Increasingly frequent cross-border investigations have raised difficult questions of privilege and work product protection over the last few years. In the United States, attorney-client privilege protects confidential communications between attorneys and clients for the purpose of seeking or rendering legal advice, and the work product doctrine protects documents or materials prepared in anticipation of litigation from discovery. Not every country offers those protections. Although many other countries recognize some form of privilege or confidentiality between attorneys and clients, that privilege or confidentiality may be construed to cover a narrower subset of communications. International businesses therefore must recognize that communications deemed privileged in the United States may not be considered privileged in other countries. For example, in France in-house counsel are not considered members of a "bar" and professional secrecy typically does not protect communications between a company's management and its in-house counsel. In Germany, privilege may apply to communications with in-house counsel in civil proceedings but not in criminal proceedings. Moreover, in those jurisdictions in which privilege is recognized, the circumstances under which privilege is waived also differ across jurisdictions. Japanese law, for example, provides no baseline attorney-client privilege although specific rules such as those issued by the Japan Fair Trade Commission may protect such communications when related to the particular subject matter. English law, on the other hand, is more similar to US attorney-client privilege but does not extend as safely to internal investigation notes. Under English law, documents generated during an internal investigation will only be privileged if the communication is with the narrowly defined "client," the documents betray the trend of legal advice or litigation (which can include criminal proceedings) was in reasonable contemplation. Comparing France, Germany, Japan, England, and the United States exemplifies how decisions to disclose attorney-client communications to third parties may have different consequences in different jurisdictions, even if the disclosure may not effect waiver in the jurisdiction in which it is made. When these differences in privilege law are present, the question must be addressed: which privilege rule controls? The US Court of Appeals for the Second Circuit's recent decision in Mangouras v. Squire Patton Boggs may offer new insight into that question.
US Courts' Differing Treatment of Choice of Privilege Law
Some US district courts resolve the question of whose privilege law applies by engaging in the comity or "touch base" analysis. The court will ask which country has the predominant or "most direct and compelling interest" in whether the communications should remain confidential. To answer this question, courts will consider a variety of factors, such as the location of the author and recipient of the communication, the subject matter of the communications, and which country's laws the legal advice rendered implicates.
Depending on how the touching base analysis comes out under US law, there is no guarantee the client's communication with a US lawyer will be protected, even in a US court. Instead, the US court will apply the privilege law of whichever country has the predominant interest in whether the communications remain confidential.
Other courts have applied the "most significant relationship" test from the Restatement (Second) of Conflict of Laws. According to the Restatement:
Evidence that is not privileged under the local law of the state which has the most significant relationship with the communication will be admitted, even though it would be privileged under the local law of the forum, unless the admission of such evidence would be contrary to the strong public policy of the forum.
Under this approach, courts apply the law of the jurisdiction with the most significant relationship with the privileged communication, such as the law of the jurisdiction where the communication is centered. Other commenters have opined that the Restatement's most significant relationship test was tilted towards disclosure to a greater degree than the touch base test. Adopting the touch base test would therefore be a step towards additional protection for privileged materials.
The Second Circuit's Decision in Mangouras
The Second Circuit's recent decision in Mangouras v. Squire Patton Boggs appears to be the first circuit court decision to embrace the touch base test and therefore offers new insight into privilege analysis in cross-border matters going forward. The case relates to an oil tanker named the Prestige (a darkly coincidental twist for fans of the 2006 film), which sank off the coast of Spain in 2002, releasing nearly 77,000 metric tons of oil into the sea. Spain sued the American Bureau of Shipping (ABS) in the Southern District of New York, alleging that ABS was reckless in evaluating the tanker's seaworthiness. In the New York action, Spain was represented by Brian Starer of Squire Patton Boggs. Squire hired C.R. Cushing & Co. Inc., a naval architecture firm, to prepare a report on the cause of the sinking, and Charles Cushing served as an expert witness. The district court dismissed the action in 2012, and the Second Circuit affirmed the dismissal.
