Ethics 20/20 and Conflicts of Law Panel: Materials to Distribute: 37 th National Conference on Professional Responsibility (Memphis 2011)

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1 Ethics 20/20 and Conflicts of Law Panel: Materials to Distribute: 37 th National Conference on Professional Responsibility (Memphis 2011) 1. Choices of Law Hypos (taken from the ABA 20/20 Commission paper - item #2) 2. ABA Ethics 20/20 Commission Conflicts of Interest, Uniformity and Choice of Law Working Group Issues Paper, Choice of Law in Cross-Border Practice, also available at bility/ authcheckdam.pdf 3. Comments on the ABA Ethics 20/20 Commission Paper on Choice of Law in Cross- Border Practice, also available at ments.authcheckdam.pdf 4. Association of the Bar of the City of New York Committee on Professional Responsibility, Report on Conflicts of Interest in Multi-Jurisdictional Practice: Proposed Amendments to New York Rules of Professional Conduct 8.5 (Disciplinary Authority and Choice of Law) and 1.10 (Imputation of Conflicts of Interest) (2010) 5. Michael Traynor, The First Restatements and the Vision of the American Law Institute, Then and Now, 32 S. Ill. U. L. J. 145 (2007) 6. SSRN, Symeon C. Symeonides Scholarly Papers, available at (includes, inter alia, links to Symeonides, Choice of Law in the American Courts in 2010: Twenty-Fourth Annual Survey, 58 Am. J. Comp. L. (2011)) 7. Choice of Law Excerpts from European Union Directives 77/249 and 98/5 8. Hans-Jürgen Hellwig, At the Intersection of Legal Ethics and Globalization: International Conflicts of Law in Lawyer Regulation, 27 Penn St. Int l L. R. 395 (2009) 9. Rogers, Terry, et. al, Challenges of Transnational Legal Practice: Advocacy and Ethics, Proceedings of the 103 rd ASIL Annual Meeting 10. Laurel S. Terry, Slides: A Model for International Choice of Law and Coordination of Attorney Regulation, International Legal Ethics Conf. IV (Palo Alto, July, 2010) 11. Catherine A. Rogers, Cross-Border Bankruptcy as a Model for Regulation of International Attorneys, in Pieter H. F. Bekker, Rudolf Dolzer & Michael Waibel, eds., MAKING TRANSNATIONAL LAW WORK IN A GLOBAL ECONOMY: ESSAYS IN HONOR OF DETLEV VAGTS (Cambridge University Press 2010) 12. International Insolvency Protocol and Sample Protocol [from the Lehman bankruptcy]

2 Ethics 20/20 and Conflicts of Law The ABA Commission on Ethics 20/20 has recognized the critical importance of "choice of law" issues in the area of professional responsibility resulting from increased globalization and use of technology in law practice, particularly in evaluating the imputation of conflicts of interest for lawyers practicing in international contexts. This panel will bring together leaders from the academic, law firm, and international legal ethics communities, as well as one of this country's preeminent experts on general conflicts of law jurisprudence, to discuss what can be done to make inconsistent ethics rules workable in our 21st Century world. Laurel S. Terry (panel leader) The Dickinson School of Law The Pennsylvania State University 150 S. College Street Carlisle, PA (717) Jonathan Goldsmith Avenue de la Joyeuse Entrée 1-5 B-1040 BRUXELLES Jennifer Paradise White & Case 1155 Avenue of the Americas New York, New York (212) Michael Traynor Co-Chair, ABA Commission on Ethics 20/ Eton Ave. Berkeley, CA (510)

3 RULE 8.5 HYPOTHETICALS CIRCULATED BY THE ABA ETHICS 20/20 COMMISSION Fact Pattern [#2]: Screening of Laterals in Multistate Law Firms. Firm GHI has offices in States Y and Z. Mike, a lawyer at GHI who practices in State Z, is handling a matter against LITCO in a court in State Z. The firm now wants to hire a lateral, Lucy, to work in GHI s offices in State Y, where Lucy is licensed. Lucy has been representing LITCO at her current firm in a matter substantially related to the matter that Mike is now handling adverse to LITCO. If GHI hires Lucy, LITCO would remain a client of Lucy s former firm, but Lucy s hiring would create a conflict of interest for Mike in his lawsuit against LITCO if Lucy s work for LITCO is imputed to Mike if and when she moves to GHI. State Y allows law firms to screen lateral lawyers to avoid the imputation of this type of conflict (nonconsensual screening), but State Z does not. Can GHI hire Lucy and employ a screen to prevent Lucy s conflict from being imputed to Mike without obtaining LITCO s consent? Fact Pattern [#3]: Conflicts in International Multi-Office Law Firms. Firm JKL has offices in the United States and Country Q. Max in JKL s New York office represents NCO on contract matters. Lia, in JKL s office in Country Q, is asked to undertake an arbitration, litigation, or negotiation against NCO on a matter unrelated to Max s work. Lia s work will be done entirely in Q. Q s rules allow her to do the work. New York s imputation rules treat Max and Lia as one lawyer for conflict purposes, so Lia s clients are imputed to Max. Thus, if Lia were in New York she could not accept the work without informed consent. Can Lia undertake the engagement? Fact Pattern [#4]: Choice of Law Provisions in Engagement Letters. Anticipating the inconsistent conflict rules in the prior two fact patterns, the two firms had specified in their original engagement letters with their clients that the conflict rules in a designated jurisdiction (or in the Model Rules) would govern their relationship. The firms wish only, to the extent allowed, to contract for governing conflict rules, not other rules where there might be inconsistency among jurisdictions, because lack of uniformity in conflict rules is where they run into the most difficult problems. The firms reason that conflict rules are nearly always default rules that can be supplanted by private contract (i.e., informed consent as defined in the rules). Can the firms and the clients bind themselves to such a substitution with the result that the firms can safely conform their conduct to the conflict rules identified in the agreement? Would reliance on such a contractual provision give lawyers a reasonable belief that their conduct complied with applicable rules of professional conduct under Model Rule 8.5(b)(2)? Fact Pattern [#5]: Client Fraud. Ann and Len are representing INCO in a series of negotiations regarding a joint business venture with other parties and that will take place in several jurisdictions, including the two jurisdictions in which Ann and Len are admitted, State A and State L, respectively. Ann and Len learn that INCO is engaged in a substantial fraud in connection with the matter. The potentially defrauded parties to the joint venture are in States Q, R, and S. State A s rule forbids Ann to reveal what she knows. State L s rule requires Len to disclose. The rules of Q, R, and S, where Ann and 1

4 Len did much of their work (as authorized under the applicable multijurisdictional practice rules) forbid, permit, and require revelation, respectively. What can (or must) Ann and Len now do with regard to the revelation? Under what circumstances would their reliance on a particular jurisdiction s rules protect them from discipline under Model Rule 8.5(b)(2), which provides that [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? Does Rule 8.5(a) make clear (or as clear as possible) which jurisdictions would have disciplinary authority over the lawyers identified in these fact patterns? If not, how should Rule 8.5(a) be changed? Does Rule 8.5(b) enable a lawyer confidently to resolve the issues in the above fact patterns? If not, how should Rule 8.5(b) be revised to offer clearer guidance? What should be the answers to the above fact patterns? In those cases where the current rule offers a clear answer, is that answer correct? If not, how should Rule 8.5(b) be changed? 2

5 ABA 20/20 Commission HYPOS not included: Fact Pattern #1: Virtual Law Practices. Susan has a solo practice in State X and advertises her will-writing services on her website, which is accessible anywhere in the world. Most of her clients come from State X, but she occasionally writes wills for individuals who live in nearby State Y. (Susan is not licensed to practice in State Y.) When Susan works for a State Y resident, she communicates via telephone and the Internet, but she does not physically enter State Y. The State Y resident comes to State X to execute the will. With regard to Susan's website and her work for State Y residents, does State Y have disciplinary authority over Susan under Model Rule 8.5(a)? If so, which jurisdiction s rules would State Y apply under Rule 8.5(b)? In addition to different advertising rules, the two jurisdictions may, for example, have different conflict of interest rules and rules for fee agreements. Fact Pattern #6: Partnering and Sharing Fees with Non-Lawyers. Law firm ABC has offices in five states, Washington, D.C., and London. Washington, D.C. allows nonlawyer equity partners, and ABC (which has 1,100 lawyers) has two nonlawyer partners, both economists who work with the firm s antitrust lawyers in each of the firm s offices. ABC also has three nonlawyer partners in London who are financial planners and who work with trusts and estates lawyers in London and in the United States on the needs of families with interests around the world. The London financial planners also provide financial advice through the firm to clients who are not law clients of the firm. What is and what should be the rule regarding the ability of the economists and financial planners to share in the income of the firm and the ability of lawyers outside Washington, D.C., to share in the fees generated by the economists and financial planners? 3

6 CO-CHAIR Jamie S. Gorelick WilmerHale 1875 Pennsylvania Ave., N.W. Washington, DC CO-CHAIR Michael Traynor 3131 Eton Ave. Berkeley, CA MEMBERS Professor Stephen Gillers New York, NY Jeffrey B. Golden London, United Kingdom George W. Jones, Jr. Washington, DC Hon. Elizabeth B. Lacy Richmond, VA To: From: AMERICAN BAR ASSOCIATION ABA Commission on Ethics 20/ N. Clark Street Chicago, IL Phone: (312) Fax: (312) Website: ABA Entities, Courts, Bar Associations (state, local, specialty and international), Law Schools, Disciplinary Agencies, Individuals, and Entities ABA Commission on Ethics 20/20 Working Group on Uniformity, Choice of Law, and Conflicts of Interest 1 Judith A. Miller Washington, DC Hon. Kathryn A. Oberly Washington, DC Roberta Cooper Ramo Albuquerque, NM Herman Joseph Russomanno Miami, FL Professor Theodore Schneyer Tucson, AZ Professor Carole Silver Bloomington, IN Kenneth W. Starr Waco, TX Frederic S. Ury Fairfield, CT Hon. Gerald W. VandeWalle Bismarck, ND LIAISONS ABA Board of Governors Carolyn B. Lamm Washington, DC Kenneth G. Standard New York, NY ABA Center for Professional Responsibility Donald B. Hilliker Chicago, IL ABA Task Force on International Trade in Legal Services Professor Robert E. Lutz, II Los Angeles, CA ABA Standing Committee on Ethics and Professional Responsibility Philip H. Schaeffer New York, NY ABA Young Lawyers Division Youshea A. Berry COMMISSION REPORTERS Andrew M. Perlman, Chief Reporter Boston, MA Paul Paton Sacramento, CA Anthony Sebok New York, NY W. Bradley Wendel Ithaca, NY CENTER FOR PROFESSIONAL RESPONSIBILITY Jeanne P. Gray, Director Ellyn S. Rosen, Commission Counsel (312) Marcia Kladder, Policy & Program Director (312) Natalia Vera, Senior Paralegal (312) Date: January 18, 2011 Re: I. Introduction Issues Paper: Choice of Law in Cross-Border Practice The American Bar Association Commission on Ethics 20/20 is examining a number of legal ethics issues arising from the increasing globalization of law practice. The goal of this paper is to identify ethics-related choice of law problems that have arisen because of this increase in cross-border practice and to elicit comments on possible approaches that the Commission is currently considering. Comments received may be posted to the Commission s website and should be submitted by March 15, The Commission has taken no positions about the matters addressed in this paper. Rather, the Commission expects to use any comments that it receives to supplement the research that the Commission has completed and to facilitate the development of various reports and proposals that the Commission plans to draft during the next year and a half. II. Model Rule 8.5: Disciplinary Authority; Choice of Law Rules of professional conduct vary within the United States and around the world. These variations create problems for lawyers who engage in cross-border practice, especially when they encounter legal ethics issues that could be resolved differently depending on which jurisdiction s rules apply. Model Rule 8.5 of the Model Rules of Professional Conduct is designed to address this problem. It provides as follows: 1 Members of the Working Group are: Stephen Gillers (Chair and Commission Member), Hon. Elizabeth B. Lacy (Commission Member), Theodore Schneyer (Commission Member), Doug Ende (National Organization of Bar Counsel), Donald B. Hilliker (ABA Center for Professional Responsibility), Janet Green Marbley (ABA Client Protection Committee), Jim McCauley (ABA Ethics Committee), and John P. Sahl (ABA Standing Committee on Professional Discipline). Andrew M. Perlman serves as Reporter, and Dennis A. Rendleman and John A. Holtaway provide counsel. Kimley Grant, Regulation Paralegal (312)

7 (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. (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. Rule 8.5(a) describes the circumstances under which a lawyer is subject to the disciplinary authority of a jurisdiction, even if the lawyer is licensed in another jurisdiction. Rule 8.5(b) identifies which jurisdiction s rules of professional conduct should be applied to the lawyer s conduct. For example, a lawyer might be subject to the disciplinary authority of New Jersey under Rule 8.5(a) by engaging in law practice there, but Rule 8.5(b) might specify that the New Jersey disciplinary authority should apply the ethics rules of Illinois to determine whether the lawyer should, in fact, be disciplined. III. Potential Problems and Ambiguities with Model Rule 8.5 Model Rule 8.5 supplies clear answers in some circumstances, but it produces unclear and arguably problematic results in other contexts. These ambiguities and possible problems are reflected in the following fact patterns: Fact Pattern #1: Virtual Law Practices. Susan has a solo practice in State X and advertises her will-writing services on her website, which is accessible anywhere in the world. Most of her clients come from State X, but she occasionally writes wills for individuals who live in nearby State Y. (Susan is not licensed to practice in State Y.) When Susan works for a State Y resident, she communicates via telephone and the Internet, but she does not physically enter State Y. The State Y resident comes to State X to execute the will. With regard to Susan's website and her work for State Y residents, does State Y have disciplinary authority over Susan under Model Rule 8.5(a)? If so, which jurisdiction s rules would State Y apply under Rule 8.5(b)? In addition to different 2

8 advertising rules, the two jurisdictions may, for example, have different conflict of interest rules and rules for fee agreements. Fact Pattern #2: Screening of Laterals in Multistate Law Firms. Firm GHI has offices in States Y and Z. Mike, a lawyer at GHI who practices in State Z, is handling a matter against LITCO in a court in State Z. The firm now wants to hire a lateral, Lucy, to work in GHI s offices in State Y, where Lucy is licensed. Lucy has been representing LITCO at her current firm in a matter substantially related to the matter that Mike is now handling adverse to LITCO. If GHI hires Lucy, LITCO would remain a client of Lucy s former firm, but Lucy s hiring would create a conflict of interest for Mike in his lawsuit against LITCO if Lucy s work for LITCO is imputed to Mike if and when she moves to GHI. State Y allows law firms to screen lateral lawyers to avoid the imputation of this type of conflict (nonconsensual screening), but State Z does not. Can GHI hire Lucy and employ a screen to prevent Lucy s conflict from being imputed to Mike without obtaining LITCO s consent? Fact Pattern #3: Conflicts in International Multi-Office Law Firms. Firm JKL has offices in the United States and Country Q. Max in JKL s New York office represents NCO on contract matters. Lia, in JKL s office in Country Q, is asked to undertake an arbitration, litigation, or negotiation against NCO on a matter unrelated to Max s work. Lia s work will be done entirely in Q. Q s rules allow her to do the work. New York s imputation rules treat Max and Lia as one lawyer for conflict purposes, so Lia s clients are imputed to Max. Thus, if Lia were in New York she could not accept the work without informed consent. Can Lia undertake the engagement? Fact Pattern #4: Choice of Law Provisions in Engagement Letters. Anticipating the inconsistent conflict rules in the prior two fact patterns, the two firms had specified in their original engagement letters with their clients that the conflict rules in a designated jurisdiction (or in the Model Rules) would govern their relationship. The firms wish only, to the extent allowed, to contract for governing conflict rules, not other rules where there might be inconsistency among jurisdictions, because lack of uniformity in conflict rules is where they run into the most difficult problems. The firms reason that conflict rules are nearly always default rules that can be supplanted by private contract (i.e., informed consent as defined in the rules). Can the firms and the clients bind themselves to such a substitution with the result that the firms can safely conform their conduct to the conflict rules identified in the agreement? Would reliance on such a contractual provision give lawyers a reasonable belief that their conduct complied with applicable rules of professional conduct under Model Rule 8.5(b)(2)? Fact Pattern #5: Client Fraud. Ann and Len are representing INCO in a series of negotiations regarding a joint business venture with other parties and that will take place in several jurisdictions, including the two jurisdictions in which Ann and Len are admitted, State A and State L, respectively. Ann and Len learn that INCO is engaged in a substantial fraud in connection with the matter. The potentially defrauded parties to the joint venture are in States Q, R, and S. State A s rule forbids Ann to reveal what she knows. State L s rule requires Len to disclose. The rules of Q, R, and S, where Ann and 3

9 Len did much of their work (as authorized under the applicable multijurisdictional practice rules) forbid, permit, and require revelation, respectively. What can (or must) Ann and Len now do with regard to the revelation? Under what circumstances would their reliance on a particular jurisdiction s rules protect them from discipline under Model Rule 8.5(b)(2), which provides that [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? Fact Pattern #6: Partnering and Sharing Fees with Non-Lawyers. Law firm ABC has offices in five states, Washington, D.C., and London. Washington, D.C. allows nonlawyer equity partners, and ABC (which has 1,100 lawyers) has two nonlawyer partners, both economists who work with the firm s antitrust lawyers in each of the firm s offices. ABC also has three nonlawyer partners in London who are financial planners and who work with trusts and estates lawyers in London and in the United States on the needs of families with interests around the world. The London financial planners also provide financial advice through the firm to clients who are not law clients of the firm. What is and what should be the rule regarding the ability of the economists and financial planners to share in the income of the firm and the ability of lawyers outside Washington, D.C., to share in the fees generated by the economists and financial planners? With regard to these facts patterns, the Commission seeks feedback regarding the following questions: Does Rule 8.5(a) make clear (or as clear as possible) which jurisdictions would have disciplinary authority over the lawyers identified in these fact patterns? If not, how should Rule 8.5(a) be changed? Does Rule 8.5(b) enable a lawyer confidently to resolve the issues in the above fact patterns? If not, how should Rule 8.5(b) be revised to offer clearer guidance? What should be the answers to the above fact patterns? The first and fifth fact patterns implicate the second sentence of Model Rule 8.5(b)(2), which states that [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. Should this portion of Model Rule 8.5(b)(2) be retained or modified? Should the choice of rule provision vary depending on whether the underlying legal service primarily arises under state or federal law, with a greater emphasis on uniformity when the service arises under federal law? 4

10 In those cases where the current rule offers a clear answer, is that answer correct? If not, how should Rule 8.5(b) be changed? How should the Commission address inconsistencies among jurisdictions with regard to their choice of law rules (i.e., some jurisdictions still adhere to the pre text)? 2 Should all jurisdictions be urged to adopt the same choice of rule provision, or is this rule, like other rules, a matter best left for each jurisdiction to decide on its own based on its own policies? IV. Possible Solutions to the Rule 8.5 Issues The Commission could consider various possible revisions to Model Rule 8.5, including the following: A. Proposal by the Association of the Bar of the City of New York The Committee on Professional Responsibility of the Association of the Bar of the City of New York recently issued a report, proposing the following approach in New York. (The redline reflects the Committee s approach relative to Model Rule 8.5.) (a) A lawyer admitted to practice in this state is subject to the disciplinary authority of this state, regardless of where the lawyer's conduct occurs. A lawyer may be subject to the disciplinary authority of both this state and another jurisdiction where the lawyer is admitted for the same conduct. (b) In any exercise of the disciplinary authority of this state, the Rules of Professional Conduct to be applied shall be as follows: 2 Prior to 2002, when the current version of Model Rule 8.5 was adopted, Rule 8.5(b) had offered a more straightforward, bright line approach. That bright line approach is still used in some jurisdictions, including New York. New York Rule 8.5 provides as follows: (b) In any exercise of the disciplinary authority of this state, the Rules of Professional Conduct to be applied shall be as follows: (1) For conduct in connection with a proceeding in a court before which a lawyer has been admitted to practice (either generally or for purposes of that proceeding), the rules to be applied shall be the rules of the jurisdiction in which the court sits, unless the rules of the court provide otherwise; and (2) For any other conduct: (i) If the lawyer is licensed to practice only in this state, the rules to be applied shall be the rules of this state, and (ii) If the lawyer is licensed to practice in this state and another jurisdiction, the rules to be applied shall be the rules of the admitting jurisdiction in which the lawyer principally practices; provided, however, that if particular conduct clearly has its predominant effect in another jurisdiction in which the lawyer is licensed to practice, the rules of that jurisdiction shall be applied to that conduct. Thus, choice of law problems are complicated not only because of the increase in cross-border practice and the variations among ethics rules, but because there is a lingering disagreement among states as to the appropriate choice of law rule to apply. Deleted: jurisdiction Deleted: jurisdiction Deleted: 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. Deleted: jurisdiction Deleted: Choice of Law. Deleted: jurisdiction Deleted: rules Deleted: professional conduct 5

11 (1) For conduct in connection with a matter pending before a tribunal, the rules to be applied shall be the rules of the jurisdiction in which the court tribunal sits, unless the rules of the tribunal provide otherwise; and (2) For any other conduct, the rules to be applied shall be the rules of this state; provided, however, that if a lawyer reasonably believes that the services for which the lawyer or the lawyer's firm has been retained have their predominant effect in another jurisdiction, such lawyer may rely on the rules of professional conduct of such other jurisdiction. Association of the Bar of the City of New York Committee on Professional Responsibility, Report on Conflicts of Interest in Multi-Jurisdictional Practice: Proposed Amendments to New York Rules of Professional Conduct 8.5 (Disciplinary Authority and Choice of Law) and 1.10 (Imputation of Conflicts of Interest), pages 1-2 (March 2010), available at ReportonConflictsofInterestinMulti-JurisdictionalPractice.pdf. Deleted: for Deleted: for Deleted: of the jurisdiction in which the lawyer s conduct occurred, or, if the predominant effect of the conduct is in a different jurisdiction, Deleted: 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 Deleted: the lawyer s Deleted: will occur. Moreover, to address some of the conflicts-related issues identified in the above fact patterns, New York has proposed the adoption of the following Rule 1.10(d): Id. at 4. (d) Notwithstanding the foregoing, no conflict will be imputed hereunder where (i) a conflict arises under these rules from the conduct of lawyers practicing in another jurisdiction in accordance with such jurisdiction s rules of professional conduct, and (ii) such conduct is permitted by the rules of professional conduct of that other jurisdiction. B. Proposal by Professors Laurel Terry and Catherine Rogers Professors Laurel Terry and Catherine Rogers have submitted a report (attached to this memorandum), which offers an alternative proposal. (The redline is relative to the Model Rule.) RULE 8.5: Disciplinary Authority; Choice of Law (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. (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 6

12 follows: (1) For conduct in connection with a matter pending before a tribunal, the rules to be applied shall be the rules specified by or for the tribunal, if any; 3 (2) If no ethical rules are specified by or for a tribunal for matters pending before it, the rules to be applied shall be: i) for conduct in connection with a matter pending before a tribunal, other than an international tribunal, the rules of the jurisdiction in which the tribunal sits, unless the rules of the tribunal provide otherwise; or ii) for conduct in connection with a matter pending before an international tribunal, the rules of this jurisdiction, including Rule 8.5. As described in the attached memo, this proposal does not suggest any specific amendments to the provisions currently found in Rule 8.5(b)(2). C. Adoption of the Restatement Approach The Restatement (Third) of the Law Governing Lawyers contains an extended discussion of choice of law considerations and proposes the following approach, which could be reflected in Model Rule 8.5 and its comments: It is... necessary to have a choice-of-law rule to determine which specific provision of two or more arguably applicable and inconsistent lawyer-code provisions should apply. Such a rule should take appropriate account of such elements as the following: the nature of the charged offense; the nature of the lawyer's work; the impact of the questioned conduct on the interests of third persons and on public institutions such as tribunals, administrative agencies, or legislative bodies; the residence and place of business of any client or third person whose interests are materially affected by the lawyer's actions; the place where the affected conduct occurred; and the nature of the regulatory interest reflected in the different provisions in question. That rule should be selected for application which, among rules having a plausible basis for application, is the rule of the jurisdiction with the most significant relationship to the charged offensive 3 This proposed language for 8.5(b)(1) differs textually from the current ABA Model Rule 8.5(b)(1) and the City Bar s proposal, but its purpose and effect are the same. All three rules specify that the advocate s first step is to consult the tribunal s own rules. The proposed changes to paragraph (b)(1) are necessary to accommodate the substantive changes proposed for paragraph (b)(2). 7

13 conduct. See Restatement Second, Conflict of Laws 6. Somewhat contrary to that approach, the 1983 ABA Model Rules of Professional Conduct were amended in 1993 (Rule 8.5), adding a rule that attempted to provide more rigid, per se rules an approach that has not recommended itself to most jurisdictions (see Reporter's Note). No more specific formula than that stated here can adequately deal with all relevant conflict considerations, and each issue of conflict must be addressed on its specific facts. However, as a presumptive preference, a lawyer in nonlitigation work is subject to the lawyer code of the single state in which the lawyer is admitted or, if admitted in more than one state, in the state in which the lawyer maintains his or her principal place of law practice. If the lawyer's act occurs in the course of representing a client in a litigated matter, the presumptive preference is for the lawyer-code rules enforced by the tribunal in which the proceeding is pending. Either presumptive preference can be displaced by a sufficient demonstration that the interests of another jurisdiction are, on the particular facts, more involved than those of the presumptive jurisdiction. Restatement (Third) of the Law Governing Lawyers, 5, cmt. h. III. Conclusion Lawyers need clearer guidance when they engage in cross-border practice and encounter rules of professional conduct that impose conflicting obligation. For this reason, the Commission seeks input into whether amendments to Model Rule 8.5 or other action would be advisable and specifically requests feedback on whether any of the above approaches (or any other alternatives not described here) would be more effective than the current version of Model Rule 8.5. The Commission also seeks feedback on whether it should consider any amendments to Model Rule 1.10 in order to clarify how conflicts of interest should be resolved when the conflict implicates more than one jurisdiction. Any responses or comments on related issues should be directed by March 15, 2011, to: Natalia Vera Senior Research Paralegal, Commission on Ethics 20/20 ABA Center for Professional Responsibility 321 North Clark Street 15th Floor Chicago, IL Phone: 312/ Fax: 312/ mailto: Natalia.Vera@americanbar.org Comments received may be posted to the Commission s website. 8

14 Sample Bibliography The Commission has had the benefit of reviewing numerous materials, a select number of which are included in this sample bibliography. The Working Group and Commission welcome recommendations for additional resources that address the issues in this paper. Representative Ethics Opinions Arizona: State Bar of Ariz., Formal Op. No (1990) (applying choice of law principles to conclude that lawyer who was a member of both the Arizona and Navajo Nation bars was not subject to discipline by the former for compliance with the latter s rules during representative appointment by the latter), available at District of Columbia: D.C. Bar Op. 311 (2002) (applying D.C. Rule 8.5(b)(2)), available at Florida: Florida Bar, Formal Op. No (1988) (applying choice of law principles to ascertain which jurisdiction s ethics rules govern contingent fee schedules and client statements of rights), available at Pennsylvania Philadelphia: Philadelphia Bar Ass n, Prof l Guidance Comm., Op. No (2008) (discussing choice of law principles where Pennsylvania-licensed lawyer represents Pennsylvania residents who were injured in Florida pro hac vice in Florida court), available at Selected Publications & Other Sources 1. Ronald A. Brand, Professional Responsibility in a Transactional Transactions Practice, 17 J. L. & Com. 317 (1998) 2. Stephen B. Burbank, State Ethical Codes and Federal Practice: Emerging Conflicts and Suggestions for Reform, 19 Fordham Urb. L.J. 969 (1992) 9

15 3. Stephen A. Calhoun, Note, Globalization s Erosion of the Attorney-Client Privilege and What U.S. Courts Can Do to Prevent It, 87 Tex. L. Rev. 235 (2008) 4. Edward A. Carr and Allan Van Fleet, Professional Responsibility Law in Multijurisdictional Litigation: Across the Country and Across the Street, 36 S. Tex. L. Rev. 859, (1995) 5. Wayne J. Carroll, Liberalization of National Legal Admissions Requirements in the European Union: Lessons and Implications, 22 Penn State Int l L. Rev. 563 (2004) 6. Theresa Stanton Collett, Foreword, Symposium: Ethics and the Multijurisdictional Practice of Law, 36 S. Tex. L. Rev. 657 (1995) 7. Mary C. Daly, Resolving Ethical Conflicts in Multijurisdictional Practice-- Is Model Rule 8.5 the Answer, an Answer, or No Answer at All?, 36 S. Tex. L. Rev. 715, 719 (1995) 8. Mary C. Daly, The Dichotomy Between Standards and Rules: A New Way of Understanding the Differences in Perceptions of Lawyer Codes of Conduct Between U.S. and Foreign Lawyers, 32 Vand. J. Transnat l L (1999) 9. Mary C. Daly & Carole Silver, Flattening the World of Legal Services : The Ethical and Liability Minefields of Offshoring Legal and Law Related Services, 38 Geo. J. Int l L. 401 (2007) 10. Stephen Gillers, Lessons From the Multijurisdictional Practice Commission: The Art of Making Change, 44 Ariz. L. Rev. 685, 715 (2002) 11. Stephen Gillers, It's an MJP World: Model Rules Revisions Open the Door for Lawyers to Work Outside Their Home Jurisdictions, 88 A.B.A. J. 51 (Dec. 2002) 12. Mark I. Harrison & Mary Gray Davidson, The Ethical Implications of Partnerships and Other Associations Involving American and Foreign Lawyers, 22 Penn State Int l L. Rev. 639 (2004) 13. Hans Jurgen Hellwig, The Legal Profession in Europe: Achievements, Challenges and Chances, 4 Ger. L. Rev. 263 (2003), available at Emile Loza, Attorney Competence, Ethical Compliance, and Transnational Practice, Idaho State Bar Ass n, The Advocate 28 (2009). 15. Judith A. McMorrow, Creating Norms of Attorney Conduct in International Tribunals: A Case Study of the ICTY, 30 B.C. Int l & Comp. L. Rev. 139 (2007) 10

16 16. Nancy J. Moore, Lawyer Ethics Code Drafting in the Twenty-first Century, 30 Hofstra L.Rev. 923, 943 (2002) 17. Nancy J. Moore, Choice of Law for Professional Responsibility Issues in Aggregate Litigation, 14 Roger Williams Univ. L. Rev. 73 (2009) 18. H. Geoffrey Moulton, Federalism and Choice of Law in the Regulation of Legal Ethics, 82 Minn. L. Rev. 73 (1997) 19. Gary A. Munneke, Multijurisdictional Practice of Law: Recent Developments in the National Debate, 27 J. Legal Prof. 91 (2003) 20. Matthew T. Nagel, Note, Double Deontology and the CCBE: Harmonizing the Double Trouble in Europe, 6 Wash. U. Global Stud. L. Rev. 455 (2007) 21. Carol A. Needham, The Multijurisdictional Practice of Law and the Corporate Lawyer: New Rules for a New Generation of Legal Practice, 36 S. Tex. L. Rev. 1075, (1995) 22. Natalie E. Norfus, Note, Assessing the Recent Revisions to Model Rule 8.5: How Do the Changes Affect U.S. Attorneys Practicing Abroad, Specifically Those Practicing in Japan?, 36 Geo. Wash. Int l L. Rev. 623 (2004) 23. James Podgers, The New World: Lawyer Ethics Are Getting More Attention as a Matter of International Law, 92-MAY A.B.A. J Catherine Rogers, Context and Institutional Structure in Attorney Regulation: Constructing an Enforcement Regime for International Arbitration, 39 Stan. J. Int l L. 1 (2003) 25. Catherine Rogers, Lawyers Without Borders, 30 U. Pa. J. Int l L (2009) 26. Laurel S. Terry, An Introduction to the European Community s Legal Ethics Code Part I: An Analysis of the CCBE Code of Conduct, 7 Geo. J. Legal Ethics 1 (1993) 27. Laurel S. Terry, An Introduction to the European Community s Legal Ethics Code Part II: Applying the CCBE Code of Conduct, 7 Geo. J. Legal Ethics 345 (1993) 28. Laurel S. Terry, U.S. Legal Ethics: The Coming of Age of Global and Comparative Perspectives, 4 Wash. U. Glob. Stud. L. Rev. 463 (2005) 29. John Toulmin, Q.C., A Worldwide Common Code of Professional Ethics?, 15 Fordham Int l L.J. 673 ( ) 30. Carole Silver, Regulatory Mismatch in the Market for Legal Services, 23 Nw. J. Int'l L. & Bus. 487, 495 (2003) 11

17 31. Detlev F. Vagts, International Legal Ethics and Professional Responsibility, 92 Am. Soc. Int l L. Proc. 378 (1998) 32. Detlev F. Vagts, Professional Responsibility in Transborder Practice: Conflict and Resolution, 13 Geo. J. Legal Ethics 677, 690 (2000) 33. Carla C. Ward, Comment, The Law of Choice: Implementation of ABA Model Rule 8.5, 30 J. Legal Prof. 173 (2006) 34. Kirsten Weisenberger, Peace is not the Absence of Conflict: A Response to Professor Rogers s Article Fit and Function in Legal Ethics, 25 Wisc. Int l L.J. 89 (2007) 35. Christopher Whelan, Ethics Beyond the Horizon: Why Regulate the Global Practice of Law?, 34 Vand. J. Transnat l L. 931 (2001) 36. Jamie Y. Whitaker, Current Development , Remedying Ethical Conflicts in a Global Legal Market, 19 Geo. J. Legal Ethics 1079 (2006) 37. Charles W. Wolfram, Expanding State Jurisdiction to Regulate Out-of-State Lawyers, 30 Hofstra L. Rev (2002) 38. Association of the Bar of the City of New York Committee on Professional Responsibility, Report on Conflicts of Interest in Multi-Jurisdictional Practice: Proposed Amendments to New York Rules of Professional Conduct 8.5 (Disciplinary Authority and Choice of Law) and 1.10 (Imputation of Conflicts of Interest) (March 2010), available at JurisdictionalPractice.pdf. 12

18 Draft: Oct. 1, 2010 Please do not cite or quote without permission & FROM: Laurel S. Terry Catherine A. Rogers MEMORANDUM DATE: October 1, 2010 (updated Dec. 1, 2010 by adding footnote 2) RE: Proposed Revisions to Model Rule 8.5 On June 24, 2010, we circulated a proposal to add to the ABA Model Rules of Professional Conduct a new Model Rule 8.6. The purpose of the new rule, if adopted, would be to govern choice-of-law issues for legal activities that occur outside the United States or before an international tribunal that sits or is seated in the United States. We have now received comments and feedback on our June 24 th draft and have had the opportunity to review the Report on Conflicts of Interest in Multi-Jurisdictional Practice: Proposed Amendments to New York Rules of Professional Conduct 8.5 (Disciplinary Authority and Choice of Law) and 1.10 (Imputation of Conflicts of Interest) prepared by the Professional Responsibility Committee of the New York City Bar Association which was released on June 29, In light of this feedback, we have revised our proposed rule, a copy of which is attached. The current draft seeks to simplify proposed changes by incorporating them into Rule 8.5 instead of being proposed as a stand-alone Rule 8.6. Thus, the blackletter in the attached draft now provides a unitary rule for both domestic and transnational practice. Should the Commission prefer, the same concepts could be included in a separate Rule 8.6 that would apply to U.S. lawyers engaged in transnational practice. This proposal is limited to the most problematic applications of the current version of Model Rule 8.5(b)(1), which mandates application of the ethical rules of the foreign jurisdiction in which an international tribunal sits when such tribunal does not have its own ethical rules. The problems arise with international tribunals because, unlike U.S. state and federal courts, many international tribunals have not adopted rules of conduct for lawyers appearing before them. As a result, the first clause in paragraph (b)(1) usually applies and subjects U.S.-licensed lawyers to the rules of the jurisdiction where the tribunal sits. While this formulation makes sense in the domestic situation, where state and federal lawsuits are subject to venue rules, the approach of paragraph (b)(1) is inapposite to the context of international disputes. In disputes before international tribunals, clients, their counsel, and the underlying dispute are often wholly and intentionally unrelated to the place where the tribunal physically sits. As a result, in obliging counsel to follow the rules of professional conduct of the jurisdiction where an international tribunal sits, Rule 8.5(b)(1) effectively requires that U.S. attorneys abide by rules that are completely unrelated to the proceedings in which they are appearing. To illustrate, because the Iran-U.S. Claims Tribunal sits in the Hague and does not have its own ethical rules, under paragraph (b)(1) a U.S. attorney 1

19 Draft: Oct. 1, 2010 Please do not cite or quote without permission & would be bound by Dutch ethical rules, even though Dutch law and Dutch procedure have no relationship with, or even relevance to, proceedings before the Tribunal and regardless of whether the Dutch rules (or sources interpreting them) are available in an official English translation. Moreover, because few, if any, foreign jurisdictions have a choice of law rule equivalent to Rule 8.5(b)(1), U.S.-licensed lawyers are likely to be the only lawyers appearing before the Iran-U.S. Claims Tribunal who would be subject to Dutch rules. For more detailed discussion of the problems with the current version of Rule 8.5, see Catherine A. Rogers, Lawyers Without Borders, 30 U. PENN. INT L L. REV (2009); see also CHALLENGES OF TRANSNATIONAL LEGAL PRACTICE: ADVOCACY AND ETHICS, Panel 30 in the Proceedings of the 103 rd Annual Meeting of the American Society of International Law (2010) (forthcoming). The solution found in the attached proposal is straightforward. If an international tribunal has adopted rules of conduct for counsel appearing before it, Rule 8.5(b)(1) would require a U.S.-licensed lawyer to comply with those rules. But if the tribunal has not adopted rules of conduct for counsel, the fallback provision would be Rule 8.5, not the rules of the jurisdiction in which the international tribunal sits. In streamlining the blackletter, the current proposal shifts into the Comments much of detailed guidance that had been included in the blackletter of our June 24 th draft. The draft makes clear that very different considerations apply in transnational settings, but proposes that those considerations be treated as background guidance rather than blackletter mandates. Because this proposal is limited in scope to those provisions that pertain to advocates, namely the provisions of paragraph (b)(1) of the current Model Rule 8.5 and paragraphs (b)(1)&(b)(2) of the proposed revisions below, the proposed revisions do not address the provisions in paragraph (b)((2) of the Model Rule, now paragraph (b)(3) of the proposal. We are aware that the New York City Bar has proposed changes to the provisions in paragraph (b)(2) of the current version of the Model Rule and we are generally supportive of those proposed changes. We welcome any and all comments and suggestions. Please send them to Laurel Terry at LTerry@psu.edu and Catherine Rogers at CAR36@psu.edu. 2

20 APPENDIX A Redline Version RULE 8.5: Disciplinary Authority; Choice of Law Draft: Oct. 1, 2010 Please do not cite or quote without permission LTerry@psu.edu & CAR36@psu.edu (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. (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 to be applied shall be the rules specified by or for the tribunal, if any; 1 (2) If no ethical rules are specified by or for a tribunal for matters pending before it, the rules to be applied shall be: i) for conduct in connection with a matter pending before a tribunal, other than an international tribunal, the rules of the jurisdiction in which the tribunal sits, unless the rules of the tribunal provide otherwise; or ii) for conduct in connection with a matter pending before an international tribunal, the rules of this jurisdiction, including Rule 8.5. (3) [As described in the attached memo, this proposal does not suggest any specific amendments to the provisions currently found in Rule 8.5(b)(2).] 1 This proposed language for 8.5(b)(1) differs textually from the current ABA Model Rule 8.5(b)(1) and the City Bar s proposal, but its purpose and effect are the same. All three rules specify that the advocate s first step is to consult the tribunal s own rules. The proposed changes to paragraph (b)(1) are necessary to accommodate the substantive changes proposed for paragraph (b)(2). A-1

