Legal privilege, confidentiality and professional secrecy Q&A: Dubai International Financial Centre by Zakir Mir Esq. (Repost from the Practical Law Company)

This week, Zakir Mir was featured on Practical Law, where he wrote about Confidentiality and Professional Secrecy in the DIFC, and Dubai.

Subscribers to Practical Law can access the article here as well: https://uk.practicallaw.thomsonreuters.com/w-020-5789

Disclosure

1. What are the rules relating to disclosure of documents by parties to civil litigation in your jurisdiction? Can a party be compelled to make specific disclosure of certain documents?

Generally, a party must disclose to the court and other parties only the information and evidence it relies on when making a claim or defence before the court in the Dubai International Financial Centre (DIFC). This rule mirrors the general disclosure or production burden found in the United Arab Emirates (UAE) civil court system. This is a marked departure from the broad discovery requirements and procedures generally seen in the US and other common law jurisdictions.

Legal professional privilege, confidentiality, professional secrecy (Privilege)

2. Are communications between a lawyer and their client protected by rules on legal professional privilege, confidentiality or professional secrecy in your jurisdiction?

Any licensed lawyer can apply to be admitted to the DIFC courts. It is a common law jurisdiction operating within the UAE civil law system, based on the English common law system. It has its own law but will apply the laws specified in a contract for commercial disputes brought before it, for example if the contract specifies UK law, it will apply UK law. Otherwise, its "original" jurisdiction applies only to the companies and entities incorporated "within the DIFC," which is an area within downtown Dubai. Its essential purpose is to provide a forum for international businesses to litigate and/or to resolve disputes in accordance with the law of their choice (as specified in the contract). The case law of the DIFC is only about ten to 15 years old, and once a judgment is reached, it must be executed on the mainland (for most companies who operate in the mainland). As a result, each case is highly specific.

Generally, the rules of client confidentiality apply in the DIFC jurisdiction. Information is deemed confidential, which if revealed to an adverse (or neutral) party, could prejudice the client's interests. Registered lawyers in the

DIFC are bound by a detailed set of ethics rules that govern lawyer-client privilege and confidentiality. The DFIC does not individually regulate criminal, anti-trust or tax issues. The civil courts within the jurisdiction manage civil and commercial issues. Consultants outside the DIFC, or unregistered practitioners, are bound by the ethics rules in their home jurisdiction or they may be regulated by the Government of Dubai Legal Affairs Department. In theory, the DIFC courts may apply different notions and standards of privilege to two separate counsel appearing in the same case.

The DIFC is a financial free zone in the Emirate of Dubai exempt from the civil and commercial laws of the UAE and operates largely as a self-regulated common law jurisdiction. The UAE criminal laws and regulations, including the regulations on anti-money laundering do still apply in the DIFC.

The DIFC glossary defines privilege as "the right of a party to refuse to disclose a document or to produce a document or to refuse to answer questions on the ground of some special interest recognised by law" (Schedule of Definitions to RDC, Part 2).

Privileged communication is defined in the Regulations of the Dubai Financial Supervisory Authority's (DFSA), as "a privilege arising from the provision of professional legal advice and any other privilege properly applicable by law to the communication in question but does not include a general duty of confidentiality".

The Code of Conduct of Legal Practitioners in the DIFC (DIFC code) imposes a duty on practitioners to keep attorney-client communication private unless the client permits its release, the DIFC court orders the release or it is required by law. This privilege continues even if the client ceases to be a client.

(For more information on specific rules, see Question 3, Question 4, and Question 6.)

Scope of privilege

3. What kinds of documents or communications (such as e-mails, letters, faxes, personal discussions and phone calls) are protected by the rules on privilege? Can this protection be extended to evidence of such communications (for example, a document summarising what was discussed between a lawyer and their client in a phone call)?

Any information that a client communicates to its legal advisor is generally regarded as confidential and may only be disclosed as follows:

• With the client's permission.

• By court order.