The same year, tanker captain Apostolos Mangouras was charged with various crimes in Spain related to the oil spill following a 10-year investigation in Spain. The Cushing firm again acted as an expert witness. Three witnesses who provided declarations in the New York action provided live testimony at Mangouras' nine-month trial. Mangouras was ultimately acquitted of all but one charge ("serious disobedience to authority"). The Spanish Supreme Court reversed the decision in January 2016, finding Mangouras guilty of gross negligence.
The plot then thickens. In 2017, Mangouras filed two applications under 28 U.S.C. § 1782—seeking materials from the Squire defendants and the Cushing firm—in furtherance of his efforts to expose and punish those witnesses whom they believed lied in the Spanish case. Mangouras sought the discovery from the Squire defendants for use in a potential "Querella Criminal"—a privately instituted criminal proceeding in Spain—asserting that three witnesses gave false testimony and that their testimony in Spain directly conflicted with their statements in US proceedings. Mangouras sought discovery from both the Squire defendants and Cushing firm for use in a European Court of Human Rights case about whether the Spanish criminal proceedings breached his right to a fair trial under the European Convention on Human Rights.
Section 1782 requires that "(1) the person from whom discovery is sought resides (or is found) in the district of the district court to which the application is made, (2) the discovery is for use in a foreign proceeding before a foreign [or international] tribunal, and (3) the application is made by a foreign or international tribunal or any interested person." The statute is limited, however, to discovery that does not violate "any legally applicable privilege." If an applicant satisfies the statutory requirements, the district court then weighs four discretionary favors set forth in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004): "(1) whether 'the person from whom discovery is sought is a participant in the foreign proceeding,' in which case ‘the need for § 1782(a) aid generally is not as apparent'; (2) 'the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to US federal-court judicial assistance'; (3) 'whether the § 1782(a) request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States'; and (4) whether the request is 'unduly intrusive or burdensome.'"
The district court granted the requested discovery, finding that Mangouras' request satisfied the statutory requirements of § 1782 and the discretionary factors weighed in Mangouras' favor based on his anticipated litigation through both a Querella Criminal and the European Court of Human Rights. Critically, the district court declined to directly rule on the respondents' argument that Spanish privilege barred discovery, and limited the invocation of Spanish privilege to objections to use of the documents. The district court reasoned that the parties made conflicting representations about Spanish law—a topic beyond the court's bailiwick—and that the court should decline to engage in a "speculative foray into legal territories unfamiliar to federal judges" by resolving disputes about the application of Spanish privilege law.
Respondents began turning over documents to Mangouras, completing the production in May 2018, but they appealed, seeking an order for the return of their documents on the grounds that the district court had wrongfully denied their invocations of privilege.
On appeal, respondents argued that the district court erred in granting Mangouras' § 1782 applications because "the materials are absolutely privileged under Spanish law and because Mangouras failed to establish that the discovery was for use in a foreign proceeding under the statute." The Second Circuit reversed the lower court's decision, finding that it had erred by applying US privilege law without conducting a choice-of-law analysis regarding whether US or Spanish law should control.
The Second Circuit found the district court did not address the statute's requirement that discovery not be "in violation of a legally applicable privilege" or consider whether Spanish privilege law was "legally applicable." In doing so, the Second Circuit held that "[i]n circumstances where the parties dispute which nation's privilege law furnishes the 'legally applicable privilege,' and those competing national laws provide different results, courts should first conduct a choice-of-law analysis to determine which body of privilege law applies."
The Second Circuit held that "the 'touch base' test is the proper choice-of-law test for purposes of determining which privileges are 'legally applicable' in the § 1782 context." The court reiterated the "touch base" analysis in this context:
Under the touch base test, a court applies "the law of the country that has the 'predominant' or 'the most direct and compelling interest' in whether … communications should remain confidential, unless that foreign law is contrary to the public policy of this forum." … The country with the predominant interest is either "the place where the allegedly privileged relationship was entered into," or "the place in which that relationship was centered at the time the communication was sent." … Thus, "communications relating to legal proceedings in the United States, or that reflect the provision of advice regarding American law, 'touch base' with the United States and, therefore, are governed by American law, even though the communication may involve foreign attorneys or a foreign proceeding."