21 Draft: Oct. 1, 2010 Please do not cite or quote without permission & Comment Disciplinary Authority [1] It is longstanding law that the conduct of a lawyer admitted to practice in this jurisdiction is subject to the disciplinary authority of this jurisdiction. Extension of the disciplinary authority of this jurisdiction to other lawyers who provide or offer to provide legal services in this jurisdiction is for the protection of the citizens of this jurisdiction. Reciprocal enforcement of a jurisdiction s disciplinary findings and sanctions will further advance the purposes of this Rule. See Rules 6 and 22, ABA Model Rules for Lawyer Disciplinary Enforcement,. A lawyer who is subject to the disciplinary authority of this jurisdiction under Rule 8.5(a) appoints an official to be designated by this Court to receive service of process in this jurisdiction. The fact that the lawyer is subject to the disciplinary authority of this jurisdiction may be a factor in determining whether personal jurisdiction may be asserted over the lawyer for civil matters. Choice of Law [2] A lawyer may be potentially subject to more than one set of rules of professional conduct which impose different obligations. The lawyer may be licensed to practice in more than one jurisdiction with differing rules, or may be admitted to practice before a particular court with rules that differ from those of the jurisdiction or jurisdictions in which the lawyer is licensed to practice. Additionally, the lawyer s conduct may involve significant contacts with more than one jurisdiction. [3] Paragraph (b) seeks to resolve such potential conflicts. Its premise is that minimizing conflicts between rules, as well as uncertainty about which rules are applicable, is in the best interest of both clients and the profession (as well as the bodies having authority to regulate the profession). Accordingly, it takes the approach of (i) providing that any particular conduct of a lawyer shall be subject to only one set of rules of professional conduct, (ii) making the determination of which set of rules applies to particular conduct as straightforward as possible, consistent with recognition of appropriate regulatory interests of relevant jurisdictions, and (iii) providing protection from discipline for lawyers who act reasonably in the face of uncertainty. [4] Paragraph (b)(1) provides that as to a lawyer s conduct relating to a proceeding pending before a tribunal, the lawyer shall be subject only to the rules adopted by or prescribed for that tribunal. The applicable rules might consist of pre-established ethical rules that apply to all matters pending before that tribunal or rules or rulings regarding conduct that are imposed for a specific matter. of the jurisdiction in which the tribunal sits unless the rules of the tribunal, including its choice of law rule, provide otherwise. [The remainder of comment 4 focuses on Rule 8.5(b)(2), which this proposal does not address]. A-2

22 Draft: Oct. 1, 2010 Please do not cite or quote without permission & [5] Many international tribunals do not have pre-established ethical rules. The absence of such rules creates problems because participants from different systems may have different perceptions about what constitutes ethical conduct and their abiding by different ethical rules can undermine the fairness and perceived legitimacy of the proceedings. Accordingly, international tribunals sometimes address lawyer conduct issues through procedural orders or rulings, either at the beginning of the proceedings or in response to specific issues that arise during the proceedings. Particularly in international arbitral tribunals, parties often enter into agreements and tribunals issue rulings regarding the procedures to be followed. Those agreements and rulings sometimes have implications regarding the conduct of counsel, and related issues of legal ethics. Consistent with their obligations under Rule 3.4(c), a lawyer should make every effort to comply with such agreements and rulings to the extent possible consistent with these rules. To the extent that compliance is not possible, a lawyer should provide the tribunal and opposing counsel timely notice of the lawyer s intent not to comply and cite to the conflicting rule that is determined to apply under paragraph (b)(2)(ii). [6] Paragraph (b)(2) provides two distinct choice-of-law rules that apply to those situations in which a tribunal does not have any rules governing the conduct of lawyers appearing before it. For domestic tribunals, paragraph (b)(2)(i) provides that the governing rules are the ethical rules, including the choice of law provisions, of the jurisdiction in which the domestic tribunal sits. Paragraph b(2)(ii) provides that, if an international tribunal does not have any preestablished rules and has not adopted rules for a specific matter, then a lawyer who is licensed in this jurisdiction and who is appearing before an international tribunal shall use the rules of this jurisdiction. [7] The choice-of-law rule for domestic tribunals in paragraph b(2)(i) selects the rules of the jurisdiction where the tribunal sits. In such contexts, there is necessarily some relationship between the dispute and the jurisdiction in which the tribunal is located, even when the tribunal is an arbitral tribunal instead of a court. The same is not true with respect to international tribunals. The place where an international tribunal sits or has its seat often bears little or no relationship either to the dispute, the proceedings or the parties. Indeed, in the international context, the jurisdiction in which the international tribunal sits or has its seat is often selected for travel convenience or precisely because it bears no relationship to the dispute. Accordingly, if an international tribunal does not have any general rules governing counsel conduct and has not adopted any rules specific to the matter at hand, then the rules of this jurisdiction apply rather than the rules of the jurisdiction in which the international tribunal has its seat. [8] The term international tribunal includes foreign and international tribunals seated abroad, as well as tribunals, other than U.S. state and federal A-3

23 Draft: Oct. 1, 2010 Please do not cite or quote without permission & courts, that are seated in the United States but are constituted to resolve a dispute that involves property located abroad, performance or enforcement of obligations abroad, or has some other reasonable relation with one or more foreign states. Rule 8.5(b)(2)(ii) thus applies to international arbitral proceedings that physically occur in the United States, such as an ICSID arbitral tribunal, because these proceedings have more in common with international tribunals seated abroad than with other domestic tribunals in which all lawyers are licensed in a U.S. jurisdiction. 2 [9] It may be the case that a lawyer appearing before an international tribunal is licensed in more than one U.S. jurisdiction. In that situation, the provisions of paragraph (b)(2)(ii) do not fully resolve the choice-of-law issue since that lawyer may be directed under that paragraph to abide by ethical of rules that are different from those that another jurisdiction directs the lawyer to follow. In that instance, the lawyer should, consistent with the approach found in paragraph (b)(3), apply the rules of the other jurisdiction if the lawyer if the lawyer reasonably believes that the lawyer s representation in that case has a predominant effect in the other U.S. jurisdiction. This approach may be appropriate, for example, if the clients are located in another U.S. jurisdiction or if the lawyer s primary office or principal locus for preparing the case is the other U.S. jurisdiction. Choice-of-Law in Parallel Proceedings [10] Large complex international cases often involve multiple proceedings that occur in different venues. In many instances, these parallel proceedings involve a combination of national courts, arbitral tribunals and other international tribunals. Generally, lawyers will be able to abide by all the ethical rules of the multiple tribunals, even if the rules of one tribunal are more restrictive than those of another. For example, in a case pending in a U.S. court, a lawyer may wish to depose abroad a witness who resides in a country that does not permit private depositions, and instead requires that any deposition be administered by a local judge. A lawyer can comply with both U.S. ethical obligations and the foreign prohibition by pursuing the judicial procedure in the local foreign court, or by arranging to depose the witness in a jurisdiction where the foreign prohibition does not apply. If a lawyer cannot comply with the rules of both tribunals, the rules of the tribunal that are most directly related to the relevant conduct apply. One forum is likely to have a more direct link to the conduct in question, for example if the activities physically occur in that forum. In the event that a lawyer 2 In the Oct. 1, 2010 draft, this sentence stated Rule 8.5(b)(2)(ii) thus applies to international arbitral proceedings that physically occur in the United States, such as an ICSID arbitral tribunal, because these proceedings have more in common with international tribunals seated abroad than with other domestic tribunals in which all lawyers are licensed in a U.S. jurisdiction. The updated draft, dated Dec. 1, 2010, deletes the words in which all lawyers are licensed because some U.S. jurisdictions authorize pro hac vice appearances by lawyers who are licensed in a foreign jurisdiction but not a U.S. jurisdiction. See A-4

24 Draft: Oct. 1, 2010 Please do not cite or quote without permission & cannot comply with the rules that would otherwise apply to proceedings before a particular tribunal, the lawyer shall provide timely notice, both to the tribunal and to opposing counsel, of the lawyer s intention not to comply with the otherwise applicable rule, and cite to the conflicting rule that is determined to apply under paragraph (b)(2)(ii). [insert as [11] and [12] comments related to proposed Rule 8.5(b)(3] [713] The choice of law provision in Rule 8.5(b)(3) applies to lawyers engaged in transnational practice, unless international law, treaties or other agreements between competent regulatory authorities in the affected jurisdictions provide otherwise. Issues Related to Enforcement [614] If two admitting jurisdictions were to proceed against a lawyer for the same conduct, they should, applying this rule, identify the same governing ethics rules. They should take all appropriate steps to see that they do apply the same rule to the same conduct, and in all events should avoid proceeding against a lawyer on the basis of two inconsistent rules. In the domestic context, U.S. disciplinary authorities have procedures for communicating regarding lawyer conduct issues. For example, many jurisdictions have adopted rules that address reciprocal discipline and cooperation issues such as those found in ABA Model Rule of Disciplinary Enforcement 22. U.S. jurisdictions also share information through the National Lawyer Regulatory Data Bank. In the international context, there are no formal rules or procedures to facilitate reciprocal discipline and cooperation. However, decisions regarding discipline for conduct that occurs in another country or involves violation of foreign or international ethical rules may be aided by information from the foreign jurisdiction or international or foreign tribunal. In determining whether to impose discipline, this jurisdiction may seek appropriate guidance from the foreign jurisdiction or foreign or international tribunal regarding the interpretation of and the policies underlying its rule, and whether discipline would be imposed by that jurisdiction for the conduct at issue. Moreover, this jurisdiction may take under consideration any factual findings or assessments of a lawyer s conduct rendered by a foreign or international tribunal, whether or not such tribunal imposed sanctions directly on the lawyer. [15] The ethical rules of some foreign jurisdictions or international tribunals may require conduct that would be considered offensive to the public policy of this jurisdiction. For example, an order by a foreign tribunal that would require a lawyer to violate directly a non-derogable order of a court in this jurisdiction would almost invariably be a violation of the public policy of this jurisdiction. In determining whether discipline is appropriate for conduct that A-5

25 Draft: Oct. 1, 2010 Please do not cite or quote without permission & occurred outside the United States and is subject to the rules of a foreign jurisdiction or international tribunal, this jurisdiction may consider whether the imposition of discipline would result in grave injustice, be contrary to the reasonable and good faith expectations of the lawyer regarding the applicable rules, or be offensive to the public policy of this jurisdiction. This allowance for exceptions based on grave injustice, unfair surprise or violation of public policy is consistent with the approach found in ABA Model Rule of Disciplinary Enforcement 22(D)(3), which contains a similar public policy exception in the context of reciprocal discipline between individual U.S. jurisdictions. A-6

26 APPENDIX B Clean Version RULE 8.5: Disciplinary Authority; Choice of Law Draft: Oct. 1, 2010 Please do not cite or quote without permission LTerry@psu.edu & CAR36@psu.edu (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. (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 to be applied shall be the rules specified by or for the tribunal, if any; (2) If no ethical rules are specified by or for a tribunal for matters pending before it, the rules to be applied shall be: i) for conduct in connection with a matter pending before a tribunal, other than an international tribunal, the rules of the jurisdiction in which the tribunal sits,; or ii) for conduct in connection with a matter pending before an international tribunal, the rules of this jurisdiction, including Rule 8.5. (3) [As described in the attached memo, this proposal does not suggest any specific amendments to the provisions currently found in Rule 8.5(b)(2).] B-1

27 Draft: Oct. 1, 2010 Please do not cite or quote without permission & Comment Disciplinary Authority [1] It is longstanding law that the conduct of a lawyer admitted to practice in this jurisdiction is subject to the disciplinary authority of this jurisdiction. Extension of the disciplinary authority of this jurisdiction to other lawyers who provide or offer to provide legal services in this jurisdiction is for the protection of the citizens of this jurisdiction. Reciprocal enforcement of a jurisdiction s disciplinary findings and sanctions will further advance the purposes of this Rule. See Rules 6 and 22, ABA Model Rules for Lawyer Disciplinary Enforcement,. A lawyer who is subject to the disciplinary authority of this jurisdiction under Rule 8.5(a) appoints an official to be designated by this Court to receive service of process in this jurisdiction. The fact that the lawyer is subject to the disciplinary authority of this jurisdiction may be a factor in determining whether personal jurisdiction may be asserted over the lawyer for civil matters. Choice of Law [2] A lawyer may be potentially subject to more than one set of rules of professional conduct which impose different obligations. The lawyer may be licensed to practice in more than one jurisdiction with differing rules, or may be admitted to practice before a particular court with rules that differ from those of the jurisdiction or jurisdictions in which the lawyer is licensed to practice. Additionally, the lawyer s conduct may involve significant contacts with more than one jurisdiction. [3] Paragraph (b) seeks to resolve such potential conflicts. Its premise is that minimizing conflicts between rules, as well as uncertainty about which rules are applicable, is in the best interest of both clients and the profession (as well as the bodies having authority to regulate the profession). Accordingly, it takes the approach of (i) providing that any particular conduct of a lawyer shall be subject to only one set of rules of professional conduct, (ii) making the determination of which set of rules applies to particular conduct as straightforward as possible, consistent with recognition of appropriate regulatory interests of relevant jurisdictions, and (iii) providing protection from discipline for lawyers who act reasonably in the face of uncertainty. [4] Paragraph (b)(1) provides that as to a lawyer s conduct relating to a proceeding pending before a tribunal, the lawyer shall be subject only to the rules adopted by or prescribed for that tribunal. The applicable rules might consist of pre-established ethical rules that apply to all matters pending before that tribunal or rules or rulings regarding conduct that are imposed for a specific matter. B-2

28 Draft: Oct. 1, 2010 Please do not cite or quote without permission & [5] Many international tribunals do not have pre-established ethical rules. The absence of such rules creates problems because participants from different systems may have different perceptions about what constitutes ethical conduct and their abiding by different ethical rules can undermine the fairness and perceived legitimacy of the proceedings. Accordingly, international tribunals sometimes address lawyer conduct issues through procedural orders or rulings, either at the beginning of the proceedings or in response to specific issues that arise during the proceedings. Particularly in international arbitral tribunals, parties often enter into agreements and tribunals issue rulings regarding the procedures to be followed. Those agreements and rulings sometimes have implications regarding the conduct of counsel, and related issues of legal ethics. Consistent with their obligations under Rule 3.4(c), a lawyer should make every effort to comply with such agreements and rulings to the extent possible consistent with these rules. To the extent that compliance is not possible, a lawyer should provide the tribunal and opposing counsel timely notice of the lawyer s intent not to comply and cite to the conflicting rule that is determined to apply under paragraph (b)(2)(ii). [6] Paragraph (b)(2) provides two distinct choice-of-law rules that apply to those situations in which a tribunal does not have any rules governing the conduct of lawyers appearing before it. For domestic tribunals, paragraph (b)(2)(i) provides that the governing rules are the ethical rules, including the choice of law provisions, of the jurisdiction in which the domestic tribunal sits. Paragraph b(2)(ii) provides that, if an international tribunal does not have any preestablished rules and has not adopted rules for a specific matter, then a lawyer who is licensed in this jurisdiction and who is appearing before an international tribunal r shall use the rules of this jurisdiction. [7] The choice-of-law rule for domestic tribunals in paragraph b(2)(i) selects the rules of the jurisdiction where the tribunal sits. In such contexts, there is necessarily some relationship between the dispute and the jurisdiction in which the tribunal is located, even when the tribunal is an arbitral tribunal instead of a court. The same is not true with respect to international tribunals. The place where an international tribunal sits or has its seat often bears little or no relationship either to the dispute, the proceedings or the parties. Indeed, in the international context, the jurisdiction in which the international tribunal sits or has its seat is often selected for travel convenience or precisely because it bears no relationship to the dispute. Accordingly, if an international tribunal does not have any general rules governing counsel conduct and has not adopted any rules specific to the matter at hand, then the rules of this jurisdiction apply rather than the rules of the jurisdiction in which the international tribunal has its seat. [8] The term international tribunal includes foreign and international tribunals seated abroad, as well as tribunals, other than U.S. state and federal courts, that are seated in the United States but are constituted to resolve a dispute that involves property located abroad, performance or enforcement of obligations B-3

29 Draft: Oct. 1, 2010 Please do not cite or quote without permission & abroad, or has some other reasonable relation with one or more foreign states. Rule 8.5(b)(2)(ii) thus applies to international arbitral proceedings that physically occur in the United States, such as an ICSID arbitral tribunal, because these proceedings have more in common with international tribunals seated abroad than with other domestic tribunals in a U.S. jurisdiction. [9] It may be the case that a lawyer appearing before an international tribunal is licensed in more than one U.S. jurisdiction. In that situation, the provisions of paragraph (b)(2)(ii) do not fully resolve the choice-of-law issue since that lawyer may be directed under that paragraph to abide by ethical of rules that are different from those that another jurisdiction directs the lawyer to follow. In that instance, the lawyer should, consistent with the approach found in paragraph (b)(3), apply the rules of the other jurisdiction if the lawyer if the lawyer reasonably believes that the lawyer s representation in that case has a predominant effect in the other U.S. jurisdiction. This approach may be appropriate, for example, if the clients are located in another U.S. jurisdiction or if the lawyer s primary office or principal locus for preparing the case is the other U.S. jurisdiction. Choice-of-Law in Parallel Proceedings [10] Large complex international cases often involve multiple proceedings that occur in different venues. In many instances, these parallel proceedings involve a combination of national courts, arbitral tribunals and other international tribunals. Generally, lawyers will be able to abide by all the ethical rules of the multiple tribunals, even if the rules of one tribunal are more restrictive than those of another. For example, in a case pending in a U.S. court, a lawyer may wish to depose abroad a witness who resides in a country that does not permit private depositions, and instead requires that any deposition be administered by a local judge. A lawyer can comply with both U.S. ethical obligations and the foreign prohibition by pursuing the judicial procedure in the local foreign court, or by arranging to depose the witness in a jurisdiction where the foreign prohibition does not apply. If a lawyer cannot comply with the rules of both tribunals, the rules of the tribunal that are most directly related to the relevant conduct apply. One forum is likely to have a more direct link to the conduct in question, for example if the activities physically occur in that forum. In the event that a lawyer cannot comply with the rules that would otherwise apply to proceedings before a particular tribunal, the lawyer shall provide timely notice, both to the tribunal and to opposing counsel, of the lawyer s intention not to comply with the otherwise applicable rule, and cite to the conflicting rule that is determined to apply under paragraph (b)(2)(ii). [insert as paragraphs [11] and [12] comments related to proposed Rule 8.5(b)(3)] B-4

30 Draft: Oct. 1, 2010 Please do not cite or quote without permission & [13] The choice of law provision in Rule 8.5(b)(3) applies to lawyers engaged in transnational practice, unless international law, treaties or other agreements between competent regulatory authorities in the affected jurisdictions provide otherwise. Issues Related to Enforcement [14] If two admitting jurisdictions were to proceed against a lawyer for the same conduct, they should, applying this rule, identify the same governing ethics rules. They should take all appropriate steps to see that they do apply the same rule to the same conduct, and in all events should avoid proceeding against a lawyer on the basis of two inconsistent rules. In the domestic context, U.S. disciplinary authorities have procedures for communicating regarding lawyer conduct issues. For example, many jurisdictions have adopted rules that address reciprocal discipline and cooperation issues such as those found in ABA Model Rule of Disciplinary Enforcement 22. U.S. jurisdictions also share information through the National Lawyer Regulatory Data Bank. In the international context, there are no formal rules or procedures to facilitate reciprocal discipline and cooperation. However, decisions regarding discipline for conduct that occurs in another country or involves violation of foreign or international ethical rules may be aided by information from the foreign jurisdiction or international or foreign tribunal. In determining whether to impose discipline, this jurisdiction may seek appropriate guidance from the foreign jurisdiction or foreign or international tribunal regarding the interpretation of and the policies underlying its rule, and whether discipline would be imposed by that jurisdiction for the conduct at issue. Moreover, this jurisdiction may take under consideration any factual findings or assessments of a lawyer s conduct rendered by a foreign or international tribunal, whether or not such tribunal imposed sanctions directly on the lawyer. [15] The ethical rules of some foreign jurisdictions or international tribunals may require conduct that would be considered offensive to the public policy of this jurisdiction. For example, an order by a foreign tribunal that would require a lawyer to violate directly a non-derogable order of a court in this jurisdiction would almost invariably be a violation of the public policy of this jurisdiction. In determining whether discipline is appropriate for conduct that occurred outside the United States and is subject to the rules of a foreign jurisdiction or international tribunal, this jurisdiction may consider whether the imposition of discipline would result in grave injustice, be contrary to the reasonable and good faith expectations of the lawyer regarding the applicable rules, or be offensive to the public policy of this jurisdiction. This allowance for exceptions based on grave injustice, unfair surprise or violation of public policy is consistent with the approach found in ABA Model Rule of Disciplinary Enforcement 22(D)(3), which contains a similar public policy exception in the context of reciprocal discipline between individual U.S. jurisdictions. B-5

31 COMMENTS Conflicts of Interest, Uniformity and Choice of Law Working Group Issues Paper Choice of Law in Cross-Border Practice ABA Standing Committee on Client Protection p.2-3 ABA Section of Real Property, Trust & Estate Law p.4-6 Attorneys Liability Assurance Society, Inc..p.7-9 Mark A. Dubois, Chief Disciplinary Counsel, CT Judicial Branch..p.10 Stephanie L. Kimbro, Esq. p Brian Toohey & Anne Marie Morris, Esq. p.15-19

32 CHAIR Justice Daniel J. Crothers North Dakota Supreme Court Department E. Boulevard Avenue Bismarck, ND Tel: 701/ Fax: 701/328/4480 MEMBERS Nancy L. Cohen Denver, CO Lindsey D. Draper Madison, WI Daniel R. Hendi Trenton, NJ Janet Green Marbley Columbus, OH Leo Wesley Ottey, Jr. Baltimore, MD Charles J. Vigil Albuquerque, NM LIAISONS: BOARD OF GOVERNORS Harold D. Pope, III Southfield, MI NATIONAL CLIENT PROTECTION ORGANIZATION Robert D. Welden Seattle, WA NATIONAL ORGANIZATION OF BAR COUNSEL Sara Rittman Jefferson City, MO SOCIATION OF PROFESSIONAL RESPONSIBILITY LAWYERS Dianna M. Anelli Columbus, OH CENTER FOR PROFESSIONAL RESPONSIBILITY DIRECTOR Jeanne P. Gray Tel: 312/ Fax: 312/ SOCIATE CLIENT PROTECTION COUNSEL Selina S. Thomas Tel: 312/ Fax: 312/ AMERICAN BAR ASSOCIATION To: Commission on Ethics 20/20 From: Re: Daniel J. Crothers, Chair Standing Committee on Client Protection Issues Paper: Choice of Law in Cross Border Practice Date: March 15, 2011 Standing Committee on Client Protection 321 N. Clark Street 15th Floor Chicago, IL / Fax: 312/ The Commission on Ethics 20/20 has asked for a review of ethics issues that arise as a result of the increase in practice across state borders. The Committee s responses primarily focus on issues related to the protection of the clients interests. Regarding Fact pattern #1, the Committee recognizes that a client who seeks legal services from a lawyer not licensed in the client s home state assumes a certain amount of risk; however, it is the responsibility of lawyers to adhere to rules of professional conduct. While an analysis under Model Rule 8.5 is instructive to lawyers and disciplinary authorities, it should not affect the client s rights. A client should be able to file a disciplinary complaint or make a claim for reimbursement in either jurisdiction. It then becomes the responsibility of the disciplinary authorities and client protection funds to determine the applicability of Model Rule 8.5. The issues presented in fact pattern #2 are complex and often controversial. It is the Committee s position that the best interests of the client should always be a lawyer s primary concern before an analysis of choice of law under Model Rule 8.5 can begin. In this fact pattern, choice of law cannot be decided without an examination of imputed disqualification under the competing jurisdictions Rule It is not the Committee s intention to re-open the debate on Model Rule However, when a law firm has offices in more than one jurisdiction, with differing versions of Rule 1.10, or other rules of professional conduct affecting client interests, the firm should focus on the best interests of the clients while making business decisions that are reasonably beneficial to the firm. While it is arguably consistent with Model Rule 8.5 to allow a lawyer with a conflict to move from one firm to another without client consent, when faced with a choice of law question, the lawyer s duty to the client should be the lawyer s priority. Accordingly, in fact pattern #2, a reading of Model Rule 8.5 alone may allow the lawyer to move firms without client consent, but the best interests of the client would either require the consent of the lateral lawyer s client or withdrawal by the hiring firm.

33 Likewise in fact pattern # 3, if the firm s lawyers are making decisions in the best interests of clients: a firm s lawyer in one jurisdiction would not take on representation in opposition to another firm client without both clients consent, regardless of whether a choice of law question is involved. The Committee is particularly concerned with the concept of contracting with a client for governing rules of professional conduct. The second and third principles of the Commission on Ethics 20/20 are to preserve core professional values of the American Legal profession and maintain a strong, independent and self-regulating profession. The Committee questions whether core professional values of the legal profession would allow a lawyer to contract with a client regarding which professional conduct rules would apply to the lawyer s conduct. That decision rests solely with the highest court of appellate jurisdiction in a state, the body responsible for the regulation of the practice of law. Assuming without deciding that a lawyer can enter into such an agreement, and that the client has been properly informed of her rights and advised to consult independent counsel before moving forward, it is the Committee s position that it would be reasonable for the lawyers in fact patterns #2 and #3 to rely on those agreements in deciding applicable rules of conduct only if there is a reasonable basis to establish predominant effect in the underlying representation, as is required by Rule 8.5(b)(2). The Committee notes that Rule 10 of the ABA Model Rules for Lawyers Funds for Client Protection provide a method for determining payment to clients when there is a choice of law issue. The factors for consideration include whether a client contracted for or waived certain rights. Accordingly, the Commission could consider a comment that requires any choice of law provisions to include the caveat that such agreements may affect other rights of the client, as the ability to claim a loss to a particular jurisdiction s lawyers fund for client protection. Finally, making a reasonable assessment of the predominant effect, as required by Rule 8.5(b)(2), may not always be clear to the lawyer. The Committee suggests the Restatement approach would be instructive. The Restatement (Third) of the Law Governing Lawyers, includes a number of factors that could be considered when assessing the applicable jurisdiction s rules: the nature of the charged offense; the nature of the lawyer's work; the impact of the questioned conduct on the interests of third persons and on public institutions such as tribunals, administrative agencies, or legislative bodies; the residence and place of business of any client or third person whose interests are materially affected by the lawyer's actions; the place where the affected conduct occurred; and the nature of the regulatory interest reflected in the different provisions in question. The Committee suggests incorporating specific factors into the comments for Model Rule 8.5, similar to those listed in the Restatement. The Committee also suggests amending Model Rule 8.5 to include a provision that allows the application of the lawyer s home jurisdiction s rules when the determination of predominant effect is not possible. Such an amendment would also be in the spirit of Model Rule 8.5(b)(2) and Comments [5]and [6].

34 1901 Sixth Avenue North 2400 AmSouth Harbert Plaza Birmingham, Alabama Telephone Fax MEMORANDUM TO: FROM: Ms. Robin Roy, American Bar Association Adam J. Sigman, Chairman, Ethics and Professionalism Committee, ABA-RPTE (RP-Side) Pat Char, Chairwoman, Ethics and Professionalism Committee, ABA- RPTE (TE-Side) RE: ABA Commission on Ethics 20/20; Issues Paper: Choices of Law in Cross Border Practice CC: Ms. Susan G. Talley Ms. Pat Char DATE: March 30, 2011 As requested, the following list combines the comments and concerns raised by the ABA- RPTE Ethics and Professionalism Committees (both the RP and TE sides). Our group recognizes that many instances of cross-border practice occur every day in our practice area. As mentioned in the paper (copy attached), Rule 8.5 addresses some of these, while missing others. We believe that Rule 8.5 might be the most offended (casually) rule in the books. For example, if one of us were fortunate enough to have a client that wanted to purchase a swath of REO properties from a particular bank or servicer (at a discount) and the properties spanned several states, we cannot definitively answer where the predominant effect of our counsel "occurs" if the client is based in our home state and we engage (truly engage) local counsel in each of the other states/jurisdictions. In many respects, our counsel occurs where the client "is" or "goes" (which is sometimes out of our control). Most often, the client (and its office and operation) remains in our home state/jurisdiction. The paper raises 2 chief issues based on our group's discussion. The first is the UPL issue that arises out of cross border practices

35 March 30, 2011 Page 2 In response to this paper's first issue, we believe the Commission should be asked whether the ABA wants to revise Rule 8.5 to reduce or even halt cross-border practices entirely or find a way re-draft Rule 8.5 to better describe a safe harbor for well meaning attorneys in 1 jurisdiction who have a client that wants to transact in several jurisdictions. We vote for the latter. As an example, the ABA could craft an addendum to 8.5 to provide a safe-harbor for well meaning attorneys whose clients push the borders. In this regard, please note we've specifically excluded attorney advertising in another jurisdiction (a separate issue entirely that we did not discuss nor address here). Instead, we are referring to a solution for the hypothetical above - with the multi-state transaction client. We envisioned a modified Rule 8.5 that provides a safeharbor for a lawyer licensed in 1 jurisdiction who (1) follows the adopted rules in his/her home state/jurisdiction, and (2) familiarizes him/herself and follows, reasonably, the adopted rules in each transaction state/jurisdiction, and (3) engages local counsel in each transaction state. As an alternative or a supplement, Rule 8.5 could add a quasi-pro-hac-vice process (similar to litigation practices). The second issue is whether the actions of the attorney who crosses the border are subject to the disciplinary authority of the cross-border state, and, if so, which state's ethics rules will apply. We think the proposed/revised rule has taken the best possible approach, i.e. that the attorney's conduct can be subject to discipline in the cross-border state. With respect to which state's rules will apply, we believe that each state is going to apply its own rules and that the attorney may be subject to discipline in both his/her home state/jurisdiction as well as the cross-border state/jurisdiction. However, we think that the ABA should support a position that the crossborder state should take into account (as a factor) the attorney's reasonable belief as to whether a UPL violation occurred (provided such a reasonable belief existed). The more difficult question involves attorneys (a) crossing the border and performing work with an impact in the non-home state, or (b) performing work that is intended to have legal consequences primarily in the jurisdiction that is not the home attorney s state. Of the two approaches suggested that are relevant to 8.5(b)(2) the New York proposal and the Restatement the New York proposal is closest to the existing rule, with the primary difference being that it is more clearly written. Both the existing rule and the New York proposal focus on the lawyer s reasonable belief about the predominant effect of the lawyer s conduct. After reviewing the presumption and factors described in the Restatement approach, it does not seem that a significant change from the existing rule to something like the Restatement s approach would materially improve the rule. Both approaches permit consideration of numerous different circumstances that may be material to what rule applies. Because the facts to which the rule may be applicable can vary significantly, an effort to be more specific may not improve the rule and could leave a hole where the rule should be applied. This rule, like every other statute, regulation, and rule, is difficult to apply in some circumstances and may be open to varied interpretation. But, that sort of flexibility is necessary and desirable. Please do not hesitate to contact us with any question or concern. As a minor editorialization, I would like to add that preparing comments to this paper was very difficult. Both due to the breadth of the issues raised in applying and modifying Rule 8.5, and also in reaching a consensus among the participants in my working group respecting the comments

36 March 30, 2011 Page 3 If you have any questions or concerns regarding this memorandum, please do not hesitate to contact me. Respectfully submitted, Adam J. Sigman

37 American Bar Association Commission on Ethics 20/20 Comments on Issue Paper Regarding Choice of Law in Cross-Border Practice Submitted by: Attorneys Liability Assurance Society, Inc., A Risk Retention Group 311 S. Wacker Drive Chicago, Illinois Contact: Jeffrey T. Kraus Vice President Loss Prevention Counsel jtkraus@alas.com Dated: March 15, 2011 Attorneys Liability Assurance Society, Inc., A Risk Retention Group (ALAS) submits the following comments on the Commission s Issue Paper Regarding Choice of Law in Cross- Border Practice (Issue Paper). I. Introduction Founded in 1987, ALAS is a mutual insurance company that insures 233 major law firms, including over 58,000 lawyers in 49 states, the District of Columbia, and 26 foreign countries, and is the leading provider of professional liability insurance for large law firms in the United States. Lawyers from ALAS were actively involved in the American Law Institute s development of the Restatement Third, The Law Governing Lawyers and in the American Bar Association s 2002 revision of the Model Rules of Professional Conduct, and they are involved with other professional and bar associations that have defined the ethical and professional duties of lawyers. Among other services, ALAS provides its insured lawyers with extensive loss prevention advice. ALAS also actively monitors the defense of professional liability claims asserted against its insured firms and lawyers. By virtue of the services it renders, ALAS has a unique understanding of problems confronting law firms today. As the Issue Paper notes, professional conduct rules vary both within the United States and internationally. And, as the Fact Patterns included in the Issue Paper demonstrate, Model Rule 8.5 may not adequately inform lawyers on which set of professional conduct rules apply in engagements that involve multiple jurisdictions. Accordingly, ALAS submits the following observations regarding the three possible revisions to Model Rule 8.5 discussed in the Issue Paper. 1

38 II. Proposal by the Association of the Bar of the City of New York Committee on Professional Responsibility. The Association of the Bar of the City of New York Committee on Professional Responsibility (ABCNY Committee) issued an extensive Report on Conflicts of Interest in Multi-Jurisdictional Practice in March In that Report, the ABCNY Committee proposed changes to New York Rules of Professional Conduct 8.5 and ALAS currently takes no position on the precise formulations of these proposed changes, but notes that the ABCNY Committee s approach presents a sensible solution to many of the quandaries lawyers and law firms face when trying to determine which set of sometimes conflicting professional conduct rules apply in cross-border representations. In particular, the ABCNY Committee s approach to imputation in Rule 1.10 may clarify the application of Rule 8.5 in many circumstances. ALAS also notes that it may be prudent for the Commission to consider harmonizing any proposed change to Rule 1.10 designed to deal specifically with cross-border practice issues with broader efforts to address conflicts of interest. See, e.g., Creamer, Expanding Screening Further, The Professional Lawyer, Volume 20, Issue 3 (2010) (advocating proposed changes to Model Rule 1.10 designed to address conflicts of interest in general that were first published over 10 years ago by the Section of Business Law s Ad Hoc Committee on Ethics 2000). This would be consistent with the Commission s charge, as stated in Section C of its Preliminary Issues Outline, to examine the conflicts of interest rules in light of law firm growth and the globalization of the legal practice, including studying the utility and ongoing feasibility of imputed disqualification rules such as Model Rule III. Proposal by Professors Laurel Terry and Catherine Rogers. ALAS does not have sufficient information regarding the issues raised by Professors Terry and Rogers regarding international tribunals to make any substantive comment on their proposed revisions to Model Rule 8.5. IV. Adoption of the Restatement Approach. ALAS does not believe that the Commission should consider revising Rule 8.5 or its comments to reflect the choice of law approach taken by the Restatement Third of the Law Governing Lawyers. The factors outlined in Section 5, cmt. h of the Restatement may be relevant to a theoretical choice of law analysis, but they do not resolve the ambiguities demonstrated by the Fact Patterns in the Issue Paper. V. Designating the Governing Professional Conduct Rules by Contract. Clients and lawyers should be able to agree that a designated jurisdiction s professional conduct rules regarding conflicts of interest will govern their relationship. See Fact Pattern #4 of 2

39 the Issue Paper. Such an agreement contained in the lawyer s engagement letter (or similar communication) could eliminate much of the choice of law uncertainty for clients and lawyers pertaining to cross-border representations. The extent of the information and explanation that a lawyer should communicate to the client on this issue may depend on a number of factors. At a minimum, however, a client should be able to freely contract for a specific jurisdiction s conflict of interest rules when the client is experienced in legal matters generally, an experienced user of the legal services involved, or independently represented, as by in-house counsel. VI. Conclusion ALAS respectfully submits the foregoing for the Commission s consideration. 3

40 Mark A. Dubois Interesting problem, not easily solved as different states have different choice of laws regimes. As with some of the other things you have been working on, the problem is that when you try to create a single rule for conduct crossing state and national borders, you inevitably get very complex very quickly. Perhaps the simplest solution would be: (b) For any other conduct, the applicable law to be applied shall be in accordance with the choice of laws jurisprudence of this state. Mark A. Dubois Chief Disciplinary Counsel State of CT-Judicial Branch

41 Stephanie L. Kimbro, Attorney at Law P.O. Box 4484, Wilmington, NC March 14, 2011 ABA Commission on Ethics 20/20 Working Group on Uniformity, Choice of Law, and Conflicts of Interest 321 N. Clark Street Chicago, IL Re: Issues Paper: Choice of Law in Cross-Border Practice I would like to respond to the Commission s request for feedback regarding the first fact pattern listed in the issues paper entitled Virtual Law Practices and whether a portion of 8.5(b)(2) should be retained or modified. I will speak from my experience as a solo practitioner who has operated a completely web-based virtual law office pertaining to North Carolina law for going on six years now. I will also speak from my experience as the co-founder of a software as a service application that provides other attorneys from solos to smaller firms with the ability to deliver unbundled legal services online. In this role and as a practitioner myself, I have worked with many attorneys who are engaged in different forms of virtual law practice where the first fact pattern is a regular occurrence. Several of the other fact patterns mentioned in this issues paper also may relate to virtual law practice, both those operated by solos and by larger, multijurisdictional firms. I am in the process of writing a more detailed paper regarding the implications of virtual law firms that are cross-border and involve international law. This more complex form of virtual law practice does need to be addressed in the comments to 8.5 and runs into some of the same issues that are brought up by Professors Terry and Rogers in their excellent analysis and proposal that follows the Commission s paper. The use of the virtual law firm in outsourcing legal services overseas and working with non-lawyers in the use of the technology to deliver the legal services are obvious issues that are hinted at in almost all of the fact patterns. However, these issues involve the confidentiality and security of client data, which should be addressed separately outside of Rule 8.5. Maybe a note to this effect about the issues related to multijurisdictional virtual firms could be integrated into the comments for 8.5 along with Professors Terry and Rogers proposed international tribune comments. I will limit myself in this response to the specific request for feedback on the first fact pattern. I do not believe that any modification to the second sentence of Model Rule 8.5(b)(2) is necessary. Some clarification of the process of setting up a virtual law office and then how the legal services are delivered online may be useful. A virtual law office provides legal services pertaining only to the laws of the state(s) in which the attorney is licensed to practice law. When setting up a virtual law office, the attorney creates a website like any other law firm would; the only difference is the addition of the secure client portal where the prospective client and existing clients will register for assistance. The virtual law office website states throughout where the attorney is licensed to practice

42 law. The terms and conditions or disclaimers custom on these sites explains again where the attorney is licensed to practice law. This is no different than a traditional law firm website. When the prospective client registers to request legal services from the attorney, he or she must scroll through a clickwrap agreement and accept it before proceeding. A clickwrap agreement is the common method of clicking on a button on a website to accept the terms or user agreement associated with the use of that site or the online software application. You may be familiar with clickwrap agreements from registering for online banking or signing up for profiles on social media sites such as Facebook or LinkedIn, or have encountered it before purchasing items online with a credit card. The clickwrap on the virtual law office website yet again reminds the prospective client of the jurisdiction of the attorney. For further reassurance, the attorney may have the online client sign a traditional or digital engagement agreement that provides notice of which state s laws will apply should there be any dispute. In addition, some client portals have jurisdiction checks so that in order to register, the prospective client must provide their address. For example, with the software application that I use, if a prospective client is not physically located in the state where I am licensed, a red flag notice in the form of a reminder box is shown to the prospective client online, reminding them that I am only licensed to practice law in North Carolina. On my end, I am also provided with a red flag notice that this prospective client may have an out of state legal matter that I cannot handle. With all of these safe-guards in place online, it is difficult to perceive how an attorney with a virtual law office would have any confusion about where the predominant effect of his or her conduct would occur. The answer would be: whichever state s laws were required to create and make enforceable the legal matter needed for that client. To provide a real-world example, some of my clients may be located in my neighboring state of South Carolina, but I would only provide legal services to those clients if the legal matter they needed assistance with pertained to North Carolina law. I have worked with clients in northern states who own retirement property here in North Carolina and who needed assistance with a North Carolina real estate matter. I have worked with families who currently live in other states but who are moving to North Carolina and want their estate planning updated to conform to North Carolina laws so that it will be effective and ready for them when they move here. There are many other situations in which my clients are not physically located in the state where I am licensed to practice, but need my assistance nonetheless on a NC-law related legal matter. The second sentence of 8.5(b)(2) asks where the lawyer reasonably believes the predominate effect of his or her conduct will occur. There is no question that the predominant effect would be in the state to which the legal matter s law pertains. In the case of my virtual law office, it would be in North Carolina. Completely virtual law offices, such as the one in the first fact pattern, primarily deliver unbundled or limited scope legal services. Other virtual law firms provide the same full-service representation as a traditional law firm but handle most of their business transactions online through the virtual law office. Some of these traditional firms with a virtual law office integrated into their structure may also provide limited scope representation online, as well as full-service representation that combines in-person 2

43 with online communication. Most often these are transactional services and do not involve litigation. If the virtual law office serves clients in multiple jurisdictions because the attorney is licensed in multiple jurisdictions, then the rules that apply to the lawyer s conduct will be those of the state whose laws apply to the client s legal matter. If discipline is necessary, then that state s laws would be the source of disciplinary authority. For example, if in the first fact pattern the Will that lawyer Susan create for her client was pertaining to the laws of State Y where she is not licensed, she should reasonably expect that the effect of that legal work would occur in State Y. Therefore, she should be subject to the laws of State Y. This ignores the fact that she is committing unauthorized practice of law in another jurisdiction. However, if she provides a Will that pertains to the laws of State X, where she is licensed to practice, because the mere fact that her client is physically located in State Y does not mean that Susan should be subject to the laws of State Y. International law firms have been using technology such as web conferencing tools and client extranets for years now to work with clients overseas without meeting them in person. The virtual law office operated by a solo or small firm is no different in that respect. As long as the virtual practitioner takes the appropriate steps to make sure that she is selecting the proper law to be applied to the client s legal matter, does not engage in UPL and checks for conflicts of interest in compliance with the rules of the jurisdictions in which she is licensed, the activities of a virtual practitioner should not be treated any differently than those of a traditional, brick & mortar law office practitioner. A client s presence in a different geographic location than his or her attorney does not mean that state s ethics rules should come into play for the attorney handling a project that is unrelated to that state s laws. In the first fact pattern, Susan s website, as with all attorney websites, has the potential to be viewed by anyone anywhere in the world. State Y shouldn t have disciplinary authority over Susan because her website may be viewed by prospective clients in their state. By having a website, she is not offering to provide legal services in State Y under Rule 8.5(a). It should state clearly on her site under which state s laws she is offering to provide legal services. State bars that wish to retain more antiquated control over their members will create residency requirements and bona fide office rules, as in the case of the New Jersey Joint Opinion regarding virtual law offices. See for example, a recent law review article I wrote entitled Practicing Law Without an Office Address: How the Bona Fide Office Requirement Affects Virtual Law Practice. University of Dayton Law Review, Volume 36:1 (2011). ( The issue becomes more complex with a multijurisdictional virtual law firm where the solo or small firm with a virtual law office is licensed and serving online clients in more than one state. For this type of practice, the virtual practitioner must be careful to conform with the rules of multiple state bars when the attorney provides or offers to provide any legal services in those jurisdictions. For example, when creating 3

44 the virtual law office website, the attorney licensed in three different states would need to make sure that the site was approved by each state bar as required and that the strictest requirements of the three state bar rules was adhered to before delivering unbundled legal services online. Again, if an ethics issue arises, the state law that would apply would be the law of the state where the attorney s actions had an impact. For example, if the attorney is physically located in State X, but licensed and providing online legal services in States X, Y and Z and fails to comply with an ethics rule in State Y in the course of providing services under State Y law, that attorney is subject to the discipline and laws of State Y. I would be happy to contribute to any further discussion on the issues presented in this paper as they relate to the use of technology to deliver legal services online. Respectfully, Stephanie L. Kimbro, M.A., J.D. 4

45 MEMORANDUM To: ABA Commission on Ethics 20/20 From: Brian Toohey and Anne Marie Morris * Date: March 14, 2011 Re: Proposed Amendment to ABA Model Rule 8.5(b)(1) Recommendation We are not convinced that the proposed amendment to ABA Model Rule 8.5 ( MR 8.5 ), submitted to the Commission by Professors Laurel Terry and Catherine Rogers, 1 is in the best interest of either US or foreign attorneys. Although the revision appears at first glimpse to offer a cleaner and simpler fallback provision when an international tribunal has no ethics rules of its own, it provides no practical guidance for our global practitioners and makes already muddied waters even murkier. We recommend additional study by the Commission before the amendments are put forward. Background to MR 8.5 and the Proposed Revision The problem of which jurisdiction s ethical principles should apply in a transnational setting is not unique to US attorneys practicing abroad. The international legal community is scratching its head over how to determine or regulate attorney conduct. As Johnny Veeder cogently puts it: To the Q: What are the professional rules applicable to an Indian lawyer in a Hong Kong arbitration between a Bahrainin claimant and a Japanese defendant represented by NY lawyers, the answer is no more obvious than it would be in London, Paris, Geneva and Stockholm. There is no clear answer. 2 In the words of Professor Rogers, International arbitration dwells in an ethical no-man s land Where ethical regulations should be, there is only an abyss. 3 The general consensus is that national codes of ethics will never get on the same page concerning how international practitioners should be regulated, and, consequently, the solution is to be found in action from either the international community or the tribunals * Brian Toohey is Chair of the Multijurisdictional Practice Subcommittee of the Ethics and Professionalism Committee, ABA Section of Litigation, and Of Counsel to Jones Day. Anne Marie Morris is a Jones Day Associate. 1 Laurel S. Terry & Catherine A. Rogers, Memorandum: Proposed Revisions to Model Rule 8.5, dated October 1, 2010 (updated December 1, 2010). 2 Johnny Veeder, 2001 Goff Lecture. 3 Catherine A. Rogers, Fit and Function in Legal Ethics: Developing a Code of Conduct for International Arbitration, 23 MICH. J. INT L L. 341 ( ).

