition' and are not likely to be successful in court/declined by an arbitrator

• Applications are most likely to succeed where specific documents/document classes are identified, that are relevant to the case and material to its outcome, with tribunal and parties legal backgrounds influencing whether or not disclosure is directed and its extent

• Document disclosure extends to those within a party's control, including those in physical possession and those a party had a right to inspect and take copies, including documents in the possession of an employee/agent over which a party has control

• Disclosure does not necessarily include documents held by subsidiary companies, professional agents, and ex-employees

Documents and ESI

• 'documents’ is not restricted to paper or originals but includes electronically stored information (ESI)
• Invariably there will be ESI relevant to the dispute, e.g. emails (including deleted emails) and database data
• ESI extends to anything recording info, and will include sound files, electronic personal organisers, file servers and back-up tapes and hard drives
• ESI disclosure can also extend to 'metadata' attached to each document, (hidden data including document's history e.g. the original author, creation date, hidden notes and blind copy recipients)
• Opening and printing a document can alter the metadata, care must be taken when dealing with ESI

Guidance

• Unless arbitration rules dealing with disclosure apply, arbitrators cannot compel a party to disclose documents to see -Parties are not obliged to disclose all documents on which they intend to rely/those that adversely affect their case, or inspection of such documents, and an arbitrator can draw adverse inferences from a refusal by requesting such documents
• Arbitrator may wish to consider the reasonableness of the reasons for the refusal and take that into account in determining the weight to be given to the other evidence adduced
• Disclosure orders arbitrators can issue:
• An order dispensing with disclosure
• An order to disclose documents a party relies on, and specific disclosure required from the opponent
• An order to disclose documents on an issue by issue basis
• An order for 'standard disclosure' (defined by relevant law and rules)
• An order for disclosure on a train of enquiry’ basis if permitted by the relevant laws e.g. the old Peruvian Guano test
• Or other permitted/appropriate orders under the arbitration rules/laws
• Document disclosure will be determined based on reference to the issues raised in the parties' statements of case
• Unless any applicable arbitration rules dealing with disclosure apply, the arbitrator cannot compel a party to disclose documents
• Parties are not obliged to disclose all documents on which they rely/those that adversely affect their case, or inspection of such documents, and an arbitrator can draw adverse inferences from a refusal by requesting such documents
• Arbitrators should consider where parties refuse document disclosure and assess the reasonableness of it
• The Redfern Schedule is a method requesting information/documents setting out the particular document or information sought, why it is relevant, and why it is otherwise unavailable to the requesting party
• Column (1): documents requested
• Column (2): reasons for request
• Column (3): objections to production
• Column (4): left blank for the decision of the tribunal on each request
• ICC publication on 'Techniques for Controlling Time and Costs in Arbitration' confirms parties normally produce documents they intend to rely on
• Each party should consider avoiding production requests unless such production is relevant and material to the outcome, they could consider referring to the procedure in the IBA Rules on the Taking of Evidence in International Arbitration
• The IBA's Rules on the Taking of Evidence in International Arbitration are used in international arbitration and designed to provide a mechanism -These exist for document disclosure and reflect procedures in use in different legal systems/particularly useful when parties come from different legal cultures
• The process is fair/possible by:
• Defining documents widely
• Obliging parties to disclose documents available to them
• Through a Request for Documents: includes describing each document sufficiently to identify it, state how documentation is relevant, and in the control of the other party for that specific circumstance
• Possible objections to such a request include lack of sufficient relevance, legal privilege, and an unreasonable burden
• Failure to comply with a direction to disclose entitles inferrence that such document would be adverse to the interests of that party