• As required by law. (Part C-8(6), DIFC Code.)

This duty is broad and continues even after the legal practitioner ceases to act for the client.

Adverse inferences

4. Can any adverse inferences be drawn where privilege has been claimed?

The court may draw adverse inferences for failure to disclose documents (Part 28, Rules of the DIFC Courts 2018 (RDC)). However, where documents are protected by valid lawyer-client privilege, there are no specific rules for drawing adverse inferences for non-disclosure of privileged information. Adverse inferences are more commonly drawn in the DIFC jurisdiction regarding governing law clauses in contracts.

Exceptions

5. Are there any exceptions to the application of these rules? What are the circumstances in which these rules do not apply?

In general, there are no exceptions to the rules of privilege and confidentiality. The only exceptions would be disclosure or waiver by court order, or with the client's consent.

Types of privilege

6. To claim privilege and prevent disclosure, is it necessary for the communication/document to be specially created for (i) the dominant purpose of legal proceedings which are either reasonably anticipated or existing (litigation privilege); or (ii) for the purpose of obtaining legal advice (legal advice privilege)?

The obligation of confidentiality is quite broad (see Question 3). However, Rule 28.28(2) RDC outlines the concept of "legal impediment or privilege". The court has quite wide discretion to refuse to admit evidence for various reasons, including legal impediment or privilege under the legal or ethical rules that the court determines applicable. This may be highly influenced by the legal practitioner's home jurisdiction and the code of ethics in place there.

Litigants and practitioners usually prefer for the DIFC court to apply their chosen law and professional rules. The main purpose of this is to create a neutral forum for litigating commercial disputes in the Gulf Cooperation Council (GCC) and increase confidence and transparency in the legal system among the international business community.

Other requirements

7. Are there other requirements that must be satisfied for privilege to apply (apart from confidentiality, which is covered in Question 11)?

The privilege requirements depend on the home jurisdiction of the legal practitioner appearing before the court, and the court's application and interpretation of the appropriate ethics rules. (For more information, see Question 6.) As governing law in the DIFC is fixed by contract, and the majority of judges are licensed and qualified elsewhere, the court may only rely on the broad regulations set out in the RDC and the DIFC Code.

Defining the client

8. Who is considered to be the "client" for the purposes of privilege in your jurisdiction? What happens when the client is a company or a corporate entity? Can all employees of a company be treated as the "client" or will the "client" be limited to those employees or representatives of a company who are authorised to give instructions to or to seek advice from the lawyer?

The home jurisdiction of the legal practitioner would be instructive in defining "client". However, in the UAE, there are some narrow interpretations of the law that define the client as the person who:

• Executed a valid power of attorney.

• Has some form of contractual agreement with the attorney.

This, however, is not necessarily a universal definition and the Dubai or UAE courts may diverge from this definition. The answer depends on what type of contract is being litigated before the court, for example, there would be a different outcome depending on whether there is a labour issue, or a commercial contract with New York Law specified as the governing law.

For practical purposes, given that the DIFC is a small geographical space within downtown Dubai, many practitioners in the DIFC courts would be governed by the Government of Dubai Legal Affairs Department or the Dubai Financial Services Authority (for the DIFC). Therefore, the professional rules applicable in Dubai may be applied to the conduct of lawyers, while the law of the Emirate of Dubai (or the governing law by contract), would be applied to the matter.

Defining the lawyer

9. Who is considered a lawyer for the purpose of privilege in your jurisdiction?

The definition of "lawyer" for the purpose of privilege depends on the following:

• Written confidentiality agreement between the parties.

• The parties' home jurisdiction.

• Any executed power of attorney.

• The application and interpretation of ethics rules by the court.

Given this loose definition, it is generally accepted that all legal practitioners in the DIFC, including support staff and trainees, foreign lawyers, in-house lawyers and other professionals are bound by a confidentiality obligation where it may be reasonably implied or found to exist by the court.

