practicing ethically in rule-of-law challenged countries … · bribes to nigerian government...

Practicing Ethically in Rule-of-Law Challenged Countries Cristina K. Lunders Senior Associate Fulbright & Jaworski LLP October 3, 2014

Hypothetical

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• You are working with an attorney in the United States who needs to serve an individual, who resides in Brigadoon, with a subpoena in connection with a federal court case.

• How should this individual be served?

Hypothetical

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• Federal Rule of Civil Procedure 4(f)(1) instructs that the proper method of service is: • By complying with Brigadoon law

regarding service of subpoenas; • Through a Brigadoon court by

sending a letter rogatory; • If not prohibited by Brigadoon law,

by (i) personally delivering a copy of the subpoena, or (ii) using any form of mail that requires a signed receipt; or

• By obtaining a U.S. court order for alternative service.

• How do you proceed?

Today’s Topic

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• Attorneys practicing in the U.S. may face issues that implicate foreign law. • Some of these countries may face rule-of-law

challenges. For example: ‒ A lack of transparency ‒ Corruption in the legal and judicial systems.

• How can attorneys navigate these systems?

Topics to be Discussed

• “Practicing” Foreign Law • Ethical Rules of Competence • Unauthorized Practice of Law • Applicable Laws in Direct Conflict

• Low-Transparency Legal Systems • Corruption

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Hypothetical

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• Continuing our earlier scenario, you decide to conduct internet research on Brigadoon’s law regarding service of subpoenas, and consider serving the individual in compliance with Brigadoon law.

• What are the potential pitfalls?

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“Practicing” Foreign Law


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• Representation of a client may involve issues that implicate both U.S. and foreign law. • Attorneys in the U.S. should generally offer advice on U.S. law (i.e.

federal and state law (for states in which they are licensed)).

• Attorneys providing advice on foreign law should be wary of potential pitfalls that can arise from failing to retain local counsel, such as: • Disciplinary action under a state bar’s ethical rule of competence;

or • Foreign jurisdictions considering such advice as the unauthorized

practice of law.

Ethical Rules of Competence

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• U.S. lawyers advising on foreign law have an ethical duty to do so competently. • "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.” – ABA Model Rule 8.5

• This duty can require an attorney to acquire adequate knowledge of the relevant foreign law, or retain local counsel to provide such advice.

Ethical Rules of Competence, cont’d.

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• If an attorney fails to uphold this duty, the disciplinary board of the jurisdiction in which the attorney is licensed could take disciplinary action, which can include: • Reprimand, • Probation, • Suspension, or • Disbarment.

• The disciplinary board of the jurisdiction in which the attorney is providing or offering to provide services could also take disciplinary action.

Unauthorized Practice of Law

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• The definition of the “practice of law” varies among different countries, and consequently, attorneys providing advice on foreign law may unknowingly engage in the unauthorized practice of law.

• There have been cases where a foreign jurisdiction has alleged U.S. attorneys engaged in the unauthorized practice of law.

Unauthorized Practice of Law, cont’d.

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• Lawyers Collective v. Bar Council of India (Dec. 16, 2009) • Bombay High Court held that a decision by the Reserve Bank

of India (RBI) allowing foreign law firms to open liaison offices in India was not justified.

• Two U.S. multinational law firms headquartered in New York and one U.K. multinational law firm headquartered in London were permitted by the RBI to open liaison offices in India.

• The court held that although these were “liaison” offices, the attorneys were allegedly practicing law in non-litigious matters by: ‒ Presenting themselves as experts in the field of law; and

‒ Rendering legal assistance by drafting documents, advising clients, and giving opinions.


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• Tips • Where possible, avoid providing advice on foreign law

without appropriate guidance. • Retain foreign counsel to guide you through complex

legal systems. • Be wary of local counsel who do not understand your

commitment to practice ethically and all that entails.


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• Tips (cont’d.) • Utilize available resources to identify competent

counsel, such as: ‒ The international law section of state or local bar

associations; ‒ The foreign country’s embassy or consulate; and ‒ The Martindale-Hubbell Directory search engine.