46 themselves in crafting an ethical framework. 4 As even Professor Rogers is quick to admit, MR 8.5(b)(1), even if revised, is only a stopgap solution - an imperfect attempt at providing some guidance for US attorneys until international tribunals enact codes of ethics and/or the international community finds an alternative resolution. 5 MR 8.5(b) outlines which ethical principles apply when a matter is before an international tribunal. US lawyers are potentially subject to ethical rules of multiple jurisdictions, which impose differing and sometimes conflicting obligations. MR 8.5(b) seeks to resolve such potential conflicts 6 and provide a straightforward determination of which set of rules applies in a given situation. Indisputedly, a clear and workable choice-of-law rule would be helpful, both for attorneys and for the tribunals enforcing the rules. Originally, MR 8.5(b) applied only to matters before courts and was crafted primarily for the national setting. US lawyers began servicing more clients abroad and, as alternative-dispute resolution processes came into vogue, 7 the rule was explicitly expanded to lawyers engaged in transnational practice 8 and to proceedings in non-court tribunals, such as binding arbitration. 9 In other words, MR 8.5(b) is not just a national rule attempting to be applied to the international setting. It has been explicitly re-crafted to try to meet the challenges and complexities of fast-paced globalization. 10 If an international tribunal has its own code of ethics, MR 8.5(b)(1) kicks in nicely, instructing US attorneys to follow that tribunal s code. When that international tribunal does not have its own set of rules, however, MR 8.5(b)(1) falls short in providing clear and helpful choice-of-law guidance to US attorneys. The current version provides that where a tribunal does not have its own code of ethics, a US attorney should follow the rules of the jurisdiction where the tribunal sits. This provision has several glaring shortcomings. First, the international tribunal may be physically located in a jurisdiction that intentionally has no bearing on the disputed matter, having been selected by the parties as a neutral setting. Consequently, the ethical rules of the physical seat of the tribunal may not have any natural relation to the proceedings. 11 Also, large complex international cases often involve multiple proceedings that occur in different venues, 12 making it difficult to determine where a tribunal sits. Further, 4 The fact that global arbitration practitioners function under different national legal frameworks does not mean that international practitioners are pirates sailing under no national flag; it means only that on the high seas, navigators need more than a coastal chart. Johnny Veeder, 2001 Goff Lecture. 5 Ultimately.international tribunals must develop their own ethical rules. It seems inevitable that conscripting national ethical rules into service be accepted in the short run as a temporary, second best solution. Rogers, Lawyers Without Borders, supra note 2, at MODEL RULES OF PROF L CONDUCT R. 8.5 cmt. 3 (2002) 7 Catherine A. Rogers, Lawyers Without Borders, 30 U. PENN. INT L L. REV. 1035, 1042 (2009). 8 MODEL RULES OF PROF L CONDUCT R. 8.5 cmt. 7 (2002) 9 Rogers, Lawyers Without Borders, supra note Professor Catherine Rogers, one of the authors of the recent proposal to revise 8.5(b)(1), takes a different view: International practice was added [to MR 8.5] as something of an afterthought Id. at For example, the Iran-US Claims Tribunal or the International Court of Justice. See Id. 12 Terry & Rogers, Memorandum: Proposed Revisions to Model Rule 8.5, supra note 1, at A-4.

47 even if the tribunal physically sits in only one jurisdiction, sits can be interpreted to mean something other than the tribunal s physical location. As Professor Rogers points out, the International Tribunal for the Law of the Sea has its seat in Germany, but may sit and exercise its functions elsewhere whenever it considers this desirable. 13 Finally, and most significantly, MR 8.5(b)(1) potentially obligates US attorneys to conform to a set of ethical rules markedly different from those applicable to non-us opposing counsel. If opposing counsel are not similarly required to follow the ethical rules of the jurisdiction where the tribunal sits, the two sides will be subject to different ethical obligations, potentially placing the party with the more stringent regulations at a disadvantage. As Jan Paulsson notes, in cases where counsel come from three different countries where standards are quite inconsistent on a given point, does the client whose lawyer is subject to the lowest standard have an unfair advantage? 14 For example, an article by Cyrus Benson reports that UK rules allow a lawyer to communicate with the employees of an adverse corporate party which is already represented by counsel, under US rules contact with certain employees is prohibited, under German rules it is generally not allowed, and under Mexican law it is typically allowed. 15 Another example is that US attorneys may prepare a witness to testify, but this is strictly forbidden under UK ethical rules. 16 Benson adds, this list goes on. 17 Professors Terry and Rogers propose revising MR 8.5(b) to try to resolve some of these shortcomings. 18 They propose that where a tribunal does not have its own set of rules of conduct, the fallback choice-of-law should be the rules of the US attorney s home licensing jurisdiction, rather than the rules of the jurisdiction where the tribunal sits. Although we agree that the current version of MR 8.5 is imperfect in providing clear guidance for our global practitioners, we do not believe this proposal is successful in improving the rule, and in fact, believe it will exacerbate the rule s shortcomings. Analysis The current version of MR 8.5(b)(1) recognizes that its national guidance is only a temporary solution and that US attorneys need something more than just their home ethics rules as guidance for ethical behavior abroad. Instead of directing attorneys all the way back to their home licensing jurisdiction to find a set of obligations disconnected from the proceeding at hand, it instructs US attorneys to abide by the ethical obligations most closely connected to the proceeding, usually the local ethical norms where the tribunal sits. In some cases, a close 13 Rogers, Lawyers Without Borders, supra note 7, at Doak Bishop, Keynote Address: Ethics in International Arbitration, ICAA Congress Rio, May 26, 2010, quoting Jan Paulsson, Standards of Conduct for Counsel in International Arbitration, 3 AM. REV. INT L ARB. 214 (1992). 15 See Cyrus Benson, Can Professional Ethics Wait: The Need for Transparency in International Arbitration, 3 DISP. RESOL. INT L 78, 83 (Mar. 2009). 16 Id. 17 Id. at Terry & Rogers, Memorandum: Proposed Revisions to Model Rule 8.5, supra note 1.

48 connection between the ethical rules and the proceedings will be present. For example, some international criminal tribunals are seated in the country where the purported criminal activity took place. 19 Even in cases where the connection is more attenuated, 20 the fallback choice-of-law to the rules of the jurisdiction where the tribunal sits provides at least some tangible connection between and context for the proceeding and ethical obligations. Furthermore, the tribunal does not function in a vacuum, and the social and ethical norms of the tribunal s physical location likely influence the proceedings to some extent. Additionally, local counsel is often required and engaged when a foreign attorney appears before an international tribunal. 21 One commentator has also suggested that When analyzing how norms of attorney conduct are established in international tribunals, all roads lead back to the judges. 22 If this assessment is accurate, there is even greater reason to direct US attorneys to follow the local ethical norms of where the judge and tribunal sit. As compared to applying home licensing rules of US attorneys, the ethical rules of the local jurisdiction where the tribunal is seated seem more likely to mesh with the norms expected from the judge or arbitrator. In contrast, Terry and Roger s proposed revision to MR 8.5(b)(1) falls back on the lawyer s home jurisdiction code of ethics, seeming to ignore the need for much more than national codes to guide international practitioners behavior as they attempt to navigate the unchartered international arena. The proposal also entirely separates the attorney s ethical obligations from the particular context of an international proceeding. It asks the US attorney to apply a set of rules, drafted within the context of the licensing state s particularities, to a proceeding that may bear little relation to that original context. The proposal offers no guidance for melding these two realities. Although the proposal provides a bright line fall back provision, it comes at the price of hamstringing US attorneys into a highly particularized set of home licensing rules that leave little flexibility to adapt to the particularities of the international setting. The current version of MR 8.5(b)(1) is not ideal in this respect either but the proposed revision only exacerbates this shortcoming. Additionally, the ambiguity of the current version of MR 8.5(b)(1), whether intentional or not, provides much needed flexibility for attorneys to use their judgment concerning what is meant by where the tribunal sits in a given context. As Professor Rogers notes, the ability to discern regulatory distinctions and make difficult choices between conflicting rules is an essential skill of an international practitioner Examples are the Special Courts in Sierra Leone, Cambodia, and East Timor. 20 For example, when parties specifically choose a location that does not have any direct bearing on the proceeding, in order to provide a neutral setting. 21 [There] is the necessity, in many instances, of having local counsel for purposes of an international arbitration proceeding. STEVEN C. BENNETT, ARBITRATION: ESSENTIAL CONCEPTS 183 (2002). 22 Judith A. McMorrow, Creating Norms of Attorney Conduct in International Tribunals: A Case Study of the ICTY, 30 B.C. ENVTL. AFF. L. REV. 139, 171 (2007). 23 One of the defining features of global advocates is that they routinely engage in regulatory arbitrage. This process requires them to evaluate the inter-relative effects of particular rules in determining which ones can or should apply to a particular situation. This is a unique and valuable skill. Rogers, Lawyers Without Borders, supra note 7, at 1059.

49 Importantly, the proposed revision may well increase the likelihood of an uneven playing field whenever a US attorney appears before an international tribunal. The current default to the jurisdiction where the tribunal sits provides greater room for finding a common ethical standard, particularly when local counsel is engaged on both sides. Non-US attorneys will more likely abide by the rules of the jurisdiction where the tribunal sits, than by US rules. Conclusion [T]he lack of ethical guidance continues to breed (or at least permit) procedural unfairness in various cases, attack[s] the integrity of the system and invite[s] deterioration in standards of professional conduct. 24 Undoubtedly, the world of international legal ethics needs attention. 25 The consensus is that the solution lies in an international code of ethics, rather than in national ethical codes. In our opinion, the proposed revision to MR 8.5 moves us away from this ultimate goal of an international solution, sacrificing the end goal for a temporary façade of a bright line choice-of-law. The proposal focuses on the national code as a black-and-white default, giving the appearance of providing clear ethical guidance. But in reality it asks US attorneys to apply a highly developed and particularized set of regulations, drafted in the context of US litigation, to an entirely different environment. We believe that this proposal is impracticable, risks the further tilting of the playing field, and could hamstring US attorneys from effectively representing clients abroad Benson, Can Professional Ethics Wait: The Need for Transparency in International Arbitration, supra note 15, at The costs of not having a workable ethical framework extend beyond any one proceeding. [E]thical violations could have serious consequences for parties and tribunals and threaten the public s confidence in arbitration as a viable dispute resolution system. For example, such violations could 'result in unnecessary motions, longer hearings, duplication of effort and wasted time.' Unethical behavior, moreover, could 'slow the dispute resolution process and increase the cost of arbitration.' The reputation of arbitration as a fair process certainly would be adversely affected if attorneys felt free to engage in unethical conduct, either because the arbitration process is flexible and for the most part private, or because attorneys in arbitration are unlikely to see the same arbitrators more than once. Steven Bennett, Who Is Responsible For Ethical Behavior By Counsel In Arbitration?, 63:2 DISPUTE RES. J. 38, 39 (2008), citing Pat Sadler, One Lawyer s Proposal For A Code Of Professionalism In Securities Arbitration, 1264 PLI/Corp 67, 77 (2001). 26 Common-law ethical codes are typically much more detailed than civil-law codes, and common-law systems include duties to not only the client but also to the tribunal (see Benson, Can Professional Ethics Wait: The Need for Transparency in International Arbitration, supra note 15, at 82). This suggests that common-law countries, such as the US, will more likely be the disadvantaged party in the uneven playing field created by international practitioners functioning under different national ethical codes.

50 ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK COMMITTEE ON PROFESSIONAL RESPONSIBILITY Report on Conflicts of Interest in Multi-Jurisdictional Practice: Proposed Amendments to New York Rules of Professional Conduct 8.5 (Disciplinary Authority and Choice of Law) and 1.10 (Imputation of Conflicts of Interest) March 2010 This Report addresses certain anomalies in the New York Rules of Professional Conduct (the New York Rules ) relating to multijurisdictional practice, particularly in the context of concurrent representations being handled by different lawyers affiliated in a firm and practicing in more than one jurisdiction. Part I sets forth this Committee s proposed amendments to New York Rules 8.5 and Part II identifies significant differences between New York Rule 8.5 (Disciplinary Authority and Choice of Law) and Rule 8.5 of the Model Rules of Professional Conduct ( Model Rules ), and urges that the New York Rule be amended to conform to the Model Rule formulation, with one variation. Part III examines the application of New York Rule 8.5, Model Rule 8.5 and this Committee s proposed amendments to New York Rule 8.5 in situations where there are jurisdictional variations in the conflicts-of-interest rules. Part IV explores the interplay between New York Rule 8.5 and New York Rule 1.10 (Imputation of Conflicts of Interest), and identifies the undesirable result under the existing imputation rules of the extra-territorial application of New York conflict-of-interest rules to lawyers who are neither licensed in New York nor engaged in matters with any nexus to New York. The Committee s proposed amendments to New York Rules 8.5 and 1.10 would rectify this anomaly. Part V summarizes the Committee s recommendations. Part I. Text of Proposed Rule Changes For the reasons set forth in this Report, the Committee urges the following amendments to New York Rules 8.5 and The proposed text to be deleted appears in strike-through and the proposed text to be added appears in italics. Proposed Revisions to New York Rule 8.5: RULE 8.5: Disciplinary Authority and Choice of Law (a) A lawyer admitted to practice in this state is subject to the disciplinary authority of this state, regardless of where the lawyer s conduct occurs. A lawyer may be subject to the disciplinary authority of both this state and another jurisdiction where the lawyer is admitted for the same conduct. (b) In any exercise of the disciplinary authority of this state, the Rules of Professional Conduct to be applied shall be as follows: Reprinted with permission.

51 Comment (1) For conduct in connection with a proceeding in a court before which a lawyer has been admitted to practice (either generally or for purposes of that proceeding) matter pending before a tribunal, the rules to be applied shall be the rules of the jurisdiction in which the court tribunal sits, unless the rules of the court tribunal provide otherwise; and (2) For any other conduct: Disciplinary Authority (i) If the lawyer is licensed to practice only in this state, the rules to be applied shall be the rules of this state, and (ii) If the lawyer is licensed to practice in this state and another jurisdiction, the rules to be applied shall be the rules of the admitting jurisdiction in which the lawyer principally practices; provided, however, that if particular conduct clearly has its predominant effect in another jurisdiction in which the lawyer is licensed to practice, the rules of that jurisdiction shall be applied to that conduct. the rules to be applied shall be the rules of this state; provided, however, that if a lawyer reasonably believes that the services for which the lawyer or the lawyer s firm has been retained have their predominant effect in another jurisdiction, such lawyer may rely on the rules of professional conduct of such other jurisdiction. [1] It is longstanding law that the conduct of a lawyer admitted to practice in this state is subject to the disciplinary authority of this state. Extension of the disciplinary authority of this state to other lawyers who provide or offer to provide legal services in this state is for the protection of the citizens of this state. Reciprocal enforcement of a jurisdiction s disciplinary findings and sanctions will further advance the purposes of this Rule. See ABA Model Rules for Lawyer Disciplinary Enforcement, Rules 6 and 22. A lawyer who is subject to the disciplinary authority of this state under Rule 8.5(a) appoints an official to be designated by the Appellate Division to receive service of process in New York State. The fact that the lawyer is subject to the disciplinary authority of this state may be a factor in determining whether personal jurisdiction may be asserted over the lawyer for civil matters. Choice of Law [2] A lawyer may be potentially subject to more than one set of rules of professional conduct, imposing different obligations. The lawyer may be licensed to practice in more than one jurisdiction with differing rules, or may be admitted to practice before a particular court with rules that differ from those of the Reprinted with permission.

52 jurisdiction or jurisdictions in which the lawyer is licensed to practice. Additionally, the lawyer s conduct may involve significant contacts with more than one jurisdiction. [3] Paragraph (b) seeks to resolve such potential conflicts. Its premise is that minimizing conflicts between rules, as well as uncertainty about which rules are applicable, is in the best interest of clients and the profession (as well as the bodies having authority to regulate the profession). Accordingly, it takes the approach of (i) providing that any particular conduct of a lawyer shall be subject to only one set of rules of professional conduct, and (ii) making the determination of which set of rules applies to particular conduct as straightforward as possible, consistent with recognition of appropriate regulatory interests of relevant jurisdictions. Paragraph (b) is not intended to subject lawyers to discipline if they act reasonably in the face of uncertainty about where the predominant effect of their conduct will occur. [4] Paragraph (b)(1) provides that as to a lawyer s conduct relating to a proceeding pending before a tribunal, the lawyer shall be subject only to the rules of the jurisdiction in which the tribunal sits unless the rules of the tribunal, including its choice-of-law rules, provide otherwise. As to all other conduct, including conduct in anticipation of a proceeding not yet pending before a tribunal, paragraph (b)(2) provides that a lawyer shall be subject to the rules of this state, unless the lawyer reasonably believes that the admitting jurisdiction in which the lawyer s conduct occurred, principally practices or, if the predominant effect of the services for which the lawyer, or the lawyer s firm, has been retained conduct clearly is in another jurisdiction in which the lawyer is licensed to practice, the rules of that jurisdiction shall be applied to the conduct. In such case, the lawyer may rely on the rules of professional conduct of the jurisdiction where the predominant effect of the services occurs. In the case of conduct in anticipation of a proceeding that is likely to be before a tribunal, the predominant effect of such conduct could be where the lawyer principally practices, where the conduct occurred, where the tribunal in which the proceeding is ultimately brought sits, or in another jurisdiction. [5] When a lawyer is licensed to practice in this state and another jurisdiction and the lawyer s conduct involves significant contacts with more than one jurisdiction, it may not be clear whether in which jurisdiction the predominant effect of the lawyer s conduct will occur. in an admitting jurisdiction other than the one in which the lawyer principally practices. So long as the lawyer s conduct conforms to the rules of a jurisdiction in which the lawyer is licensed and reasonably believes the predominant effect will occur, the lawyer should not be subject to discipline under this Rule. Where a lawyer, under paragraph (b)(2) of this Rule, relies upon the rules of professional conduct of another jurisdiction, such lawyer must become familiar with the relevant rules of such jurisdiction, and conform the lawyer s conduct thereto Reprinted with permission.

53 [6] When a lawyer reasonably believes that the lawyer s conduct will be governed by the rules of a jurisdiction other than this state, and the rules of such other jurisdiction differ from those of this state, the lawyer must likewise comply with the obligation, pursuant to Rule 1.4, to promptly inform the client of such a material development in the matter. [67] If two admitting jurisdictions were to proceed against a lawyer for the same conduct, they should, applying this Rule, identify the same governing ethics rules. They should take all appropriate steps to see that they do apply the same rule to the same conduct, and in all events should avoid proceeding against a lawyer on the basis of two inconsistent rules. [78] The choice-of-law provision applies to lawyers engaged in transnational practice, unless international law, treaties or other agreements between or among competent regulatory authorities in the affected jurisdictions provide otherwise. Proposed Revisions to New York Rule 1.10: RULE 1.10: Imputation of Conflicts of Interest (a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rule 1.7, 1.8 or 1.9, except as otherwise provided therein. (b) When a lawyer has terminated an association with a firm, the firm is prohibited from thereafter representing a person with interests that the firm knows or reasonably should know are materially adverse to those of a client represented by the formerly associated lawyer and not currently represented by the firm if the firm or any lawyer remaining in the firm has information protected by Rule 1.6 or Rule 1.9(c) that is material to the matter. (c) When a lawyer becomes associated with a firm, the firm may not knowingly represent a client in a matter that is the same as or substantially related to a matter in which the newly associated lawyer, or a firm with which that lawyer was associated, formerly represented a client whose interests are materially adverse to the prospective or current client unless the newly associated lawyer did not acquire any information protected by Rule 1.6 or Rule 1.9(c) that is material to the current matter. (d) Notwithstanding the foregoing, no conflict will be imputed hereunder where (i) a conflict arises under these rules from the conduct of lawyers practicing in another jurisdiction in accordance with such jurisdiction s rules of professional conduct, and (ii) such conduct is permitted by the rules of professional conduct of that other jurisdiction. (d) (e) A disqualification prescribed by this Rule may be waived by the affected client or former client under the conditions stated in Rule Reprinted with permission.

54 (e) (f) A law firm shall make a written record of its engagements, at or near the time of each new engagement, and shall implement and maintain a system by which proposed engagements are checked against current and previous engagements when: (1) the firm agrees to represent a new client; (2) the firm agrees to represent an existing client in a new matter; (3) the firm hires or associates with another lawyer; or (4) an additional party is named or appears in a pending matter. (f) (g) Substantial failure to keep records or to implement or maintain a conflictchecking system that complies with paragraph (e) shall be a violation thereof regardless of whether there is another violation of these Rules. (g) (h) Where a violation of paragraph (f) by a law firm is a substantial factor in causing a violation of paragraph (a) by a lawyer, the law firm, as well as the individual lawyer, shall be responsible for the violation of paragraph (a). (h) (i) A lawyer related to another lawyer as parent, child, sibling or spouse shall not represent in any matter a client whose interests differ from those of another party to the matter who the lawyer knows is represented by the other lawyer unless the client consents to the representation after full disclosure and the lawyer concludes that the lawyer can adequately represent the interests of the client. Part II. Proposed Amendment to Rule 8.5: Disciplinary Authority and Choice of Law New York Rule 8.5(a) contains the uncontroversial proposition that a lawyer admitted in New York is subject to discipline in this state. New York Rule 8.5(b) governs situations where more than one jurisdiction s ethics rules are implicated by a lawyer s conduct. Rule 8.5(b)(1) distinguishes between litigation conduct and any other conduct, identifying the applicable ethics rules, in sum, as follows: If the conduct occurs in the context of a proceeding in a court before which the lawyer has been admitted to practice (whether generally or on a pro hac vice basis), Rule 8.5(b)(1) provides that the applicable ethics rules are the rules of the jurisdiction where the court sits, unless the rules of the applicable court provide otherwise. If the conduct does not occur in the context of a court proceeding, Rule 8.5(b)(2) first looks at whether the lawyer is licensed only in New York or in New York and another jurisdiction. Then: Reprinted with permission.

55 (a) if the lawyer is licensed to practice only in this state, the New York Rules apply; and (b) if the lawyer is licensed in New York and another jurisdiction, the ethics rules are those of the place where the lawyer principally practices, unless the conduct has its predominant effect in that other jurisdiction, in which case that jurisdiction s rules shall apply. Model Rule 8.5, adopted by the majority 1 of states, is similar in structure to the New York Rule. Model Rule 8.5(a) provides, in substance, that a lawyer admitted to practice in a jurisdiction, or a lawyer providing or offering to provide legal services in such jurisdiction, is subject to that jurisdiction s disciplinary authority, regardless of where the lawyer s conduct occurs. Model Rule 8.5(b) provides as follows: (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. Model Rule 8.5(b) thus differs from the New York Rule in at least three significant respects. First, Model Rule 8.5(b)(1) uses the broader term tribunal -- not court -- thereby bringing arbitration and various administrative proceedings within its scope. Second, Model Rule 8.5(b)(2) contains an important safe harbor for lawyers engaged in multijurisdictional practice: that is, that such lawyers will not be subject to discipline where their conduct complies with the ethics rules of the jurisdiction in which they reasonably believe[] the predominant effect of their conduct will occur. This safe harbor is currently embodied only in the comments to the New York Rules. 2 Finally, and most significantly, under the Model Rule, the applicability of another state s ethics rules to a lawyer s conduct does not hinge on actual 1 To date, 36 states have adopted the Model Rules formulation, either verbatim or in substance, for choice of disciplinary authority and choice of law. See ABA Commission on Multijurisdictional Practice, State Implementation of ABA Model Rule 8.5, available at 2 The Comment [5] to New York Rule 8.5 states: When a lawyer is licensed to practice in this state and another jurisdiction and the lawyer s conduct involves significant contacts with more than one jurisdiction, it may not be clear whether the predominant effect of the lawyer s conduct will occur in an admitting jurisdiction other than the one in which the lawyer principally practices. So long as the lawyer s conduct conforms to the rules of a jurisdiction in which the lawyer is licensed and reasonably believes the predominant effect will occur, the lawyer should not be subject to discipline under this Rule Reprinted with permission.

56 admission in the state where the conduct occurs or where the predominant effect of the lawyer s conduct is felt. A simple scenario demonstrates the advantages of the Model Rule approach over the current New York Rule: Scenario 1: Lawyer A, a New York admitted attorney, receives a referral from a current client, a New York headquartered corporation, to represent, as co-counsel with a local Texas firm, its Texas subsidiary, Company Y, in an asset sale to Company Z, which is 3 also a Texas corporation. The transaction in question will be governed by Texas law. Company Y has no assets in New York and Lawyer A is being engaged solely because of Lawyer A s extensive experience with the type of transaction at issue. Which ethical rules apply to Lawyer A s conduct with respect to its representation Company Y in Texas? The matter in question is transactional in nature and therefore does not trigger the jurisdictional provisions of Model Rule 8.5(b)(1). Under Model Rule 8.5(b)(2), Lawyer A s conduct is governed by the ethical rules in effect in the jurisdiction in which Lawyer A s conduct 4 occurs and/or has its predominant effect. Since the matter involves two Texas companies in a of 3 Prior to August 2002, when the American Bar Association adopted Model Rule 5.5, there was no ethical mechanism by which lawyers could engage in cross-border representation absent dual admission or admission pro hac vice. The pre-2002 version of Model Rule 5.5 provided simply that a lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction. Since only three jurisdictions the District of Columbia, Michigan and Virginia then permitted practice in the absence of admission to the Bar (either by virtue of temporary or permanent license), it was not clear whether a lawyer could ethically engage in cross-border practice except in those three states. See John A. Holtaway, Cross-Border Representation of Your Client (April 2007), available at Charles W. Wolfram, Sneaking Around in the Legal Profession: Interjurisdictional Unauthorized Practice by Transactional Lawyers, 36 S. Tex. L. Rev. 666 (1995). Model Rule 5.5, which provides numerous exceptions to the unauthorized practice rules, has significantly facilitated cross-border practice in the 35 jurisdictions that have adopted a variation of it. See ABA Commission on Multijurisdictional Practice, State Implementation of ABA Model Rule 5.5, available at New York is not one of those jurisdictions. Indeed, the Presiding Justices of the Four Appellate Departments in New York have expressed reservations about the adoption of the Model Rule s multi-jurisdictional practice provisions. See Letter of March 6, 2006 from Vincent Buzard, President of the New York State Bar Association to the Presiding Justices of the Four Appellate Departments reprinted in Roy Simon, Simon s New York Code of Professional Responsibility Annotated, at 513 (2007). Accordingly, lawyers who conduct business in New York without being licensed here can take cold comfort only in former Ethical Consideration 8-3 which stated that Clients and lawyers should not be penalized by undue geographic constraints upon representation in legal matters, and the bar should address itself to improvements in licensing, reciprocity, and admission procedures consistent with the needs of modern commerce. 4 This predominant effect test is consistent with the comments to the multijurisdictional practice provisions of the Model Rules, which provide that a lawyer who practices law in this jurisdiction pursuant to Model Rule 5.5(c) or (d) or otherwise is subject to the disciplinary authority of this jurisdiction. Model Rule 5.5, Comment [19] Reprinted with permission.

57 transaction taking place in Texas and governed by Texas law, the Texas rules of professional conduct would govern Lawyer A s conduct. Not so in New York under current New York Rule 8.5. Since the matter for which Lawyer A has been retained does not involve proceedings before a court, Rule 8.5 (b)(1) is inapplicable. Lawyer A is not admitted in any jurisdiction other than New York, so Rule 8.5 (b)(2)(ii) is also inapplicable. Accordingly, the ethics rules to be applied to Lawyer A s conduct in this matter, per Rule 8.5(b)(2)(i), would be those in the only jurisdiction in which Lawyer A is admitted, New York a state whose sole nexus with the transaction is Lawyer A s involvement. Under the Model Rule or this Committee s proposed Rule 8.5, however, this anomalous result would be avoided. Lawyer A would not behave unethically if, reasonably believing that the services for which she has been retained have their predominant effect in Texas, she conformed her conduct to the Texas Rules of Professional Conduct. 5 This Committee s proposed amendment to Rule 8.5 differs from the Model Rule approach in two significant respects. First, the Committee s proposed amendment omits Model Rule 8.5 s reference to the jurisdiction in which the lawyer s conduct occurred. This Committee believes that such reference is confusing and that, for the sake of clarity, the default rules of professional conduct for New York licensed attorneys should be New York. Second, this Committee s proposed amendment, again for the sake of clarity, collapses Model Rule 8.5 s reference to predominant effect and the safe harbor for reasonable belief into a single permissible reliance standard: if a lawyer reasonably believes that the services for which the lawyer or the lawyer s firm has been retained have their predominant effect in another jurisdiction, such lawyer may rely on the rules of professional conduct of such other jurisdiction. (Emphasis added). The safe harbor contained in the Model Rules, and in this Committee s proposed amendment to Rule 8.5, is significant. Under each Rule -- but not the current New York Rule if Lawyer A in Scenario 1 reasonably believes that her conduct will have its predominant effect in Texas (and Lawyer A, having duly notified her client of that belief, conforms her conduct to the Texas rules), Lawyer A will not be subject to discipline in New York for failing to follow a differing New York rule. Part III. Rule 8.5 in the Context of Varying Conflicts-of-Interest Rules The foregoing choice-of-law and choice-of-authority provisions have greatest salience where there is a substantive jurisdictional conflict with respect to a particular ethics rule. In other words, where there is no substantive difference between the relevant Texas and New York rules, Lawyer A in Scenario 1 need not be concerned with which state s rules govern her 5 As set forth in greater detail below, this Committee is of the view that a lawyer relying on this provision would be required, under New York Rule 1.4, where there was a substantial difference between the rules of the admitting jurisdiction and the jurisdiction where the conduct occurs to provide his or her client with clear notice as to the ethical rules applicable to the lawyer s conduct. See Rule 1.4 ( A lawyer shall promptly inform the client of material developments in the matter. ). Such notice would be particularly necessary if the lawyer was of the view that the predominant effect of a representation was in a jurisdiction other than the jurisdiction in which the client resides Reprinted with permission.

58 conduct. Where there is such a substantive difference, the choice of law provisions become significant. 6 In most United States jurisdictions save Texas the governing conflicts-of-interest rules are substantively similar to Model Rule 1.7. That is, a lawyer is ethically prohibited from acting against the interests of a client (absent such client s informed consent) even if the adverse representation bears no relationship to the lawyer s concurrent representation of the client. New York Rule 1.7(a); Model Rule 1.7(a). In Texas, and in many, if not most jurisdictions outside of the United States, however, the rules governing conflicts of interest are markedly different. In such jurisdictions, a lawyer is only prohibited from acting against the interests of existing clients where there is a significant risk that the clients confidences will be used against them, or where the matters the lawyer is handling for the clients are substantially related. See, e.g., The Code of Conduct for Lawyers in the European Union, Rule 3.2 ( A lawyer may not advise, represent or act on behalf of two or more clients in the same matter if there is a conflict, or a significant risk of a conflict, between the interests of those clients. A lawyer must cease to act for both clients when a conflict of interest arises between those clients and also whenever there is a risk of a breach of confidence or where his independence may be impaired. ); National Bar Council of France Regulatory Decision No establishing Harmonised Practice Rules for the French Bars, Article 4.1 ( Lawyers may not advise, represent or act on behalf of two or more parties in the same matter if there is a conflict between their interests or, without the agreement of the parties, there is a serious risk of such a conflict. ); Solicitor s Code of Conduct 2007 (United Kingdom) ( Solicitor s Code ), Rule 3.01(2) ( There is a conflict of interest if you owe, or your firm owes, separate duties to act in the best interests of two or more clients in relation to the same or related matters, and those duties conflict, or there is a significant risk that those duties may conflict. ) (Emphases added). In such jurisdictions, it is a common and accepted practice to take adverse action whether in transactional matters or in contentious proceedings against existing clients in unrelated matters. Indeed, in such jurisdictions, the freedom of lawyers to act adversely to their current clients in unrelated matters is generally considered to be a necessary corollary to a client s freedom to select counsel of its choice. The following scenario illustrates how a client s choice of counsel, and a lawyer s freedom to act, differ under the current New York Rule and the Model Rule. 6 For the sake of brevity, we limit our discussion of the issues presented by New York Rule 8.5 to substantive variations in the rules governing conflicts of interest. However, the issues discussed in this part of the Report arise in myriad other forms among lawyers engaged in multijurisdictional work. Take, for example, a lawyer conducting an internal investigation for a client in another state. The client is concerned that it may be investigated by federal and state authorities for alleged violations of antitrust laws. If private litigation ensues, the lawyer will seek, as a matter of course, pro hac vice admission to the state in question. As of now, however, no mechanism for such admission exists. Under the ethics rules of the state in which the client is located, interviews of employees of a competitor that one knows to be represented by counsel is permitted. Under the New York Rules, such interviews are only permitted in very limited circumstances absent the consent in advance of the competitor s counsel. The client is confident that its competitor has hired local counsel and that such counsel is already attempting to interview the client s employees. Must the New York admitted lawyer: (a) turn down the work; (b) request that the client incur the additional expense of engaging local counsel to conduct the interviews; or (c) forego the interviews altogether in conformity with the New York Rule, even if detrimental to the client? Reprinted with permission.

59 Scenario 2: Lawyer A, an attorney admitted only in New York, is currently representing (Texas-based) Company Y, assisted by local counsel, in an asset sale to (Texas-based) Company Z. Lawyer A also wishes to represent Company X in the purchase of certain other subsidiaries of Company Y in Texas. Neither company has any New York assets and Lawyer A is being retained solely because of Lawyer A s extensive experience in the types of transaction at issue. None of the information that Lawyer A has learned by virtue of her ongoing representation of Company Y is relevant to the acquisition contemplated by Company X. 7 Simply put, under the existing New York Rule 8.5, Lawyer A in Scenario 2 cannot ethically represent Company X in acquiring subsidiaries of Company Y because the governing ethics rules (New York s) prohibit Lawyer A from representing interests adverse to those of her current client, absent each client s informed consent. (We can assume that Company X will consent but Company Y may not.) Under the Texas Rules, however, a lawyer similarly situated to Lawyer A could ethically represent Company X without Company Y s consent, provided that Lawyer A s work for both Company X and Company Y occurs or has its predominant effect in Texas. Both the Model Rule and this Committee s proposed revisions to New York Rule 8.5 would also authorize the simultaneous representations: Since Lawyer A s conduct in each transaction will have its predominant effect in Texas, Lawyer A will have acted ethically as long as her conduct conforms to the Texas rules of professional conduct. 8 Imagine now that the acquisitions described in Scenario 2 are taking place in the U.K. and are governed by U.K. law. Under the Solicitor s Code, a solicitor in the United Kingdom (Lawyer B) would be free to represent Company X in acquiring subsidiaries from Company Y (and even in suing Company Y for breach of contract were the deal to fall through) even if he concurrently represented Company Y in unrelated matters. Company X therefore has the ability to retain its counsel of choice when retaining Lawyer B. Company X, likewise, may retain any lawyer admitted in a jurisdiction that has adopted the Model Rules approach (Lawyer C), since the applicable rules governing Lawyer C s representation of Company X under Model Rule 8.5 are the Solicitor s Code. 9 But what if Company X wants to retain a New York licensed lawyer (still Lawyer A)? In the absence of dual admission in the U.K., Lawyer A s conduct will be governed by the New York Rules. Absent the informed consent of Company Y, Lawyer A will be required to forego a matter that both Lawyers B and C would be free to accept and Company 7 For a further discussion on whether information learned during the course of the representation of a client is relevant to a concurrent adverse representation, please see the discussion following Scenario 6 below. 8 As well, Lawyer A must advise the affected clients of the applicable ethical rules. 9 Comments to the Model Rules and the New York Rules specifically (and identically) state that Rule 8.5 applies to transnational matters: The choice-of-law provision applies to lawyers engaged in transnational practice, unless international law, treaties or other agreements between or among competent regulatory authorities in the affected jurisdictions provide otherwise. Model Rule 8.5 Comment [7]; New York Rule 8.5, Comment [7] Reprinted with permission.