It seems likely that the DIFC will consider members of the legal profession to include:

• UAE-qualified local advocates licensed to practice before the civil courts across the Emirates.

• Dubai- or Abu Dhabi-registered legal consultants with foreign legal qualifications and current foreign practising certificates (as regulated by the Government of Dubai Legal Affairs Department established as per Law No. (32) of 2008).

• DIFC-registered lawyers (as registered with the DIFC Dispute Resolution Authority).

10. Will legal advice given by an in-house lawyer of a parent company to a subsidiary company in the same group be protected by rules of privilege in your jurisdiction?

Whether advice given by an in-house lawyer of a parent company to its subsidiary is protected by privilege will depend on whether a conflict of interest arises between the parties. If there is no conflict of interest, the law of confidentiality may apply and the advice may be protected by the rules of privilege as applied by the specific court and judge trying the case in the DIFC.

The majority of cases heard in the DIFC are related to contract-based disputes, therefore, the governing law of the contract is instructive in determining whether an in-house lawyer of a parent company is protected.

Confidentiality

11. Is it a requirement of privilege that the communication (whether oral or written) must have been confidential at the time of coming into existence? What happens if confidentiality is lost?

All DIFC-registered practitioners have a home jurisdiction. The point at which communication becomes confidential or loses that confidentiality depends on the rules of the DIFC practitioner's home jurisdiction and the court's interpretation. The court interprets the application of privilege as and when it is brought up by the parties. This is due to the DIFC being a jurisdiction within a jurisdiction, created solely to facilitate commercial dispute resolution. (For more information, see Question 6.)

Duration of privilege

12. Will documents or communications deemed privileged in the legal matter in which they came into existence continue to be considered privileged in a subsequent legal matter?

The continued privileged status of documents or communications in subsequent legal matters is determined by the governing law of the contract and the home jurisdiction of the legal practitioner. Therefore, this is highly case- specific and while it may continue in one dispute, the privilege may be halted in others.

Loss and waiver of privilege

13. Are there circumstances in which privilege can be lost? If so, how can it be lost? Can it be reclaimed? What happens if a privileged document has been disclosed by mistake?

The loss and waiver of privilege depends on the court's interpretation and the home jurisdiction and governing law of the parties' agreement. Nevertheless, the DIFC court is a court of first instance and does not set precedent. Therefore, there is no applicable case law on the loss or reclamation of privilege. The issue would be decided on a case by case basis.

The governing law in the contract would be the first point of reference. It is generally considered that the second point of reference would be the home jurisdiction. It would essentially depend on what the specific judge reasoned in the matter. The DIFC court is equivalent to a "court of first instance" in the UAE, so it does not set anything resembling precedent in this regard.

14. Who can waive privilege or confidentiality in a document?

Generally yes, confidentiality may be waived. However, the courts may make their own interpretation of the ethics rules governing the legal practitioner. For example, in certain common law jurisdictions, it is possible to waive privilege or confidentiality when a third person attends a private meeting between the client and the attorney. The courts may apply this interpretation on a case by case basis and depending on the practitioner appearing before them. The DIFC Ethics Rules are very vague.

15. Is privilege lost if a confidential document has been disclosed to a limited number of people but has not been made available to the general public?

Loss of privilege for a confidential document that is not available to the public depends on the court's interpretation and the home jurisdiction of the legal practitioner. However, the loss or improper disclosure of confidential documents to the public does not waive privilege in most scenarios if it is not done negligently or deliberately. Most contracts with employees, directors or other key partners usually state that any confidential information may only be shared with the contractor, partner or employee if done under a similar or stronger obligation of confidentiality. This can protect the confidentiality of documents through a chain of contracts.

16. Can a party who has decided to waive privilege in a document (that forms part of a series of interconnected documents) for its own benefit, nevertheless retain privilege in other related documents, even though they may provide the court and the other side with a more complete picture?