The Squire defendants argued that the "touch base" analysis should not apply, because, if US law was found to control, it could lead to discovery that might infringe on another country's laws and could "encourage reciprocal infringements of US privileges." The Second Circuit rejected this argument, noting that a foreign jurisdiction can refuse to order discovery of documents that are privileged under its own law.
Mangouras' Implications for Privilege Assertions In the Context of Multi-Jurisdictional Investigations
In addition to clarifying the choice of law analysis in the context of cross-border litigation, Mangouras' crystallization of the touch base doctrine, beyond its interpretation of Section 1782, has broader implications for how investigative lawyers should approach the invocation of privilege during investigations, and the assertion of privilege in any multi-jurisdictional investigation that may follow. In an ideal world, lawyers managing investigations being conducted in multiple countries simultaneously are incentivized to structure and document cross-border investigations with an eye toward which privilege law will apply to which aspects of the investigation under Mangouras in any litigation, whether filed in the United States or abroad given the availability of US discovery under Section 1782. Those considerations could include factors such as: (1) how broadly to define the scope of an investigation in an engagement letter (i.e., which jurisdictions are likely to initiate their own investigation); (2) how to frame the purpose of major communications; (3) who should be included in the circulation of major attorney-client communications; and (4) who should be present for witness interviews (this analysis could even differ depending on the location of the interview), among other considerations. These factors could prove relevant to establishing which of the potential jurisdictions on which the communications could "touch base" under Mangouras, in the event those communications are later the subject of discovery in either US litigation or a Section 1782 application.
The practical reality, however, is that in fast-moving internal investigations there is often pressure to obtain substantive answers quickly. Delay can lead to stale evidence, tainted witnesses, or even business consequences for the client. The suggestions in the previous paragraph are therefore aspirational, not necessarily prescriptive. Counsel should do their best to consider the forgoing factors at the outset and remain flexible as facts and findings emerge, which could change the privilege analysis.
Mangouras may also have implications for communications and provision of information from defense counsel to prosecutors in parallel investigations in the United States and abroad that may coincide with or follow the internal investigation. Certain attorney-client communications and work product generated during the prior investigation that would ordinarily be privileged under US law may not be under the privilege law of another jurisdiction. Although prosecutors often give deference to attorney-client communications occurring in non-US jurisdictions, the Second Circuit has now provided more aggressive prosecutors with a basis from an authoritative court to argue that such a document, if it is not protected under the law in the jurisdiction where it "touches base," must be produced under a grand jury or other government subpoena, or in reciprocal criminal discovery under Rule 16.
The Mangouras decision sets the table for increasing disputes regarding the privileged status of international communications. Mangouras emphasizes the need to consider foreign privilege rules and the interests of foreign governments in applying those rules to the facts of each case. The resulting litigation will likely be complex and time-consuming because it will require both research into foreign law and fact-intensive argument. Trial court judges are often reluctant to wade into foreign privilege law—as emphasized by the trial court judge here—because resolving complicated legal questions is far more difficult and time consuming when the legal questions arise from a foreign legal doctrine.
As with most privilege issues, the best way to limit litigation costs is often to consider the possibility of litigation at the outset of an international project or engagement. By considering the potential for litigation, international businesses can frame confidential communications in the way that most strongly implicates the desire of the more protective nation to maintain confidentiality. If, for example, Nation A protects communications between one company’s general counsel to a joint venturer's CEO, but Nation B does not, then the general counsel would be well advised to emphasize in real time the aspects of key communications that increase their ties to Nation A over Nation B.
Privilege law is not simple, and neither is international choice of law analysis. But as cross-border privilege disputes persist, Mangouras may mark a significant move toward more consistency in which privilege rules apply in the context of cross-border investigations.