60 X will be deprived of its lawyer of choice simply because Lawyer A is licensed in New York. 10 This Committee s proposed Rule 8.5 would remedy that imbalance, and permit New York licensed Lawyer A to act in accordance with the Solicitor s Code with respect to the matters described in scenario 2, where the predominant effect of the representation occurs in the U.K.; provided, of course, that Lawyer A has duly informed her clients, at the outset of the representation or whenever relevant, of the applicability of such ethical rules to her conduct. It should be acknowledged that the applicability of professional conduct rules addressing conflicts of interest is particularly complex in the context of multijurisdictional practice because generally concurrent client conflicts involve more than one matter which may, in turn, invoke the rules of more than one jurisdiction. Take, for example, the following scenario: Scenario 3: Lawyer A is licensed both in New York and as a Solicitor with the U.K. Law Society. Lawyer A is representing Company Y, a U.K. plc, in an asset sale to Company Z, a New York corporation, in a transaction that will be governed by New York law and involve solely New York assets. Lawyer A is then asked by Company X, a U.K. plc, to represent it in connection with the purchase of certain other subsidiaries of Company Y. Companies X and Y are both U.K. entities, the subsidiaries being purchased are all located in the U.K. and the agreements will be governed by U.K. law. As in Scenario 1 above, none of the information that Lawyer A has learned by virtue of her ongoing representation of Company Y is relevant to the acquisition contemplated by Company X. Under each of current New York Rule 8.5, Model Rule 8.5 and this Committee s proposed amendments to Rule 8.5, Lawyer A s conduct with respect to the first representation (of Company Y in its sale of New York assets to New York Company Z) is governed by the New York Rules. With respect to the second representation (of Company X in its purchase of Y s U.K. subsidiary), since Lawyer A is dually admitted and the representation of Company X will have its predominant effect in the U.K., under all three regimes, Lawyer A will have behaved ethically if she conforms her conduct to the Solicitor s Code. Yet Lawyer A cannot simultaneously ethically represent both Company X and Company Y in these two separate transactions, absent client consent, under the New York Rules. She can ethically represent both under the Solicitor s Code. What is Lawyer A to do? Only a handful of ethics opinions have addressed this conundrum and none in the context of conflicts of interest. Numerous ethics opinions have approved the concept of partnerships between lawyers admitted in different jurisdictions. See, e.g., ABA Formal Op (endorsing partnership with foreign lawyers); New York State Bar Association Op We note, of course, that both Lawyer B and Lawyer C may face constraints on adverse representation imposed by their clients. Taking on an adverse representation that is permitted by the ethical rules but is likely to anger a key client simply constitutes poor business judgment Reprinted with permission.

61 (approving partnership with lawyers admitted in foreign jurisdictions provided that appropriate supervision to ensure compliance with applicable ethical rules occurs); New York State Bar Association Op. 658 (approving partnership between New York lawyer and Swedish lawyer); New York State Bar Association Op. 658 (approving partnership between New York lawyer and Japanese bengoshi); New York State Bar Association Op. 542 (approving partnership between New York lawyer and British solicitor); The District of Columbia Bar Op. No. 278 (endorsing partnership with foreign lawyers). But only a handful of such opinions have discussed the ethical quandary faced by partners subject to substantively diverse ethics rules. In New York State Bar Association Opinion 762, for example, the State Bar opined that the supervisory duties of a New York lawyer under former DR were satisfied once she or he assured that the conduct of fellow lawyers and staff to whom the New York rules were applicable conformed to the Code and that therefore a New York lawyer was not obligated to conform the conduct of other non-new York lawyers and staff of the firm to New York rules. On the other hand, a few ethics opinions approving affiliations between lawyers licensed in different jurisdictions have indicated that the extra-territorial application of the U.S. conflicts rules is appropriate. See, e.g., ABA Formal Op (endorsing partnerships with foreign lawyers provided that conflicts with the interests of clients with U.S. matters are managed as Rule 1.7 and related rules require ); The District of Columbia Bar Op. No. 278 (endorsing partnerships with foreign lawyers only to the extent that they do not impair the D.C. Bar member s ability and obligation to uphold ethical standards ). Of note, however, is the fact that both of these opinions pre-date the 2002 adoption of Model Rules 5.5 and 8.5 (and their D.C. Rules of Professional Conduct corollaries) which arguably require a different interpretation of the extra-territorial effect of a given jurisdiction s conflict of interest rules. Indeed, the comments to both Model Rule 8.5 and New York Rule 8.5 indicate that the intent of paragraph (b) is to satisfactorily resolve conflicts between ethics rules: Its premise is that minimizing conflicts between rules, as well as uncertainty about which rules are applicable, is in the best interest of both clients and the profession (as well as the bodies having authority to regulate the profession). The most salient opinion addressing how lawyers admitted in multiple jurisdictions should act with respect to substantively diverse ethics rules was issued by the American Bar Association in Formal Ethics Opinion There the American Bar Association was faced with determining which ethical regime should govern the conduct of a lawyer admitted in one jurisdiction that permitted partnership with non-lawyers and another that prohibited the same conduct. Although the opinion pre-dates the passage of Ruled 8.5, the American Bar Association concluded that the lawyer complied with each ethical regime if he or she refrained from sharing fees with non-lawyers in matters in the jurisdiction in which such fee-sharing was prohibited, and shared fees with non-lawyers only with respect to those matters in jurisdictions in which such fee-sharing was permissible. See also Mich. Ethics Op. RI-225 (1995) (Michigan licensed lawyer may invest in out-of-state firm that permits fee-sharing with non-lawyers as permitted under that state s ethics rules, provided that the lawyer does not practice in affiliation with that firm in Michigan). In short, the approach adopted in the American Bar Association opinion is: When in Rome, do as the Romans do. This Committee endorses that approach. Returning to Scenario 3 above, if Lawyer A conforms her conduct with respect to all New York matters -- i.e., all matters in which the Reprinted with permission.

62 representation will have its predominant effect in New York -- to the New York Rules and conforms her conduct with respect to all U.K. matters -- i.e., all matters in which the representation will have its predominant effect in the U.K. -- to the Solicitor s Code, this Committee believes that Lawyer A has fulfilled her ethical obligations. Since Lawyer A can concurrently represent Company X and Company Y under the ethics rules governing the representation of Company X (the Solicitor s Code), it logically follows that Lawyer A can accept the concurrent representation. To the extent that the language of Model Rule 1.7 and New York Rule 1.7 appear at first reading to prohibit such concurrent representation, such prohibition should be understood to apply only with respect to those matters where a conflict arises under the rules of the jurisdiction where such matter has its predominant effect. Any other interpretation of the interplay between Rules 1.7 and 8.5 would render Rule 8.5 meaningless and would result in the extraterritorial application of the New York conflict of interest rules to matters with no nexus to New York. This approach to resolving multijurisdictional conflicts is entirely consistent with the stated purpose of both the Model Rule and the current New York Rule 8.5. As set forth in Comment 3 to the New York Rule, the purpose of the Rule is to minimize[e] conflicts between rules, as well as uncertainty about which rules are applicable by: (i) providing that any particular conduct of a lawyer shall be subject to only one set of rules of professional conduct, and (ii) making the determination of which set of rules applies to particular conduct as straightforward as possible, consistent with recognition of appropriate regulatory interests of relevant jurisdictions. Moreover, Comment 3 makes clear that Rule 8.5(b) is not intended to subject lawyers to discipline if they act reasonably in the face of uncertainty about where the predominant effect of their conduct will occur. Resolving the ethical conundrum as set forth above is the only resolution that applies a single set of rules to Lawyer s A conduct with respect to each representation described in Scenario 3, 11 provides Lawyer A with sufficient protection from discipline in the face of uncertainty and permits clients, such as Company X, in jurisdictions where the conflicts rules are less restrictive, to enjoy their accustomed degree of free choice in the selection of counsel. Is this fair to Company Y, a client that has retained Lawyer A to represent it in a New York matter and therefore has a reasonable expectation of conflict-free counsel in accordance with the New York Rules? This Committee believes that the answer is Yes provided that Lawyer A has complied with her obligations to keep Company Y aware of the concurrent representation of Company X and the applicability of the Solicitor s Code, including the relevant rules on conflicts of interest, to that representation. Such concurrent representation is a significant development in the representation of Company Y and therefore must be disclosed under New York Rule 1.4 ( A lawyer shall promptly inform the client of material developments in the matter. ). Since Company Y may have previously assumed that only New York Rule 1.7 applied to Lawyer A s conduct, the fact that Lawyer A s representation of Company X is governed by the Solicitor s Code -- and, therefore, adverse representation in unrelated matters may be undertaken with respect to matters being handled in the U.K. -- is a 11 Resolving the conflict between New York Rule 1.7 and the Solicitor s Code in favor of prohibiting Lawyer A from undertaking the representation of Company X would in effect require Lawyer A to conform her conduct to the rules of two jurisdictions with respect to her representation of Company X Reprinted with permission.

63 material development of which Company X should be advised. Company Y cannot preclude Lawyer A from taking on such concurrent representation. However, if such a development is abhorrent to Company Y, it will have the opportunity to discharge Lawyer A and obtain new counsel. Part IV. The Effect of the Imputation Rule New York Rule 1.10, better known as the imputation rule, provides as follows: (a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rule 1.7, 1.8 or 1.9, except as otherwise provided therein. New York Rule 1.10(a). Model Rule 1.10(a) contains a substantively identical provision. The following serves as an illustration of the complications introduced by the imputation rule in the context of multijurisdictional practice: Scenario 4: Lawyer A is again representing Company Y in the New York asset sale to Company Z, as described in Scenario 3. Lawyer B, Lawyer A s partner, a U.K.-admitted lawyer, is subsequently asked (while the New York matter is still pending) to represent U.K.-based Company X in the U.K. acquisition of a Company Y s U.K. subsidiary, as described in Scenario 3. Under the Solicitor s Code, Lawyer B may ethically represent Company X without obtaining consent from Company Y. However, the impact on Lawyer A of Lawyer B s conduct is not clear under current New York Rule There are two possible interpretations of how the imputation rule should be read in the context of lawyers governed by differing ethical regimes. The first, focusing on the any one of them practicing alone language, would lead to the conclusion that a lawyer who is not otherwise subject to New York Rule 1.7 fulfills his or her ethical obligations if he or she conforms his or her conduct to that expected of him or her as a solo practitioner in the jurisdiction whose rules are applicable to the conduct. Under this interpretation of the imputation rule, if a U.K. solicitor is ethically permitted to take on an adverse representation of a current client when acting alone as a solo practitioner, then he or she is permitted to do so in the context of legal work undertaken in a law firm in which he or she is affiliated with lawyers admitted in other jurisdictions. That is, if Lawyer B would, in Scenario 4, be ethically permitted to represent Company X when acting alone, he or she would also be ethically permitted to do so when affiliated with other lawyers subject to other conflicts of interest rules. The second possible interpretation of the imputation rule, focusing on the none of them language, would prohibit Lawyer B from taking on the matter for Company X in the scenario above if Lawyer A, a lawyer affiliated in the same firm as Lawyer B, is not ethically permitted to Reprinted with permission.

64 do so. That is, if Lawyer A (admitted solely in New York) and Lawyer B (admitted solely in the United Kingdom) are associated together in a law firm, and Lawyer B is rendering services only in the U.K. to a British client (and therefore the Solicitor s Code is solely applicable to his conduct), Lawyer B must nonetheless conform his conduct to that expected of Lawyer A with respect to conflicts of interest with Lawyer A s clients. According to this interpretation of the imputation rule, where lawyers practice in a firm with lawyers licensed in other jurisdictions, not only the New York lawyer but all other lawyers associated with such lawyer are arguably bound by the New York Rules governing conflicts of interest. 12 Consistent with this interpretation of the imputation rule, Lawyer B in Scenario 4 would be required to decline the proposed representation of Client X absent Client Y s consent. 13 A troubling result? Certainly it is one that should give some pause to lawyers interested in affiliating with New York-licensed lawyers and clients seeking the advice of New York-licensed lawyers for out-of-state matters. New York Rule 8.5 clearly provides that Lawyer A is bound by the New York ethics rules because he or she is admitted only in New York. Even if Lawyer A is dually admitted in New York and the United Kingdom, under current New York Rule 8.5(b)(2)(ii) the governing ethics rules are those of the jurisdiction in which the lawyer s conduct has its predominant effect. Lawyer A s conduct i.e., her representation of Company Y in the New York sale plainly has its predominant effect in New York. Accordingly, Lawyer A cannot take on a representation adverse to her current client, absent informed consent. Lawyer B s conduct, however, has its predominant effect in the U.K. the jurisdiction, as it happens, of Lawyer B s licensure. The ethical rules applicable to Lawyer B s conduct are, therefore, those of the Solicitor s Code which would not prohibit Lawyer B s representation of Company X. Under the first interpretation of the imputation rule set forth above, as long as Lawyer B s conduct conforms to the rules of the jurisdiction in which his conduct has its predominant effect (i.e., the U.K.), Lawyer B can represent Company X because Lawyer B would not be prohibited, if practicing alone, from undertaking the matter. Under this Committee s interpretation of the Model Rules and the proposed New York Rule 8.5, moreover, Lawyer A would not be subject to discipline (provided that she reasonably believes that the predominant effect of the services performed for Company X is in the U.K.) on the sole basis of Lawyer B s concurrent representation of Company X. If Lawyer A could, acting alone, concurrently represent Client Y in the New York matter and Company X in the U.K. matter, there is no logical rationale for prohibiting Lawyer B from doing so. Adopting this Committee s proposed amendment to the imputation rule would resolve any ambiguity as to the correct interpretation of the imputation rule and would be entirely consistent with this Committee s proposed revisions to New York Rule 8.5. Specifically, we NYCRR 602.3(b), which provides that any law firm with an office in the First Department, must comply with any rules of professional conduct applicable to law firms, only compounds this problem. 13 It also bears mention that in some jurisdictions, most notably in France and Germany, the Bar rules governing attorney disclosure of client information are such that obtaining a waiver may, in and of itself, create ethical dilemmas for the lawyers involved. See, e.g., Article 2.2 of the Rules of the National Bar Council of France (prohibiting disclosure of client information to auditors or any third party ); Article 43a(2) of the Federal Lawyer s Act (Bundesrechtsanwaltsordnung BRAO) ( A Rechtsanwalt has a duty to observe professional secrecy. This duty relates to everything that has been known to the Rechtsanwalt in professional practice. ) Reprinted with permission.

65 propose that Rule 1.10 be amended to provide that: no conflict will be imputed hereunder where (i) a conflict arises under these rules from the conduct of lawyers practicing in another jurisdiction in accordance with such jurisdiction s rules of professional conduct, and (ii) such conduct is permitted by the rules of professional conduct of that other jurisdiction. The necessity of providing clarity as to how the imputation rule works in the context of multijurisdictional practice can best be demonstrated through recourse to a scenario familiar to any lawyer associated with a law firm with offices in more than one jurisdiction. Scenario 5: Lawyer B, the London-based lawyer described in Scenario 4, is handling the acquisition matter for Company X described in Scenario 4. Lawyer C, who is Lawyer B s German-licensed partner in Germany, is concurrently handling a matter for Company Q involving the negotiation of a credit facility with Company X. Neither lawyer is prohibited under the applicable rules of professional conduct from undertaking such a concurrent representation. Company X, however, is concerned that it may have certain tax liabilities under U.S. law, arising from the acquisition, and so it asks Lawyer B to consult with his New York partner, Lawyer A, a tax attorney licensed only in New York. Under the current New York Rule 8.5, Lawyer A, who is admitted only in New York, must comply with the New York rules governing conflicts of interest including the provision that she must refrain from acting adversely to any client of her firm. The fact that Lawyer A reasonably believes that the services for which she has been retained have their predominant effect in the U.K. is irrelevant under the current version of Rule 8.5. Add to this the uncertainty of the current version of the imputation rule, which could be interpreted to provide that if Lawyer A is prohibited to act, than all associated lawyers in the Firm would be prohibited to act, and Lawyer B and C are in a bind. Under the Model Rule and this Committee s proposed revisions to Rule 8.5, however, Lawyer A may rely on the Solicitor s Code provisions governing conflicts of interest, since the U.K. is the jurisdiction where all lawyers involved believe the representation will have its predominant effect. Under the Solicitor s Code, Lawyer A s concurrent representation of Company X and Company Q is entirely permissible and, accordingly, Lawyer A may provide the requested tax advice. The wisdom of adopting this Committee s proposed revisions to Rules 8.5 and 1.10 is perhaps best illustrated by the fact that the clients of many large, international law firms both want and expect their lawyers to analyze non-litigation conflicts so as to permit multijurisdictional practice in accordance with local rules of conduct. At least in the transactional setting, most large, sophisticated financial industry clients routinely grant waivers permitting their lawyers to act adversely to them in unrelated matters and expect lawyers they retain to be free to represent them in matters adverse to such lawyers other concurrently represented clients. What happens, however, where the matter at issue involves litigation? To analyze litigation conflicts, we turn to another scenario Reprinted with permission.

66 Scenario 6: Lawyer A represents Company Y in a breach of contract suit arising out of the sale of its subsidiary to Company X. The action is brought in New York Supreme Court. Lawyer B, a Londonbased U.K.-licensed partner of Lawyer A, has simultaneously been asked to represent Company X in an indemnity proceeding against Company Y arising from the acquisition matter described in Scenario 2. The indemnity proceeding has been filed in London by Company Y. Under each of New York Rule 8.5 (b)(1), Model Rule 8.5(b)(1) and this Committee s proposed revisions to New York Rule 8.5(b), the rules of the jurisdiction of the tribunal hearing Lawyer A s matter apply to Lawyer A s conduct. Under both Model Rule 8.5(b)(2) and this Committee s proposed New York Rule 8.5(b), the Solicitor s Code applies to Lawyer B s conduct. Lawyer A is prohibited from undertaking a concurrent representation adverse to her current client under New York Rule 1.7. Under the second interpretation of the imputation rule described above, Lawyer B would be prohibited from representing Company X since his representation of Company X would be imputed to Lawyer A. Under the Solicitor s Code, however, Lawyer B is not prohibited from undertaking the representation of Company X as long as he or she has not been privy to confidential information about Company Y gained during the course of the firm s relationship with Company Y. 14 Will Company X be deprived of its counsel of choice due to the simple fact that Lawyer B is affiliated with Lawyer A? Under this Committee s proposed revisions to New York Rules 8.5 and 1.10, Lawyer A and Lawyer B are ethically permitted to accept the concurrent representations, provided that Lawyer A has informed Company Y of the applicable ethics rules. 15 Some may disagree with this outcome. In the United States, a high premium is still placed on law firm loyalty, and many 14 The Committee notes that under all ethical regimes of which we are aware, a lawyer is prohibited from disclosing or using to a client s disadvantage confidential information learned about the client during the course of the representation. See, e.g., Rule 1.6 of the New York Rules of Professional Conduct ( a lawyer shall not knowingly reveal confidential information or use such information to the disadvantage of a client or for the advantage of the lawyer or a third person, unless the client gives informed consent, the disclosure is impliedly authorized to advance the best interests of the client and is either reasonable under the circumstances or customary in the professional community or the disclosure is permitted by paragraph (b). ); Model Rules of Professional Conduct Rule 1.6(a) ( a lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent ). This is certainly the case in the United Kingdom where it is not permissible to undertake a concurrent adverse representation where the lawyer possesses confidential information about the adversely represented client which is relevant to the matter. U.K. Solicitor s Code of Conduct, Rule 4.03 ( If you hold, or your firm holds, confidential information in relation to a client or former client, you must not risk breaching confidentiality by acting, or continuing to act, for another client in a matter where: (a) that information might reasonably be expected to be material; and (b) that client has an interest adverse to the first-mentioned client or former client. ). 15 At least one leading ethicist has endorsed this approach as consistent with the drafting history of the predecessor to New York Rule 8.5, DR See ROY SIMON, Simon s New York Code of Professional Responsibility Annotated (2008 Ed.) Reprinted with permission.

67 an in-house lawyer would be distressed to learn that one of the firms receiving substantial legal fees from the in-house lawyer s employer had undertaken a lawsuit against the employer, regardless of the jurisdiction in which the suit is brought. Moreover, most clients remain concerned that confidential information learned about them during the course of a representation may be used against them even in seemingly unrelated adverse representations. Adjusting client expectations with respect to conflicts of interest and providing reassurances regarding the treatment of client confidential information (including, where appropriate, the use of ethical screens) is a prudent step lawyers can, and should, take. Indeed, this Committee believes that lawyers have a duty to inform their clients of all material issues affecting their representation including the applicable ethics rules and the possibility that the applicable conflicts of interest rules may vary by the nature of the matters they refer. See New York Rule 1.4 ( A lawyer shall promptly inform the client of material developments in the matter. ). In previous opinions, this Association s Committee on Professional and Judicial Ethics has endorsed the use of advance waivers as a means of both securing client consent to future adverse representations and adjusting client expectations as to the terms of the lawyer s representation of the client. See The Association of the Bar of the City of New York, Committee on Professional and Judicial Ethics, Formal Op (Feb. 16, 2006). This Committee echoes those sentiments here. Of course, clients are always free to protect themselves against surprise by clearly stating their expectations of counsel and requiring disclosure and consent to even ethically permissible adverse representations. Adoption of this Committee s proposed revisions to Model Rules 8.5 and 1.10 would not change the fact that lawyers undertaking adverse representation of current clients must at all times be mindful of the nature of the confidential information they have acquired in the course of representing their respective clients. The question of whether confidential information learned about a client is relevant to a concurrent adverse representation is a question of fact and law in each applicable jurisdiction. It is clear from existing case law in New York, however, that some forms of confidential information such as how a client s files are kept, its settlement strategies, and its internal operations may sometimes be deemed relevant to an adverse representation, even if the underlying matters are not substantially related. See, e.g., Anderson v. Nassau Cty. Dep t of Corrections, 376 F. Supp.2d 294 (E.D.N.Y. 2005) (an attorney may not take on an adverse representation against a client where the latter s confidences will be used to his or her disadvantage). Lawyers in New York, moreover, should also be aware that even arrangements deemed to be ethically permissible may not be deemed permissible by courts before whom a motion to disqualify has been brought. See, e.g., Cinema 5, Ltd., v. Cinerama, Inc., 528 F.2d 1384 (2d Cir. 1976) (holding that the ethical rules are relevant but not dispositive as to the question of whether a disabling conflict exists). Finally, this Committee cautions that lawyers in New York and elsewhere must be mindful of how information is transmitted within their respective firms. If Lawyer B in Scenario 6 were granted access to information acquired about Client Y by Lawyer A during the course of Lawyer B s representation of Client X, there would be a high risk that at least some of that information would be relevant to Lawyer B s matter and he would be in breach of the Solicitor s Reprinted with permission.

68 Code. See, e.g., U.K. Solicitor s Code of Conduct Rule 4.03 (prohibiting acting for a client where doing so risks breach of another client s confidences). Accordingly, lawyers on either side of the Atlantic would be well-advised to consider how information is stored and accessed within their respective offices, how information about current matters is distributed within the firm, and whether a screen may be necessary to ensure that client confidentiality is not compromised in the context of even ethically permissible adverse representations Reprinted with permission.

69 Part V. Conclusion It is this Committee s view that a non-new York lawyer should not be required to comply with New York ethics rules solely by virtue of his or her affiliation with a New York lawyer. Nor should a client who has engaged a lawyer on a matter with no nexus to New York be deprived of his or her choice of counsel because of a New York ethics rule that has no bearing on his or her matter. Such extraterritorial application of the New York Rules serves as both an inhibition to affiliation with New York lawyers and an unnecessary restriction on client choice. It is also inconsistent with the expectations of both non-new York lawyers and their clients. Accordingly, this Committee respectfully urges adoption of the proposed revisions to New York Rules 8.5 and 1.10 as set forth in Part I hereof Reprinted with permission.

70 THE FIRST RESTATEMENTS AND THE VISION OF THE AMERICAN LAW INSTITUTE, THEN AND NOW Michael Traynor* American Law Institute Director Lance Liebman and I appreciate the organization of this AALS symposium by Professor Patrick Kelley and his 1 2 contribution on torts, and those of Professors Mark Movsesian on contracts, 3 4 Symeon Symeonides on conflict of laws, Deborah DeMott on agency, 5 6 Andrew Kull on restitution and unjust enrichment, and Natalie Hull and 7 Kristen Adams on the Restatement process and history. I will address (1) the status of the five Restatement subjects discussed, (2) selection of topics and Reporters for Restatements, (3) the implications of the presentations in this Symposium for the Institute s Restatement and other projects, and (4) the question whether the Institute can continue to match the vision of its founders. When the Institute began the first Restatement series, it addressed 8 primarily common law in the pre-erie era when there was a larger sense than * President, The American Law Institute. Although I have tried to reflect the Institute s history and current approaches accurately, the views stated are personal and do not purport to state the Institute s position on any matter. The Institute only takes positions after deliberation and approval by both its Council and its members. I acknowledge with appreciation the research assistance of Harry Kyriakodis, ALI Librarian, the suggestions of Director Emeritus Geoffrey C. Hazard, Jr., and his insights on the role of the judge in choice-of-law cases, and the time and care that Director Lance Liebman took to review an earlier draft and the suggestions that he made. 1. Patrick J. Kelley, The First Restatement of Torts: Reform by Descriptive Theory, 32 S. ILL. U. L.J. 93 (2007). 2. Mark L. Movsesian, Williston as Conservative-Pragmatist, 32 S. ILL. U. L.J. 135 (2007). 3. Symeon C. Symeonides, The First Conflict Restatement Through the Eyes of Old: As Bad as Its Reputation?, 32 S. ILL. U. L.J. 39 (2007). 4. Deborah A. DeMott, The First Restatement of Agency: What Was the Agenda?, 32 S. ILL. U. L.J. 17 (2007). 5. Andrew Kull, Restitution and Reform, 32 S. ILL. U. L.J. 83 (2007). 6. N.E.H. Hull, Restatement and Reform Redux: Comments for the AALS Open Source Program: Did the First Restatement Implement a Reform Agenda?, 32 S. ILL. U. L.J. 139 (2007). See also N. E. H. Hull, Restatement and Reform: A New Perspective on the Origins of the American Law Institute, 8 LAW & HIST. REV. 55 (1990), also appearing in AMERICAN LAW INSTITUTE, THE AMERICAN LAW INSTITUTE SEVENTY-FIFTH ANNIVERSARY 49 (1998); N. E. H. Hull, Back to the 'Future of the Institute': William Draper Lewis's Vision of the ALI's Mission during Its First Twenty-Five Years and the Implications for the Institute's Seventy-Fifth Anniversary, in THE AMERICAN LAW INSTITUTE SEVENTY-FIFTH ANNIVERSARY 105 (1998) [hereinafter Hull, Back to the Future]. 7. Kristin David Adams, The American Law Institute: Justice Cardozo s Ministry of Justice?, 32 S. ILL. U. L.J. 173 (2007). See also Kristen David Adams, The Folly of Uniformity? Lessons from the Restatement Movement, 33 HOFSTRA L. REV. 423 (2004); Kristen David Adams, The Restatements and the Common Law: Blaming the Mirror, 40 IND. L. REV. 205 (2007). 8. See Erie R.R. v. Tompkins, 304 U.S. 64 (1938); Swift v. Tyson, 41 U.S. (16 Pet.) 1 (1842). 145 Southern Illinois University Law Journal Rerpinted with permission.

71 146 Southern Illinois University Law Journal [Vol there is now of a general common law and a clearer slate on which to draw. During this era and since, the Institute, beginning with its Restatements and including other projects, has made significant contributions to unifying as well as simplifying and clarifying the law, primarily (although not exclusively) state law, as has the National Conference of Commissioners on Uniform State 10 Law (NCCUSL), through its preparation of uniform laws for consideration by state legislatures. Today, we have a more complex and challenging panorama of statutory as well as common law, sophisticated concepts of post Erie federalism, an important residual area of federal common law, and developing national and international interests and a foreign relations law. 13 The international implications of the law of the United States are growing, whether that law is federal or state, common law or statute, or regulatory law of the many administrative agencies, federal, state, and local, that have been created since the Institute was founded in Different times produce different challenges. Expecting the Institute to produce periodically a project of such dimensions as the first Restatements would be about as fair or realistic as asking the Supreme Court to produce periodically a case with the institutional impact of Brown v. Board of Education or Miranda v. Arizona. It is fair and realistic to ask, however, if the vision of the Institute continues to be comparable to that of its founders. 1. THE PRESENT STATUS OF THE FIVE RESTATEMENTS UNDER DISCUSSION Torts: Having completed both the Restatement and the Restatement Second of Torts, the Institute is well underway on the Restatement Third and 16 has completed the segments on products liability and apportionment of 17 liability and virtually completed the segment on torts involving physical 9. See Caleb Nelson, The Persistence of General Law, 106 COLUM. L. REV. 503 (2006). 10. For more information, see (last visited Sept. 25, 2007). 11. See, e.g., Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415 (1996); Semtek Int l, Inc. v. Lockheed Martin Corp., 531 U.S. 497 (2001); Alden v. Maine, 527 U.S. 706 (1999); Seminole Tribe of Fla. v. Florida, 517 U.S. 44 (1996). 12. See Nelson, supra note See RESTATEMENT (THIRD) OF THE LAW, FOREIGN RELATIONS LAW OF THE UNITED STATES (1987; 2 vols) U.S. 483 (1954) U.S. 436 (1966). 16. RESTATEMENT (THIRD) OF TORTS: PRODUCTS LIABILITY (1998). 17. RESTATEMENT (THIRD) OF TORTS: APPORTIONMENT OF LIABILITY (2000). Southern Illinois University Law Journal Rerpinted with permission.

72 2007] The First Restatements harm and property damage. It has commenced work on economic torts and 19 related wrongs. It completed, in a separate Restatement Third of Unfair 20 Competition, work on a subject that had been addressed in part in the first Restatement but that was no longer deemed appropriate to include in the Restatement Second. 21 The first Restatement had Francis Bohlen as Chief Reporter, and the Restatement Second had William Prosser and then, after Prosser s death, John Wade as Chief Reporter. One major difference in the Restatement Third is that the subject of torts has expanded to the point where it is not feasible to name one person with comparable range, depth of experience, and acuity of vision to be the Chief Reporter for the entire subject. The Institute necessarily has had to segment the subject and appoint Reporters for the various segments. At the same time, it recognizes the need for coordination of the segments and is therefore beginning the process of overview, liaison, and coordination. 22 Contracts: After the first Restatement was published under the leadership of Chief Reporter Samuel Williston, two key developments occurred: Enough progress in the common law occurred to justify a 23 Restatement Second, which had Robert Braucher and then, after his appointment to the Supreme Judicial Court of Massachusetts, Allan 18. RESTATEMENT (THIRD) OF TORTS: LIABILITY FOR PHYSICAL AND EMOTIONAL HARM, Proposed Final Draft No. 1 (Apr. 6, 2005); RESTATEMENT (THIRD) OF TORTS: LIABILITY FOR PHYSICAL AND EMOTIONAL HARM (Tentative Draft No. 5, 2007). 19. RESTATEMENT (THIRD) OF ECONOMIC TORTS AND RELATED WRONGS (Discussion Draft 2007). This project began in RESTATEMENT (THIRD) OF UNFAIR COMPETITION (1995). The chapters (34, 35, 36 and 38) that were concerned with trade practices and labor disputes have been omitted, in the view that these subjects have become substantial specialties, in their own right, governed extensively by legislation and largely divorced from their initial grounding in the principles of torts. See pp. 1 3, infra. RESTATEMENT (SECOND) OF TORTS (1971) Vol. 4, at vii. 21. RESTATEMENT (THIRD) OF UNFAIR COMPETITION foreword at xi (1995) (foreword by then Director Geoffrey C. Hazard, Jr., stating AThis Restatement is the Institute s first independent work on the subject. The subject of unfair competition was to have been addressed in the Restatement, Second, of Torts, as it had been in the original Restatement of Torts. However, it was eventually decided that the law of unfair competition had evolved to the point that it was no longer appropriate to treat it as a subcategory of the law of Torts. See 4 Restatement, Second, Torts, Introduction and Introductory Note to Division Nine.@). 22. Under the direction of Lance Liebman, the Institute has begun the necessary coordination efforts. 23. RESTATEMENT (SECOND) OF CONTRACTS (1981). Southern Illinois University Law Journal Rerpinted with permission.

73 148 Southern Illinois University Law Journal [Vol Farnsworth, as Chief Reporters; and the Uniform Commercial Code (UCC) 26 was adopted under the leadership of Chief Reporter Karl Llewellyn and the joint sponsorship of NCCUSL. As yet, the Institute has not seen a compelling need to commence work on a Restatement Third. It has, however, worked 27 with NCCUSL to keep the UCC updated. Moreover, after the Institute 28 disengaged from a proposed Article 2B on software, and NCCUSL decided 24. See E. ALLAN FARNSWORTH, FARNSWORTH ON CONTRACTS (various editions); E. Allan Farnsworth, Ingredients in the Redaction of the Restatement (Second) of Contracts, 81 COLUM. L. REV. 1 (1981) (Symposium on the Restatement (Second) of Contracts); E. Allan Farnsworth, Some Prefatory Remarks: From Rules to Standards, 67 CORNELL L. REV. 634 (1982) (Symposium: The Restatement (Second) of Contracts). 25. AMERICAN LAW INSTITUTE AND NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS, UNIFORM COMMERCIAL CODE (1952). The UCC initially included Articles 1 to 10: General Provisions, Sales, Commercial Paper, Bank Deposits and Collections, Letters of Credit, Bulk Transfers, Warehouse Receipts, Investment Securities, Secured Transactions, Effective Date and Repealer. The code has been amended many times since See Hull, Back to the Future, supra note 6, in AMERICAN LAW INSTITUTE, THE AMERICAN LAW INSTITUTE SEVENTY-FIFTH ANNIVERSARY at Recent revisions and amendments to the Uniform Commercial Code include: Revised Article 5 (Letters of Credit) ( ); Revised Article 2 (Sales) ( ); Revised Article 8 (Investment Securities) ( ); Revised Article 9 (Secured Transactions) ( ); Amendments to Article 7 (Documents of Title) ( ). For a recent and important perspective, see Amelia H. Boss, The Future of the Uniform Commerical Code Process in an Increasingly International World, 68 OHIO ST. L. J. 349 (2007). 28. A Tentative Draft dated April 15, 1998, was the last formal draft that the Institute issued for proposed UCC Article 2B. Numerous law review articles examined 2B, including: Bryan G. Handlos, Drafting and Negotiating Commercial Software Licenses: A Review of Selected Issues Raised by Proposed Uniform Commercial Code Article 2B, 30 CREIGHTON L. REV (1997); Garry L. Founds, Shrinkwrap and Clickwrap Agreements: 2B or Not 2B?, 52 FED. COMM. L.J. 99 (1999); Robert W. Gomulkiewicz, How Copyleft Uses License Rights to Succeed in the Open Source Software Revolution and the Implications for Article 2B, 36 HOUS. L. REV. 179 (1999) (Symposium: Licensing in the Digital Age). At the 1998 ALI Annual Meeting, Professor Charles McManis of Washington University of St. Louis submitted a motion that introduced intellectual property considerations in relation to mass-market licenses, which resulted in a divided vote against the motion but ensuing support for his idea. Charles R. McManis, Discussion of the Uniform Commercial Code, Article 2B (Licenses), 75 A.L.I. PROC (1999). Also in 1998, Professor Pamela Samuelson, Director of the Berkeley Center for Law and Technology, organized an influential conference at Boalt Hall entitled Intellectual Property and Contract Law in the Information Age: The Impact of Article 2B of the Uniform Commercial Code on the Future of Transactions in Information and Electronic Commerce. See UCC 2B Conference Homepage, events/ucc2b (last visited June 20, 2007); Mark A. Lemley, Beyond Preemption: The Law and Policy of Intellectual Property Licensing, 87 CAL. L. REV. 111 (1999) (Symposium: Intellectual Property and Contract Law for the Information Age: The Impact of Article 2B of the UCC on the Future of Information and Commerce) (numerous IP academics and practitioners participated in this symposium). The contributions of Professors Samuelson and McManis and other intellectual property scholars were important steps in developing the broader framework of understanding that helped lead to the ultimate rejection of UCITA. See, e.g., Pamela Samuelson, Intellectual Property and Contract Law for the Information Age: Foreword to a Symposium, 87 CAL. L. REV. 1 (1999). Charles R. McManis, The Privatization (or Shrink-Wrapping ) of American Copyright Law, 87 CAL. L. REV. 173 (1999). Southern Illinois University Law Journal Rerpinted with permission.

74 2007] The First Restatements 149 not to pursue further efforts with its proposed Uniform Computer Information 29 Transactions Act (UCITA), the Institute began an independent project on 30 Principles of the Law of Software Contracts, with liaison contributions from a NCCUSL representative. 31 Conflict of Laws: Unlike the other Restatements, the first Restatement of Conflict of Laws, prepared by and under the direction of Chief Reporter Joseph Beale, sought to freeze the law in notions of territoriality and vested rights, pursued the bureaucratization and depersonalization of the law with a vengeance, impeded the development of the law, and further provoked the 32 conflicts revolution that had already begun and was led and advanced by noted scholars, including Walter Wheeler Cook, David Cavers, Brainerd Currie, and Robert Leflar, to name just a few. The Restatement Second, under the leadership of Professor Willis Reese as Reporter, began as the 37 revolution occurred, was finished in 1971, and, while the revolution continued its extended and still uncompleted course, was updated in certain 29. The National Conference of Commissioners on Uniform State Laws promulgated the Uniform Computer Information Transactions Act in 1999, but also made minor revisions to it in 2000 and See (supplying the Act's current status). At this time, Maryland and Virginia are the only states that have adopted UCITA, and in a qualified manner at that. Several states have enacted anti-ucita provisions, including Iowa, North Carolina, West Virginia and Vermont. See also Amelia H. Boss, Taking UCITA on the Road: What Lessons Have We Learned?, 7 ROGER WILLIAMS U. L. REV. 167 (2001). 30. The Institute's PRINCIPLES OF THE LAW OF SOFTWARE CONTRACTS project began in See (supplying more detailed information). 31. That representative is currently Professor Boris Auerbach. Other liaison representatives are Jesse Feder, Richard L. Field and Emery Simon. See ip&projectid=9#lia. 32. See SYMEON C. SYMEONIDES, THE AMERICAN CHOICE-OF-LAW REVOLUTION: PAST, PRESENT AND FUTURE (2006), reviewed by Louise Weinberg, Theory Wars in the Conflict of Laws, 103 MICH. L. REV (2005). See also Patrick J. Borchers, The Choice-of-Law Revolution: An Empirical Study, 49 WASH. & LEE L. REV. 357 (1992). 33. See WALTER WHEELER COOK, THE LOGICAL AND LEGAL BASES OF THE CONFLICT OF LAWS (1942); Walter Wheeler Cook, Substance and Procedure in the Conflict of Laws, 42 YALE L. J. 333 (1933); Walter Wheeler Cook, The Federal Courts and the Conflict of Laws, 36 U. ILL. L. REV. 493 (1942). 34. See David F. Cavers, A Critique of the Choice-of-Law Problem, 47 HARV. L. REV. 173 (1933); DAVID F. CAVERS, THE CHOICE-OF-LAW PROCESS (1965). 35. See BRAINERD CURRIE, SELECTED ESSAYS ON THE CONFLICT OF LAWS (1963) [hereinafter CURRIE, ESSAYS]; Brainerd Currie, Notes on Methods and Objectives in the Conflict of Laws, 1959 DUKE L.J. 171 (1959) [hereinafter Currie, Notes]. 36. See ROBERT ALLEN LEFLAR, LUTHER L. MCDOUGAL, AND ROBERT L. FELIX, AMERICAN CONFLICTS LAW (various editions). 37. RESTATEMENT (SECOND) OF CONFLICT OF LAWS (1971). Southern Illinois University Law Journal Rerpinted with permission.