Hypothetical

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• Continuing our earlier scenario, you serve your subpoena, but the subpoenaed party refuses to provide documents, claiming the Hague Evidence Convention prohibits the removal of such documents from Brigadoon.

• What discovery laws apply?

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Applicable Laws in Direct Conflict

Applicable Laws in Direct Conflict

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• Attorney advising on foreign law should also be aware of barriers in foreign legal systems which may conflict with U.S. laws or regulations.

• One major barrier is “blocking statutes,” or laws enacted in one jurisdiction to obstruct the local application of a law enacted in another jurisdiction. • Canada's Foreign Extraterritorial Measures Act (FEMA) and

orders issued under FEMA may directly conflict with the U.S.’s Cuban Liberty and Democratic Solidarity (LIBERTAD) Act.

Blocking Statutes

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• One area of legal practice where blocking statutes can be particularly impeding is discovery.

• Blocking statutes in some countries restrict or prohibit the disclosure, copying, transfer, inspection or removal of documents for use in foreign proceedings unless the transfer complies with the Hague Evidence Convention. • The Hague Evidence Convention only permits evidence to be

transmitted to other countries via a letter of request, which can be impractical in some cases.

• Can be implicated where a lawsuit is filed in one country and relevant records are located in another.

Blocking Statutes, cont’d.

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• Examples of blocking statutes: • France’s Law 80-538: Imposes criminal penalties, including

imprisonment, on parties who, among other things, transmit outside of the Hague Evidence Convention process documents or information for use in foreign judicial or administrative proceedings.

• Can present a “Catch 22” situation for an attorney and his or her client. • A U.S. court can sanction a litigant who refuses to produce

documents or information subject to a discovery order, regardless of whether a blocking statute impedes that production.

• A foreign court may sanction local counsel for complying with a U.S. discovery order.

Blocking Statutes, cont’d.

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• Tips • Understand that there can be a direct conflict of laws

in two different jurisdictions. • Obtain advice from local counsel regarding the

subtleties of local law. • Consider what action is in your client’s best interest,

and avoid violating either law.

Hypothetical

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• Continuing our earlier scenario, your local counsel instructs you that the President of Brigadoon makes radio addresses, and those radio addresses become the unwritten law of the country.

• Local counsel seems to recall that the President indicated that the Hague Evidence Convention did not need to be followed.

• Is this radio address enough to defeat the subpoenaed party’s response?

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Low-Transparency Legal Systems


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• What is legal transparency? A legal system is transparent if the individuals subject to its law or attorneys representing those individuals can “see through” the system. For example, transparency includes a determination of: • Whether individuals can understand and comply with the

requirements of laws; • Whether individuals can foresee the consequences of

compliance or noncompliance; and • Whether the legal system has written laws that are available

to the public.

Examples of Low-Transparency Legal Systems

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• Equatorial Guinea • No independent judiciary. • Laws are created by presidential decrees, which are not

published in an official manner for public display or knowledge. ‒ Even justices of EG’s Supreme Court have trouble accessing legal

archives and current legislation.

‒ For example, in February 2005, after allegations of corruption, EG’s president issued a decree ordering all civil servants and members of the armed forces to declare their assets to a national public ethics commission, but failed to specify whether the order included the president, and failed to include any penalties for non-compliance.

Examples, cont’d.

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• Lack of finality in a court’s decision • District Court A issues a take-nothing judgment against

Plaintiff. After that judgment, Plaintiff files the exact same case in District Court B, and is awarded damages.

• Lack of clarity in a court’s jurisdiction • District Court A, which traditionally has not exercised

personal jurisdiction over individuals residing in District B, allows Plaintiff to proceed with a case against Defendant, who resides in District B, even though there is no connection between Defendant and District Court A.

Examples, cont’d.

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• Lack of a central filing system for property records • Bank executes a $50,000 loan with Mr. Smith and holds his

property deed as collateral. • Mr. Smith later defaults on the loan, and when the Bank tries

to foreclose on the property, it discovers that Mr. Smith transferred the property, before the loan was closed, but notice was not provided to the bank because local law does not require the new property owner to file the transfer.

