CROSS BORDER ETHICS ISSUES
Written and Presented by:
Steven M. Richman, Esq.
Duane Morris
1940 Route 70 East, Suite 200
Cherry Hill, NJ 08003-2171
856.874.4213
smrichman@duanemorris.com
DISCLAIMER: THE MATERIALS HEREIN ARE NOT LEGAL ADVICE BUT PRESENTED FOR GENERAL INFORMATIONAL PURPOSES, AND
NO ATTORNEY-CLIENT RELATIONSHIP IS ESTABLISHED HEREIN. FOR SPECIFIC AND APPLICABLE LEGAL ADVICE, CONSULT AN
APPROPRIATE LEGAL PROFESSIONAL LICENSED TO PRACTICE LAW IN YOUR JURISDICTION
Initial Comment: Anticipate
 Anticipate eventualities: all the “what ifs”
 Force Majeure: what excuses performance
 Are your clauses susceptible of multiple meanings?
 Whose language?
 What are the ethics rules in the jurisdictions where the
dispute is or where the contract will be performed?
 What legal acts will you be performing?
Choice of Law issues
 Rules on limitations on damages and other relief
 Recovery of attorney's fees and costs
 Privilege: substantive versus procedural?
 Choice of forum issues
Overview
 Minimize disputes and resolve expeditiously
 Choice of law and forum
 Arbitration versus litigation
 Attorney-client privilege
 Discovery and privacy
 International parties involve different countries and
different legal system, with different expectations
 Civil law versus common law
 Different translations of English and idioms
Discovery Issues
 Two broad issues in foreign discovery: “blocking”
statues and data protection/privacy laws.
 Blocking statutes prevent transfer of certain types of
documents or information for use in foreign
litigation and can contain criminal sanctions.
 One solution is to use Hague Convention on Taking
of Evidence Abroad in Civil or Commercial Matters,
which permits requests for documentary and
deposition discovery, though various countries have
opted out or limited what is available
Discovery Issues (cont’d)
 Discovery of foreign companies in U.S. litigation may be obtained
through federal rules of civil procedure. Societe Nationale Industrielle
Aerospatiale v. U.S. Dist. Court for S. Dist. of Iowa, 482 U.S. 522
(1987). Court has discretion to compel discovery.
 However, Aerospatiale emphasized that “American courts should
therefore take care to demonstrate due respect for any special
problem confronted by the foreign litigant on account of its
nationality or the location of its operations, and for any sovereign
interest expressed by a foreign state.” Considerations relevant to the
comity analysis include: (1) the importance to the litigation of the
information requested; (2) the specificity of the request; (3) whether
the information originated in the United States; (4) whether alternative
means exist to obtain the information; and (5) whether the interests of
the United States outweigh the interests of the foreign jurisdictions in
maintaining confidentiality.
Discovery and Privacy
 For European Union Member States, data protection
and privacy legislation must comply with Directive
95/46/EC, which member states and establishes a
“floor” for privacy protection
 Problem is competing requirements engendered by
discovery demands to foreign litigants in U.S. courts,
or those with non-U.S. data; when faced with a U.S.
court order requiring production in litigation: “Do
you prefer I go to jail here, or there?”
 “Voluntary” compliance may also be problematic
Ethics Implications
 ABA Model Rule 5.5 addresses safe harbors in U.S.
for transient practice
 Rules against aiding and abetting unauthorized
practice of law
Alternate Dispute Resolution
 Arbitration is binding, out of court resolution;
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contract must be clear as to what and who, and
applicable rules
Mediation (non-binding facilitation)
Litigation is traditionally in-court resolution
A court will generally apply its own procedures and
the chosen law
Arbitration awards generally enforceable by treaty;
at present no treaty for enforcement of foreign
judgments
Arbitration
 Must be in writing; public policy in favor of
 Awards enforceable by treaty, and federal and state statutes
 Hall Street limits appeal to federal statutory grounds
 Supposedly faster, private, confidential, cheaper, though
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not all agree
Scope of clause determines issues and authority
Rules of evidence do not apply unless specified
Dealing with vacancies, discovery, emergencies
Absence of traditional evidentiary expectations, as
settlement discussions
Scope
 Scope important to determine what is arbitrable and
what is not
 IBA Guidelines for Drafting International
Arbitration Clauses
 AAA Drafting Dispute Resolution Clauses
 Address authority of tribunal, document production,
confidentiality issues, allocation of costs and fees,
qualifications of arbitrators, time limits, finality,
cooling off periods, mandatory versus permissive,
multiparty and multicontract issues, preliminary
relief, all or none, reasoned opinion, language
IBA Rules on Taking of Evidence
 Issued as a resource to parties and arbitrators
 Adopt in arbitration clause in contract
 Provide mechanisms for the presentation of documents,
witnesses of fact and expert witnesses, inspections, as well
as the conduct of hearing
 Used together with the regime’s rules
‘[In addition to the institutional, ad hoc or other rules chosen
by the parties,] [t]he parties agree that the arbitration shall
be conducted according to the IBA Rules of Evidence as
current on the date of [this agreement/the commencement of
the arbitration].’