75 150 Southern Illinois University Law Journal [Vol respects in It enjoys growing acceptance by courts but continues to 40 receive significant criticism by scholars. Although thoughtful scholars 41 recommend a Restatement Third, the subject is still much debatable, and the law in key areas has not sufficiently settled in the view of many to justify 42 beginning a Restatement Third. Three critical building blocks exist in this area: (1) Personal jurisdiction is still immersed in fact-intensive concepts of due process, entailing costly and substantial collateral litigation, most 38. RESTATEMENT (SECOND) OF CONFLICT OF LAWS, 1988 REVISIONS (1988), issued as permanent pocket parts for the two main Conflict of Laws volumes. 39. See, e.g., Nedlloyd Lines B.V. v. Superior Court, 834 P.2d 1148 (Cal. 1992); Ingersoll v. Klein, 262 N.E.2d 593 (Ill. 1970); Symeon C. Symeonides, The Judicial Acceptance of the Second Conflicts Restatement: A Mixed Blesssing, 56 MD. L. REV (1997). 40. See, e.g., Weinberg, supra note 32, at ; Louise Weinberg, A Structural Revision of the Conflicts Restatement, 75 IND. L.J. 475 (2000); Albert A. Ehrenzweig, The Second Conflicts Restatement: A Last Appeal for Its Withdrawal, 113 U. PA. L. REV (1965); Herma Hill Kay, Chief Justice Traynor and Choice of Law Theory, 35 HASTINGS L.J. 747 (1984); David E. Seidelson, Interest Analysis or the Restatement Second of Conflicts: Which Is the Preferable Approach to Resolving Choice-of-Law Problems?, 27 DUQ. L. REV. 73 (1988); Larry Kramer, Rethinking Choice of Law, 90 COLUM. L. REV. 277 (1990); Larry Kramer, On the Need for a Uniform Choice of Law Code, 89 MICH. L. REV (1991) (Symposium: One Hundred Years of the Uniform State Laws); Friedrich K. Juenger, A Third Conflicts Restatement?, 75 IND. L.J. 403 (2000) [hereinafter Juenger, Third Conflicts]; FRIEDRICH K. JUENGER, CHOICE OF LAW AND MULTISTATE JUSTICE (Spec. Ed. 2005) [hereinafter JUENGER, M ULTISTATE JUSTICE]. See also William F. Baxter, Choice of Law and the Federal System, 16 STAN. L. REV. 1 (1963); Willis L. M. Reese, Conflict of Laws and the Restatement Second, 28 LAW & CONTEMP. PROBS. 679 (1963); Willis L. M. Reese, Contracts and the Restatement of Conflict of Laws, Second, 9 INT'L & COMP. L.Q. 531 (1960). 41. See Gene Shreve, Introduction, 75 IND. L. J. 399 (2000) (Symposium: Preparing for the Next Century-A New Introduction of Conflicts); Symeon C. Symeonides, The Need for a Third Conflicts Restatement (And a Proposal for Tort Conflicts), 75 IND. L. J. 437 (2000); Symeon C. Symeonides, American Choice of Law at the Dawn of the 21st Century, 37 WILLAMETTE L. REV. 1 (2001) (Symposium). 42. See, e.g., Russell J. Weintraub, The Restatement Third of Conflict of Laws: An Idea Whose Time Has Not Come, 75 IND. L. J. 679 (2000); Juenger, Third Conflicts, supra note E.g., International Shoe Co. v. State of Wash., Office of Unemployment, 326 U.S. 310, 66 S.Ct. 154 (1945); Shaffer v. Heitner, 433 U.S. 186 (1977); Worldwide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980); Helicopteros Nacionales de Colum., S.A. v. Hall, 466 U.S. 408 (1984); Burger King v. Rudzewicz, 471 U.S. 462 (1985); Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102 (1987); Burnham v. Superior Court, 495 U.S. 604 (1990). 44. Under the European approach, which is more rule-oriented, there is less collateral litigation. See Council Regulation on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters, EC Regulation No. 44/2001. See also the predecessor Brussels Convention, officially the "Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters" (Official Journal L 299, 31/12/1972 pp ) and the Lugano Convention, officially the "Convention on jurisdiction and the enforcement of judgments in civil and commercial matters" (Official Journal 1988 L 319, p. 9); Linda J. Silberman, Developments in Jurisdiction and Forum Non Conveniens in International Litigation: Thoughts on Reform and a Proposal for a Uniform Standard, 28 TEX. INT. L.J. 501 (1993); See Friedrich K. Juenger, American Jurisdiction: A Story of Comparative Neglect, 65 U. COLO. L. REV. 1 (1993); Juenger, Third Conflicts, supra note 40; Russell J. Weintraub, Due Process Limitations on the Personal Jurisdiction of State Courts, 63 Southern Illinois University Law Journal Rerpinted with permission.

76 2007] The First Restatements 151 recently in efforts to apply Supreme Court cases from another era to the internet (2) Choice of law is still embroiled in constant debate. Moreover, it is still limited by the pervasive notion that it is necessary to select the law of a particular jurisdiction for an issue or a case rather than develop the idea that choice-of-law cases (at least true conflict cases) are different because by definition they involve the laws of two or more jurisdictions. The conflict of laws, especially choice of law, needs more than a tune up; it needs a systematic overhaul. Although it would be ambitious, I venture to suggest that such an overhaul of the law of conflict of laws and choice-of-law methodology could, for example: (a) Address and build on the reality that true conflict cases necessarily involve the laws of two or more jurisdictions and that, as in life, the appropriate resolution of a conflict is not necessarily limited to one of the competing choices but may involve an accommodation that takes both choices 47 into account. It is likewise realistic also to recognize that the long effort OR. L. REV. 485 (1984). 45. See, e.g., Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp (W.D.Pa. 1997); Blumenthal v. Drudge, 992 F. Supp. 44 (D.D.C. 1998). See also Bensusan Rest. Corp. v. King, 126 F.3d 25 (2d Cir. 1997); CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 1996); Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir. 1997); Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1321 (9th Cir. 1998); Michael Traynor & Laura Pirri, Personal Jurisdiction and the Internet: Emerging Trends and Future Directions, 2 Practising Law Institute, Sixth Annual Internet Law Institute, at 93 (2002). 46. See, e.g., CURRIE, ESSAYS, supra note 35; Currie, Notes, supra note 35; Brainerd Currie, The Disinterested Third State, 28 LAW & CONTEMP. PROBS. 754 (1963); Herma Hill Kay, A Defense of Currie s Governmental Interest Analysis, 215 RECUEIL DES COURS 9 (1989); Larry Kramer, Rethinking Choice of Law, 90 COLUM. L. REV. 277 (1990); Louise Weinberg, Against Comity, 80 GEO. L.J. 53 (1991); Joseph William Singer, Real Conflicts, 69 B.U. L. REV. 3 (1989); Robert Allen Leflar, Choice-Influencing Considerations in Conflicts Law, 41 N.Y.U. L. REV. 267 (1966); William F. Baxter, Choice of Law and the Federal System, 16 STAN. L. REV. 1 (1963); Herma Hill Kay, The Use of Comparative Impairment To Resolve True Conflicts: An Evaluation of the California Experience, 68 CAL. L. REV. 577 (1980); ANDREAS F. LOWENFELD, CONFLICT OF LAWS: FEDERAL, STATE, AND INTERNATIONAL PERSPECTIVES (2d ed. 1998); Friedrich K. Juenger, How Do You Rate a Century?, 37 WILLAMETTE L. REV. 89 (2001); William L. Reynolds, Legal Process and Choice of Law, 56 MD. L. REV. 1371, (1997) (summarizing criticisms of Restatement Second); Michael Traynor, Conflict of Laws, Comparative Law, and the American Law Institute, 49 AM. J. COMP. L. 391, 397 (2001). For two key California cases, see Kearney v. Salomon Smith Barney, Inc., 137 P.3d 914 (Cal. 2006); Offshore Rental Co. v. Continental Oil Co., 583 P.2d 721 (Cal. 1978). 47. See JUENGER, M ULTISTATE JUSTICE, supra note 40, at 9 10: For our purposes it is important to note that the Greeks and the Romans approached the legal issues posed by the cross-frontier movement of persons, things and transactions in a similar fashion. Instead of elaborating a system of choice-of-law rules, they created special tribunals with competence to decide multistate disputes and accorded them a fair measure of freedom to find appropriate solutions. Perhaps in Greece, and certainly in Rome, these tribunals developed rules of decision that, although local in origin, had a supranational purport. Whether the reliance on substantive rules rather than choice-of-law principles to resolve multistate problems Southern Illinois University Law Journal Rerpinted with permission.

77 152 Southern Illinois University Law Journal [Vol. 32 during the conflicts revolution and now to perfect a means of choosing a particular law of a particular jurisdiction is not an attainable quest in true conflict cases, which by definition are multi-jurisdictional. (b) Develop the principle, of which Professor Currie was a premier advocate, of identifying and eliminating false conflicts in significant part 48 through the forum s restrained and enlightened view of forum law. (c) Synthesize and articulate a principle of rational party autonomy for selecting and interpreting choice-of-law clauses and choice-of-forum clauses for contract and related disputes, particularly between parties with comparable bargaining power. 49 shows a lack of legal acumen or good common sense is another question. But if the experience gathered in antiquity is any indication, choice of law rules in the modern sense are clearly not the only possible response to multistate problems. See also Friedrich K. Juenger, Mass Disasters and the Conflict of Laws, 1989 U. ILL. L. REV. 105, 126 (Amost suitable rule of decision ); Michael Traynor, A Heavenly Inquiry from Professor Juenger, in FRIEDRICH K. JUENGER, CHOICE OF LAW AND MULTISTATE JUSTICE x1 (Spec. Ed. 2005); additional references cited at note 61, infra. Cf. Chief Judge Jack Weinstein s creative choice of law memorandum in In re Agent Orange Product Liability Litigation, 580 F. Supp. 690, 711 (E.D.N.Y. 1984) ( no acceptable test can point to any single state ); Id. at 713 (Ait is likely that each of the states would look to a federal or a national consensus law of manufacturer s liability, government contract defense and punitive damages. What is the nature of the national consensus or federal law is a subject for another memorandum ). Although the case later settled without resolution of the choice-of-law issues and Chief Judge Weinstein s memorandum was not an appealable order, on both mandamus and a later appeal it did not receive the approval of the U.S. Court of Appeals for the Second Circuit. In re Diamond Shamrock Chemicals Co., 725 F.2d 858, 861 (2d Cir. 1984); In re Agent Orange Product Liability Litigation, 818 F.2d 145, 165 (2d Cir. 1987) ( the intellectual power of Chief Judge Weinstein s analysis alone would not be enough to prevent widespread disagreement ). See also Jack B. Weinstein, Mass Tort Jurisdiction and Choice of Law in a Multi-National World Communicating by Extraterrestrial Satellites, 37 Willamette L. Rev. 145 (2000). Had the first Restatement not impeded the development of the law, perhaps a common law of conflict of laws might have been developed that decades ago would have begun to yield enough cases involving relevant elements from two or more jurisdictions that could then have been synthesized. It bears noting that the Institute and The International Institute for the Unification of Private Law (UNIDROIT) recently published Principles of Transnational Civil Procedure (Cambridge U. Press, 2006) which synthesizes fundamental principles of civil procedure from the common law system and the civil law system, in some respects a far more daunting challenge than resolving a conflict between the laws of two states. 48. See Currie, supra note 46; Brainerd Currie, Married Women s Contracts: A Study in Conflict-of-Laws Method, 25 U. CHI. L. REV. 227 (1958). For examples of restrained and enlightened decisions, see, e.g., Lauritzen v. Larsen, 345 U.S. 571 (1953); F. Hoffman-La Roche Ltd. v. Empagran S.A., 542 U.S. 155 (2004); Bernkrant v. Fowler, 55 Cal. 2d 588 (1961). See also Weinberg, supra note 32, at 1642; William M. Richman, Diagramming Conflicts: A Graphic Understanding on Interest Analysis, 41 OHIO ST. L.J. 317, (1982); Michael Traynor, Professor Currie s Restrained and Enlightened Forum, 49 CAL. L. REV. 845 (1961). 49. U.C.C General Provisions (2001 Revisions); See, e.g., Nedlloyd Lines B.V. v. Superior Court, 834 P.2d 1148 (Cal. 1992). Southern Illinois University Law Journal Rerpinted with permission.

78 2007] The First Restatements 153 (d) Develop additional tools for conflict avoidance, including pretrial settlement of conflicts issues and alternative dispute resolution. 50 (e) Assure a coherent constitutional grounding for a fresh methodology and make better judicial use of the tools our Constitution provides for our 51 nation of states in Article IV s Full Faith and Credit Clause and Privileges and Immunities Clause; Article I s Commerce Clause; and the Fourteenth Amendment s Due Process Clause, Equal Protection Clause, and Privileges 50. See James A. R. Nafziger, Avoidance of Choice-of-Law Conflicts: An Introduction, 12 WILLAMETTE J. INT L L. & DIS. RESOL. 179 (2004). 51. U.S. CONST. art. IV, ' 1. At present, in a true conflict of laws, Athere is no obligation of full faith and credit to a sister state s lawscas opposed to a sister state s judgments. Weinberg, supra note 32, at 1635; see Alaska Packers v. Indus. Accident Comm n, 294 U.S. 532 (1935); Pac. Employers Ins. Co. v. Indus. Accident Comm n, 306 U.S. 493 (1939). Compare Hughes v. Fetter, 341 U.S. 609 (1951) with Carroll v. Lanza, 349 U.S. 408, 411 (1955) ( A statute is a >public act within the meaning of the Full Faith and Credit Clause). See also Wells v. Simonds Abrasive Co., 345 U.S. 514, 521 (1953) (Jackson, J., dissenting) ( The whole purpose and the only need for requiring full faith and credit to foreign law is that it does differ from that of the forum. ); Kermit Roosevelt, III, The Myth of Choice of Law: Rethinking Conflicts, 97 MICH L. REV. 2448, (1999); Gene R. Shreve, Choice of Law and the Forgiving Constitution, 71 IND. L. J. 271 (1996); Robert H. Jackson, Full Faith and CreditCThe Lawyers Clause of the Constitution, 45 COLUM. L. REV. 1 (1945). 52. U.S. CONST. art. IV, ' 2, cl. 1. See Supreme Court of New Hampshire v. Piper, 470 U.S. 274 (1985); Hicklin v. Orbeck, 437 U.S. 518 (1978); Austin v. New Hampshire, 420 U.S. 656 (1975); Toomer v. Witsell, 334 U.S. 385, 395 (1948) ( The primary purpose of [the Privileges and Immunities Clause]... was to help fuse into one Nation a collection of independent, sovereign States. ). Compare Case 186/187, Cowan v. Tresor Public, 1989 E.C.R. 195 (English resident mugged on the Paris Metro entitled to crime victim compensation under French law despite its limitation of coverage to residents of France; right to travel unencumbered by such residency restrictions was a fundamental part of European citizenship) with Ostrager v. State Bd. of Control, 99 Cal. App. 3d 1, 160 Cal. Rptr. 317 (1979), appeal dismissed for want of a substantial federal question, 449 U.S. 807 (1980) (New York resident shot while on vacation in San Francisco not entitled to crime victim compensation under California law, which, like the French law, was limited to residents, because right was not fundamental ). Justice Stevens would have noted probable jurisdiction and set the Ostrager case for oral argument. Id. See also Quong Ham Wah Co. v. Indus. Accident Comm n., 192 P.2d 1021 (1920), writ of error dismissed, 255 U.S. 445 (1921) (residency limitation under California workers compensation law was invalid under Privileges and Immunities Clause); CURRIE, ESSAYS, supra note 35, at ; Roosevelt, III, supra note 51, at U.S. CONST. art I, '1. Compare Donald H. Regan, The Supreme Court and State Protectionism: Making Sense of the Dormant Commerce Clause, 84 MICH. L. REV (1986) and Donal H. Regan, Siamese Essays: (I) CTS Corp. v. Dynamics Corp. of American and Dormant Commerce Clause Doctrine; (II) Extraterritorial State Legislation, 85 MICH. L. REV (1987), with Mark Gergen, The Selfish State and the Market, 66 TEX. L. REV (1988) and Mark Gergen, Territoriality and the Perils of Formalism, 86 MICH. L. REV (1988). 54. U.S. CONST. amend. XIV, ' 2. See Allstate Ins. Co. v. Hague, 449 U.S. 302, (1981); Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 818 (1985); see also Home Ins. Co. v. Dick, 281 U.S. 397 (1930); Arthur T. von Mehren & Donald Trautman, Constitutional Control of Choice of Law: Some Reflections on Hague, 10 HOFSTRA L. REV. 35 (1981); Roosevelt, III, supra note 51, at 2507 (AApart from the fact that Due Process governs relations between states and individuals, while Full Faith and Credit governs interstate relations, there is an important conceptual difference. Due process analysis sets a minimum threshold; beyond that threshold there are no restrictions. Consequently, a due process analysis often leads to the conclusion that a number of different states laws may appy.... Southern Illinois University Law Journal Rerpinted with permission.

79 154 Southern Illinois University Law Journal [Vol or Immunities Clause as well as, when appropriate, good legislative use of 57 Congress power to legislate in the area constitutional tools that are still relatively unused in the conflict of laws. Reexamination of the constitutional framework should also lead to an analysis that in addition to interests of federalism and state autonomy to which the Supreme Court has largely deferred, national interests exist and that a national solution may be preferable in some cases than one that attempts to address a national problem by choosing the law of one state. 58 (f) In considering a national solution to the problem of mass torts, consider also the recommendations of the American Law Institute in its Complex Litigation Project. 59 (g) Subject to applicable and reexamined constitutional constraints; build on existing examples of relevant blending techniques, including the principle 60 of dépeçage, which allows a court to apply the law of one state to govern one Full Faith and Credit, by contrast, demands that each state accord the greatest degree of respectcfull faith and creditcto the laws of sister states. This may be a baseline requirement in some sense, but the baseline is set as high as it possibly could be. To suppose that such a forceful command results in the same threshold test as Due Process in particular the toothless Allstate testcis to suppose that the Constitution cares very little about the resolution of conflicts between laws. That supposition is of course false.... ). See also Paul Freund, Chief Justice Stone and the Conflict of Laws, 59 HARV. L. REV (1946). 55. U.S. CONST. amend. XIV, ' 2. See CURRIE, ESSAYS, supra note 35, at ; Douglas Laycock, Equal Citizens of Equal and Territorial States: The Constitutional Foundations of Choice of Law, 92 COLUM. L. REV. 249 (1992), discussed in Weinberg, supra note 32, at 1654, n.55 (an important article addressing the problems of territoriality and intrastate discrimination and interest analysis and interstate discrimination). See also Mark P. Gergen, Equality and the Conflict of Laws, 73 IOWA L. REV. 893 (1988). 56. U.S. CONST. amend. XIV, ' 2; see Edwards v. California, 314 U.S. 160 (1941). 57. U.S. CONST. art. I, ' 1; art. IV, ' 1; amend. XIV, ' See, e.g., Samuel Issacharoff, Settled Expectations in a World of Unsettled Law: Choice of Law after the Class Action Fairness Act, 106 COLUM. L. REV (2006). Professor Issacharoff is also the Chief Reporter for the Institute s current project on Principles of the Law of Aggregate Litigation, which includes class actions, a subject of crucial relevance to choice-of-law. Professor Issacharoff identifies the Aneed to facilitate common legal oversight of undifferentiated national market activity.@ Id. at See also Stanley E. Cox, Substantive, Multilateral, and Unilateral Choice-of-Law Approaches, 37 WILLAMETTE L. REV. 171, 179 (2001) (AThe substantive approach to choice of law works best in situations where no particular jurisdictions have predominant sovereignty-based claims to adjudicate an underlying dispute, but where most parties desire a comprehensive and consistent result on the merits.... [It] works best in mass disaster and consolidated or class litigation situations@); Friedrich K. Juenger, Mass Disasters and the Conflict of Laws, 1989 U. ILL. L. REV. 105, 126 (1989); Michael H. Gottesman, Draining the Dismal Swamp: The Case for Federal Choice of Law Statutes, 80 GEO. L.J. 1 (1991). 59. AMERICAN LAW INSTITUTE, COMPLEX LITIGATION: STATUTORY RECOMMENDATIONS AND ANALYSIS (1994). 60. See RESTATEMENT (SECOND) OF CONFLICT OF LAWS ' 145, cmt. d (1971); DAVID F. CAVERS, THE CHOICE-OF-LAW-PROCESS 19, (1965); Courtland H. Peterson, Private International Law at the End of the Twentieth Century: Progress or Regress?, 46 AM. J. COMP. L. 197, (1998); Willis L.M. Reese, Dépeçage: A Common Phenomenon in Choice of Law, 73 COLUM. L. REV. 58 (1973); Southern Illinois University Law Journal Rerpinted with permission.

80 2007] The First Restatements 155 issue and the law of another state to govern a separate issue; the developing theory that substantive principles to resolve conflicts are permissible even if 61 they are not identical to the law of any competing jurisdiction; the law of defamation, where the Supreme Court has required and facilitated the blending of constitutional considerations (such as the First Amendment) with state tort 62 law; and the law of comparative responsibility and apportionment in tort cases. 63 (h) Examine and explain the unique role of judges in conflict of laws cases, recognizing that judges, whose responsibilities include deciding cases according to principles that include justice, should not be precluded in appropriate cases from blending the most fitting or appropriate elements of competing laws even though the result is not identical to either. Although legislators constantly blend policies and make compromises, it would be farfetched to contend that judges within applicable constitutional constraints can never, even occasionally, do what legislators do routinely, particularly when judges seek to enable sister states to act as sisters and foster an accommodating, moderate, and not one-sided solution. 64 Christopher G. Stevenson, Dépeçage: Embracing Complexity to Solve Choice-of-Law Issues, 37 IND. L. REV. 303 (2003); Louise Weinberg, Theory Wars in the Conflict of Laws, 103 MICH. L. REV (2005). For an international copyright law example, see Itar-Tass Russian News Agency v. Russian Kurier, Inc., 153 F.3d 82, (2d Cir. 1998) (ownership question governed by Russian law, infringement question by U.S. law). 61. See Paul Schiff Berman, Judges as Cosmopolitan Transnational Actors, 12 TULSA J. COMP. & INT L. L. 109, 114 (2004) (Awhereas most traditional choice-of-law regimes require a choice of one national norm, a cosmopolitan approach permits judges to develop a hybrid rule that may not correspond to any particular regime@); Hannah L. Buxbaum, Conflict of Economic Laws: From Sovereignty to Substance, 42 VA. J. INT L. L. 931, (2002); Stanley E. Cox, Substantive, Multilateral, and Unilateral Choice-of-Law Approaches, 37 WILLAMETTE L. REV. 171, (2001); Graeme B. Dinwoodie, A New Copyright Order: Why National Courts Should Create Global Norms, 149 U. PA. L. REV. 469, (2000); Juenger, supra note 46, at ; Friedrich K. Juenger, The Need for a Comparative Approach to Choice-of-Law Problems, 73 TUL. L. REV. 1309, (1999); Luther L. McDougal III, A Private International Law: Just Gentium Versus Choice of Law Rules or Approaches, 38 AM. J. COMP. L. 521, (1990); Peterson, supra note 60, at 214; Traynor, supra note 48; Arthur T. von Mehren, Special Substantive Rules for Multistate Problems: Their Role and Significance in Contemporary Choice of Law Methodology, 88 HARV. L. REV. 347 (1974); Arthur T. von Mehren, Choice of Law and the Problem of Justice, 41 LAW & CONTEMP. PROBS. 27, (1977). See also John E. Coons, Approaches to Court Imposed CompromiseCThe Uses of Doubt and Reason, 58 NW. U. L. REV. 750 (1964); John E. Coons, Compromise as Precise Justice, 68 Cal. L. Rev. 250 (1980). 62. See, e.g., N.Y. Times v. Sullivan, 376 U.S. 254 (1964). 63. RESTATEMENT (THIRD) OF TORTS: APPORTIONMENT OF LIABILITY (2000). 64. See, e.g., Kearney v. Salomon Smith Barney, Inc., 137 P.3d 914 (Cal. 2006) (in which the Supreme Court of California held that a California law prohibiting eavesdropping on telephone conversations justified injunctive relief against future transgressions: but that the defendant s reliance on Georgia law, which did not prohibit the eavesdropping, precluded monetary relief for past transgressions. Although phrased in jurisdiction-selecting and comparative impairment terms, the result is an example of multistate justice worth building on.) See also Berman, supra note 61, at 110 (The best Southern Illinois University Law Journal Rerpinted with permission.

81 156 Southern Illinois University Law Journal [Vol (i) Reexamine the principle of Klaxon v. Stentor, which constrains the federal courts from exercising a potentially significant and constructive role way to avoid legal imperialism is for judges to think of themselves as cosmopolitan transnational actors ); Traynor, supra note 48. Judges may be required by the Supremacy Clause to apply a higher law such as a provision of the Constitution or a federal statute notwithstanding a conflicting state law of the jurisdiction in which they sit; and they may be required by other constitutional clauses or principles of the conflict of laws that govern in their jurisdiction to apply the law of another state or country. Taking into account and applying the laws of jurisdictions other than their own, whether vertically or horizontally, is not merely an exercise of comity or discretion but of the responsibilities inherent in judicial office. And as the Kearney case demonstrates, judges can select in appropriate cases from provisions of the laws both of their own jurisdiction and another jurisdiction. It bears noting that in Matter of Rhone-Poulenc Rorer, Inc., 51 F.3d 1293 (7th Cir. 1995) (Posner, J.), a divided panel granted a writ of mandamus to require decertification of a class of hemophiliacs who sought class certification in an action against manufacturers of anti-hemophiliac factor concentrate. The majority opinion states that Athe district judge proposes to substitute a single trial before a single jury instructed in accordance with no actual law of any jurisdictionca jury that will receive a kind of Esperanto instruction, merging the negligence standards of the 50 states and the District of Columbia.@ Id. at The majority also referred to Athe questionable constitutionality of trying a diversity case under a legal standard in force in no state,@ although the court noted that a similar approach Ahas been approved for asbestos litigation.@ Id. at The panel majority recognized that Aat some level of generality the law of negligence is one, not only nationwide but worldwide,@ but also stated that negligence law can differ among the states on such issues, for example, as duty of care, forseeability, proximate cause, and judicial formulations of pattern jury instructions. Id. Although Judge Posner s remarks about AEsperanto@ and possible unconstitutionality might be read more broadly, it is crucial to note that they arose in the specific context of a class action involving the possible blending in a jury instruction of the law of 51 jurisdictions. By contrast, in typical choice-oflaw cases, there are both historical roots and theoretical justifications for blending the laws of two or more jurisdictions. See, e.g., supra notes 46 and 59. Indeed, it seems doubtful that the disparaging terms, Ano actual law,@ or AEsperanto,@ or Aquestionable constitutionality,@ could be applied rationally, for example, to the law of defamation, or determinations of comparative responsibility, or various and numerous statutes, which often blend and compromise various competing interests, or to cases such as the recent Supreme Court of California s decision, which invoked California law to justify injunctive relief but Georgia law to deny monetary relief. Kearney, 137 P.3d 914. Moreover, in many, if not most, true conflict cases, there will be some plausible rationale that will allow the court to choose the law of either State A or State B to resolve the case or question. If, for example, the forum is State A, and it could permissibly choose the law of either A or B, what is the problem with the court s choosing to apply State A s law to a part of the case and State B s law to the rest? Instead of disregarding entirely the law of one interested state, the court seeks to balance the interests of each state. See Dinwoodie, supra note 61, at 546 ( But the critique is somewhat less withering when the state in question freely decides that it wishes Esperanto to be the vernacular of choice ); id. at 576: ([T]he approach that I propose can be no more offensive to national sovereignty than the wholesale application of foreign law. If it is consistent with our existing notions of judicial duty either to apply the forum law or the law of another state, the application of a law falling between that of the forum and the other state cannot be more offensive to notions of democratic legitimacy or state sovereignty ). See also Alfred Hill, The Judicial Function in Choice of Law, 85 COLUM. L. REV (1985) (providing an earlier and thoughtful view, although a more conservative one) U.S. 487 (1941). Southern Illinois University Law Journal Rerpinted with permission.

82 2007] The First Restatements 157 in advancing the rational development of the conflict of laws and suitable national solutions rather than parochial state solutions for national issues. 66 (k) Take into appropriate account the growing and relevant international 67 efforts such as those to achieve harmonization of the law; international cooperation and coordination mechanisms as in international insolvency law, and international intellectual property law; the articulation of international principles as in UNIDROIT s Principles of International Commercial 66. See Henry M. Hart, Jr., The Relations Between State and Federal Law, 54 COLUM. L. REV. 489, 513 (1954); Issacharoff, supra note 58, at , , 1865; Roosevelt, III, supra note 51, at 2510 n.264 (AI do not believe that federal conflicts rules are necessary, provided that we pay attention to constitutional restrictions on state conflicts rules. It is troubling that under Klaxon the federal courts act as ventriloquists dummies, reproducing the very parochialism and bias their diversity jurisdiction exists to counter. ). 67. See, e.g., Hannah Buxbaum, Conflict of Economic Laws: From Sovereignty to Substance, 42 VA. J. INT L L. 931, (2002); Dinwoodie, supra note 61, at 570 n.318. Traditionally, choice of law and harmonization are cast as alternative means of accommodating international differences. Choice of law analysis involves difficult decisions where harmonization has failed to eradicate differences in national laws; harmonization of national laws reduces the importance of choice of law determinations where those determinations have become too troublesome or uncertain. The latter observation explains in part the recent explosion in copyright harmonization efforts. But the substantive law method would enlist one strategy in the cause of the other, by facilitating the convergence of different national rules applicable to international disputes. See also AMERICAN LAW INSTITUTE, INTELLECTUAL PROPERTY: PRINCIPLES GOVERNING JURISDICTION, CHOICE OF LAW, AND JUDGMENTS IN TRANSNATIONAL DISPUTES, Tentative Draft No. 1 (2007); Paul Schiff Berman, Towards a Cosmopolitan Vision of Conflict of Laws: Redefining Governmental Interests in a Global Era, 153 U. PA. L. REV (2005); Paul Schiff Berman, The Globalization of Jurisdiction, 151 U. PA. L. REV. 311 (2002); Christian Joerges, The Challenges of Europeanization in the Realm of Private Law: A Plea for a New Legal Discipline, 14 DUKE J. COMP. & INT L L. 149 (2004). 68. See AMERICAN LAW INSTITUTE, TRANSNATIONAL INSOLVENCY PROJECT: COOPERATION AMONG THE NAFTA COUNTRIES (2003) (the pioneering work); see also ANNE-MARIE SLAUGHTER, A NEW WORLD ORDER (2004); Buxbaum, supra note 67, at ; Hannah Buxbaum, Forum Selection in International Contract Litigation: The Role of Judicial Discretion, 12 WILLAMETTE J. INT L L. & DISP. RESOL. 185 (2004); E. Bruce Leonard, Breakthroughs in Court-to-Court Communications in Cross-Border Cases, 20 AM. BANKR. INST. J. 18 (Sept. 2001); E. Bruce Leonard, The Way Ahead: Protocols in International Insolvency Cases, 17 AM. BANKR. INST. J. 12 (Jan. 1999); Nafziger, supra note 50, at ; Anne-Marie Slaughter, Focus: Emerging Fora for International Litigation (Part 2): A Global Community of Courts, 44 HARV. INT L L. J. 191 (2003); Jay Lawrence Westbrook, The Transnational Insolvency Project of the American Law Institute, 17 CONN. J. INT L L. 99 (2001); Jay Lawrence Westbrook & Jacob S. Ziegel, The American Law Institute NAFTA Insolvency Project, 23 BROOK. J. INT L 7 (1997); Jay Lawrence Westbrook, Theory and Pragmatism in Global Insolvencies: Choice of Law and Choice of Forum, 65 AM. BANKR. L.J. 457 (1991). In cooperation with the International Insolvency Institute, the ALI has recently begun a new transnational insolvency project on Principles of Cooperation (2006 ). 69. AMERICAN LAW INSTITUTE, INTELLECTUAL PROPERTY, supra note 67. Southern Illinois University Law Journal Rerpinted with permission.

83 158 Southern Illinois University Law Journal [Vol Contracts, which are akin to the Restatements; and the emergence of a lex 72 mercatoria. It is not a coincidence that in contrast to our aggressive term, the conflict of laws, other countries use the more peaceful term, private international law. 73 (3) Only the third building block of judgments is relatively coherent, as 74 it is governed by a principle of finality. Even with judgments, however, emerging issues exist about whether and to what extent to recognize and 75 enforce non-monetary judgments. The Institute is not ignoring conflict of laws. So far, it has addressed it in discrete ways, especially through its now-completed project on recognition 76 and enforcement of foreign country judgments; its completed project on 77 international intellectual property; and its work with NCCUSL on 78 amendments to the choice of law provisions of Article 1 of the UCC, an effort that unfortunately has not met with enactments by state legislatures. Its 70. UNIDROIT, Principles of International Commercial Contracts, 34 L.L.M (1995); see MICHAEL JOACHIM BONELL, AN INTERNATIONAL RESTATEMENT OF CONTRACT LAW (2d ed. 1997). 71. See Bonell, supra note 70; Juenger, supra note See Juenger, supra note 61, at , 1330; Friedrich K. Juenger, American Conflicts Scholarship and the New Law Merchant, 28 VAND. J. TRANSNAT L L. 487, (1995). But see Keith Highet, The Enigma of the Lex Mercatoria, 63 TUL. L. REV. 613 (1989). 73. See CHESHIRE & NORTH, PRIVATE INTERNATIONAL LAW (13th ed. 1999). See also Juenger, supra note 61; Sir Basil Markesinis & Jorg Fedtke, The Judge as Comparatist, 80 TUL. L. REV. 11 (2005); Milena Sterio, The Globalization Era and the Conflict of Laws: What Europe Could Learn from the United States and Vice Versa, 13 CARDOZO J. INT L & COMP. L. 161 (2005); Michael Traynor, Conflict of Laws, Comparative Law, and the American Law Institute, 49 AM. J. COMP. L. 391, , (2001). Although developing international principles are important and relevant, international conflicts and domestic conflicts are different under the Constitution of the United States. See Albert A. Ehrenzweig, Interstate and International Conflicts Law: A Plea for Segregation, 41 MINN. L. REV. 717 (1957). 74. See, e.g., Baker v. Gen. Motors Corp., 522 U.S. 222 (1998); Fauntleroy v. Lum, 210 U.S. 230 (1908). 75. Baker, 522 U.S See also AMERICAN LAW INSTITUTE, RECOGNITION AND ENFORCEMENT OF FOREIGN JUDGMENTS: ANALYSIS AND PROPOSED FEDERAL STATUTE 3 (2006). 76. AMERICAN LAW INSTITUTE, RECOGNITION AND ENFORCEMENT OF FOREIGN JUDGMENTS: ANALYSIS AND PROPOSED FEDERAL STATUTE (2006); Linda Silberman, Comparative Jurisdiction in the International Context: Will the Proposed Hague Judgments Convention Be Stalled?, 52 DEPAUL L. REV. 319 (2002); Linda Silberman, Can the Hague Judgments Project Be Saved?: A Perspective from the United States, in A GLOBAL LAW OF JURISDICTION AND JUDGMENTS: LESSONS FROM THE HAGUE 158, (2002); Linda J. Silberman & Andreas F. Lowenfeld, A Different Challenge for the ALI: Herein of Foreign Country Judgments, an International Treaty and an American Statute, 75 IND. L.J. 635, (2000). 77. AMERICAN LAW INSTITUTE, INTELLECTUAL PROPERTY: PRINCIPLES GOVERNING JURISDICTION, CHOICE OF LAW, AND JUDGMENTS IN TRANSNATIONAL DISPUTES (Proposed Final Draft 2007) (publication in 2008 is expected). 78. U.C.C. Art. 1 (General Provisions) (2001 Revisions). The Article 1 amendments addressed only choice of law clauses, not choice of forum clauses because the Drafting Committee wanted to avoid situations in which one party of an entirely domestic transaction would choose, due to its superior bargaining power, not a fellow state, but instead a foreign state with such fundamentally different policies that such forum selection would be overreaching. Southern Illinois University Law Journal Rerpinted with permission.

84 2007] The First Restatements work on world trade is also relevant because trade disputes often involve conflicting laws and policies that may need both harmonization as well as a means for resolving conflicts. Agency: The first Restatement was succeeded by a Restatement 80 Second, which has just recently been succeeded by the Restatement Third, 81 under the leadership of Chief Reporter Deborah DeMott. It addresses central and modern problems of liability and attribution of responsibility in 82 challenging situations such as those presented by the Enron disaster. It should prove to be of great help to courts and lawyers who must wrestle with these ubiquitous problems and to scholars who write about them. 83 Restitution and Unjust Enrichment: The first Restatement, which did not include Unjust Enrichment in its title although it addressed that principle throughout, was a pioneering work. It was followed by an effort, eventually 84 terminated, to begin a Restatement Second and then by the current project, 85 the Restatement Third of Restitution and Unjust Enrichment, under the 86 leadership of Chief Reporter Andrew Kull. In an elegantly stated and deeply 79. The Institute began a project entitled Principles of World Trade Law: The World Trade Organization in See infra text accompanying notes RESTATEMENT (SECOND) OF AGENCY (1958). 81. RESTATEMENT (THIRD) OF AGENCY (2006). See also Deborah A. DeMott, When Is a Principal Charged with an Agent's Knowledge?, 13 DUKE J. COMP. & INT'L L. 291 (2003) (Comparisons and Connections: A Symposium in Memory of Herbert Bernstein); Deborah A. DeMott, A Revised Prospectus for a Third Restatement of Agency, 31 U.C. DAVIS L. REV (1998). 82. In the winter of , William Powers, Jr., then Dean of The University of Texas School of Law (and now President of the University of Texas), chaired the Internal Committee of Investigation for Enron. Commissioned by the Enron Board of Directors, this committee investigated the transactions between Enron and several partnerships headed by Enron s former chief financial officer Andrew Fastow. That investigation led to the APowers Report,@ which was highly critical of these transactions. 83. RESTATEMENT OF RESTITUTION (1933). 84. Two Tentative drafts were produced in the early 1980s for the Restatement of the Law Second, Restitution, before the project was discontinued. In Tentative Draft No. 1 (1983), a proposed section 6, entitled Benefit in Relation to an Agreement, provided in subdivision (2) that A person whose conduct in negotiating for a gain or advantage results in a benefit to him and a loss or expense to another may be unjustly enriched by the benefit, if, in the absence of compensation to the other, the conduct appears unconscionable in purpose or effect. No account is taken of uncompensated loss or expense in this connection if it results from a risk fairly chargeable, as between the parties, to the person who bears it. Such loss or expense is taken into account only if it was foreseeable by the person receiving the benefit provided. Had such a principle, which was controversial, been adopted, it might have led to the development of the law of restitution and unjust enrichment in this troubled area akin to that under section 90 of the first Restatement and Restatement Second of Contracts. The Restatement Third does not adopt this proposal but addresses the problems in other ways. For example, it discusses anticipated contracts that fail to materialize in Section 23, comment c, and opportunistic behavior in Section The Third Restatement of Restitution and Unjust Enrichment project has been underway since 1997 and has thus far produced five Tentative Drafts and numerous Preliminary and Council Drafts. 86. See Andrew Kull, Rescission and Restitution, 61 BUS. LAW. 569 (2006); Andrew Kull, James Barr Ames and the Early Modern History of Unjust Enrichment, 25 OXFORD J. LEGAL STUD. 297 (2005); Andrew Kull, The Source of Liability in Indemnity and Contribution, 36 LOY. L.A. L. REV. 927 Southern Illinois University Law Journal Rerpinted with permission.

85 160 Southern Illinois University Law Journal [Vol. 32 researched project, and in various tentative drafts that have been discussed and largely approved by the Institute s Council and members, Professor Kull articulates substantive principles of liability, some that constitute a basis for 87 liability independent of tort and contract as in the case of mistake, and some 88 that provide alternative grounds for liability. He now begins the challenging task of articulating the various remedies, including not only monetary relief and the constructive trust but others such as the equitable lien and subrogation. When completed, this project will not only clarify and simplify a major area of the common law; it also will provide another important way of looking at cases that involve an element of unjust enrichment. II. SELECTION OF TOPICS AND REPORTERS FOR RESTATEMENTS In contrast to the first Restatement era, the Institute now exercises more choices about the form and approach that a project takes. The main choices are a Restatement, model legislation, or a set of Principles. It also may sponsor studies for the Institute rather than by it, as in the enterprise liability 89 project that preceded the Restatement Third of Torts: Products Liability. Under the leadership of Conrad Harper, Chair of the Institute's Special Committee on Institute Style, and Michael Greenwald, Reporter (and then also a Deputy Director), in 2005 the Institute issued a handbook for Institute Reporters and those who review their work, which is entitled Capturing the 90 Voice of The American Law Institute. The Handbook describes the various 91 forms and articulates the differences among Restatements, Legislative (2003) (Symposium); Andrew Kull, Restitution's Outlaws; 78 CHI.-KENT L. REV. 17 (2003) (Symposium); Andrew Kull, Defenses to Restitution: The Bona Fide Creditor, 81 B.U. L. REV. 919 (2001); Andrew Kull, Disgorgement for Breach, The Restitution Interest, and The Restatement of Contracts, 79 TEX. L. REV (2001) (Symposium); Andrew Kull, Restitution in Bankruptcy: Reclamation and Constructive Trust, 72 AM. BANKR. L.J. 265 (1998); Andrew Kull, Rationalizing Restitution, 83 CAL. L. REV (1995); Andrew Kull, Restitution as a Remedy for Breach of Contract, 67 S. CAL. L. REV (1994). 87. See RESTATEMENT OF RESTITUTION AND UNJUST ENRICHMENT 5 12 (Tentative Draft No. 1, 2001). 88. Tentative Draft No. 4 outlines the scope of the project and includes sections on defective consent or authority ('' 13 17); transfers under legal compulsion ('' 18 19); intentional transactions ('' 20 30); restitution and contract ('' 31 39); restitution for wrongs ('' 40 46); and indirect enrichment ('' 47 48). RESTATEMENT OF RESTITUTION AND UNJUST ENRICHMENT (Tentative Draft No. 4, 2001). 89. AMERICAN LAW INSTITUTE, ENTERPRISE RESPONSIBILITY FOR PERSONAL INJURY (1991). 90. AMERICAN LAW INSTITUTE, CAPTURING THE VOICE OF THE AMERICAN LAW INSTITUTE: A HANDBOOK FOR ALI REPORTERS AND THOSE WHO REVIEW THEIR WORK (2005) [hereinafter HANDBOOK]. 91. Restatements are addressed to courts and others applying existing law. Restatements aim at clear formulations of common law and its statutory elements or variations and reflect the law as it presently stands or as it might plausibly be stated by a court. Restatement black letter formulations assume the Southern Illinois University Law Journal Rerpinted with permission.