• How can attorneys navigate these legal systems?


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• Practice Tips • When the legal system you're working in lacks transparency,

you need to ensure your actions are transparent. • Questions those practicing in low-transparency legal

systems should ask themselves: ‒ What am I basing my actions and decisions on? ‒ What reasonable steps have I taken to verify the legal authority I

am relying on? ‒ What reasonable steps have I taken to verify the

appropriateness of my actions?

• Try to avail yourself of a more transparent legal system.

Hypothetical

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• Continuing our earlier scenario, local counsel informs you that he can have the local police seize responsive documents, but he needs a sizeable retainer before he takes any action.

• Permissible?

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Corruption

Corruption

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• Corruption generally refers to providing value to an individual (or group of individuals) to obtain or retain business or a business advantage (particularly when that business or business advantage is provided by a government).

• Corruption affects the business and governance systems of many countries, both developed and developing.

Corruption Perception Index 2013

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Source: Transparency International Corruption Perceptions Index 2013 - an annual index of 178 countries, indicating the perceived level of public-sector corruption in a country/territory: (http://www.transparency.org).

Corruption

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• Corruption is a significant issue in the legal profession.

• In 2010, the International Bar Association, Organization for Economic Co-operation and Development, and the United Nations Office on Drugs and Crime conducted a survey concerning corruption in the legal profession. • Surveyed 642 legal professionals in 95 jurisdictions.

Corruption

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Source: Risk and Threats of Corruption and the Legal Profession. International Bar Association, Organization for Economic Co-operation and Development, and the United Nations Office on Drugs and Crime – survey of 574 IBA members concerning corruption in the legal profession.

Case Example

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• TSKJ: 2009-2012, $1.15 billion • A four-company joint venture allegedly paid $182 million in

bribes to Nigerian government officials, in part through Jeffrey Tesler (a UK solicitor), winning four contracts to build liquefied natural gas facilities on Bonny Island, Nigeria, worth over $6 billion.

• In addition to penalizing members of the joint venture a total of over $1.8 billion, enforcement authorities also went after Tesler. ‒ Tesler was neither a U.S. citizen nor a resident. He fought extradition to

the U.S., but was unsuccessful. ‒ Tesler was sentenced to 21 months in prison, ordered to forfeit $149

million, and was also fined $25,000.

Corruption

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• The U.S. battles corruption of foreign public officials through the U.S. Foreign Corrupt Practices Act (“FCPA”), which applies to U.S. companies, citizens, or residents, whether or not they act within or outside of the U.S.

• Many foreign jurisdictions also have anti-corruption laws.

• Some examples: ‒ United Kingdom, Russia, China, Brazil, Canada, Australia,

Germany

The FCPA

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• Foreign Corrupt Practices Act, 15 U.S.C., 78dd-1 et seq., 78m, enacted in 1977.

• Creates both civil and criminal liability for individuals and companies and is enforced by the Department of Justice and the Securities and Exchange Commission.

• Two components: • Anti-bribery provisions: prohibit offering or providing anything

of value to a foreign official to obtain or retain business, direct business to any person, or obtain a business advantage.

• Accounting and internal controls provisions: require U.S. public companies to maintain accurate books and records and internal controls sufficient to detect and prevent violations.

Hypothetical

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• Continuing our earlier scenario, this situation presents several red flags, including: • Local counsel requests a large upfront

payment; and • Local counsel suggests that he/she can get

government officials to take action (unclear whether action is legal or not).

• Red flags should be addressed to determine if a reasonable, non-corruption-related explanation can be provided for the red flag. In the absence of a reasonable explanation, the inference is that these red flags present a corruption risk.

Hypothetical

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• Opposing counsel files a motion to quash the subpoena. You seek to file a motion to have their case thrown out for lack of jurisdiction. The court clerk refuses to stamp your motion as filed unless you make a one-time cash payment of $50.

• Permissible?

The FCPA

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• Under the FCPA, in general there is no prohibition on paying the government for services, licenses, etc. • However, in a low-transparency jurisdiction it can be difficult to

determine whether the money is going to the government or a corrupt official.