Ethics Implications
 No rules of evidence, so settlement proposals
 Federal rules of evidence prohibit admissibility of
evidence of (1) consideration or a promise or offer
thereof in an attempt to compromise a claim and (2)
“conducts or statements” in settlement negotiations
(except in a criminal case and in a regulatory
context) when offered to prove “liability for,
invalidity of, or amount of” a disputed claim or to
impeach a prior inconsistent statement
ABA Model Rule 5.5
 Rule 5.5—unauthorized practice of law and
multijurisdictional practice of law
 Precludes practice unless authorized, and has safe
harbors—such as temporary practice relating to
taking discovery or participating in an arbitration.
 Predicate for ABA rule was that it related to lawyers
admitted in other US jurisdictions. Check local
adoptions.
Ethics Implications (cont’d)
 When the evidentiary strictures against evidence
relating to settlement and compromise are
introduced in an arbitration proceeding?
 Unless one’s arbitration clause is clear as to specific
exclusions or to what extent state law privileges will
apply, or the arbitration regime’s rules expressly deal
with the issue, the kinds of prohibitions usually seen
in court will not necessarily preclude introduction of
settlement offers or discussions into the arbitration
process
National Bulk Carriers, Inc. v. Princess Management
Company, Ltd.
 Among other arguments, the losing party sought to
vacate an award on the grounds that certain alleged
ex parte comments had been made to the arbitration
panel; the district court and court on appeal found
the comments to be “offhand” but, even if they were
deliberate, the arbitrator had stated it to be
irrelevant. This was not enough for the court on
appeal to find prejudice so as to vacate an award. 597
F. 2d 819 (2nd Cir. 1979).
Bowles Fin. Group v. Stifel, Nicolaus & Co.
 Court decided the specific question of whether an
award should be vacated when the winning attorney
“deliberately, intentionally, affirmatively and
repeatedly communicated to the arbitrators an offer
of settlement” from the losing party to influence the
result
 During the arbitration, the attorney had introduced
the settlement offer to prove liability of the other
party.
 Answer: No.
Columbia Medical Center of Lewisville, Subsidiary L.P. v.
Heller
 Arbitrators admitted three settlement proposals into
evidence, even though they had ruled them not
proper subjects of discovery, since all parties already
possessed them. The arbitration had been conducted
under AAA rules, which specifically address the lack
of applicability of rules of evidence.
 Court noted AAA Guide for Commercial Arbitrators
addresses such evidence but to arbitrator’s discretion
 Refused to vacate the award on this ground
Choice of Law
 Establishes which law will govern the substantive issues
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relating to contract and related claims
US and foreign courts generally enforce, but subject to
public policy and overriding EU law
Applies in arbitration as well as court
If absent, courts do their own analysis
Determine choice of law up front, not as a tag-on at end
can affect outcome
Establishes common understanding of the clauses
“Choice of law” or “conflict of law often used
interchangeably
Choice of Law
 US courts generally enforce; if not specified, various
tests (substantial relationship, e.g.)
 Exceptions:
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--against public policy
--no reasonable relationship to forum
• US courts also apply foreign law (F.R.C.P. 44.1)
• Can affect ability to terminate contract or amount of
damages, entitlement to interest, and others
• Scope: tort and contract, “relating to and arising out
of” versus “interpretation,” e.g.
Why Choice of Law is Important
 If no contractual choice of law clause, court chooses
 Creates uncertainty
 Courts generally first look to see if a conflict; if not,
don’t choose law
 Tests: “traditional,” the “significant contacts,” the
Restatement 2d,” “lex fori,” “better law” and
“combined modern.”
Substance versus Procedure
 Governs substantive, not procedural issues
 Courts apply choice of law provision to the
substantive law of the chosen state, but not to
procedural or practice questions
 Forum state governs procedural issues
Scope
 Scope of the choice of law clause defined what types
of claims would be governed by that choice of law.