Partial waiver of privilege of a group of documents for a party's own benefit may be possible but this is highly case specific, and depends on the court's interpretation of the applicable ethics rules in a particular scenario under the RDC. For example, in Mahesh Srichand Tourani v Dusty Tourani and others [2018] DIFC Claim No CFI-007-2018, the judge held that a witness who testified as the solicitor for the claimant in the Dubai courts, did not waive privilege when testifying. The solicitor testified regarding the arguments made in the Dubai courts in a separate proceeding, on behalf of the claimant. This may not be an exact partial waiver of privilege, it is a key example of where a judge allows a solicitor or lawyer, who may not even be trying the case, to provide testimony on the otherwise confidential communications made between themselves and the client, for the benefit of the client.

Common interest privilege

17. Will privilege in a confidential communication be preserved if it is voluntarily disclosed to a third party who has a common interest in the subject matter of the privileged document or in the legal proceedings for which the document has been created? If so, can such privilege be waived unilaterally by the sharing party?

18. Is it necessary for parties to have an agreement in writing to preserve the common interest privilege or can the common interest be inferred from conduct?

under an obligation of confidentiality, and for the purpose of the claim that forms the basis of the dispute. The primary (home) jurisdiction of the DIFC-registered lawyer would apply.

The court interprets the code of conduct governing the particular legal practitioner in their home jurisdiction when determining whether common interest privilege may be inferred from conduct, not just from a written agreement.

Joint privilege

19.Can parties that retain the same solicitor to advise them on a legal matter or share a joint interest in the subject matter of a privileged communication (such as beneficiary and trustees, partners or parent and subsidiary company) share privileged communication between them without waiving privilege? What are the key requirements to invoke and waive shared/joint privilege?

Privilege may be preserved when confidential information is voluntarily disclosed to an interested third party where the law of the practitioners' home jurisdiction permits this. Usually it is not waived when parties complete disclosure under an obligation of confidentiality, and for the purpose of the claim that forms the basis of the dispute. The primary (home) jurisdiction of the DIFC-registered lawyer would apply.

Part privilege

20. Where a document contains some privileged and some non-privileged information, does the privileged information have to be disclosed or can it be protected from disclosure?

The application of part privilege depends on the relevant rules and interpretation by the court on how the information contained in the whole document fits together and which information should be protected from disclosure. This is highly case specific. (For more information, see Mahesh Srichand Tourani v Dusty Tourani and others [2018] DIFC Claim No CFI-007-2018.)

Other kinds of privilege

21. Are there any rules regarding privilege against self-incrimination and spousal privilege in your jurisdiction? If so, are there any circumstances in which the court can override privilege in such cases and order disclosure?

The DIFC court would apply spousal privilege or the privilege against self-incrimination if it is applicable in the practitioner's home jurisdiction or could be argued to be applicable in the dispute between the parties. However, spousal privilege is unlikely to be applicable or even a relevant consideration in most commercial disputes in the DIFC. The DIFC courts do not hear domestic or criminal matters.

Privilege in an internal investigation

22. Assume that an internal fact-finding investigation is being carried out in relation to an alleged misconduct or fraud in the company. No legal advice is being sought or litigation contemplated at this stage. Are interviews of the employees or the final report to the board of directors considered privileged if the board subsequently decides to obtain legal advice?

Any licensed trial lawyer can apply to be admitted to the DIFC courts. It is a common law jurisdiction operating within the UAE civil law system, based on the English common law system. It has its own law, but will apply the laws specified in a contract, for commercial disputes brought before it, for example if the contract specifies UK law, it will apply UK law. Otherwise, its "original" jurisdiction applies only to the companies and entities incorporated "within the DIFC", which is just a geographical, commercial area within downtown Dubai.

The essential purpose of the DIFC is to provide a forum for international businesses to litigate and/or resolve disputes in accordance with the law of their choice (as specified in the contract). The case law of the DIFC is only about ten to 15 years old, and once a judgment is reached, it must be executed on the mainland (for most companies who operate in the mainland). Therefore, there is unfortunately no clear answer to the question, except to say that the answer is highly case and contract specific.