• Facilitating Payments Exception • Made to secure “routine governmental action” • Must be low-value, reasonable, and well-documented • Many local laws prohibit them • Examples include: ‒ Obtaining copies of permits, licenses, or other official documents ‒ Processing governmental papers (e.g., visas, customs clearance) ‒ Providing police protection ‒ Scheduling inspections

Hypothetical

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• Continuing our earlier scenario, the court clerk is a government official.

• The $50 payment could be: • A legitimate processing fee

paid to the government; • A facilitation payment (which

may be illegal under local law); or

• A bribe.

Judicial Corruption

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• An effective judiciary guarantees fairness in legal processes, yet many countries struggle with judicial corruption, which can take many forms, including: • Political interference from executive or legislative branches

of government to influence judges’ rulings; and • Bribery of judges and/or other court personnel.

• Rule-of-law challenged countries face a high risk of judicial corruption, but such corruption can occur in other countries as well.

Examples of Judicial Corruption

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• Ecuador • Republic of Ecuador v. ChevronTexaco Corp. (March 4,

2014) ‒ After losing a $181.1 billion judgment in an Ecuadorian court

(later reduced to $9.5 billion by the Ecuador Supreme Court), Chevron filed multiple lawsuits against the American plaintiffs' attorneys, American consulting firms, and Ecuadorian co-conspirators involved (the “Ecuador Plaintiffs”) alleging fraud and corruption in the Ecuadorian case.

Examples of Judicial Corruption

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• Ecuador: Chevron (cont’d). • The United States District Court of the Southern District of

New York agreed with Chevron, finding overwhelming evidence of fraud in the Ecuadorian case, including evidence showing: ‒ The bribery of the deciding Ecuadorian judge;

‒ An environmental report allegedly written by an “independent expert” was actually written by the Ecuador Plaintiffs’ American attorneys;

‒ The Ecuador Plaintiffs schemed to engage in judicial intimidation; and

‒ The Ecuador Plaintiffs participated in a concerted effort to provide misinformation to members of the U.S. Government, Chevron investors, and others to force Chevron to settle.

• The U.S. District Court therefore refused to enforce the judgment against Chevron.

Examples of Judicial Corruption, cont’d.

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• Indonesia • The Constitutional Court Chief Justice, Akil Mochtar, was

charged with corruption in October 2013 for allegedly receiving a $262,000 bribe to issue a favorable verdict in an election dispute. An investigation revealed that Mochtar had cash and assets worth more than $6 million.

• China • In 2004, two vice-presidents of the Wuhan Intermediate

Court, three deputy divisional directors, seven mid-ranking judges and one court clerk, were tried for receiving more than $600,000 in bribes. The bribery investigation implicated more than 100 other judges and court officials who also participated in some sort of bribery.

Examples of Judicial Corruption, cont’d.

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• United Kingdom • In November 2011, Munir Patel, a clerk at Redbridge

Magistrates’ Court, was convicted of taking £500 ($828) to avoid entering details of a traffic summons on a court database. The indictment alleged that Patel had engaged in similar misconduct for over a year and earned at least £20,000 ($33,159) by helping 53 offenders. Patel was sentenced to three years for bribery and six years for misconduct in a public office, and was the first person convicted under the U.K. Bribery Act.

Minimizing Corruption Risk

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• Tips: • Be cautious in selecting and observant in

supervising local counsel. ‒ Do not recommend or retain local counsel that has displayed or

implied an ability to influence a foreign official.

• When making a payment to a government official: ‒ Request documentation, such as an official record, a receipt, or

an invoice; and ‒ Be transparent in your intent and expectations.

Minimizing Corruption Risk, cont’d.

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• Tips (cont’d): • When in doubt, treat all foreign individuals like they are

government officials. • Seek guidance before making a payment that you

believe may be questionable. ‒ Non-compliance with the FCPA can be very costly.

• Consult with local counsel to help you navigate foreign judicial systems.

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Questions?

Thank you! For more information please contact:

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Cristina K. Lunders Senior Associate Norton Rose Fulbright LLP Tel +1 713 651 5619 [email protected]

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