86 2007] The First Restatements Recommendations, Principles, and Studies. Those distinctions are pertinent to the decision about what form a project should take. The Institute is not precluded from other approaches. For example, in , it published a draft Statement of Essential Human Rights, not as an official work of the Institute itself that carries with it the imprimatur of approval by both the Council and the members, but as a contribution to the debate, one that was drafted by a Committee representing principal cultures of the world appointed by the Institute and that played a major role in what became the Universal Declaration of Human Rights, which was adopted by the 96 General Assembly of the United Nations in This might be a good time for the Institute to consider other areas of law where our work would seek to contribute to enlightenment and debate rather than to articulating definitive legal principles. Such areas might include questions concerning the challenges of wealth transfer across generations; issues at the intersection of science and law; new thinking about the imperfectly restated subject of conflict of laws, discussed supra; or proposing a model cross-national license for intellectual property. 97 A major criterion is whether a project will contribute to the general law, including both common law and statutory law. Two recent examples of projects that synthesize common law and statutory law are the Restatement stance of describing the law as it is.@ HANDBOOK, supra note 90, at AModel or uniform codes or statutes and other statutory proposals are addressed mainly to legislatures, with a view toward legislative enactment. Statutory formulations assume the stance of prescribing the law as it shall be.@ Id. at A Principles may be addressed to courts, legislatures, or governmental agencies. They assume the stance of expressing the law as it should be, which may or may not reflect the law as it is.@ Id. at The Institute sometimes produces studies that analyze in depth particular areas of the law.... [These studies may lay] the practical and theoretical groundwork for subsequent black-letter propositions.@ Id. at STATEMENT OF ESSENTIAL HUMAN RIGHTS (1945). The Statement was formally published by Americans United for World Organization, Inc. The complete text of the Statement of Essential Human Rights appears in AMERICAN LAW INSTITUTE, THE AMERICAN LAW INSTITUTE SEVENTY- FIFTH ANNIVERSARY 261 (1998). See also Hull, Back to the Future,supra note 6, at 105, ; Michael Traynor, The President s Letter That s Debatable : The ALI as a Public Policy Forum: Ninth in an Occasional Series: The Statement of Essential Human Rights A Groundbreaking Venture (pts. 1 & 2), THE ALI REPORTER (ALI Phila., Pa.), Winter 2007, at 1, THE ALI REPORTER (ALI Phila., Pa.), Spring 2007, at Universal Declaration of Human Rights, G.A. res. 217A, at 71, U.N. GAOR, 3d Sess., 1st plen. mtg., U.N. Doc A/810 (Dec. 12, 1948). 97. At an early meeting that helped frame what became the Institute s project on International Intellectual Property, a suggestion was made, to my recollection by then Director Geoffrey C. Hazard, Jr., that among the array of alternatives, a possible project might be the articulation of a model license of intellectual property, with principal negotiating alternatives and comments. There may be other negotiating situations in which it could be useful to identify the major alternative solutions. Southern Illinois University Law Journal Rerpinted with permission.

87 162 Southern Illinois University Law Journal [Vol Third of Property: Wills and Other Donative Transfers, which synthesizes 99 various state statutes such as the Uniform Probate Code and the common law, and the Restatement Third of Unfair Competition, which synthesizes federal 100 statutory law, such as the Lanham Act on trademarks, and state statutory law, such as the Uniform Trade Secrets Act, and the common law. 103 The Institute takes into account the rules v. standards debate. A subject matter that is quite developed in case law and statutes may be ready for Restatement treatment and the articulation of black letter rules. One that is not yet so developed may be appropriate for Principles treatment and the articulation of principles, sometimes accompanied by standards and tests that include several factors. The difference is only suggestive, not operative. For example, a Restatement provision may be stated in terms of various general factors as is the test of a most significant relationship in section 6 of 104 the Restatement Second of Conflict of Laws. 98. RESTATEMENT (THIRD) OF PROP.: DONATIVE TRANSFERS (2003). 99. UNIFORM PROBATE CODE (amended 2006) U.S.C. '' (2000) The National Conference of Commissioners on Uniform State Laws promulgated the Uniform Trade Secrets Act in 1979, with an amended version issued in See (last visited Sept. 25, 2007) (the Act's current status) Chapter fourteen states the principles governing liability for the appropriation of intangible trade values. Topic 1 states a general rule rejecting the recognition of exclusive rights in intangible trade values, subject to a series of specified exceptions. RESTATEMENT (THIRD) OF UNFAIR COMPETITION 38 (1995). Topic 2 states the rules comprising the law of trade secrets. A majority of the states have adopted the Uniform Trade Secrets Act, which codifies the common law doctrines relating to the protection of trade secrets. The rules stated in Topic 2 are applicable to both statutory and common law trade secret cases. Id. at Rules governing the right of publicity, which protects against certain appropriations of the commercial value of a person's identity, are treated in Topic 3. Id. at See Louis Kaplow, Rules Versus Standards: An Economic Analysis, 42 DUKE L. J. 557 (1992); Antonin Scalia, The Rule of Law as Law of Rules, 56 U. CHI. L. REV (1989); Cass R. Sunstein, Problems with Rules, 83 CAL. L. REV. 953 (1995); Michael Traynor, Public Sanctions, Private Liability, and Judicial Responsibility, 36 WILLAMETTE L. REV. 787, (2000): Courts face a familiar dilemma when fashioning judicial rules: Whether cases and statutes have developed sufficiently to support a court s articulation of a rule, or whether the law remains sufficiently uncertain that a court is more comfortable continuing to apply multiple standards or factors to particular situations.... The choice between rules, standards, multiple factors, principles, or other approaches presents a constant challenge to courts and legislatures as well as to the ALI, whose founding purpose is to contribute to >the clarification and simplification of the law. Unlike a trial or appellate court, confronted with one case to decide, the ALI has the opportunity to consider a variety of decided cases and enacted statutes, as well as the challenge and responsibility to synthesize them RESTATEMENT (SECOND) OF CONFLICT OF LAWS 6 (1971). See, e.g., Traynor, supra note 103, at 803 n.89 (2000) (A[t]he conflict of laws provides one of the best examples of courts struggling to reach the proper balance between factors and rules ); id. at 804 (Restatement Second of Conflict of Laws, section 6, lists seven factors relevant to the choice of the applicable rule of law, which Southern Illinois University Law Journal Rerpinted with permission.

88 2007] The First Restatements 163 In addition to the distinctions in the form of a project, other criteria that are relevant to the decision whether the Institute will undertake a project in any form can be articulated in the form of questions: Can the Institute contribute to bringing reason and order to a particular area of law? Will the project be useful to judges, practitioners, and teachers? Can it identify an able Reporter? Criteria for the selection of an able Reporter include mastery of the subject matter; leadership qualities; standing among peers, although not necessarily eminence (Beale after all was eminent but wrong); writing ability; being able to take and commit the time necessary to prepare drafts and to see the project through to publication; and the ability to listen to and respect the views of others, while not necessarily agreeing with them. It may be useful to provide potential examples without extended discussion: Examples of projects that are eligible presently for Restatement treatment in my view include employment law (which the Institute has begun to address in Restatement form), although controversial; the law of expert evidence; medical malpractice; and the law of remedies, particularly in torts. Examples of projects that are not eligible presently for Restatement treatment 107 in my view include information liability, which is too undeveloped; personal jurisdiction and choice of law, which are still too unsettled and need a fresh 108 look; and environmental law, which entails an intertwining of complex statutory laws and administrative regulations, federal and state, and local land use laws. 109 include the needs of the interstate and international systems. How is a trial court going to apply that test? Is it susceptible of proof by evidence? Should the court seek learned amicus briefs on the point? ) The Employment Law project so far has produced numerous confidential Preliminary and Council Drafts, as well as one Discussion Draft, dated April 27, RESTATEMENT THIRD OF EMPLOYMENT (Discussion Draft No. 1, 2006). The ALI presently expects to consider a Tentative Draft at its annual meeting in May See, e.g., Matthew W. Finkin, Shoring up the Citadel (At-Will Employment), 24 HOFSTRA LAB. & EMP. L. J. 1 (2006); Matthew W. Finkin, Second Thoughts on a Restatement of Employment Law, 7 U. PA. J. LAB. & EMP. L. 279 (2005) See Michael Traynor, Information Liability and the Challenges of Law Reform: Introductory Note appearing in JANE K. WINN, CONSUMER PROTECTION IN THE AGE OF THE 'INFORMATION ECONOMY', at 81 (2006) See, supra, text accompanying notes With sufficient funding and careful attention, perhaps someday an organization such as the Environmental Law Institute, on whose board I served for twelve years, might undertake a project to synthesize environmental law. If such a project were undertaken, it would also be necessary to mitigate if not neutralize lobbying and the influence of the numerous special interests in this area. Recognition of a fundamental human right to a healthful environment is also important. See Michael Traynor, On Environmental Law, DAEDALUS 116 (Summer 2003). Apart from a broad environmental law project, the American Law Institute might continue to attend to certain specific areas as it has in the tort law governing public nuisance. See Denise E. Antolini, Modernizing Public Nuisance: Solving the Paradox of the Special Injury Rule, 28 ECOL. L. Q. 755 (2001). Southern Illinois University Law Journal Rerpinted with permission.

89 164 Southern Illinois University Law Journal [Vol. 32 III. IMPLICATIONS FOR THE FUTURE, AND THE VISION OF THE INSTITUTE The Institute s strengths are its members and its deliberative processes, stature, independence, and dedication to quality. Its resources are limited. It must decide carefully what projects are fitting. It will want to undertake projects that meet the needs of the profession and the public. It can find a medium ground for solid work between stultifying description of the is and unduly venturesome pursuit of the ought. Its work need not be pigeonholed as either descriptive or normative. It can identify and pursue work that has a reasonable shelf life and that will be useful for a generation or more. In reflecting on the presentations to this Symposium and the contributions of the first Restatement series as a whole, it is evident that the founders of the Institute and the leaders who saw the first Restatements through to publication had an important and useful, although not flawless, vision, one of restating the law of the United States in the areas that covered the critical subjects of the common law and therefore touched the lives of 110 many people. As the Restatement Second series and the Restatement Third 110. For more on the early and later history of the American Law Institute, see George W. Wickersham, The American Law Institute, 43 L. Q. REV. 449 (1927); William Draper Lewis, Report on Work of American Law Institute, 15 A.B.A. J. 741 (1929); William Draper Lewis, American Law Institute Reaches Advanced Stage of Its Great Work, 16 A.B.A. J. 673 (1930); The American Law Institute, in BENJAMIN N. CARDOZO, LAW AND LITERATURE AND OTHER ESSAYS AND ADDRESSES 121 (1931); Herbert F. Goodrich, New Bottles for Old Wine, 14 OR. L. REV. 26 (1934); Mitchell Franklin, The Historic Function of The American Law Institute: Restatement as Transitional to Codification, 47 HARV. L. REV (1934); Hessel E. Yntema, The American Law Institute, 12 CAN. B. REV. 319 (1934); Hessel E. Yntema, What Should The American Law Institute Do?, 34 MICH. L. REV. 461 (1936); Herbert F. Goodrich, Institute Bards and Yale Reviewers, 84 U. PA. L. REV. 449 (1936); Herbert F. Goodrich, American Law Institute, 26 A.B.A. J. 858 (1940); WILLIAM DRAPER LEWIS, HISTORY OF THE AMERICAN LAW INSTITUTE AND THE FIRST RESTATEMENT OF THE LAW, AHow We Did It (1945), also appearing in AMERICAN LAW INSTITUTE, RESTATEMENT IN THE COURTS, PERMANENT EDITION (1945); Herbert F. Goodrich, The Story of The American Law Institute, 1951 WASH. U. L.Q. 283 (1951); HERBERT F. GOODRICH & PAUL A. WOLKIN, THE STORY OF THE AMERICAN LAW INSTITUTE (1961); AGNES LYNCH STARRETT, The American Law Institute, in THE M AURICE AND LAURA FALK FOUNDATION: A PRIVATE FORTUNE A PUBLIC TRUST (1966); Max Rheinstein, Leader Groups in American Law, 38 U. CHI. L. REV. 687 (1971); AMERICAN LAW INSTITUTE, THE AMERICAN LAW INSTITUTE 50TH ANNIVERSARY (1973); GRANT GILMORE, THE AGES OF AMERICAN LAW (1977); John G. Fleming, The Restatements and Codification, 2 JEWISH L. ANN. 108 (1979); Nathan M. Crystal, Codification and the Rise of the Restatement Movement, 54 WASH. L. REV. 239 (1979); Norris Darrell & Paul A. Wolkin, The American Law Institute, 52 N.Y. ST. B.J. 99 (1980); William P. LaPiana, A Task of No Common Magnitude : The Founding of The American Law Institute, 11 NOVA L. REV (1987); ELLEN CONDLIFFE LAGEMANN, Conceptualists vs. Realists: An Institute to Restate the Law, in THE POLITICS OF KNOWLEDGE: THE CARNEGIE CORPORATION, PHILANTHROPY, AND PUBLIC POLICY (1989); N. E. H. Hull, Restatement and Reform: A New Perspective on the Origins of the American Law Institute, 8 LAW & HIST. REV. Southern Illinois University Law Journal Rerpinted with permission.

90 2007] The First Restatements 165 series have demonstrated, there will be a constant need for updating. At an appropriate point, the Institute will need to start considering a Restatement 111 Fourth series. In addition to its Restatement work and to the various specific 112 projects it has undertaken recently, it may be timely to ask whether the Institute should explore other areas that might either evoke, given present day challenges and circumstances, or go well beyond the vision of its founders as well as the post-first Restatement vision of former Director Herbert Wechsler 113 under whose leadership the Model Penal Code was prepared. In recent years, although the Institute has undertaken many important and timely projects, including continuing Restatement work, at least four non- Restatement projects in my view reflect a vision and ambition that compares quite favorably with that of the original Restatements. 55 (1990), also appearing in AMERICAN LAW INSTITUTE, THE AMERICAN LAW INSTITUTE SEVENTY- FIFTH ANNIVERSARY 49 (1998), WILLIAM P. LAPIANA, LOGIC AND EXPERIENCE: THE ORIGIN OF MODERN AMERICAN LEGAL EDUCATION (1994); Shirley S. Abrahamson, Refreshing Institutional Memories: Wisconsin and the American Law Institute the Fairchild Lecture, 1995 WIS. L. REV. 1 (1995); G. Edward White, The American Law Institute and the Triumph of Modernist Jurisprudence, 15 L. & HIST. REV. 1 (1997); Herbert P. Wilkins, Symposium on The American Law Institute: Process, Partisanship, and the Restatements of the Law, 26 HOFSTRA L. REV. 567 (1998); John P. Frank, The American Law Institute, , 26 HOFSTRA L. REV. 628 (1998); Back to the Future, supra note 6, at 105, ; Gary E. O'Connor, Restatement (First) of Statutory Interpretation, 7 N.Y.U. J. LEGIS. & PUB. POL'Y 333 ( ); Kristen David Adams, The Folly of Uniformity? Lessons from the Restatement Movement, 33 HOFSTRA L. REV. 423 (2004); Kristen David Adams, The Restatements and the Common Law: Blaming the Mirror, 40 IND. L. REV. 205 (2007) See Stephen D. Sugarman, Rethinking Tort Doctrine: Visions of A Restatement (Fourth) of Torts, 50 UCLA L. REV. 585 (2002). Another candidate for Fourth Restatement treatment, perhaps after an intervening study, is the foreign relations law of the United States In brief, the Institute s current projects are as follows: See Model Penal Code: Sentencing (1999 ) Principles of the Law of Aggregate Litigation (2003 ) Principles of the Law of Government Access to and Use of Personal Digital Information (2006) Principles of the Law of Nonprofit Organizations (2000 ) Principles of the Law of Software Contracts (2004) Principles of World Trade Law: The World Trade Organization (2001) Restatement of the Law Third: Employment Law (2000) Restatement of the Law Third: Property (Wills and Other Donative Transfers) (1991) Restatement of the Law Third: Restitution and Unjust Enrichment (1997) Restatement of the Law Third: Torts: Liability for Physical and Emotional Harm (1996) Restatement of the Law Third: Trusts (1992) Transnational Insolvency Project: Principles of Cooperation (2006) [with the International Insolvency Institute] 113. MODEL PENAL CODE (1962). Southern Illinois University Law Journal Rerpinted with permission.

91 166 Southern Illinois University Law Journal [Vol The first is the Institute's Principles of Corporate Governance. Initiated during Herbert Wechsler's final years as Director and completed during the term of his successor, Director Geoffrey C. Hazard, Jr., and with the additional and remarkable leadership of Reporter Melvin Eisenberg and then President 115 Roswell B. Perkins, these principles have been invoked by courts, addressed challenging corporate issues, including derivative litigation and takeovers, and significantly enhanced corporate behavior. For a project of such scope, difficulty, and intensity, it is understandable that it would not please everyone and some thoughtful critics have suggested the Principles might have reached even farther or criticized both the process by which it was approved and its 118 correctness. The second example is Principles of Transnational Procedure, recently 119 approved and published jointly by the Institute and UNIDROIT. Under the masterful leadership of Director Emeritus Geoffrey C. Hazard, Jr. and his colleagues, the best elements of procedural law from the common law system and the civil law system were synthesized in principles that promise to bring reason and order to international commercial litigation. Tested in many drafts and presented in many locations around the world, the principles unified international procedural law. Although the end product is a single volume and 114. AMERICAN LAW INSTITUTE, PRINCIPLES OF CORPORATE GOVERNANCE: ANALYSIS AND RECOMMENDATIONS (1994) See, e.g., Warden v. McLelland, 288 F.3d 105 (3d Cir. 2002); Boland v. Engle, 113 F.3d 706 (7th Cir. 1997); Powell v. First Republic Bank, 274 F. Supp. 2d 660 (E.D. Pa. 2003); Barth v. Barth, 659 N.E.2d 559 (Ind. 1995); Drain v. Covenant Life Ins. Co., 712 A.2d 273 (Pa. 1998); Cuker v. Mikalauskas, 692 A.2d 1042 (Pa. 1997); cf. Ostrowski v. Avery, 703 A.2d 117 (Conn. 1997) See Principles of Corporate Governance: Analysis and Recommendations '' 7.01 through See, e.g.,martin Lipton, Corporate Governance in the Age of Finance Corporatism, 136 U. PA. L. REV. 1 (1987); Martin Lipton & Steven Rosenblum, A New System of Corporate Governance: The Quinquennial Election of Directors, 58 U. CHI. L. REV. 187 (1991); Martin Lipton & Jay W. Lorsch, A Modest Proposal for Improved Corporate Governance, 48 BUS. LAW. 59 (1992); Martin Lipton & Theodore N. Mirvis, Enhanced Scrutiny and Corporate Performance: The New Frontier for Corporate Directors, 20 DEL. J. CORP. L. 123 (1995); Roswell B. Perkins, The Genesis and Goals of the ALI Corporate Governance Project, 8 CARDOZO L. REV. 661 (1987); Roswell B. Perkins, The ALI Corporate Governance Project in Midstream, 41 BUS. LAW (1986) See, e.g., Alex Elson & Michael L. Shakman, The ALI Principles of Corporate Governance: A Tainted Process and a Flawed Product, 49 BUS. LAW. 176 (1994); Lawrence E. Mitchell, Private Law, Public Interest?: The ALI Principles of Corporate Governance, 61 GEO. W ASH. L. REV. 871, 895 (1993) (Acorporate law has become too important to be left to private interests@). See also, Symposium on Corporate Governance, 48 BUS. LAW (1993); Lawrence E. Mitchell, The American Law Institute s Principles of Corporate Governance, 61 GEO. W ASH. L. REV. 871 (1993) Symposium See (last visited Sept. 25, 2007). Southern Illinois University Law Journal Rerpinted with permission.

92 2007] The First Restatements 167 does not compare in mass to the first Restatements, its vision, promise, boldness, and potential influence are of corresponding importance AMERICAN LAW INSTITUTE/UNIDROIT, PRINCIPLES OF TRANSNATIONAL CIVIL PROCEDURE (Cambridge U. Press, 2006). Of the many articles and books that discuss the project, here is a selected list: Frederic M. Bloom, Geoffrey Hazard & Michele Taruffo, Harmonization of Civil Procedure, 4 WASH. U. GLOBAL STUD. L. REV. 639 (2005) (transcript of session four of conference Lawyers and Jurists in the 21st Century: Celebrating the Centennial of Comparative Law in the United States and the Universal Congress of Lawyers and Jurists, St. Louis, 1904, cosponsored by American Society of Comparative Law, Saint Louis University School of Law's Center for International and Comparative Law, and Washington University School of Law's Whitney Harris Institute for Global Legal Studies, held November 12 13, 2004, at the Harris Institute for Global Legal Studies, St. Louis, Missouri.) Jorge Sánchez Cordero & Antonio Gidi, Las reglas y Procedimientos del Derecho Procesal Civil Transnacional. El Proyecto American Law Institute-UNIDROIT (2003). FRÉDERIQUE FERRAND, LA PROCÉDURE CIVILE M ONDIALE M ODÉLISÉE: LE PROJET D'AMERICAN LAW INSTITUTE ET D'UNIDROIT DE PRINCIPES ET RÈGLES DE PROCÉDURE CIVILE TRANSNATIONALE: ACTES DU COLLOQUE DE LYON DU 12 JUIN 20, Collection Droit et Procédures (2004). Guy Lavorel, Allocution d ouverture, 9; Olivier Moréteau, Allocution, 11; Herbert Kronke, Présentation du PALI- UNIDROIT, 17; Geoffrey C. Hazard, Jr., Objectif du Projet, 23; Frédérique Ferrand, Rapport Entre Principes et Règles Dans le Projet, 27; Jacques Junillon, L ensemble du Projet, Vue Critique d un Praticien, 35; Tony Moussa, L ensemble du Projet, Vue Critique d un Magistrat, 47; Hélène Gaudemet-Tallon, Les Aspects de Droit International Privé, 71; Hervé Croze, L introduction de l instance, 93; Jacques Normand, Le Rôle Respectif des Parties et du Juge Dans les Principes de Procédure Civile Transnationale, 103; Loïc Cadiet, La Preuve, 119; Gabriele Mecarelli, Sanction, Frais et Dépens. Les Aspects Financiers de la Procédure, 139; Serge Guinchard, Rapport de Synthèse, 155; Geoffrey C. Hazard, Jr., Postface, 345. THE FUTURE OF TRANSNATIONAL CIVIL LITIGATION: ENGLISH RESPONSES TO THE ALI/UNIDROIT DRAFT PRINCIPLES AND RULES OF TRANSNATIONAL CIVIL PROCEDURE (Mads Andenas, Neil Andrews & Renato Nazzini eds., 2004). Geoffrey Hazard, Jr., The ALI/UNIDROIT Project, 3; Rolf Stürner, Anglo-American and Continental Civil Procedure: The English Reform as a Model for Further Harmonization? 9; Cyril Glasser, Do We Need a Transnational Civil Procedure Code? A Critical Comment, 13; Jeremy Lever, Comparative Reflections, 17; Neil Andrews, Embracing the Noble Quest for Transnational Procedural Principles, 21; Anthony May, The ALI/UNIDROIT Rules of Transnational Civil Procedure in the Perspective of the New English and Welsh Rules, 43; Louise Ellen Teitz, Both Sides of the Coin: A Decade of Parallel Proceedings and Enforcement of Foreign Judgments in Transnational Litigation, 10 ROGER WILLIAMS U. L. REV. 1 (2004). Adrian Zuckerman, Conference on The ALI-UNIDROIT Principles and Rules of Transnational Civil Procedure (hosted by the British Institute of International and Comparative Law, London May 24, 2002), 21 Civ. Just. Q. 322 (2002). El Proyecto de las Normas de Proceso Civil Transnacional, 11 TRIBUNALES DE JUSTICIA 19 (2002). Winter, El Proyecto de las Normas de Proceso Civil Trasnacional, 19; Gidi, Iniciativas para la Formulación de Normas Uniformes en el Ámbito del Derecho Procesal Civil Internacional, 21 [also published in 26 Rev. Dir. Proc. Civ. (2002; Brazil) and 54 Derecho PUC 245 (2001; Peru)]; Hazard, Litigio Civil sin Fronteras: Armonización y Unificación del Derecho Procesal, 24; Hazard, Stürner, Taruffo & Gidi, Principios Fundamentales del Proceso Civil Transacional, 27 [also published in 26 REV. DIR. PROC. CIV. (2002) and 54 Derecho PUC 253 (2001)]; Hazard, Taruffo, Stürner & Gidi, Normas del Proceso Civil Trasnacional, 31 [also published in 26 Rev. Dir. Proc. Civ. (2002) and 54 Derecho PUC 263 (2001)]. Special Issue, Harmonising Transnational Civil Procedure: The ALI / UNIDROIT Principles and Rules [Vers Une Procédure Civile Transnationale Harmonisée: Les Principes et Règles ALI / UNIDROIT], 6 UNIFORM L. REV. [REVUE DE DROIT UNIFORME] 739 (2001). VERS UN PROCÈS CIVIL UNIVERSEL? LES RÈGLES TRANSNATIONALES DE LA PROCÉDURE CIVILE DE Southern Illinois University Law Journal Rerpinted with permission.

93 168 Southern Illinois University Law Journal [Vol The third example is Principles of the Law of Family Dissolution. In this important area, the Institute departed from the customary subjects of private law addressed in the Restatements. In an innovative and far-reaching project, Professor Ira Ellman, Reporter, and his colleagues addressed and provided workable solutions and pragmatic approaches to perplexing problems of separation and relationship-termination, child custody, and support, including those that arise in relationships between persons of the same sex. Fourth, Institute Director and Columbia Law School Professor Lance Liebman initiated another grand project, entitled Principles of Trade Law: The World Trade Organization. Beginning with case studies of the WTO 122 Appellate Body decisions year by year since 2001, the Institute is poised to undertake the drafting of principles, both of substance and procedure. 123 Although the Institute consulted with economists in its tax work and has a 124 political scientist as an adviser on its Aggregate Litigation Project and an L AMERCIAIN LAW INSTITUTE (Philippe Fouchard ed. 2001). Koh, The Globalization of Freedom, 26 Yale J. Int'l L. 305 (2001). Geoffery Hazard, et. al., Introduction to the Principles and Rules of Transnational Civil Procedure, 33 N.Y.U. J. Int'l L. & Pol. 769 (2001). Hazard, Jr., et al., Introduction to the Principles and Rules of Transnational Civil Procedure, 769; Hazard, Jr., et al., Fundamental Principles of Transnational Civil Procedure, 785; Hazard, Jr., et al., Rules of Transnational Civil Procedure, 793. Rolf Sturner, Some European Remarks on a New Joint Project of The American Law Institute and UNIDROIT (Foreign Law Year in Review: 1999), 34 Int'l Law 1071 (2000) THE AMERICAN LAW INSTITUTE: PRINCIPLES OF THE LAW OF FAMILY DISSOLUTION: ANALYSIS AND RECOMMENDATIONS (2003) See THE WTO CASE LAW OF 2001: THE AMERICAN LAW INSTITUTE REPORTERS STUDIES (Henrick Horn & Petros Mavroiois, eds.) Cambridge U.P. (2003); THE WTO CASE LAW OF 2002: THE AMERICAN LAW INSTITUTE REPORTERS STUDIES (Henrik Horn & Petros C. Mavroidis, eds., 2005); THE WTO CASE LAW OF 2003: THE AMERICAN LAW INSTITUTE REPORTERS STUDIES (2006). See also The American Law Institute s Publication Catalog, (last visited June 20, 2007) (providing more information about these studies). The above studies are published and distributed by Cambridge University Press and are available in North America at Europe at and Australia at See, e.g., FEDERAL INCOME TAX PROJECT: SUBCHAPTER C: PROPOSALS OF THE AMERICAN LAW INSTITUTE ON CORPORATE ACQUISITIONS AND DISPOSITIONS AND REPORTER'S STUDY ON CORPORATE DISTRIBUTIONS (1982); FEDERAL INCOME TAX PROJECT: SUBCHAPTER K: PROPOSALS OF THE AMERICAN LAW INSTITUTE ON THE TAXATION OF PARTNERS (1984); FEDERAL INCOME TAX PROJECT: SUBCHAPTER J: PROPOSALS OF THE AMERICAN LAW INSTITUTE ON THE TAXATION OF TRUST AND ESTATE INCOME AND INCOME IN RESPECT OF DECEDENTS (1985); FEDERAL INCOME TAX PROJECT: INTERNATIONAL ASPECTS OF UNITED STATES INCOME TAXATION: VOLUME I: PROPOSALS OF THE AMERICAN LAW INSTITUTE ON UNITED STATES TAXATION OF FOREIGN PERSONS AND OF THE FOREIGN INCOME OF UNITED STATES PERSONS (1987); VOLUME II: PROPOSALS OF THE AMERICAN LAW INSTITUTE ON UNITED STATES INCOME TAX TREATIES (1992); FEDERAL INCOME TAX PROJECT: TAXATION OF PRIVATE BUSINESS ENTERPRISES (Reporter's Study issued in Professor Deborah Hensler, Judge John W. Ford Professor of Dispute Resolution and Associate Dean for Graduate Studies at Stanford University, and former Director of the RAND Institute for Civil Justice. Southern Illinois University Law Journal Rerpinted with permission.

94 2007] The First Restatements economist as an adviser on its economic torts project, world trade law is the first Institute project in which the Chief Reporters and their team of Reporters 126 are equally divided between lawyers and economists. Their work, if done properly, will attend not only to economic and trade interests but also to the project s implications for intellectual property, the environment, labor, 127 international law, human rights, and other important interests. International by definition in its scope, the world trade law project reflects the new directions of the Institute in undertaking projects with international dimensions and in considering the international implications of its primarily domestic projects. 128 The world trade law project is a pioneering one, inviting comparison in the modern era with another pioneering project initiated over a century ago, well before the Institute was founded, by another Columbia scholar in the days before research could be conducted from electronic databases as well as texts and when national and international materials were less readily accessible and senior lawyers and judges did much of their own research. John F. Dillon, who, during his lifetime, was a Professor of Law in Columbia University, Chief Justice of the Supreme Court of Iowa, Circuit Judge of the United States for the Eighth Judicial Circuit, and President of the American Bar Association, described the origin, history, and preparation of his famous Commentaries on the Law of Municipal Corporations as follows: 125. Professor Victor P. Goldberg, Columbia University School of Law Addressing the membership at the Annual Dinner during the 1995 ALI Annual Meeting, Chief Judge Richard A. Posner of the Seventh Circuit Court of Appeals questioned whether the Institute's structure was as well adapted then as when the Institute was founded in He criticized the Institute's composition as consisting only of lawyers and noted that the most exciting legal scholarship and thinking of the past 30 years has been interdisciplinary. Richard A. Posner, Address by the Honorable Richard A. Posner, Chief Judge of the United States Court of Appeals for the Seventh Circuit, 72 A.L.I. PROC (1996) See Information on TRIPS (the Agreement on Trade Related Aspects of Intellectual Property Rights), available at (last visited Sept. 25, 2007) (for various documents). See also The World Trade Organization, Agreement on Trade-Related Aspects of Intellectual Property Rights, available at (last visited Sept. 25, 2007); (last visited Sept. 25, 2007); (last visited Sept. 25, 2007) (offering the text of the agreement and states that The TRIPS Agreement is Annex 1C of the Marrakesh Agreement Establishing the World Trade Organization, signed in Marrakesh, Morocco, on 15 April 1994 ) For example, Principles of the Law of Software Contracts, although intended primarily for domestic use, will refer to the European Software Directive and other international sources; and may help foster discussions with international groups with a view to harmonizing, unifying, and simplifying an international approach to software contracts. See generally Amelia H. Boss, The Future of the Uniform Commercial Code Process in an Increasingly International World, 68 OHIO ST. L.J. 349 (2007). Southern Illinois University Law Journal Rerpinted with permission.

95 170 Southern Illinois University Law Journal [Vol. 32 I selected my subject) Municipal Corporations )and entered upon the work of thorough and systematic preparation. Without the aid of stenographer or typewriter, and with no previous American treatise to guide me, I began an examination, one by one, of some thousands of the law reports, commencing with Vol. I of the State of Maine, and continuing through successive reports in that State to date. In like manner the reports of every one of the States and of the Federal and English courts were examined, occupying all of my available time for about six years. The result of this research I have never had occasion to regret. The book was successful, and it has profoundly affected my whole professional career. 129 As a contemporary reviewer noted, Dillon created a law of municipal corporations out of the then comparatively few cases dealing with the subject. 130 We welcome suggestions of projects that are capable of accomplishment and will remind us of the grand vision of the Institute s founders, of former Director Wechsler s path-breaking Model Penal Code, of the pioneering projects undertaken recently by the Institute, and of the creative and rigorous accomplishment of John Dillon in organizing a new body of law, as well as of projects that address discrete, concrete, and narrower but nonetheless important subjects John F. Dillon, 1 COMMENTARIES ON THE LAW OF M UNICIPAL CORPORATIONS ix x (Preface to the 5th Edition) (1911) Book Reviews, 25 HARV. L. REV. 300, 301 (1911) Subject to the views of the Director, the Program Committee, and the Council of the Institute, and to the challenge of enlisting able reporters, I can envision at least four projects with which the Institute could make a strong and timely contribution in addition to the suggestions made in text above, including fostering someday a scholarly rethinking of and fresh methodology for the conflict of laws. (1) The first might be Principles of National Security Law, a subject that implicates the Constitution of the United States in various ways, including separation of powers and individual liberties; federal statutes; international law; science and technology; and the challenge of assuring both liberty and security. The Institute has commenced work on one portion of the overall area, namely, government access to private information, in a project initiated in 2006 entitled Principles of the Law of Government Access to and Use of Personal Digital Information. A broader project might also encompass proposed statutory revisions of the National Security Act, 50 U.S.C a, taking into account the work of informed groups such as the ABA Standing Committee on Law and National Security. (2) The second might be a Restatement of Federal Common Law. Professor Caleb Nelson s recent article suggests numerous areas susceptible of clarification and simplification. See Nelson, supra note 9. Such a work could be an important and useful complement to the current Restatements. (3) With regard to wealth transfer, the third area might be the systematic analysis of law, economics, and policies relevant to the transmission of enormous wealth, in the trillions of dollars, from one generation to the other, which will have major public policy implications for taxation, estate planning, nonprofit organizations, and societal institutions and values. Such transmission of wealth is occurring at a time when both the federal estate tax and state rules against perpetuities are being loosened as well as challenged, changes that may foster the creation of Adynasty trusts.@ The Institute can address and is addressing certain parts of the puzzle through its projects on trusts, wills, tax, and nonprofit Southern Illinois University Law Journal Rerpinted with permission.

96 2007] The First Restatements 171 organizations but it has not yet taken a systematic overarching analysis. (4) The fourth would be a study of developments in the foreign relations law of the United States over the two decades since the publication of the Third Restatement. Such a study not only would foster scholarly debate and analysis but also lay the groundwork for a possible Restatement Fourth. I am confident that there will be many worthy examples of potential projects. Southern Illinois University Law Journal Rerpinted with permission.

97 Symeon C. Symeonides Scholarly Papers available at 1. Codifying Choice of Law for Tort Conflicts: The Oregon Experience in Comparative Perspective, 12 Yearbook of Private International Law, _(forthcoming 2011) 2. Choice of Law in the American Courts in 2010: Twenty-Fourth Annual Survey, 59 American Journal of Comparative Law_(forthcoming 2011), available at SSRN: 3. Party Autonomy in Rome I and II from a Comparative Perspective, in K. Boele- Woelki, T. Einhorn, D. Girsberger & S. Symeonides (eds), Convergence and Divergence in Private International Law Liber Amicorum Kurt Siehr (2010); also published in 28(2) Nederlands Internationaal Privaatrecht (2010), available at 4. American Federalism and Private International Law, 62 Revue Hellénique de Droit International ( forthcoming 2010), available at SSRN: 5. Choice of Law in the American Courts in 2009: Twenty-Third Annual Survey, 58 American Journal of Comparative Law (2010), available at SSRN: 6. Oregon's New Choice-of-Law Codification for Tort Conflicts: An Exegesis, 88 Oregon Law Review ( )(2009), available at SSRN: 7. A New Conflicts Restatement: Why Not? 5 Journal of Private International Law (2009), available at SSRN: 8. Choice of Law in Cross-Border Torts: Why Plaintiffs Win, and Should, 61 Hastings Law Journal (2009); earlier, longer version available at SSRN: 9. Choice of Law in the American Courts in 2008: Twenty-Second Annual Survey, 57 American Journal of Comparative Law (2009), available at SSRN: published in Spanish as Determinación del derecho applicable en los tribunales estadounidenses en 2008: Vigésimo segundo informe anual, in Tendencias y Relaciones Derecho Internacioanl Privado Americano Actual (D. Fernández Arroyo & N. González Martín, eds., 2010).

98 10. The Conflicts Book of the Louisiana Civil Code: Civilian, American, or Original? 83 Tulane Law Review (2009), available at SSRN: The American Revolution and the European Evolution in Choice of Law: Reciprocal Lessons, 82 Tulane Law Review (2008), available at SSRN: Result-Selectivism in Conflicts Law, 46 Willamette Law Review 1 (2009), available at SSRN: Rome II and Tort Conflicts: A Missed Opportunity, 56 American Journal of Comparative Law (2008), available at SSRN: 14. Choice of Law in the American Courts in 2007: Twenty-First Annual Survey, 56 American Journal of Comparative Law (2008), available at SSRN: Party Autonomy and Private Law-Making in Private International Law: The Lex Mercatoria that Isn t, in Festschrift für K.D. Kerameus (Kluwer-Sakkoulas Press, 2008), available at SSRN: The First Conflicts Restatement Through the Eyes of Old: As Bad as Its Reputation? 32 Southern Illinois University Law Journal (2007), available at SSRN: The Quest for the Optimum in Resolving Product-Liability Conflicts, in Justice in Particular: Festschrift in Honour of Professor P.J. Kozyris (Kluwer- Sakkoulas Press 2007), available at SSRN: Choice of Law in the American Courts in 2006: Twentieth Annual Survey, 55 American Journal of Comparative Law (2007), available at SSRN: Cruising in American Waters: Spector, Maritime Conflicts, and Choice of Law, 37 Journal of Maritime Law and Commerce (2006), available at SSRN: Accommodative Unilateralism as a Starting Premise in Choice of Law, in Balancing of Interests: Liber Amicorum Peter Hay (Verlag Recht und Wirtschaft GmbH, 2005), available at SSRN: Choice of Law for Products Liability: The 1990s and Beyond, 78 Tulane Law Review (2004), available at SSRN:

99 Choice of Law Excerpts from European Union Directives I. Excerpts from Council Directive 77/249/EEC of 22 March 1977 to facilitate the effective exercise by lawyers of freedom to provide services (March 22, 1977)[the 1977 Lawyers Services Directive 1 1.Activities relating to the representation of a client in legal proceedings or before public authorities shall be pursued in each host Member State under the conditions laid down for lawyers established in that State 2.A lawyer pursuing these activities shall observe the rules of professional conduct of the host Member State, without prejudice to his obligations in the Member State from which he comes. 4. A lawyer pursuing activities other than those referred to in paragraph 1 shall remain subject to the conditions and rules of professional conduct of the Member State from which he comes without prejudice to respect for the rules, whatever their source, which govern the profession in the host Member State, especially those concerning the incompatibility of the exercise of the activities of a lawyer with the exercise of other activities in that State, professional secrecy, relations with other lawyers, the prohibition on the same lawyer acting for parties with mutually conflicting interests, and publicity. II. Excerpts from Directive 98/5/EC of the European Parliament and of the Council of 16 February 1998 to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained (consolidated version (Jan. 1, 2007) [the EU Lawyers Establishment Directive] 2 Art. 6(1): Irrespective of the rules of professional conduct to which he is subject in his home Member State, a lawyer practising under his home-country professional title shall be subject to the same rules of professional conduct as lawyers practising under the relevant professional title of the host Member State in respect of all the activities he pursues in its territory Art. 7(3): Without prejudice to the decision-making power of the competent authority in the host Member State, that authority shall cooperate throughout the disciplinary proceedings with the competent authority in the home Member State. In particular, the host Member State shall take the measures necessary to ensure that the competent authority in the home Member State can make submissions to the bodies responsible for hearing any appeal

100 HELLWIG FINAL.DOC 2/9/ :12:47 PM At the Intersection of Legal Ethics and Globalization: International Conflicts of Law in Lawyer Regulation Hans-Jürgen Hellwig* I. DOUBLE DEONTOLOGY The regulation of the legal profession in Europe is within the competency of the Member States. So far there has been no harmonization by European Union ( EU ) legislation. While very few Member States, with regards to regulation of the legal profession, have choice of law rules, no such conflict rules exist at EU level. This means as a consequence that whenever a lawyer works cross-border he is subject to his home country regulatory rules and to the host country regulatory rules at the same time a phenomenon referred to in Europe as double deontology. This double deontology is specifically recognized in the lawyer-specific directives of 1977 on temporary crossborder services and that of 1998 on cross-border establishment. The double deontology is also recognized in the Council of Bars and Law Societies of Europe s ( CCBE ) Code of Conduct. There are two kinds of double deontology which will be discussed in the following on the basis of a few examples. * The author is a retired partner with the firm Hengeler Mueller and a past president of the Council of the Bars and Law Societies of Europe. This article is based on the author s presentation on May 5, 2008, at the Fifth International Meeting of the Association of Professional Responsibility Lawyers in Amsterdam. 395 Copyright Hans-Jürgen Hellwig Reprinted with permission.

