Corporate counsel for global businesses often face daunting challenges in navigating a myriad of languages, cultures and legal landscapes to provide business-enabling solutions for their clients. Compounding these challenges, the tools necessary to provide sound legal advice to international clients—the attorney-client privilege and the work product doctrine—often differ, and are sometimes nonexistent, in foreign jurisdictions. This article identifies the privilege issues that corporate counsel must consider and overcome when advising global corporations, including the key differences commonly taken for granted in the United States and often lacking abroad.

In the United States, the attorney-client privilege protects communications between attorneys and clients seeking legal assistance, while the work product doctrine shields materials and mental impressions developed in anticipation of litigation. When used appropriately, these tools protect highly sensitive—and potentially detrimental—communications from discovery by external parties. Critically from the perspective of corporate counsel, these tools empower in-house attorneys to offer forthright and unbiased advice to their clients, enabling business objectives while mitigating risk.

Given their importance, what if these tools go missing from the in-house lawyer's toolbox, and neither client nor counsel can trust that their communications will remain private? As corporations become increasingly global, and legal advice is quickly and easily disseminated across continents, counsel cannot afford erroneous assumptions about the applicability of privilege to communications extending outside the United States. This article identifies five issues for global corporations to consider.

Consideration No. 1: What Law Governs?

Not surprisingly, multinational corporations and their attorneys must first identify the laws governing privilege and discovery in jurisdictions where they operate.  Doing so will enable counsel to anticipate whether communications may be discoverable and to adopt practices that minimize risk and maintain privilege where available. While seemingly straightforward at first glance, the choice of law issue becomes complicated as different jurisdictions take diametrically different approaches, a dichotomy evident even in the United States. Most state courts apply a "most significant relationship" test to determine the governing privilege law. If a foreign country with a less protective privilege law has the most significant relationship to the issue, then that law may well govern, potentially eliminating the privileges that might otherwise apply under U.S. law. But, a minority of states will nevertheless apply their own law to privilege issues regardless of another state's interest in the communications. The same is true abroad.

Compounding the issue, many federal courts will apply the "touching base" test, which examines which country has the predominant and most direct and compelling interest. Generally, this test looks to whether the advice is with respect to U.S. or foreign legal proceedings and laws, with U.S. privilege applying in the former situation and foreign privilege rules applying in the latter situation.

Notably, most U.S. courts apply their forum rules to work product protections, as a rule of evidence, without conducting a choice of law analysis. The same can apply in many international jurisdictions, with countries like the United Kingdom applying their own privilege law to disputes in their courts (as the lex fori), regardless of any significant relationship to the dispute. In situations where the forum law is less protective of privileged communications, this can cause significant risk for U.S.-based counsel otherwise acting under the belief that privilege should shield communications from discovery. A saving grace in many such jurisdictions is that discovery is often less liberal than in the United States, offering some solace that attorney-client communications will not be discovered even in the absence of privilege.

Because location is key, counsel must strategically anticipate the forum for potential disputes and craft air-tight (and locally applicable) forum selection clauses when analyzing privilege.

Consideration No. 2: Determine Applicable Attorney-Client Privilege Protections

Choice of law clear? Counsel should next focus on the extent of attorney-client privilege protections available in the given jurisdiction.Not all communications are protected equally. And how organizational clients are treated varies greatly across jurisdictions. Most U.S. courts follow the "subject matter" test, where the communication must originate from an employee seeking to secure legal advice for the corporation, and the subject matter of the communication is within the employee's scope of duty. A few states follow the "control group" test, which is more restrictive and protects only communications between top management—the control group—and the company's lawyers.

While many foreign jurisdictions recognize some form of attorney-client privilege, the scope of protection can vary dramatically. For example, in England a recent series of cases known as Three Rivers limited the privilege protections by narrowly defining "client" to only a specific unit within the company. Like the control group test, this tapering reduces the number of employees among whom privileged communications can occur. Highlighting the challenges posed to counsel advising global clients, the application of this rule is not uniform even among jurisdictions abiding by English common law, as a court in Hong Kong rejected the Three Rivers approach. While certainly noninclusive of every country's laws, these instances underline the critical need for U.S.-based counsel to clearly understand exactly who is the client in each jurisdiction where advice is dispensed.

Consideration No. 3: How Are In-House Counsel Treated?

Not just the client, but in-house counsel themselves are often not afforded equal protections abroad as they expect domestically. In the United States, counsel are largely treated identically regardless of whether they operate in-house or outside the organization so long as they provide legal advice (as opposed to commercial or technical guidance).

This landscape shifts dramatically in foreign jurisdictions. Some countries do not extend any privilege protections to in-house counsel, not viewing them as independent from their employers. Here, in-house counsel must rely on local outside counsel to protect privilege much more so than in the United States, and at a significant cost to the company. Thus, in-house counsel must determine whether their communications will be afforded protection or whether outside counsel must be retained to handle sensitive issues.

Consideration No. 4: Determine the Applicable Work Product Protections

The uncertain treatment of work product across jurisdictions poses another challenge for counsel advising cross-border clients. Even within the broad shield of protection provided in the United States, significant differences on work product privilege exist. Courts apply varying degrees of tests as to what constitutes preparation in anticipation of litigation. Some courts look at whether the "sole" or "predominant" purpose of the document was anticipation of litigation; if it was not, then the document may not be privileged. Other courts are more lenient, focusing on whether litigation is the primary (not sole) motivating factor for the document's creation.

Even more so in foreign jurisdictions, counsel should determine the extent of work product protection available. While common law countries often hew closely to the U.S. approach on work product, shielding documents and communications prepared for the dominant purpose of litigation, other countries provide significantly less protection. In some jurisdictions, prosecutors may obtain and use in-house counsel documents against their company—regardless of confidentiality or the fact that they were prepared in anticipation of litigation. For instance, the European Union (EU) assessed a penalty of over $2,000,000 against John Deere after a European Commission investigation obtained and relied on in-house counsel's legal opinions and reports concerning potential competition law violations. The company paid the price for discovering too late that in-house counsel do not enjoy a similar level of work-product privilege in the EU as in the United States. Similarly, in Russia, documents written by in-house counsel are not privileged and even highly confidential information such as commercial secrets or personal data must be disclosed at the request of a court.

Consideration No. 5: Does the Common Interest Privilege Apply?

Counsel should also determine whether joint defense privileges are available. Some jurisdictions protect "common interest" communications that allow parties aligned in interest to share their respective attorney-client communications without waiving privilege. While many U.S. jurisdictions recognize common interest protection, some require additional hurdles to be met, such as requiring impending litigation. For example, states like New York, require a palpable threat of litigation. Other states like Delaware recognize a common legal interest exception to the waiver doctrine without requiring a threat of litigation. And on the far end of the spectrum, Texas requires actual pending litigation and for the communications to be between allied litigants for the common interest exception to apply.

The common interest doctrine may not exist in foreign jurisdictions or may exist in a significantly different capacity. Many common law countries recognize the common interest privilege and provide for generally broad protection, and may even allow for broader protections of predominantly commercial common interests.

By contrast, in many civil law jurisdictions, correspondence between the parties, or between one party's counsel and the other party, is often not confidential and may be required to be produced in court. The critical consideration in each of the above is counsel beware.

Michael Sukenik is general counsel and corporate secretary for Smoothie King. 

Robert Velevis is a partner in the complex commercial litigation group of the Dallas office of Sidley Austin.