Registered lawyers in the DIFC are bound by a detailed set of ethics rules that govern lawyer-client privilege and confidentiality. The DIFC does not individually regulate criminal, anti-trust or tax issues. The civil courts within the jurisdiction manage civil and commercial issues. Consultants outside the DIFC, or unregistered practitioners, are bound by the ethics rules in their home jurisdiction or they may be regulated by the Government of Dubai Legal Affairs Department. In theory, the DIFC courts may apply different notions and standards of privilege to two separate counsel appearing in the same case.

23. What if the interviews are conduced or the report is prepared after a decision was taken to obtain legal advice? Will it make a difference if investigation is carried out after the decision has been taken to pursue litigation

See Question 22.

24. Will the participation of an in-house lawyer or an external lawyer in leading the investigation or conducting employee interviews ensure that privilege is maintained even if no decision was taken to obtain legal advice or to pursue litigation?

In short, there are no complex rules or procedures for analysing privilege and the appointment of in-house or external counsel. The DIFC adopts the rules of other jurisdictions in this matter.

25. What are some of the good practices that corporate entities must follow in your jurisdiction to ensure that privilege associated with documents and information relevant to an internal investigation is preserved and not inadvertently lost?

The following clearly outline the rights and obligations of those with access to and knowledge of privileged documents:

• Disclaimers.

• Legal notices.

• Contracts.

Also, it is extremely important to clearly label documents or information as privileged in any investigation. In addition, practitioners must be particularly careful to exclude certain members of the organisation, including managing directors, if necessary, from the information and access to the information revealed in an investigation. It is unclear whether privilege can be waived if the managing director or another non-legal staff member is privy to information concerning the legal rights of the company when litigation is imminent as this would be determined by the individual court or judge. In addition, it is problematic if management is not briefed on the correct conduct regarding that information, and carelessly disseminates it throughout the organisation or beyond. In the UAE in particular, the biggest concern arising relates to conflicts of interest, where the manager themselves may face liability for corporate negligence and, therefore, could have a conflicted interest with the company. It is unclear how the courts will interpret the privilege laws as it depends on the home jurisdiction of the legal practitioner, and the jurisdiction clause of any applicable contract.

Privilege in M&A transactions

26. Assume that a potential buyer of a company has requested access to privileged documents. Can the privileged documents be shared with the potential buyer and still retain its privileged status by asking the buyer to sign a contractual undertaking?

The seller should ensure that the contractual undertaking requires the purchaser to acknowledge that:

• The documents are confidential.

• The documents are protected by attorney-client privilege that is not waived by disclosure.

• The disclosure is for the limited purpose of due diligence.

The documents revealed should also be redacted and limited as far as possible.

27. What steps can the seller management take to protect its privileged documents from the buyer before closing?

To protect privileged documents before closing, the seller may include certain contractual terms in a confidentiality agreement, or may redact and reduce the information to that which is relevant and pertinent to the transaction.

Privilege in cross-border investigations and litigation

28. In investigations or disputes that stretch across multiple jurisdictions, do courts and regulatory authorities apply local laws (that is the law of the forum) to determine privilege associated with a document?

The judge and court have discretion as to how to determine privilege associated with a document in a dispute stretching across multiple jurisdictions.

29. What happens if a potentially applicable foreign rule on privilege conflicts with local laws? Can a document that is not privileged in the country in which it was created or is located be considered privileged in your jurisdiction and vice versa?

The laws of the DIFC are vague and therefore, it is not likely that there will be a conflict with the foreign rule on privilege as the court considers the rules and laws that apply to and govern the home jurisdiction of the legal practitioner appearing before the court.

Recent developments

30. Have there been any recent cases, statutes or other legal developments on privilege in your jurisdiction?

We are not aware of any recent developments on privilege in the DIFC.

END OF DOCUMENT

zakir mirJune 13, 2019