The issue is the same with regard to forum selection.
The language of the forum selection clause
determines its scope. Schering Corp. v. First
Databank, Inc., 479 F. Supp. 2d 468, 470 (D.N.J.
2007).
Forum Court Uses Local Law To Determine:
 form of claim (tort or contract)
 necessary or indispensable parties
 rules regarding service of process and notice
 rules of pleading and pre-trial practice
 whether a claim can or must proceed as counterclaim, defense or set-off
 conduct of trial (e.g., entitlement to jury and role of judge)
 means of securing obedience to court orders
 enforcement of judgment
 debtor exemptions for purposes of collection efforts
 burden of proof, evidentiary burdens and presumptions
 sufficiency of evidence (to extent these relate to conduct of trial as
opposed to substantive law)
Practical Point
 It is helpful to have broader language that applies to
claims “relating to the relationship” between the
parties, or words to that effect. In general, the
broader the language in your choice of law clause,
the better chance exists that a court will apply a
contractual choice of law clause to tort claims as well.
 "[this] Agreement shall be construed under the laws
of the State of California” did not include tort claims.
Caton v. Leach Corp., 896 F.2d 939, 942 (5th Cir.
1990).
Which Means:
 Important to consider choice of law in conjunction
with choice of forum
 E.g., in N. Bergen Rex Transp. v. Trailer Leasing Co.,
158 N.J. 561, 569 (1999), the issue was the
reasonableness of attorney's fees in a lease dispute.
 Though Illinois law was substantive, court held
attorney's fees were procedural and examined the
reasonableness of contractually permitted fees under
New Jersey law, and not Illinois law.
Practical Pointer
 Raise the issue early in the drafting process, not
when it is done
 Consider neutral jurisdictions if neither party
concedes the other’s jurisdiction.
 E.g., consider New York as reasonable and
established commercial venue
No Reasonable Relation
 Restatement looks to whether:
“chosen state has no substantial relationship to the
parties or the transaction and there is no other
reasonable basis for the parties choice”
E.g. above of New York—suppose a Danish company
and Louisiana distributor—might agree on New York
as accepted commercial law
If chose, say, Alaska, might not be deemed
reasonable given these parties
Factors in Choosing the Forum
 Costs of litigation—costs of traveling
 Need for witnesses
 Familiarity with decisions and practice
 Procedural rules
 Ability to recover certain fees and costs
 Particular privilege rules may differ
 Jury versus non-jury
 Local Counsel
 Many others
Why You Want a Forum Selection Clause
 Generally enforceable
 Eliminate uncertainty
 No guaranty, but increases chances of chosen forum
 Strong underlying policy: "in the light of present-day
commercial realities and expanding international
trade we conclude that the forum clause should
control absent a strong showing that it could be set
aside." The Bremen v. Zapata Off-Shore Co., 407
U.S. 1, 15 (1972).
The Forum Should Have a Reasonable Basis
 Economic considerations also underlie policy
reasons for enforcing forum selection clauses, even
where they have not necessarily free negotiated, but
the bound party was nonetheless on notice prior to
entering into the agreement; such will be enforced
where the parties were on notice of it and
enforcement is not fundamentally unfair. Carnival
Cruise Lines v Shute, 499 U S 585 (1991).
Ethics Considerations
 ABA Model Rule 1.1: Competence
 Need to evaluate forum in terms of the ramifications
Forum Need Not Provide All Remedies
 Even where enforcement of the forum selection
clause may, in connection with a choice of law
provision, deprive a party of certain remedies, that is
not enough to deny enforcement, provided it is not
unreasonable and the parties still have comparable
remedies. Shell v. R.W. Sturge, Ltd., 55 F.3d 1227,
1231 (6th Cir. 1995)("
Privilege
 Privilege is treated as a procedural issues, and
federal courts will apply the privilege laws of the
jurisdiction in which they sit.
 A party has the burden of proving the applicability of
a foreign privilege if it wants to assert it. In re Air
Crash at Belle Harbor, 241 F.R.D. 202, 204 (S.D.N.Y.
2007). If a party does assert the viability of a foreign
privilege, the court will undergo a traditional conflict
of law analysis to determine if the foreign privilege
applies. In re Rivastigmine Patent Litig. (MDL No.
1661), 237 F.R.D. 69, 74 (S.D.N.Y. 2006).
