Armed with the US Foreign Corrupt Practices Act (FCPA), US authorities have stepped up their efforts to fight transnational bribery.
The FCPA, which prohibits active bribery of foreign public officials, applies to two broad categories of persons: those with formal ties to the US (stock listing, citizenship, residency, or incorporation) and those who take actions in furtherance of an FCPA violation while in the US. Thus, many European companies are at risk of facing an FCPA investigation. The first question they must ask when confronted with a SEC subpoena is whether communication with their attorneys is privileged and thus protected.
Austrian attorney-client privilege
In Austria, a lawyer’s obligation to secrecy is a vital to the exercise of the legal profession. According to Section 9 para 2 RAO of the Austrian Lawyers Code (Rechtsanwaltsordnung) the lawyer is bound to professional secrecy in matters confided to him or have otherwise became known to him in his capacity as a lawyer and whose confidentiality is in the interest of his client. This duty of confidentiality is recognised by Austrian criminal law, which prohibits criminal authorities from confiscating privileged communication and allows a lawyer to refuse to testify against his client.
US attorney-client privilege
In the US, the scope of the attorney-client privilege is defined by federal common law. It protects confidential communication between a lawyer and his client. However, unlike in Austria, disclosing an attorney-client communication to a third party might waive the privilege as to the entire subject matter of the communication.
Which law applies?
To date, there is no clear criminal case law providing guidance on which privilege laws apply if – from a US law perspective – client data is located in a foreign country. Some guidance comes from patent litigation cases, where US courts have asked two questions: (i) whether foreign or US law applies to the privilege question, and (ii) whether, under the applicable law, the privilege protects the communication in question.
To resolve the first question, in instances where the alleged privileged communications took place in a foreign country or involved foreign attorneys or proceedings, courts defer to the law of the country that has the “predominant or the most direct and compelling interest in whether those communications should remain confidential”. That country may be the foreign country in which the communications took place. This analysis is referred to as the touching base test or the contact analysis. The factors considered are whether the relevant communications involved US attorneys, whether the client was a US resident attempting to protect a US right, and whether the proceedings at issue takes place in the US. The second question is then resolved by evaluating the applicable privilege laws.
Against this backdrop, there is a substantial risk that only US privilege laws (including the rather strict waiver rules as described above) will apply with respect to all attorney-client communications related to the FCPA investigation. Therefore, the first step for a company faced with an FCPA investigation by must be to ensure compliance with US attorney-client privilege rules. Otherwise, it might accidentally waive its privilege with respect to all communications relating to the investigation by providing the US authorities with a privileged document.
There is a substantial risk that only US privilege laws (including the rather strict waiver rules) will apply with respect to all attorney-client communications related to the FCPA investigation.