101 HELLWIG FINAL.DOC 2/9/ :12:47 PM 396 PENN STATE INTERNATIONAL LAW REVIEW [Vol. 27:2 II. DIFFERING DEONTOLOGY A. Conflict of Interest Prohibition 1. Definition Germany has a narrow legal definition. A conflict of interest in which the lawyer is prohibited to act exists only if the two mandates involve, in whole or in part, the same legal matter. France has basically the same narrow definition; however, a broader prohibition to act can follow from the rules on délicatesse in case there exists the risk that factual knowledge from one mandate can flow into another mandate in a different matter in the legal sense. In other words, secrecy aspects can impose additional prohibitions to act. England and Wales have a prohibition to act whenever there is a conflict in the same or related legal matters. An even broader definition is to be found in Austria where any commercial conflict triggers the prohibition to act, including conflicts from unrelated legal matters. Let me give you an example. A German lawyer from Lindau, which is a city on the Lake of Constance, advises a German client who is a purchaser in a commercial sales transaction. He accompanies him to Bregenz, which is an Austrian city 10 kilometers away, also on the Lake of Constance, for negotiations with the Austrian seller. The seller is represented by an Austrian lawyer. The German lawyer representing the purchaser knows the seller rather well because he gives legal advice to the seller in a leasehold matter in Germany. The leasehold matter is a matter completely different from the commercial sales transaction. When the German lawyer enters the conference room, he is requested by the Austrian lawyer to resign from representing his German client, the purchaser, in the sales transaction because the interests of such client in that matter are opposed to the interests of his other client, the Austrian client, in the leasehold matter. 2. Client Waiver? In France, Germany, and Austria the conflict of interest prohibition cannot be waived by the client. Professional regulation in England and Wales does not permit a waiver either. However, professional regulation is, in factual life, superseded by civil law which knows countervailing duties of confidentiality and disclosure where a waiver is permissible. If the waiver is given by both parties, the lawyer does not violate his duties Copyright Hans-Jürgen Hellwig Reprinted with permission.

102 HELLWIG FINAL.DOC 2/9/ :12:47 PM 2008] AT THE INTERSECTION OF LEGAL ETHICS AND GLOBALIZATION 397 under civil law, and the violation of professional regulation has no consequences because it is not brought to the attention of the competent professional bodies. This is different when the waiver is given by one party only. A lawyer acting on the basis of one waiver only runs the risk that the other client applies for an injunction under civil law and brings charges against him for violation of professional regulation. 3. Law Firm Dimension? This is the question of whether the mandate of one lawyer creates a conflict of interest prohibition for the other lawyers in the firm. This is the case in France, Austria, and England and Wales. It is also the case in Germany; however, with the proviso that, in the law firm dimension of the prohibition, a waiver is possible under certain conditions. The clients after comprehensive written information can give their express waiver provided that the needs of the justice system, which requires that the lawyer represents the interests of the client in an independent, secrecy bound and integral manner, are not opposed to the waiver. In other words two conditions must be met, namely both clients must waive, and, there must not be opposing needs of the justice system. The prevailing view in Germany is that needs of the justice system are not opposed if, in a bidding process, a law firm represents several bidders who have given their consent because the lawyers in question operate with Chinese walls. However, when a defeated bidder goes to court to challenge the victory of the successful bidder, the law firm cannot represent either client because the needs of the justice system are opposed to plaintiff and defendant being represented in court by the same law firm. B. Secrecy/Confidentiality Obligation 1. What is a Secret? Is a secret only what the client confides to the lawyer? Or is a secret everything that the lawyer learns in the mandate, including third party information? The answers in Europe differ from country to country. 2. Waiver? In Germany and England and Wales, a waiver is possible with regard to information coming from the client, because the client is the master of the secret. France, Belgium, and Luxembourg do not accept a Copyright Hans-Jürgen Hellwig Reprinted with permission.

103 HELLWIG FINAL.DOC 2/9/ :12:47 PM 398 PENN STATE INTERNATIONAL LAW REVIEW [Vol. 27:2 waiver because in those countries the secrecy obligation follows from the professional status of the lawyer in the justice system. 3. Correspondence Between Lawyers The aforesaid difference can become quite relevant in the case of correspondence between lawyers from different countries. A letter which is sent by a French lawyer to another lawyer with the specific mention confidential or under privilege must, under French rules, not be disclosed by the recipient lawyer to his client. Germany and other countries do not accept such secrecy vis-à-vis their own clients. In these countries, the client has a legal right to be fully informed by his lawyer, even as far as his correspondence with the other lawyer is concerned. 4. Law Firm Dimension All countries in Europe recognize that the secrecy/confidentiality obligation applies not only to the acting lawyer but also to all other members of the firm. C. Résumé As regards conflicts of interest prohibition and secrecy/confidentiality obligation, which are both core values of the legal profession, the core is identical; the margins, however, differ from country to country. With specific regard to double deontology, there is only one practical consequence following therefrom: whichever regulation is stricter on any given aspect, such regulation applies. III. CONFLICTING DEONTOLOGY The typical situation is the clash between reporting/disclosure and secrecy/confidentiality obligations. The best known examples of reporting obligations are in the areas of money laundering and the fight against terrorism. England and Wales and the Netherlands have very far-reaching reporting obligations that go well beyond the applicable EU Directives these countries have goldplated the EU legislation. Other countries such as Germany and France have limited their national laws to the minimum required under the Directives. These differences in national implementation of EU legislation can have severe consequences as the following example shows. A German lawyer working in London, be it temporarily or in an office in London, is subject to English reporting obligations because he is working in England. At the same time, he remains subject to his German Copyright Hans-Jürgen Hellwig Reprinted with permission.

104 HELLWIG FINAL.DOC 2/9/ :12:47 PM 2008] AT THE INTERSECTION OF LEGAL ETHICS AND GLOBALIZATION 399 secrecy/confidentiality obligations. This means that, looking at the difference in scope of English and German reporting obligations, such lawyer can be subject to English reporting obligations on the one hand and German secrecy/confidentiality obligations on the other hand. This is a true catch-22 situation, particularly when one considers that both the violation of the English reporting obligation and the violation of the German secrecy/confidentiality obligation are not only professional violations but also criminal offences. These problems can also arise in the inverse situation, i.e. when an English lawyer is working in Europe. The English lawyer would be subject to English reporting obligations and to German or French secrecy/confidentiality obligations. The issue of conflicting deontology can also become relevant whenever the competent authorities or bodies from England check whether English lawyers working in law firms in other European countries have properly complied with their English reporting obligations. Another example of conflicting deontology can be found in child abduction cases. One German lawyer in London went to jail when, because of his German secrecy/confidentiality obligation, he refused to comply with the order of an English court to disclose certain information that the court held relevant in a child abduction case. Another German lawyer in a similar case escaped arrest in a London court room only because he produced a letter in which the German ambassador had invited him to a luncheon in honour of the president of the German Constitutional Court which was scheduled for right after the court hearing the judge shied away from a diplomatic conflict. The judge immediately thereafter went on holiday. The lawyer in question was positively surprised when another judge stepped in and lifted the previous court order by which the lawyer had been put under disclosure obligation. Further, he was negatively surprised when other orders against him were lifted which had, in effect, mandated that his telephone lines be tapped and his mail courier scrutinized by the telephone and postal services. It goes without saying that the aforesaid problems of conflicting deontology have law firm dimension. IV. HOW TO SOLVE THE PROBLEM? When I was Head of the German CCBE Delegation, I suggested that the CCBE should ask the EU Commission to introduce into the Lawyers Directives of 1977 and 1998 clear rules on regulatory conflicts as far as work outside courts and authorities is concerned. Temporary cross- Copyright Hans-Jürgen Hellwig Reprinted with permission.

105 HELLWIG FINAL.DOC 2/9/ :12:47 PM 400 PENN STATE INTERNATIONAL LAW REVIEW [Vol. 27:2 border work should be subject to home country regulation only i.e., it should be subject to the country of origin principle as it has long been recognized in the freedom of goods area. Work in a cross-border office should be subject to the host country regulation. This suggestion did not find the necessary majority in the CCBE. Some bars even denied the existence of a double deontology problem. The country of origin principle is already to be found in connection with advertising in the E-Commerce Directive, which is also applicable to lawyers. It was included for temporary cross-border work in the 2004 draft of the 2006 Service Directive, which is a horizontal directive applicable to all service providers. It was taken out of the draft because it was rejected by a large majority of bars and law societies. They insisted that their national regulation should be applied to foreign lawyers working in their country and also to their own lawyers working in foreign countries a clear example of national egoism. It would have been easy to say that there is enough equivalence in professional regulation from country to country in Europe to introduce clear choice of law provisions. In other areas, European politicians again and again have had the courage to use sufficient equivalence as basis for clear choice of law positions. Unfortunately, as regards regulation of the legal profession, politicians are inclined to follow the legal profession. Consequently, the problem is ultimately in the hands of the European bar leaders who show less courage than national egoism. The German Bar Association the Deutscher Anwalt Verein in 2006 suggested a so-called unilateral conflict rule to be included in the German Federal Lawyers Act, according to which all cross-border activity of a German lawyer should be subject only to the regulation of the country of destination (host country) provided that the rules of such country in such a case are applicable also to foreign lawyers. This unilateral conflict rule would be applicable to temporary and established cross-border activity. So far, this suggestion has not been taken up in public discussion. Another way of eliminating the problems of double deontology would be to eliminate double deontology in the first place by harmonizing, through EU legislation, the regulation of the legal profession by the Member States as it applies to both domestic and crossborder activities of a lawyer. However, such an approach is even more ambitious than the conflict of laws approach, and it is in my mind completely unrealistic to expect such harmonization in the foreseeable future. Giving up national sovereignty over the entire regulation of the legal profession is even more difficult to accept than to make concessions, through conflict of law rules, with respect to cross-border activities only. Copyright Hans-Jürgen Hellwig Reprinted with permission.

106 HELLWIG FINAL.DOC 2/9/ :12:47 PM 2008] AT THE INTERSECTION OF LEGAL ETHICS AND GLOBALIZATION 401 It would be unfair to put all the blame on the bars and law societies. Many parts of professional regulation are in the hands of the national governments. In particular, in the area of conflicting deontology, e. g. money laundering reporting versus professional secrecy/confidentiality, these governments are rather unlikely to take up suggestions from the bars and law societies to ease the problems of double deontology should such suggestions ever be made. Does that mean that the situation is entirely hopeless? Not quite so. The International Bar Association and the CCBE have recently commenced active work in the double deontology area. Both of them are still in the beginning stages, namely the phase of fact finding through questionnaires. Let us hope that this work will go beyond this first phase and will result in concrete proposals, which will then be adopted by the respective decision-making bodies. Copyright Hans-Jürgen Hellwig Reprinted with permission.

107 CHALLENGES OF TRANSNATIONAL LEGAL PRACTICE: ADVOCACY AND ETHICS This panel was convened at 10:45 am, Friday, March 27 and included as panelists: Laurel Baig of the Appeals Unit of the Office of the Prosecutor at the International Criminal Tribunal for the former Yugoslavia; Christopher Greenwood of the International Court of Justice; Viren Mascarenhas of Freshfields, Bruckhaus, Deringer US LLP; and Laurel Terry of Penn State Dickinson School of Law. Catherine Rogers of Penn State Dickinson organized this panel. * Introduction By Catherine A. Rogers When Oscar Schacter first wrote his seminal piece, The Invisible College of International Lawyers, 1 he could not have imagined that just thirty years later, that group would be so prominent that the American Society of International Law would dedicate a panel at its 102nd Annual Meeting to discuss the unique professional and ethical challenges they face. Even if the ranks of international lawyers are no longer as obscure as when Schacter wrote, however, as the following contributions reveal, their role and professional obligations often remain opaque, even as their specific functions before international tribunals have become more demanding. The essays that follow in these Proceedings summarize some of the panel presentations on these topics by international lawyers and a scholar of international legal ethics. 2 While each essay presents a unique viewpoint, they all converge in their call for greater clarity both to guide attorneys in making ethical decisions, and to ensure that regulation and discipline for violation of rules is fair and effective. Laurel Baig, a legal officer at the Office of the Prosecutor of the International Criminal Tribunal for the former Yugoslavia ( ICTY ), illustrates through the example of witness proofing how national procedural practices and gut instincts are unreliable guides for lawyers in navigating their ethical obligations before international criminal tribunals. At a more fundamental level, she observes that shared cultural backgrounds of domestic lawyers, along with the relative stability of national legal systems, can be helpful background to lawyers in making ethical decisions. Meanwhile, international criminal tribunals are dynamic, and the lawyers who practice before them are culturally diverse. Adding to these complexities, international tribunals present unique ethical and practical challenges in dealing with mass atrocities and cultural differences in dealing with witnesses from culturally diverse backgrounds. Baig makes a strong case that national ethical rules are simply not capable of regulating attorneys in this complex context. Instead, she calls for specialized written rules to capture the shared ethical expectations of lawyers practicing before international criminal tribunals. * Christopher Greenwood did not submit remarks for the Proceedings. Professor of Law, Penn State Dickinson School of Law. 1 Oscar Schachter, The Invisible College of International Lawyers, 72 NW. U. L. REV. 217 (1977). 2 In addition to the contributors in these Proceedings, Judge Christopher Greenwood of the International Court of Justice participated in the panel discussions that contributed to the following essays, and Attorney Natalie Reid of Debevoise & Plimpton LLP moderated those discussions. 1

108 2 ASIL Proceedings, 2009 A complimentary but nevertheless distinct view is presented by Viren Mascarenhas, who has served as a Legal Officer at the Special Court for Sierra Leone. Like Baig, Mascarenhas also calls for clearer rules. In addition to the rules themselves, Mascarenhas demonstrates how some of these substantive ambiguities are exacerbated by related unresolved issues about how to allocate regulatory powers. For example, with regard to the issues regarding payments to witnesses, he contemplates whether the real solution is the creation of a special sub-unit to administer the payments, thus removing the ethical ambiguities. Meanwhile, with regard to the disciplinary powers of international criminal tribunals, he ponders whether the transmission of letters by national regulatory authorities are an effective means of discipline, and separately whether a tribunal has (or should have) the power to hold an attorney in contempt for disobeying a court order when it conflicts with specified ethical rules. Instead of a view from within practice before international criminal tribunals, Laurel Terry, a legal scholar specializing in comparative and international ethics, takes a step back to frame the issues raised by Baig and Mascarenhas in terms of how to improve guidance for, and regulation of, attorneys practicing before international tribunals. While approaching these subjects from outside of immediate practice, Terry offers a range of concrete suggestions including making applicable codes of ethics more readily available on tribunals websites and extending them to all attorneys (not only defense counsel). To address problems and ambiguities that arise as a result of the possibility of an international attorney being subject to more than one set of ethical rules, Terry proposes that international tribunals add to their ethical codes specific choice-of-law provisions. Peering out beyond the context of international criminal tribunals, Terry notes that private international arbitration could similarly benefit from development of more specific codes and that organizations like ASIL have a critical role to play in providing a forum and context in which such developments can be cultivated. International Criminal Law and Legal Ethics: The Need for Shared Expectations By Laurel Baig * The transition from domestic to international criminal law practice entails many challenges and learning experiences. Colleagues from different legal systems approach problems with different backgrounds and different expectations. Nowhere is this more apparent than when questions of ethics arise. Domestic lawyers operate in a stable environment with shared expectations. Most domestic bar associations include legal ethics as part of lawyer training, promulgate rather detailed rules of professional conduct, offer a variety of services to assist lawyers who are facing an ethical problem, and create adjudicatory mechanisms to assess claims of misconduct. As a result, within a domestic legal system, all lawyers share a common set of norms, which should provide a common understanding of the basic rules of expected conduct. When one moves to the international arena, this common ground disappears. While colleagues from disparate backgrounds generally share some agreement concerning the sources of substantive international law, this is not necessarily true for questions of practice or procedure. Often the practical debates divide international lawyers down the expected civil * Legal Officer in the Office of the Prosecutor for the ICTY. The views expressed in these comments are those of the author alone, and do not necessarily reflect the views of the ICTY or the United Nations in general.

109 Challenges of Transnational Legal Practice: Advocacy and Ethics 3 law against common law lines, but significant procedural differences also exist between seemingly similar jurisdictions. The discovery that not everyone shares the same expectations is interesting and intellectually engaging when it comes to procedural issues like the admission of documentary evidence (such as: do you need to lay a foundation with a witness, or can you just propose admission of a dossier of documents from the bar table?), but it is much more disconcerting when ethical norms are in question. For example, in many civil jurisdictions ex parte communications between the prosecution and the judges are accepted as ordinary practice. Such communications would be forbidden in common law jurisdictions. Witness Preparation: A Case Study Recently, the international criminal tribunals have grappled with questions of procedural ethics that have highlighted the lack of shared expectations at the international level. The contrasting approaches to the practice of pre-trial witness preparation called witness proofing exemplify this phenomenon. Witness proofing is an interesting case study because the domestic practice is contradictory. Although witness coaching is prohibited, many domestic systems allow the lawyer to meet with the witness to explain the likely areas of examination and cross-examination, to inform the witness about effective courtroom behavior, and to review exhibits. American lawyers commonly meet their witnesses before trial to prepare them to give evidence. For the English barrister, however, it is considered unethical to meet with a witness prior to trial in order to rehearse their evidence in preparation for trial. Similar prohibitions exist in many civil law jurisdictions. Although the Statutes and Rules of Procedure and Evidence of the ICTY and the International Criminal Tribunal for Rwanda ( ICTR ) are silent on the matter, both the prosecution and defense teams at these institutions commonly proof their witnesses. The few defense challenges to witness preparation have been dismissed by the judges, who have accepted that the practice is useful to the judicial process. 2 In contrast, in November 2006, shortly before the first and only prosecution witness in the confirmation hearing for the International Criminal Court s ( ICC ) first case, the Pre- Trial Chamber banned witness proofing, allowing witness familiarization with the courtroom setting only through the court s witness service. 3 A year later, this rule was relaxed slightly, permitting the witnesses to review their prior statements to refresh their memory but confirming that lawyers were not allowed to meet or talk with the witnesses once they arrived in The Hague. 4 The Trial Chamber reasoned that: any discussion on the topics to be dealt with in court or any exhibits which may be shown to a witness in court [...] could lead to a distortion of the truth and may come dangerously close to constituting a rehearsal of in-court testimony. 5 Interestingly, the first witness in the first ICC trial in January See, e.g., Prosecutor v. Limaj, Bala and Musliu, Case No. IT T ICTY, Decision on Defence Motion on Prosecution Practice of Proofing Witnesses (Dec. 10, 2004); Prosecutor v. Gacumbitsi, Case No. ICTR A, Judgement, 74 (July 7, 2006). 3 Prosecutor v. Lubanga Dyilo, Case No. ICC-01/04-01/06, Decision on the Practices of Witness Familiarisation and Witness Proofing, Pre-Trial Chamber I (Nov. 8, 2006). 4 Prosecutor v. Lubanga Dyilo, Case No. ICC-01/04-01/06, Decision Regarding the Practices Used to Prepare and Familiarise Witnesses for Giving Testimony at Trial, Trial Chamber I (Nov. 30, 2007). 5 Prosecutor v. Lubanga Dyilo, Decision Regarding the Practices Used to Prepare and Familiarise Witnesses for Giving Testimony at Trial, Case No. ICC-01/04-01/06, Trial Chamber I, 51 (Nov, 30, 2007).

110 4 ASIL Proceedings, 2009 experienced a number of problems that might have been ameliorated if he had been better prepared by the prosecution. Defense challenges to the established practice of witness proofing at the ad hoc tribunals based on the ICC approach were dismissed, 6 leaving international criminal lawyers with a significant divergence in basic practice based on ethical considerations. International Legal Ethics Must Take Into Account the Unique International Context And this is the heart of the problem: what should be the norm in international law concerning witness preparation or any other ethical question? Particularly when there are conflicting national practices, what should be the international practice? Are there significant differences between national and international criminal law practice that demand a different assessment of what is ethical and what is prohibited? In my view, international legal ethics cannot merely be borrowed from national jurisdictions. Instead, international ethical norms must address the unique realities of international legal practice. Two examples serve to illustrate this unique context in which international criminal lawyers operate and why the rules might be different than in a domestic system. First, since international investigations focus on mass atrocities instead of isolated criminal incidents, witnesses often observe months or years of criminal events involving large numbers of victims and perpetrators. In these circumstances, pre-trial witness preparation is arguably more important than in domestic criminal trials because of the need to narrow the scope of the witness s evidence to focus on the particular incidents charged in the indictment at trial. Secondly, cultural differences between the lawyer and witness in international proceedings are more acute than in ordinary domestic trials. Witness and lawyer may not share the same perceptions of time, distance, color, or even observation. Rwandan witnesses, for example, tend to speak in terms of having seen something, even when they actually learned the information from a third person. Witnesses from some of the areas in the former Yugoslavia might describe the UN flag as being yellow. These sorts of differences can be easily sorted out in witness preparation, but they would cause immeasurable confusion and inefficiency in the courtroom. Such cultural frictions might also leave a truth-telling and reliable witness open to unnecessary attack in cross-examination. The Need for a Written Code of Shared Ethical Expectations Lawyers practicing international criminal law lack the ethical safety net provided by a developed national bar. There is no common training course. There are no comprehensive rules of professional conduct that guide all lawyers. There are no consistent enforcement mechanisms. There are few professional associations available to provide support and guidance to a lawyer facing an ethical problem. International lawyers are often left with only their gut feeling. Unfortunately, this sense of right and wrong is usually trained within a national system that might be governed by different norms than those applicable or appropriate in international criminal tribunals. The case study of witness preparation shows that there are a variety of approaches to this practice, and that a lawyer cannot assume that the international practice is consistent with 6 See, e.g., Prosecutor v. Milutinovic et al., Case No. IT T ICTY, Decision on Odjanić Motion to Prohibit Witness Proofing (Dec. 12, 2006); Prosecutor v. Karemera, Ngirumpatse and Nsirorera, Case No. ICTR AR73.8, Decision on Interlocutory Appeal Regarding witness Proofing (May 11, 2007).

111 Challenges of Transnational Legal Practice: Advocacy and Ethics 5 national practices, or even with the practices at other international criminal tribunals. This puts the practitioner in a very difficult position, particularly when there is a conflict between the expectations of the lawyer s domestic bar association and the practice at an international institution. In this regard, it is crucial that any new international code of ethics address the conflicts between national and international rules, both as a matter of positive law and through communication and negotiation with the national bodies. Most efforts to create international ethical codes have focused on defense counsel. All of the major institutions have a code of conduct for defense. 7 ICTY and ICTR lawyers working for the prosecution are governed by Standards of Professional Conduct, setting out the basic norms to be followed. 8 Interestingly, there is no specific ethics code for the many lawyers who work with the judges in chambers or elsewhere within the tribunals. Like all United Nations Staff Members, these lawyers are bound by the United Nations Staff Rules. A clear set of rules would assist all international criminal lawyers in their daily practice. A shared set of principles of professional conduct would go a long way towards creating common expectations among the various legal professionals in international criminal law. The process of preparing a shared code would create an opportunity to assess whether ethical norms in national systems would advance or impede the goals of international criminal law. Shared rules would also empower lawyers to stand up against practices that violate agreedupon principles. Particularly for the young lawyer or the lawyer who has only recently transitioned to the international arena, it can be difficult to buck the trend of current practice. Shared rules create a common language to explain why an existing practice should be changed. Positive rules set out in a governing document would also go a long way towards resolving conflicts with national bar associations. A lawyer faced with an international practice that conflicts with a national rule of professional conduct is in a much stronger position if the lawyer can argue a positive rule that requires or permits the impugned conduct. A shared code of professional conduct is never going to answer the most difficult ethical questions. There will still be those instances where a gut feeling tells you something is wrong, but the rules fail to tell you exactly why that is. Hopefully, though, shared rules would bring us closer to seeing the competing ideals that are at stake and to understanding how the particular practice or situation fits into the unique setting of international criminal law. Remarks by Viren Mascarenhas * Introduction The task of regulating ethical behavior on the part of lawyers practicing before international criminal tribunals, including hybrid tribunals such as the Special Court for Sierra Leone (the SCSL, the Special Court or the Tribunal ) should not be underestimated. Indeed, the lawyers who work in the Office of the Prosecutor ( OTP ), who assist judges in the trial and appeals chambers, and who serve either in the Defense Office of the Tribunal or as legal counsel on behalf of the accused persons or suspects, come from a wide variety of national 7 See, e.g., ICC Code of Prof l Conduct for [Defence] Counsel (Dec..2005); Code of Prof l Conduct for Defence Counsel, Annexed to the Decision of the Registrar (June 8, 1998); ICTY, Code of Prof l Conduct for Counsel Appearing Before the Int l Tribunal, ICTY Doc. IT/125/Rev. 2 (June 29, 2006). 8 ICTY and ICTR Prosecutor s Regulation No. 2, Standards of Prof l Conduct for Prosecution Counsel (1999). * Associate, International Arbitration, Freshfields, Bruckhaus Deringer US LLP. He previously worked as a Legal Officer at the Special Court for Sierra Leone.

112 6 ASIL Proceedings, 2009 legal jurisdictions. Furthermore, many of these lawyers might not have been exposed previously to the unique idiosyncrasies of practicing in the field of international criminal law. For example, witnesses encountered might not speak the same language, might have observed or have been subjected to severe brutalities and traumas, and might come from a different cultural and geographical context, such as the bush regions of Sierra Leone. And while international criminal procedure has been developing at a robust pace over the past fifteen years, the field is still relatively young. Accordingly, situations arise where past precedent does not clearly guide the behavior of lawyers given the unique, high-stakes environment in which they are operating. Still, these tribunals have created several mechanisms to regulate the ethical behavior of lawyers who practice before them. The Rules of Procedure and Evidence of the SCSL ( RPE ) are powerful in this regard. Rule 77 recognizes the inherent power of the Tribunal to punish for contempt any person who knowingly and willfully interferes with its administration of justice. In addition, Rule 46, titled Misconduct of Counsel, lists sanctions that may be imposed on counsel whose conduct is offensive or abusive, obstructs the proceedings, or is otherwise contrary to the interests of justice. 1 Such sanctions include removing counsel from representing a suspect or accused person, imposing monetary fines upon counsel, making a communication recording any misconduct of counsel to the professional body regulating conduct in his or her national jurisdiction, and being refused audience before the SCSL. 2 Pursuant to Rule 46(G) of the RPE, the Judges adopted the Code of Professional Conduct for Counsel (the Code ), which enunciates the principles of professional ethics to be observed by counsel practicing before the Tribunal. The Code is comprehensive, imposing general ethical obligations on counsel, their duty towards the Special Court, witnesses and victims and, in the case of defense counsel, towards the accused persons they represent. In the event of a potential violation of this Code, Articles set forth internal disciplinary proceedings, which could result in the sanctions listed in Rule 46 of the RPE, and others, such as admonishment, public reprimand, and restitution. 3 Furthermore, staff members of the Special Court which would include lawyers working in the OTP, Chambers, and the Defense Office (but which would not cover defense counsel who are not staff members of the Special Court) must abide by the Staff Rules and Regulations, which set forth general professional obligations on those working for the Tribunal. It is safe to say that the criminal tribunals have created instruments to regulate the behavior of counsel before them. However, their enforcement and applicability is still being fleshed out. These instruments set forth relatively general standards expected of counsel; they do not provide specific rules. Some guidance has come, however, from the jurisprudence of the criminal tribunals. The next section discusses certain examples that illustrate different constraints imposed on the behavior of the prosecution counsel and defense counsel by the tribunals. Keep in mind that disciplinary proceedings that take place under the Staff Rules and Regulations and the Code are confidential, and thus are unreported. 1 See RPE R. 46(A). 2 See RPE R. 46(B)-(E). 3 See RPE art. 34.

113 Challenges of Transnational Legal Practice: Advocacy and Ethics 7 Interaction Between Counsel and Witnesses Issues have been raised regarding the interaction between prosecution counsel, investigators, and witnesses. For example, in the RUF case, the First Accused, Issa Sesay, challenged the creation of a Witness Management Unit ( WMU ) under the OTP, which allegedly had made payments to potential and actual witnesses who would testify on the OTP s behalf. At issue was whether the creation of the WMU ran contrary to the Statute of the Tribunal, which generally provided that a Victims and Witnesses Unit would administer support services to victims and witnesses for both the Prosecution and the Defense and this unit would be under the auspices of the Registry. 4 In addition, the practice if proved might have been contrary to the Practice Direction on Allowances for Witnesses and Expert Witnesses, which generally provided that the Witnesses and Victims Section ( WVS ) would ensure the payment of all allowances for those witnesses who resided in Sierra Leone. 5 The issue was thorny, not least because the potential inducement of witness testimony by monetary payments authorized by the OTP would have undermined the credibility of the trial proceedings altogether. However, the Trial Chamber ducked the issue, concluding that because counsel for the First Accused had not questioned the identified witnesses as to payments allegedly received from the OTP during cross-examination, these questions could no longer be addressed. 6 Still, the issue should be considered by the OTP units of all of the tribunals regarding their best practices: are there justifications for creating such a sub-unit that administers payments to potential OTP witnesses, and, if so, what internal guidelines should be set for prosecution counsel and investigators to ensure that the payments do not verge on being inducements to testify? Questions have also been raised about the practice of proofing witnesses prior to their testimony. The Special Court has explained that the purpose of proofing was for counsel to discuss matters, including the witness proposed evidence, with the witness who has little experience appearing in court. 7 The practice has been generally approved by the ICTY 8 and the ICTR. 9 However, the ICC has taken a contrary position. The Pre-Trial Chamber concluded that witness preparation by counsel would not be permitted, and that familiarization of the witness with the ICC courtroom proceedings should be undertaken by the Victims and Witnesses Unit. 10 The Trial Chamber generally approved the approach of the Pre- Trial Chamber, with some modifications; most significantly, in addition to conducting the familiarization process, the Victims and Witnesses Unit would also make available to the witness his or her witness statements to refresh his or her memory prior to testimony. 11 The Victims and Witnesses Unit has submitted a report regarding both the witness familiarization 4 See Stat. art. 16(4) and RPE R See Practice Direction on Allowances for Witnesses and Expert Witnesses art The Prosecutor v. Sesay et al., Case No. SCSL T, Decision on Sesay Motion to Request the Trial Chamber to Hear Evidence Concerning the Prosecution s Witness Management Unit and Its Payment to Witnesses (June 25, 2008). 7 The Prosecutor v. Sesay et al., Case No. SCSL T, Decision on the Gbao and Sesay Joint Application for the Exclusion of the Testimony of Witness TF1-141 (Oct. 26, 2005). 8 See, e.g., The Prosecutor v. Limaj, Bala and Musliu, Case No. IT T, Decision on Defence Motion on Prosecution Practice of Proofing Witnesses (Dec. 10, 2004). 9 See, e.g., The Prosecutor v. Karemera, Ngirumpatse and Nzirorera, Case No. ICTR AR73.8, Decision on Interlocutory Appeal Regarding Witness Proofing (May, ). 10 The Prosecutor v. Lubanga, Case No. ICC-01/04-01/06, Decision on the Practice of Witness Familiarisation and Witness Proofing, Pre-Trial Chamber I (Nov. 8, 2006). 11 The Prosecutor v. Lubanga, Case No. ICC-01/04-01/06, Decision Regarding the Practices Used to Prepare and Familiarise Witnesses for Giving Testimony at Trial, Trial Chamber I (Nov. 30, 2007).

114 8 ASIL Proceedings, 2009 process as well as the practice of showing the witness previous witness statements, taking into account the language of the witness statements and whether the witness is illiterate. 12 Counsel practicing before the tribunals should remember that each tribunal might have specific practices regarding witness proofing. This is especially important since lawyers are often seconded among the different tribunals, and defense counsel have multiple cases before the different tribunals. Certainly, counsel should not assume that what is permissible in one tribunal would apply across the board. Interaction Between Defense Counsel and Suspects/ Accused Persons Defense counsel at the criminal tribunals should bear in mind that they are operating in a high-stakes environment, and they will not be permitted to withdraw easily from their cases, even if relationships with their clients are extremely difficult to manage. For example, take the case of conflict between the Third Accused in the RUF case, Augustine Gbao, and his assigned lead counsel, Andreas O Shea. The Trial Chamber rejected early motions by Gbao to be assigned new counsel in 2004 and Finally, in 2007, after many months of utter lack of communication between lead counsel and Gbao, lead counsel was finally permitted to withdraw. The Trial Chamber set the standard for withdrawal very high, noting that: While [the Chamber] is in no position to attach fault to any party, a considerable breakdown of communication, confidence and trust has occurred between the Accused and his lead counsel and such breakdown could adversely affect the rights of the Accused. In these circumstances, therefore, it would be unfair to both the Accused and the counsel to require them to continue in a particularly frustrated lawyer-client relationship. 13 What happens when a counsel s ethical obligations under his or her national bar run contrary to the best interests of the client or even the tribunal? The situation that resulted on June 4, 2007 in the case of The Prosecutor v. Taylor is illustrative here. The start of this trial had been postponed several times as a result of procedural issues. Finally, after all of these delays, many observers, such as the media and non-governmental organizations, gathered in the ICC courtroom on June 4, 2007 to watch the Prosecutor deliver his opening statement. However, Mr. Taylor did not show up to court. Mr. Karim Khan, the lead counsel for Mr. Taylor, explained that Mr. Taylor had terminated his representation, and therefore he could no longer continue to represent Mr. Taylor. The Trial Chamber was perplexed! The judges simply did not know what to do. Unwilling to postpone the start date of the trial yet again, the Trial Chamber instructed Mr. Khan to represent Mr. Taylor for, at least, the duration of the proceedings on that day. 14 However, Mr. Khan referred to Article 18 of the Code, which states that defense counsel shall not represent a client if his or her representation has been terminated. In turn, the Trial Chamber stated that its order that Mr. Khan continue representing Mr. Taylor for the June 4, 2007 proceedings trumped the Code. 15 Mr. Khan seemed to take the position that he ethically could not continue representing Mr. Taylor, regardless of the Trial Chamber s orders. The Trial Chamber, on the other hand, took the view that Mr. Khan s failure to obey its orders 12 See The Prosecutor v. Lubanga, Case No. ICC-01/04-01/06, Victims and Witnesses Unit report on practices used to prepare and familiarise witnesses for giving testimony at trial (Dec. 31, 2008). 13 The Prosecutor v. Sesay et al., Case No. SCSL T, Written Reasons for Decision on Application of Third Accused to Dispense with the Mandate of Court Appointed Counsel, Mr. Andreas O Shea (Dec. 6, 2007). 14 The Prosecutor v. Taylor, Tr. 17:28-29; 18:1-5 (June 4, 2007). 15 Id. at 20:23-28.

115 Challenges of Transnational Legal Practice: Advocacy and Ethics 9 raised the specter of him being in contempt of court. Yet Mr. Khan was of the opinion that his obligation to the client trumped any order from the Chamber he exited the courtroom, despite the final admonishment from the presiding judge of the Trial Chamber, who stated, Mr. Khan, you have not been given leave to withdraw. You don t just get up and waltz out of here. You have not been permitted to leave. 16 Mr. Khan nevertheless left. Concluding Remarks Lawyers practicing before the tribunals have been sanctioned by the tribunal when their behavior has been ethically egregious. For example, Milan Vujin, a leading member of the Tadic defense team, was fined, removed from the list of qualified counsel permitted to practice before the ICTY, and a letter recording these sanctions was sent to the Serbian Bar to which Mr. Vujin was admitted because it was determined that Mr. Vujin had engaged in witness tampering. 17 Concerns have been raised about the enforcement teeth of a tribunal s sanctions. After all, what impact does a letter to the lawyer s national jurisdiction actually have? Still, sanctions such as public reprimands, refusal (both temporary and permanent) of audience before a tribunal, and monetary fines may still have strong deterrent effects on counsel. Admittedly, the precise ethical way forward is not always clear for counsel. In many ways, this results from an absence of concrete and specific ethical rules and regulations governing counsel, and from lack of membership by counsel practicing before the tribunal in a single bar governing their regulatory conduct. At the end of the day, the Special Court s Code sets forth the following hierarchy in the event of a conflict of interest faced by defense counsel: # The best interests of the client are more important than the personal interests of the client; # The interests of justice are more important than the best interests of the client. 18 This simple hierarchy might not provide all the answers; however, it does represent the pragmatic approach sometimes adopted by tribunals to administer their proceedings when issues of conflict arise. Ethics for Lawyers in International Tribunals: Proposals for Reform By Laurel S. Terry * One of the potential challenges of transnational legal practice is the issue of inconsistent ethics rules and lack of sufficient ethical guidance. This challenge exists as a theoretical matter because of the interplay of three factors. First, individual lawyers who have a transnational legal practice (hereafter transnational lawyers ) can, as a theoretical matter, be subject 16 Id. at 24: See The Prosecutor v. Tadic, Case No. IT-94-1-A-AR77, Appeal Judgment on Allegations of Contempt against Prior Counsel, Milan Vujin (Feb. 27, 2001). 18 See Code of Prof l Conduct of Counsel, art. 15. * Professor of Law, Penn State Dickinson School of Law.

116 10 ASIL Proceedings, 2009 to multiple sets of ethics rules. Second, it is at least theoretically possible that multiple sets of ethics rules may differ from one another. Finally, if a jurisdiction lacks a choice of law or conflicts of law provision in its rules of professional conduct, then a lawyer theoretically will face the challenge of being subject to multiple conflicting ethics provisions without any guidance. Some might suggest that this challenge is illusory, and that a lawyer could resolve the issue by simply following the stricter rule. In some situations, however, it will be difficult to determine which rule is the stricter rule because the conflicting rules are based upon different and competing policy choices, such as confidentiality to the client versus obligations to third persons and the justice system. In this situation, it is difficult to determine which is the stricter rule because these rules represent different policy choices. Thus, at least theoretically, it appears that transnational lawyers will face challenges as a result of conflicting ethics rules. Since I am an academic not currently in practice, the challenges I perceive may be more theoretical than practical. It is certainly possible that these theoretical difficulties are simply not things about which practicing lawyers worry. Despite this possibility, it appears that transnational lawyers do face practical problems with respect to the issue of inconsistent ethics rules and the lack of sufficient ethical guidance. First of all, it is clear that in practice, as well as in theory, lawyers are subject to multiple ethics rules. For example, ABA Model Rule of Professional Conduct 8.5(a) explicitly states that a lawyer can be subject to the rules in two different jurisdictions for the same conduct. 1 European Union directives contain similar language. 2 Second, it is clear that ethics rules do, in fact, differ from jurisdiction to jurisdiction. For example, the contributions by Laurel Baig and Viren Mascarenhas in these Proceedings describe differences in the witness proofing rules in various jurisdictions, which has led to misunderstandings and problems in international criminal tribunals. In the private law arena, confidentiality and conflicts rules often differ among jurisdictions. 3 Third, many jurisdictions have no choice of law or conflicts of law provision with respect to conflicting ethical rules, and even if a jurisdiction does have such a rule, it may not be entirely clear. 4 The comments of my fellow panelists have convinced me that the lack of rules and of a choice of law rule creates real difficulties in international tribunals. Laurel Baig, for example, has argued that positive rules set out in a governing document would go a long way towards resolving conflicts with national bar associations. If a tribunal were to adopt the positive rules that Laurel Baig calls for, then lawyers who are licensed in U.S. jurisdictions that have adopted ABA Model Rule 8.5 would be entitled to follow the rules of the international 1 See Model Rule of Prof l Conduct R. 8.5(a) (2009), available at < mrpc_toc.html>. 2 See, e.g., Council Directive 77/249, Facilitate the Effective Exercise by Lawyers of Freedom to Provide Services, 1977 O.J. (L 78) 17 (EC) art. 4(2); Council Directive 98/5, Facilitate Practice of the Profession of Lawyer on a Permanent Basis in a Member State Other Than that in Which the Qualification was Obtained, 1998 O.J. (L 77) 36 (EC) art. 6(1). 3 See, e.g., Taru Spronken & Jan Fermon, Protection of Attorney-Client Privilege in Europe, 27 Penn St. Int l L. Rev. 439 (2008); Floris Bannier, Conflicts Of Interest: The Dutch Position, 27 Penn St. Int l L. Rev. 315 (2008); Eversheds, Attorney-Client Privilege in Europe: Understanding how the Relationship Works (2008), available at < 4 See supra notes 1 and 2. See also Hans-Jürgen Hellwig, At the Intersection of Legal Ethics and Globalization: International Conflicts of Law in Lawyer Regulation, 27 Penn St. Int l L. Rev. 395 (May 2008). I have been advised by a number of lawyers that their jurisdiction lacks a choice of law provision for ethics rule conflicts.