Foreign Privilege Issues
 In United States, attorney-client privilege generally
recognized for in-house counsel
 Not extended in European Union to communications
between in-house counsel and employees, mainly
due to claim of lack of dependence
 Varies from jurisdiction to jurisdiction; e.g.,
Germany recognizes a limited in house privilege
under certain circumstances
 Privilege generally won’t cover business advice
Foreign Privilege Issues--Arbitration
 IBA Rules on Taking of Evidence in Arbitration Article 9
provides for exclusion by the tribunal of evidence or
discovery due to “legal impediment or privilege under the
legal or ethical rules determined by the Arbitral Tribunal to
be applicable…”
 In so determining, tribunal to consider, inter alia, “the
expectations of the Parties and their advisors at the time
the legal impediment or privilege is said to have arisen” and
any possible waiver, as well as “the need to maintain
fairness and equality as between the Parties, particularly if
they are subject to different legal or ethical rules.”
Domestic Privilege
 The issue exists domestically as well. In Valencia v.
Colo. Cas. Ins. Co., 2007 U.S. Dist. LEXIS 97721
(D.N.M. Dec. 6, 2007), the court note that federal
law will govern work product issues, but attorneyclient issues are a matter of state law. Attorney client
privilege is a matter of state procedural law from the
federal standpoint, but determining which state’s
privilege applies is still the subject of a choice of law
analysis; state courts will also undergo that analysis.
Sterling Fin. Mgmt., L.P. v. UBS PaineWebber, Inc.,
336 Ill. App. 3d 442 (Ill. App. Ct. 1st Dist. 2002).
Foreign Privilege: Some Comments
 Can be criminal if violated in civil law countries
 Issues in determining who is an “attorney” where
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different types of legal functionaries
May foster inefficient use of outside counsel for
simple communications
May depend on context—in EU, the Akzo Nobel case
was a competition investigation by EU.
Canada: cases split; may depend on expectation of
privilege when foreign lawyer involved.
Circumstances and substance of advice matter
Injunctions and Fraud
 Asset freezing orders: Mareva Injunctions
 Anton Pillar orders (non-US common law
jurisdictions)
 Enforcement of non-final orders by comity
Aid of Foreign Litigation
 Bankruptcy-ancillary proceedings
 28 U.S.C. Section 1782—allows parties in
proceedings outside the United States to obtain
discovery here.
ABA Model Rule 8.5
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(a) Disciplinary Authority. A lawyer admitted to practice in this jurisdiction is subject to
the disciplinary authority of this jurisdiction, regardless of where the lawyer's conduct
occurs. A lawyer not admitted in this jurisdiction is also subject to the disciplinary
authority of this jurisdiction if the lawyer provides or offers to provide any legal services
in this jurisdiction. A lawyer may be subject to the disciplinary authority of both this
jurisdiction and another jurisdiction for the same conduct.
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(b) Choice of Law. In any exercise of the disciplinary authority of this jurisdiction, the
rules of professional conduct to be applied shall be as follows:
(1) for conduct in connection with a matter pending before a tribunal, the rules of the
jurisdiction in which the tribunal sits, unless the rules of the tribunal provide otherwise;
and
 (2) for any other conduct, the rules of the jurisdiction in which the lawyer's conduct
occurred, or, if the predominant effect of the conduct is in a different jurisdiction, the
rules of that jurisdiction shall be applied to the conduct. A lawyer shall not be subject to
discipline if the lawyer's conduct conforms to the rules of a jurisdiction in which the
lawyer reasonably believes the predominant effect of the lawyer's conduct will occur.
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ABA 2020
 R&R 107D: Amends rule 8.5 comment regarding
designation of choice of law for purposes of applicable law
governing discipline; rule always subjects lawyer to home
jurisdiction’s discipline, but lawyer can also be subject to
discipline in other jurisdiction. Rule provides that in crossborder situations where lawyer in arbitration/court, that
place’s jurisdiction applies, and in other conduct, look to
area of predominant effect and no discipline there if lawyer
followed rules and had belief that he/she was complying
with jurisdiction where predominant effect of the conduct
would be. Comment added to state that factor in
reasonable belief would be a choice of law provision in
written agreement with client (e.g., engagement letter).
8.5 Comments
 The ABA did not change model rule, but added comment to allow as
another factor, the authority to consider an agreement where lawyer
and client agree what law should apply, and that is a factor in assessing
the lawyer’s reasonable belief:
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 “With respect to conflicts of interest, in determining a lawyer's
reasonable belief under paragraph (b)(2), a written agreement between
the lawyer and client that reasonably specifies a particular jurisdiction
as within the scope of that paragraph may be considered if the
agreement was obtained with the client's informed consent confirmed
in the agreement.”