117 Challenges of Transnational Legal Practice: Advocacy and Ethics 11 tribunal and would be excused from complying with U.S. state rules that were contrary. 5 If the U.S. jurisdiction had not adopted the 2002 choice of law amendments to Rule 8.5, however, that U.S. lawyer would still face the dilemma described earlier of being subject to multiple and conflicting ethics rules. Thus, in the international public law arena, the lack of a choice of law provision creates practical difficulties for lawyers. The same is true in the private international law arena. As the speakers at several recent conferences have noted, the lack of a choice of law rule creates practical difficulties for lawyers practicing private international law. 6 If the lack of a choice of law rule is a problem, what are the possible solutions? During the panel session, I offered several recommendations. My first set of recommendations addressed international tribunals. First, I recommended that those tribunals that had ethics codes make them transparent by including them in an easy-to-locate spot on the tribunal s webpage. During the course of the research for this panel, I was advised about the existence of ethics codes that were not easily found on a tribunal s webpage. Second, I recommended that all tribunals should have an ethics code, and that they should immediately include an ethics code link on their webpage as a placeholder to encourage the prompt development of a code applicable to the lawyers practicing before them. A subset of this recommendation was that the tribunals should develop a code of conduct for all counsel practicing before them, not just defense counsel. 7 Third, I recommended that the codes of these international tribunals include a choice of law provision so that lawyers would have better guidance in the situation described during the panel session where a defendant fires his counsel. (Under the choice of law provision contained in ABA Model Rule 8.5(b)(1), for example, a lawyer would be able to defer to the Tribunal s ruling.) A subset of this recommendation is that when developing its ethics code, each tribunal should use a broad consultation process in order to ensure that all views are considered and to assist in buy in on the part of all stakeholders. 8 My fourth recommendation is that private tribunals, such as international arbitration entities, should also develop a set of rules for counsel appearing before them (even if the rules simply say that counsel should comply with the rules of their home jurisdiction). Finally, I highlighted my view that there is useful work that could be done by ASIL or others to create a framework to be the starting point as international tribunals draft their codes of conduct. I found convincing the comments of my fellow speakers that each 5 Model Rule of Prof l Conduct R. 8.5(b1)(1), supra note 1, states in pertinent part: In any exercise of the disciplinary authority of this jurisdiction, the rules of professional conduct to be applied shall be... 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. 6 See Int l Bar Ass n, Fourth Annual Bar Leaders Conference 2009, available at < Ass n of Prof l Responsibility Lawyers, APRL S Fifth Int l Mtg. (May 2008), available at < N.Y. State Bar, First Annual Int l Practice Institute (May 2009), available at < 7 Some tribunals have codes available for defense counsel, but not the prosecution. See Codes of Conduct for International Tribunals and Arbitration, Prepared for the American Soc y of Int l Law 103rd Annual Mtg. (Mar. 27, 2009) Washington, D.C., assembled by Prof. Laurel S. Terry (on file with author) and available at < Tribunals.pdf>. 8 The International Criminal Court used an extensive consultation process when developing its Code of Conduct for Defense Counsel. The final version reflected a number of changes that had been made as a result of comments from stakeholders. See generally International Criminal Court (ICC), Code of Prof l Conduct for [Defence] Counsel, Resolution ICC-ASP/4/Res.1 (Dec. 3, 2005), available at < BD397ECF-8CA8-44EF-92C6-AB4BEBD55BE2/140121/ICCASP432Res1_English.pdf>; Annex IV, Statement of the Registrar of the International Criminal Court at the 3rd meeting of the Assembly, on 10 September 2003; ICC- ASP/2/10, available at <

118 12 ASIL Proceedings, 2009 Tribunal s code of conduct should be tailored to its history, context, and circumstances. Nevertheless, international tribunals face many similar issues (such as witness proofing), and the tribunals without an ethics code probably would find it useful to have a template to use as a starting point. As difficult as these issues are, the situation is even more difficult for lawyers involved in transnational transactional work because of the lack of an international tribunal that might adopt choice of law rules. I recommended that transactional lawyers take several steps to address these kinds of challenges. First, I recommended that transnational lawyers take steps to identify which jurisdictions have choice of law rules and which ones do not. 9 Second, there should be an inventory and analysis of the ethics choice of law rules that do exist. 10 Third, I recommended that this information be made publicly available so that jurisdictions without an ethics choice of law rule could consider the approaches that have been used as they contemplate whether to adopt such a rule themselves. Finally, I recommended that those lawyers who practice in jurisdictions without a choice of law rule encourage their governing authority to adopt such a rule. Some might challenge this second set of recommendations by arguing that the absence of uniformity in choice of law rules creates a more difficult situation for lawyers than the absence of a rule. They might argue that having codified but differing choice of law rules limits lawyers choices significantly, without resolving their difficult situations. As the U.S. recent experience with the 2002 revisions to Model Rule 8.5 demonstrates, it clearly is difficult to obtain consistency in choice of law rules. 11 While there is merit to this argument, at present, I continue to believe that it is useful to press for the adoption of ethical choice of law rules. In my view, one explanation for their absence is the lack of attention historically given to this issue. I hope that by increased discussion of this issue, lawyers and regulators will become more sensitive to the challenges discussed by this panel and the need for choice of law rules. There are some interim steps that can be taken, however, as we wait for more widespread adoption of ethical choice of law rules. One interim step that can be taken is for lawyers to identify substantive problem areas. This panel has clearly demonstrated that witness proofing, ex parte contact rules, conflicts of interest principles that apply when switching jobs, and termination of counsel are among the issues that appear regularly in international tribunals and that need resolution. On the 9 The International Bar Association currently is undertaking such an effort. 10 Although a number of people are interested in conducting such an inventory, this effort is still in the beginning stages. In addition to ABA Model Rule 8.5(b), which was mentioned earlier, the choice of law approaches I am familiar with include the following: 1) the approach found in New York s former rule DR which stated that the rules of the admitting jurisdiction in which the lawyer principally practices were controlling unless particular conduct clearly has its predominant effect in another jurisdiction in which the lawyer is licensed to practice; 2) England-Wales Solicitors Code of Conduct, Rule 15: Overseas Practice (2009), which uses a lengthy rule-byrule choice of law approach, < 3) Article 4(4) in EU Directive 77/249, supra note 2; 4) Article 6 in Directive 98/5, supra note 2; 5) the country of origin principle found in Article 16(1) of early drafts of the EU Services directive that became in 2006/123. It said that Member States shall ensure that providers are subject only to the national provisions of their Member State of origin which fall within the coordinated field. 6) allowing the law firms to establish a home jurisdiction and use that jurisdiction s rules for all firm lawyers as articulated in Larry E. Ribstein, Law Firms As Firms (April 2008), available at < and 7) allow the clients to select the governing rules, as articled in Mary C. Daly, Resolving Ethical Conflicts in Multijurisdictional Practice Is Model Rule 8.5 the Answer, an Answer, or No Answer at All?, 36S. Tex. L. Rev. 715 (1995). 11 Although the ABA Commission on Multijurisdictional Practice stressed the importance of uniformity in choice of law rules, there are a number of U.S. states that have deviated in some ways from the ABA Model Rule when adopting Rule 8.5. See, e.g., American Bar Association, STATE IMPLEMENTATION OF ABA MODEL RULE 8.5 (DISCIPLINARY AUTHORITY; CHOICE OF LAW) (Apr. 17, 2009), available at < cpr/mjp/quick-guide_8.5.pdf>.

119 Challenges of Transnational Legal Practice: Advocacy and Ethics 13 transactional side, conflicts of interest, legal privilege, and the tension between confidentiality and reporting obligations are clearly issues of concern. 12 Conferences such as this one will help lawyers better understand where their ethical assumptions might differ from those of counsel from other countries. Once the issues are identified, lawyers from different countries will be better situated to develop a common understanding of how certain issues should be handled, which is the practice that has evolved in some international tribunals. Let me close by making one final observation. In my view, in order for ethics rules to affect behavior, there needs to be a system of accountability. One of the recent developments that I applaud is the effort to ensure greater cooperation among the lawyer discipline authorities in different countries. For example, EU Directives 77/249 and 98/5 both include discipline cooperation provisions. 13 In 2009, the U.S. Conference of Chief Justices ( CCJ ) and the Council of Bars and Law Societies of Europe ( CCBE ) reached an understanding about discipline cooperation, with each organization adopting a resolution. 14 The CCJ currently is engaged in discussions with the Law Council of Australia on this topic. This is a positive development that should ensure greater understanding and greater accountability. But in order to make this system of accountability fair to transnational lawyers, they need greater choice of law guidance than they currently receive in most jurisdictions. 12 See, e.g., supra note See Directive 77/249, supra note 2, at art. 7(2); Directive 98/5, supra note 2, at art. 7(3). 14 Conference of Chief Justices, Resolution 2, In Support of Cooperation Among United States and European Disciplinary Bodies (Jan. 2009), available at < Resolution of the Council of the Bars and Law Societies of Europe (CCBE) Regarding Discipline Cooperation (Feb. 2009), available at < The CCJ-Australia resolution has since been adopted and is available at <

120 A Model for International Choice of Law and Coordination of Attorney Regulation Laurel Terry Penn State Dickinson School of Law, US International Legal Ethics Conference IV Palo Alto (Stanford), CA July 17, Why Ethics Choice of Law Issues Exist Lawyers follow clients. Thus, global commerce has led to global law practice. Different jurisdictions have different ethics rules Which ethics rules apply when lawyers cross national borders or work with foreign lawyers? While nat l solutions may differ, all global lawyers face this choice of law dilemma [aka double deontology problems] I will review the US response to this issue I will also review the efforts to develop a more global, international response 2 Preview of this Session 1. Laurel Terry: Existing US choice of law rules for international practice and international initiatives 2. Catherine Rogers: Some problems with ABA Rule 8.5, some solutions, and international models to consider 3. Stephen Denyer: A practitioner s perspective on international initiatives and choice of law issues 4. Our introduction of proposed Rule 8.6, which proposes international cooperation 5. Audience discussion 3 Overview Part 1: How Has the U.S. Responded to this Issue? US lawyers are licensed by US states, not nationally; US state ethics rule include substantial variations As commerce expanded, US lawyers crossed state borders, creating pressure for new rules In 2002, the ABA added MJP safe harbors to Rule 5.5 and revised Rule 8.5 s accountability rules In 2002, the ABA also revised comment [7] to Rule 8.5 to include globally outbound U.S. lawyers: [7] The choice of law provision applies to lawyers engaged in transnational practice, unless international law, treaties or other agreements between competent regulatory authorities 4 in the affected jurisdictions provide otherwise. Additional 2002 Changes to ABA Model Rule 8.5 Lawyers who practice in, but aren t licensed by, a state are subject to discipline in that state Rule 8.5(b) provides a choice of law rule for lawyers subject to multiple ethics rules Rule 8.5(b)(1) applies to adjudication and says apply the tribunal s rules or, if none, the rules of the jurisdiction where the tribunal sits Rule 8.5(b)(2) applies to other [transactional] situations and basically says apply the rules of the jurisdiction where the action occurred or where the 5 action will have its predominant effect The Need to Improve ABA Model Rule 8.5 Catherine Rogers will explain why Rule 8.5 works poorly in an international setting We have proposed a new ABA Rule 8.6 for US lawyers engaged in international practice Our proposed Rule 8.6 includes international cooperation and coordination mechanisms We plan to submit Rule 8.6 to the ABA Commission so we invite your comments We hope that proposed Rule 8.6 contains ideas that might be useful in other countries 6 1

121 Overview Part 2: How Have Others Responded to Rule 8.5-Type Issues? A Model to Consider? The PICT Matrix There is relatively little information about national ethics choice of law rules The IBA conducted a survey seeking this information, but few responded and even fewer had such rules (see, e.g., several EU countries, Hong Kong, and the US) In my view, greater information sharing is needed. The Matrix of the Project on International Courts and Tribunals provides a possible model for info-sharing: Some of the Suggested (or Actual) Responses to Choice of Law Issues ABA Model Rule 8.5(b) (and its many US variations) An issue-by-issue approach (e.g. the UK Solicitors Regulation Authority Rule 15:Overseas Practice) EU Directives 77/249 & 98/5 (they specify home or host rules but also state without prejudice to ) EU Country of Origin Principle Allow law firms to establish a home jurisdiction & use that jurisdiction s rules for all firm lawyers [See, e.g., Ribstein] Let parties and/or counsel select the governing rules 9 Overview Part 3: The Unilateral Solution Problem (see also Terry 5-08 APRL Amsterdam slides) Is there a problem if lawyers from different countries have different choice of law rules (or no such rule?) In theory?.yes In practice? maybe It is relatively clear that there are some problems in international adjudication (e.g., witness preparation rules) It is less clear what problems arise in transactional work as a result of lawyers using different jurisdictions rules Academics and lawyers should document any problems Query: If harmonization isn t possible, is it better to 10 have differing choice of law rules or no rules? Some Possible Responses to the Unilateral Solution Problem International tribunal rules and orders (ICC Code) Harmonized domestic ethics rules (CCBE, IBA) Harmonized choice of law rules Cooperation and coordination on a case-by-case basis (Rogers cites the cross-border bankruptcy model as an example of successful coordination) Other solutions (e.g., a compact among global firms?) A super-regulator? Soft law solutions? 11 Entities Working on this Problem International Law Association (ILA): 2010 Hague Principles on Ethical Standards for Counsel Appearing before International Courts and Tribunals Union Internationale des Avocats (UIA): Worldwide Code of Ethics Project (Sept Istanbul) International Bar Association (IBA): Statement of General Principles of the Legal Profession ICC Code of Professional Conduct for Counsel IBA Group Law Firms Committee on Rule Conflicts (Stephen Denyer will discuss this in more detail) Cf. Guidelines on Conflicts of Interest in Internat l Arbitration 12 2

122 Existing Lawyer Discipline Cooperation-Coordination Models Domestically in the U.S.: ABA Rule of Disciplinary Enforcement 22 ABA Lawyer Regulatory Data Bank Internationally: [US] Conference of Chief Justices Resolution + CCBE Statement [US] Conference of Chief Justices Resolution and Protocol and Law Council of Australia CCBE Summary of disciplinary proceedings and contacts Recommendations from the UN, IBA, Council of Europe, CCBE, and the ABA (and perhaps others?) Potentially: the EU E-Justice Project? Potentially: the Asia Pacific Economic Cooperation (APEC) 13 Legal Services Initiative? In Other Fields: Choice of Law Rules and Cooperation-Coordination Models Commentators recommend cross-cultural and cross-professional ethics rule comparisons Thus, we should consider the choice-of-law approaches used in other fields We should also take note of efforts to develop international cooperation and coordination in international insolvency and intellectual property matters Are you aware of other examples we should consider? [ LTerry@psu.edu] 14 Conclusion In the US: Consider proposed Rule 8.6 for US lawyers doing international legal work Internationally: Encourage transparency with respect to: Ethical issues that create cross-border problems Available choice of law models Whether a jurisdiction has a choice of law rule Encourage, help (& perhaps shame) international tribunals into adopting lawyer codes of conduct Begin the slow process of developing multilateral solutions for transactional work 15 To Read More About It: U.S. State Ethics Rules, including choice of law rules Links to U.S. state ethics rules, (See Ethics link menu item at top) Information about ABA Model Rule 8.5 Implementation, Ethics Rules of CCBE Member & Observer States CCBE Deontology Committee: EU Directives, US/CCJ Discipline Cooperation Initiatives: (CCJ resolutions) 16 (Data bank, ABA rules) GATS & Trade Agreements: To Read More About It By Laurel Terry Global Legal Practice Resources Webpage: Links to Publications by Topic: Presentations Page: Appendix Items SSRN page: [Laurel Terry] See also [Catherine Rogers]

123 Current ABA Model Rule 8.5(b)(1) 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 19 Current ABA Model Rule 8.5(b)(2) 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: (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 20 conduct will occur. Variations in ABA Rule 8.5 Adoption Adoption Variations for 8.5, Cmt 7 The ABA reports that as of Nov. 9, 2009, 31 states had adopted ABA Comment 7 (AK, AR, CO, CT, DE, DC, GA+, ID, IL, IN, IA, KY, MD, ME, MI, MN, MO, NE, NH, NY, NC, OH, OK, PA, RI, SC, SD, UT, WA, WI) The Old New York Rule NY DR 1-105: If the lawyer is licensed to practice in this state and another jurisdiction, the rules to be applied shall be the rules of the admitting jurisdiction in which the lawyer principally practices; provided, however, that if particular conduct clearly has its predominant effect in another jurisdiction in which the lawyer is licensed to practice, the rules of that jurisdiction shall be applied to that SRA Solicitors Code of Conduct Rule 15: Overseas Practice (2009) Modification of these rules in relation to overseas practice (3) If this rule states that a rule or a provision of these rules does not apply to your overseas practice, you may disregard that rule or provision in relation to your overseas practice, but you must comply with any alternative provision which is substituted by this rule. (4) If compliance with any applicable provision of these rules would result in your breaching local law, you may disregard that provision to the extent necessary to comply with that local law. conduct Rule 15 has rule-by-rule choice of law provisions 4

124 Hong Kong Solicitors Rule 1.06 PRACTICE OUTSIDE HONG KONG: A Hong Kong solicitor when practising as a Hong Kong solicitor outside Hong Kong remains bound by the general principles of professional conduct which apply to him as a Hong Kong solicitor. Commentary 1.The principles and commentaries in this Guide apply to practice outside Hong Kong with any modification necessitated by local conditions. 2.In addition to the provisions of commentary 1, the Council has adopted as the basic code for solicitors practising outside Hong Kong the International Bar Association's International Code of Ethics (set out below) whenever the same are not inconsistent with this principle. 3.In the absence of an express application of local rules to the solicitor as a foreign lawyer, the solicitor should nevertheless respect the rules of conduct applied to local lawyers. Where the structure and sphere of activity of the local legal profession or professions differ substantially from those of Hong Kong solicitors, it may be inappropriate or impossible for a solicitor to comply in every particular with the rules of conduct applicable to the local profession or professions, or it may be doubtful which rules of conduct should be applied. In such circumstances, the solicitor should observe the standards of conduct applicable to the local lawyers to the extent this can be done without infringing 25 the rules EC [77 Services] Directive Art. 4 1.Activities relating to the representation of a client in legal proceedings or before public authorities shall be pursued in each host Member State under the conditions laid down for lawyers established in that State 2.A lawyer pursuing these activities shall observe the rules of professional conduct of the host Member State, without prejudice to his obligations in the Member State from which he comes. 26 EC [77 Services] Directive Art A lawyer pursuing activities other than those referred to in paragraph 1 shall remain subject to the conditions and rules of professional conduct of the Member State from which he comes without prejudice to respect for the rules, whatever their source, which govern the profession in the host Member State, especially those concerning the incompatibility of the exercise of the activities of a lawyer with the exercise of other activities in that State, professional secrecy, relations with other lawyers, the prohibition on the same lawyer acting for parties with mutually conflicting interests, and publicity. 27 EC [Establishment] Directive 98/5 Art. 6(1): Irrespective of the rules of professional conduct to which he is subject in his home Member State, a lawyer practising under his home-country professional title shall be subject to the same rules of professional conduct as lawyers practising under the relevant professional title of the host Member State in respect of all the activities he pursues in its territory Art. 7(3): Without prejudice to the decision-making power of the competent authority in the host Member State, that authority shall cooperate throughout the disciplinary proceedings with the competent authority in the home Member State. In particular, the host Member State shall take the measures necessary to ensure that the competent authority in the home Member State can make submissions to the bodies responsible for hearing any appeal. 28 EC Country of Origin Principle Originally in a draft of EC Directive 2006/123: 16(1): Member States shall ensure that providers are subject only to the national provisions of their Member State of origin which fall within the coordinated field. 29 EXCERPTS FROM THE 1994 U.S. GATS SCHEDULE (and offer), GATS/SC/90 Modes of supply: 1) Cross-border supply; 2) Consumption abroad; 3) Commercial presence; 4) Presence of natural persons Sector or subsector a) 1) Legal Services: practice as or through a qualified US lawyer Limitations on market access For the following jurisdiction, the following commitments apply: in (all states) 1)Services must be supplied by a natural person An in-state office must be maintained for licensure in: District of Columbia, Indiana (or an affiliate with an office and with other attorneys in the state), Michigan, Minnesota (or maintain individual residency in Minnesota), Mississippi, New Jersey, Ohio, South Dakota and Tennessee. Limitations on national treatment 1)In-state or US residency is required for licensure in: Hawaii, Iowa, Kansas, Massachusetts, Michigan, Minnesota (or maintain an office in Minnesota), Mississippi, Nebraska, New Jersey, New Hampshire, Oklahoma, Rhode Island, South Dakota, Vermont, Virginia, Wyoming. Additional commitments 30 Note: a(1) Mode 2 was identical. Had an a(2) category for foreign legal consultant (FLC) rules 5

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150 International Insolvency Samuel L. Bufford Louise DeCarl Adler Sidney B. Brooks Marcia S. Krieger Federal Judicial Center 2001 This Federal Judicial Center publication was undertaken in furtherance of the Center s statutory mission to develop and conduct education programs for judicial branch employees. The views expressed are those of the authors and not necessarily those of the Federal Judicial Center.

151 IV. International Conventions and Other Sources of International Bankruptcy Law D. Concordat The most effective present regime for regulating and coordinating transnational insolvencies is provided by the Cross-Border Insolvency Concordat, which was developed by Committee J of the Section on Business Law of the International Bar Association. The Concordat consists of general principles designed to assist courts and counsel in coordinating and harmonizing insolvency proceedings pending in two or more countries. The application of the Concordat is meant to be flexible. Courts may decide which Concordat principles to apply on a case-by-case basis The Concordat is intended as an interim measure to guide transnational insolvencies until treaties or statutes are adopted by commercial nations Thus it may become outmoded as the Model Law and the EU Regulation are adopted and implemented. Until such time, however, the Concordat is the main source of principles to guide the coordination of multinational insolvencies. The Concordat can be used in several types of transnational insolvency situations, including (1) a main insolvency proceeding that governs assets and claims on a worldwide basis; (2) a main insolvency proceeding and one or more non-main insolvency proceedings in different countries; (3) multiple insolvency proceedings that proceed on the basis of territory; and (4) multiple insolvency proceedings whose jurisdiction over assets and claims overlap See International Bar Association, Committee J Cross-Border Insolvency Concordat, Sept. 17, For the text of the Concordat, see infra Appendix A. For a comprehensive discussion of the Concordat, see Anne Nielson et al., The Cross-Border Insolvency Concordat: Principles to Facilitate the Resolution of International Insolvencies, 70 Am. Bankr. L.J. 533 (1996) [hereinafter Nielson]. See also John K. Londot, Note, Handling Priority Rules Conflicts in International Bankruptcy: Assessing the International Bar Association s Concordat, 13 Bankr. Dev. J. 163 (1996); E. Bruce Leonard, Managing Default by a Multinational Venture: Cooperation in Cross-Border Insolvencies, 33 Tex. Int l L.J. 543, (1998) [hereinafter Leonard II]. For reports on the application of the Concordat in In re Everfresh Beverages, Inc., No. 95-B (Bankr. S.D.N.Y. 1995) and No (Ont. Ct. 1995), see Leonard II at ; Nielson at See Nielson, supra note 534, at See Report on the Committee J Cross-Border Insolvency Concordat, presented to the Council of the International Bar Association s Section on Business Law, Sept. 17, 1995, at 2, 3; Nielson, supra note 534, at See Nielson, supra note 534, at

152 International Insolvency The Concordat envisions a single administrative forum as the main forum for the insolvency proceeding; cases in other fora are subsidiary to the main case The main forum should coordinate the collection and administration of assets and should receive all assets (after payment of secured and priority claims) from other fora Common claims should be filed in the main case in the local language and may be filed by mail with no formalities except for those provided by local insolvency law A discharge in the main case should be universally recognized If there is no main proceeding, the Concordat recommends using a protocol to coordinate the proceedings in the various countries In such a circumstance, each forum should administer the assets within its jurisdiction A claimant should be required to file a claim in only one forum The priority and ranking of claims should be governed by the rules of each forum The payment of claims, however, should be coordinated to assure a pro rata distribution to each creditor of the same class Thus, as a general rule, secured and priority claims are governed by local law while general unsecured claims are treated on a worldwide basis Any surplus after paying claims in one forum should be transferred to another appropriate forum, which may be the main forum or another subsidiary forum Official representatives, such as trustees, should receive notices of proceedings in all fora and should have the right to appear in all fora However, unlike the Model Law and the EU Regulation, the Concordat permits the imposition of a requirement that the official representative utilize an exequatur or similar proceeding to imple See Concordat, Prin See id. Prin. 2(A) See id. Prin. 2(B) & See id. Prin. 2(C) See id. Prin. 2(F) See id. Prin. 4(A) See id. Prin. 4(B) See id. Prin. 4(C) See id. Prin. 4(D) See id. Prin. 4(E) & (F) See Nielson, supra note 534, at See Concordat Prin See id. Prin. 3(A). 86

153 IV. International Conventions and Other Sources of International Bankruptcy Law ment recognition The official representatives may select from the administrative rules provided by any relevant forum, and are not limited to those of their home forum Similarly, the official representatives may choose avoiding power rights from any forum, unless the transaction at issue has no significant relationship with the chosen forum The Concordat provides that all creditors in any forum should have the right to appear in the other fora without being subject to personal jurisdiction there on matters unrelated to the insolvency proceeding at issue Ex parte and interim orders should be subject to challenge for a reasonable period of time by creditors and official representatives from another forum, to the extent permitted by the procedural rules of the issuing forum Public information should be shared among creditors in all fora, and nonpublic information should be provided to official representatives appointed in all fora The Concordat further provides that, if there is more than one plenary forum and no main proceeding, each forum should coordinate with the others Furthermore, in appropriate cases there should be a governance protocol to facilitate such coordination The filing of a claim should be required only in the forum of the claimant s choice, and common claims should be paid pro rata, regardless of the forum providing the source of funds However, each forum may apply its own ranking rules for classification of and distribution See id See id. Prin See id. Prin. 7. For a case holding that the U.S. court must apply British preference law to a British corporation s prefiling transfers to a British and a French bank, see Maxwell Communication Corp. v. Société Générale (In re Maxwell Communication Corp.), 93 F.3d 1036 (2d Cir. 1996) See Concordat, Prin. 8(C) See id. Prin. 3(C) See id. Prin. 3(B) See id. Prin. 3(D) For cases involving two main proceedings, one in the United States and one in the United Kingdom, see Maxwell Communication Corp. v. Société Générale (In re Maxwell Communication Corp.), 93 F.3d 1036 (2d Cir. 1996); In re Brierley, 145 B.R. 151 (Bankr. S.D.N.Y. 1992) See Concordat, Prin. 4(A) See id See id. Prin. 4(C) See id. Prin. 4(E). 8 7

154 International Insolvency to secured and priority claims The applicable law for determining the allowability of a claim, and any offset or rights to collateral should be determined according to applicable international private law If the insolvency involves local regulation with important policy concerns (such as banking or insurance), local assets should go first to local creditors protected by the regulatory scheme Reorganization can be undertaken, even if the laws of one plenary forum do not so permit, so long as the reorganization can be effected in a nondiscriminatory manner Finally, a forum should not give effect to an act of state in another jurisdiction that purports to invalidate a preinsolvency transaction unless required by the substantive law of the forum E. Protocols Where there are related insolvency proceedings in more than one country, usually one of the first tasks of counsel is to negotiate the applicable law for the transnational proceeding. Negotiation is necessary because there is normally no clear answer to this question in a transnational case. Negotiation usually results in the adoption of a protocol that must be approved by each of the courts with a related proceeding Prompt resolution of the issue of applicable law can facilitate an effective reorganization or an orderly liquidation. The protocol typically establishes which forum determines particular issues, where assets are administered, and what national law applies to the determination of specified disputes The protocol should also determine where creditors should file their claims, the language in which claims must be filed, and the required form for See id. Prin. 4(D) See id. Prin. 8(A) See id. Prin. 4(G) See id. Prin See id. Prin See, e.g., id The EU Regulation avoids this problem by a treaty provision giving predominance to the insolvency proceeding in the country with the center of the main interests of the business enterprise See, e.g., In re Ionica PLC, 241 B.R. 829, (Bankr. S.D.N.Y. 1999) (describing protocol adopted in that case relating primarily to which law would govern asset sales and professional fees). 88

155 IV. International Conventions and Other Sources of International Bankruptcy Law filing claims. Special attention must be given to the treatment of foreign creditors so that they will not be unduly disadvantaged. Most protocols negotiated to date have followed the principles of the Concordat These protocols now serve as models for protocols in future transnational insolvency cases The NAFTA Project recommends the use of a protocol to facilitate the coordination of parallel insolvency cases in two or more NAFTA countries The UN- CITRAL Model Law and the European Regulation are also likely to have substantial influence on protocols in the future For a discussion of the Concordat, see supra text accompanying notes For a brief description of a protocol, see Official Comm. v. Transpacific Corp. (In re Commodore Int l, Ltd.), 242 B.R. 243, , 259 (Bankr. S.D.N.Y. 1999). Protocols tend to be rather lengthy documents See supra text accompanying notes

156 V. Procedural Issues in Transnational Insolvency Cases Five types of procedural problems that often arise in transnational bankruptcy cases merit special attention: the appropriate venue for the main case in a transnational insolvency; giving notice to creditors; communication between the judges to whom the cases are assigned in the respective countries; the conflict of laws between the applicable international jurisdictions; and the method of calculation of creditor distributions. A. Appropriate Venue for the Transnational Case The appropriate venue for a transnational case may not be altogether apparent. While the EU Regulation provides that the country with the center of the debtor s main interests is the proper location for a main insolvency proceeding, this is not always the best choice. For example, the insolvency law of that country may be less favorable than that of another country to the debtor s orderly reorganization or liquidation and to the protection of the rights of creditors and other parties in interest. For example, In re Maruko Inc involved a Japanese corporation, but the bankruptcy case in Japan could not deal with the debtor s foreign assets or liabilities because of the Japanese insolvency law s territorial limitations. Thus a foreign main insolvency proceeding was necessary. In addition, the debtor found it more attractive to file a bankruptcy case in the United States rather than in Australia, because the U.S. automatic stay applies to secured creditors and the Australian law does not. While it was not clear that the Australian secured creditors would be bound by the U.S. automatic stay, in the end the creditors decided to observe the stay. In addition, a debtor may prefer to file in a particular country because of the sophistication of the judiciary in that country in handling B.R. 633 (Bankr. S.D. Cal. 1993). 91

157 International Insolvency bankruptcy cases, or because of the integrity and independence of the judicial processes in that country. Other factors affecting the choice of venue may include the expertise and availability of bankruptcy professionals such as accountants and attorneys. B. Notice to Creditors Notice to creditors is essential to the insolvency process. Creditors must be given notice that a bankruptcy case has been opened so they know that they are bound by the automatic stay against further creditor collection activities. Creditors must be given notice of an opportunity to file claims, and of the deadline therefor. Many other proceedings in a bankruptcy case require notice to creditors Giving notice to foreign creditors, however, poses unusual problems. One problem relating to notice is the character of the notice itself. As in the United States, citizens of many other countries are accustomed to certain formalities (which vary substantially from country to country) before their legal rights are affected. The notice that is given in a typical bankruptcy case, after which an action affects a creditor s legal rights, frequently does not have this level of formality. In the United States such notices are given often enough in legal proceedings that it is not unfair to expect a person to be bound by such a notice. However, in a country where such notices are unknown or unusual, it may not be fair to bind a creditor who has only received a notice that is typical in a U.S. bankruptcy case Another problem arises because it takes substantial time for a notice to be delivered abroad. While a notice by regular mail is normally delivered within two days in the United States, a notice sent abroad by regular mail may take a number of weeks to arrive. Even air mail may take a number of days for delivery. In addition, the typi See, e.g., Fed. R. Bankr. P (specifying the notice required for a number of common proceedings in bankruptcy cases) For example, notice may be considered insufficient unless the party giving notice complies with the requirements of the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, Nov. 15, 1965, 20 U.S.T. 361, T.I.A.S. No. 6638, 658 U.N.T.S. 163 (1969). Thirty-six countries, including the United States and most of its major trading partners, are parties to this convention. The notice process is lengthy and cumbersome. This treaty and its contents are described in Edith Wu, Evolutionary Trends in the United States Application of Extraterritorial Jurisdiction, 10 Transnat l Law. 1 (1997). 92

158 V. Procedural Issues in Transnational Insolvency Cases cal notice provisions in the Federal Rules of Bankruptcy Procedure and local rules may be insufficient to provide meaningful notice to creditors located abroad. Increasingly, domestic notice is being given by and by fax. These means are especially useful for giving notice to foreign creditors and parties in interest because such notice is much faster. Of course, fax numbers and addresses must be available to permit notice by these means. A further problem may arise if a foreign creditor or other party in interest does not understand the language in which the notice is written. In this circumstance, the notice may be insufficient for the foreigner C. Communication Between Judges Traditionally, judges in different courts have been reluctant to communicate with each other on related cases. This is especially so when the courts are located in different countries and when translators are needed to overcome language barriers. However, it is important in transnational cases that the respective judges communicate with each other, whether directly or indirectly, about the conduct of related proceedings. United States trial judges have recently become much more willing to communicate with each other on related cases, and this change is likely to extend to the international arena. Ineffective communication between judges may lead to problems, such as undue delays and expense, unduly cumbersome and lengthy hearings, inconsistent treatment of similarly situated creditors, and ultimately the dissipation of valuable assets. Perhaps the most serious problem that can arise from ineffective communication between judges is that the parties may play one court against another, which can lead to a battle between the affected courts. In addition to creating all of the foregoing problems, such a battle may bring the courts themselves into disrepute For this reason the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, supra note 576, requires that all documents subject to the convention be translated into the local language. See arts. 5 &

159 International Insolvency There is no single model for proper communication between judges in transnational insolvencies. Perhaps the best means of communication is a telephone or video conference, with translators if needed. Written communications between judges may also be advisable. In most cases, communications should be off-the-record, private, and confidential. It may be appropriate simply to inform the parties in interest that the respective judges have been in contact with one another. D. Conflict of Laws in International Insolvency Cases International insolvency cases frequently raise the potential for the application of the laws of more than one country. There are traditional rules, under the general doctrine of international private law, which generally govern the determination of applicable law where a transaction or event overlaps political boundaries However, very few reported U.S. cases apply conflict-of-laws rules in the context of international insolvencies. Generally accepted choice-of-law standards require that a controversy be decided by the law of the jurisdiction with the greatest interest in the controversy Under this test, the court is required to evaluate the relative importance of the various contacts of each jurisdiction with respect to a particular issue in controversy and to make a reasoned determination as to which jurisdiction s laws and policies are implicated to the greatest extent This principle probably explains the relative rarity of conflict-oflaws discussions in the reported case law. In a typical transnational bankruptcy case, the assets and the litigation at issue are usually firmly rooted in the United States. Thus, U.S. law would clearly apply to a See, e.g., Aranha v. Eagle Fund, Ltd. (In re Thornhill Global Deposit Fund, Ltd.), 245 B.R. 1, (Bankr. D. Mass. 2000); see generally Restatement (Second) of Conflict of Laws (1997) See, e.g., Koreag, Controle et Revision S.A. v. Refco F/X Assocs., Inc. (In re Koreag), 961 F.2d 341, 350 (2d Cir. 1992); Wells Fargo Asia, Ltd. v. Citibank, N.A., 936 F.2d 723, 726 (2d Cir. 1991); Maxwell Communication Corp. v. Société Générale (In re Maxwell Communication Corp.), 93 F.3d 1036 (2d Cir. 1996) See Koreag, 961 F.2d at 350; Maxwell Communication Corp. v. Barclays Bank (In re Maxwell Communication Corp.), 170 B.R. 800, 816 (Bankr. S.D.N.Y. 1994), aff d, 186 B.R. 807 (S.D.N.Y. 1995), aff d, 93 F.3d 1036 (2d Cir. 1996). 94

160 V. Procedural Issues in Transnational Insolvency Cases case or proceeding pending in a U.S. court under the applicable choice-of-law standards. However, in certain circumstances it is appropriate to apply the law of another jurisdiction under the choiceof-law rule. The leading U.S. bankruptcy case on choice of law is Maxwell Communication Corp. v. Barclays Bank, 581 which involved plenary bankruptcy cases in both England and the United States. The British administrators of the joint case brought a preferential transfer action in the U.S. court to set aside certain payments that had been made to two British banks and one French bank shortly before the filing of the bankruptcy cases. The U.S. court applied traditional choice-oflaw principles to find that the controversy must be decided under English law. 582 Given this decision, the court dismissed the suits on the grounds of comity. 583 The Maxwell case illustrates the kind of issue where foreign law may be the appropriate choice. In general, an adversary proceeding brought against a foreign entity raises the issue of which country s law should apply. However, issues rooted in domestic assets or domestic procedure should be governed by local law. For secured claims, it is generally assumed that the law of the situs of the collateral is the applicable law for all purposes. Generally, this rule is well founded for real estate, which is usually governed by the law of the situs. However, for personal property and especially for intangibles, a different result may often be appropriate. The choice-of-law issue sharpens when assets are transferred abroad for administration in a foreign main case. In such a situation, the foreign forum typically will properly apply its own law to both substantive and procedural issues. The choice-of-law issue raises additional complexities in a U.S. proceeding. Federal courts sitting in diversity jurisdiction are required to apply the choice-of-law rules of the forum state. 584 This rule imposes the forum state s choice-of-law rules on bankruptcy adjudications where the underlying rights and obligations are defined by state Maxwell, 170 B.R See id. at See id. at See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). 9 5

161 International Insolvency (and not federal) law In contrast, a court of appeals has held that federal principles should control in cases arising under federal law Because bankruptcy law in the United States is a complex mix of state and federal law, a bankruptcy court may be required to determine the source of the applicable legal rules (whether federal or state law) before determining which conflict-of-laws rules to apply. Fortunately, few cases require a decision between federal and state choiceof-law rules The EU Regulation provides a variation on this analysis. Under its procedures, a domestic non-main proceeding is governed by its own domestic law for most purposes, but the court is limited in how it treats local assets and creditors in light of the pendency of a main proceeding in a different country E. Distribution to Creditors The proper calculation of the distribution of assets to creditors is an unexpectedly difficult issue when there are parallel proceedings in two or more countries This difficulty inheres in both the territoriality and the universality approaches to international insolvencies How much a particular unsecured creditor receives may be affected substantially by the order in which the insolvency cases distribute assets to creditors For example, a creditor may receive substantially more if the distribution to unsecured creditors is made first in country A than if the distribution is made first in country B. Furthermore, the See, e.g., Arab Monetary Fund v. Hashim (In re Hashim), 213 F.3d 1169, 1171 (9th Cir. 2000); Continental Cas. Co. v. Kellogg (In re Chanel Fin., Inc.), 102 B.R. 549, 550 (Bankr. N.D. Tex. 1988); Hassett v. Far West Fed. Sav. & Loan Ass n (In re O.P.M. Leasing Serv., Inc.), 40 B.R. 380, (Bankr. S.D.N.Y.), aff d, 44 B.R (S.D.N.Y. 1984); Central Trust Co. v. Shepard (In re Shepard), 29 B.R. 928, 931 (Bankr. M.D. Fla. 1983). But see Koreag, 961 F.2d at 350 (dictum that federal choice-of-law principles should apply in cases arising under federal law, but finding no difference between the applicable New York and federal principles) See Koreag, 961 F.2d at 350; accord, Wells Fargo Asia, Ltd. v. Citibank, N.A., 936 F.2d 723, 726 (2d Cir. 1991) See Koreag, 961 F.2d at See supra text accompanying notes See generally, Bang-Pedersen, supra note See supra text accompanying notes See Bang-Pedersen, supra note 468, at See id., passim. 96

162 V. Procedural Issues in Transnational Insolvency Cases recovery of a particular creditor may be substantially greater if the creditor files its claim in each of the countries where an insolvency proceeding is filed. In addition, varying priority laws in the relevant countries can affect the amount of a distribution received Courts should adopt a maximum dividend rule. That is, a particular creditor should not be permitted to receive more than 100% of its claim collectively from the various insolvency proceedings in the various countries. A rule that disqualifies a creditor from receiving any more distributions in any relevant proceeding thereafter would accomplish this goal. However, such a rule may have a variety of complicated consequences for other creditors Thus far, the reported cases in the United States have not addressed these problems See id See id. 9 7

163 SAMPLE INTERNATIONAL INSOLVENCY PROTOCOL TO RESOLVE CHOICE OF LAW AND OTHER ISSUES

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