How can Japanese corporations protect confidential information in U.S. courts? Recognition of the attorney-client privilege for Japanese non-bengoshi in-house lawyers in the development of a new legal system.

• Author: Yamamoto, Masamichi

ABSTRACT

U.S. courts have seen a significant increase in the number of lawsuits involving both U.S. and Japanese corporations. In deciding these cases, U.S. courts may have to choose how to apply the attorney-client privilege to in-house lawyers retained by corporations in Japan, where the legal system and discovery rules are fundamentally different from those of the United States. U.S. courts would most likely analyze these situations under the Remy-Martin/Minolta test and recognize the attorney-client privilege only for managers of legal departments in Japanese corporations, not for other non-bengoshi (non-licensed) in-house lawyers. This will change in the near future, however, when Japanese corporations start to retain bengoshi, graduates from new Japanese law schools, as in-house lawyers. Meanwhile, Japanese corporations may still be able to protect confidential information by using legal managers, U.S. and Japanese licensed in-house lawyers, in-house lawyers acting as agents, and Upjohn memoranda. The Japanese government may also be able to support Japanese corporations by signing the Hague Evidence Convention with declaration and reservation, amending the Code of Civil Procedure provision regarding privilege, and most importantly, raising the bar passage rate for graduates of Japanese law schools. These measures would more likely protect confidential corporate information, regardless of whether U.S. courts recognize the attorney-client privilege for Japanese non-bengoshi in-house lawyers.

TABLE OF CONTENTS I. INTRODUCTION II. AN OVERVIEW OF ATTORNEY-CLIENT PRIVILEGE IN THE UNITED STATES A. Defining and Justifying the Privilege B. Recognition of the Attorney-Client Privilege for In-House Lawyers III. AN OVERVIEW OF THE JAPANESE LEGAL SYSTEM A. Discovery in Japan B. The Attorney-Client Privilege in Japan C. Traditional In-House Lawyers in Japan D. Legal Education in Japan Before 2004 E. Legal Education in Japan after 2004: The Birth of Japanese Law Schools F. The Future of In-House Lawyers in Japan IV. TRANSNATIONAL APPLICATION OF THE ATTORNEY-CLIENT PRIVILEGE A. The Scope of the Attorney-Client Privilege at the International Level B. Extension of the Attorney-Client Privilege at the International Level C. The Eisai Decision V. APPLICATION OF THE ATTORNEY-CLIENT PRIVILEGE TO JAPANESE NON-BENGOSHI IN-HOUSE LAWYERS A. Application of the Attorney-Client Privilege to Japanese Corporations B. Remy Martin or Minolta? C. Arguments For the Attorney-Client Privilege D. Against the Attorney-Client Privilege VI. RECOMMENDATIONS A. How Would U.S Courts Likely Approach? B. Application of the Remy-Martin/Minolta Test C. How Can Japanese Corporations Protect Confidential Information? D. What Can the Japanese Government Do to Support Japanese Corporations? VII. CONCLUSION I. INTRODUCTION

What is the Japanese equivalent to a lawyer or attorney? The general answer is bengoshi. (1) In the corporate transactional context, however, "Japanese lawyer" does not necessarily mean "Japanese bengoshi" because Japanese lawyer includes both Japanese bengoshi and Japanese non-bengoshi. (2) This distinction significantly affects the analysis of whether the attorney-client privilege applies to communications between a Japanese corporation and its non-bengoshi (i.e., non-licensed) in-house lawyers. Should the attorney-client privilege be applied to all Japanese in-house lawyers (i.e., both licensed and non-licensed lawyers)? Will the analysis change with the development of new Japanese law schools opened in 2004? What can a Japanese corporation and the Japanese government do to protect confidential corporate information in U.S. courts?

Because many multinational corporations (3) have entered into transactions, U.S. courts have seen a significant increase in the number of lawsuits involving both U.S. and foreign corporations, particularly Japanese corporations. (4) What happens if a U.S. corporation sues a Japanese corporation in a U.S. federal court? U.S. discovery rules are generally more liberal than those of foreign countries, providing few barriers to total disclosure. (5) The attorney-client privilege is the oldest privilege among U.S. discovery rules. (6) By contrast, the scope of discovery in Japan is far narrower than that in the United States, and Japan does not have the same type of pretrial discovery as the United States. (7)

During discovery in a U.S. court, a U.S. corporation may request all documents that are "related to the claim or defense of any party." (8) The Japanese corporation might resist producing the documents, invoking the attorney-client privilege for communications with its in-house lawyers. (9) However, most of the in-house lawyers are non-bengoshi in Japan, (10) so the U.S. corporation could refute this defense on the grounds that Japanese lawyers are not admitted to the Japanese bar. (11) The court would be forced to decide whether the attorney-client privilege applies to the communications between the Japanese corporation and its in-house lawyers. There are strong arguments that U.S. courts should compel disclosure if the evidence is vital to the case. (12) Some courts have even denied foreign corporations protection for their confidential legal communications. (13)

In Japan, because of the limited number of bengoshi, various types of non-bengoshi perform functions usually performed by U.S. lawyers. (14) Legal education in Japan was fundamentally different from that in the United States before 2004, because a law degree in Japan was predominantly an undergraduate degree (15) and education was largely separate from practical legal training. (16) In April 2004, however, sixty-eight new law schools modeled on the U.S. system opened (17) to increase the number of bengoshi and the importance of the law in Japan. (18) Thus, a drastic change is expected in the number and role of in-house lawyers in Japanese corporations.

This Note explains that U.S. courts would likely extend the attorney-client privilege to a non-bengoshi manager of a legal department of a Japanese corporation but not to most of the other non-bengoshi in-house lawyers working there. Part II provides an overview of the attorney-client privilege in the United States. Part III explores the Japanese legal system including the discovery rules, development of legal education, and roles of in-house lawyers. Part IV discusses various approaches taken by U.S. courts to the application of the attorney-client privilege for foreign legal professionals. Part V focuses on two cases from U.S. federal courts applying one of these approaches, and examines arguments for and against the recognition of the privilege for Japanese non-bengoshi in-house lawyers. Part VI analyses which approach U.S. courts would likely take and what Japanese corporations and governments could do to protect confidential corporate information.

2. AN OVERVIEW OF ATTORNEY-CLIENT PRIVILEGE IN THE UNITED STATES

   1. Defining and Justifying the Privilege

      The attorney-client privilege is the oldest privilege protecting confidential communications. (19) Wigmore formulated the attorney-client privilege as follows:

      (1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal adviser, (8) except the protection be waived. (20)

      Under the modern approach, there are only four basic elements required to establish the existence of the attorney-client privilege: (1) a communication; (2) made between privileged persons; (3) in confidence; (4) for the purpose of obtaining or providing legal assistance for the client. (21) The party asserting the privilege must raise and demonstrate each element of the privilege explicitly, affirmatively, and in a timely manner. (22)

      First, a communication is "any expression through which a privileged person ... undertakes to convey information to another privileged person, and any documents or other records revealing such an expression." (23) Second, privileged persons are "the client (including a prospective client), the client's lawyer, agents of either who facilitate communications between them, and agents of the lawyer who facilitate the representation." (24) Third, a communication is in confidence if "at the time and in the circumstances of the communication, the communicating person reasonably believes that no one will learn the contents of the communication except a privileged person ... or another person within whom communications are protected under a similar privilege." (25) Finally, a communication is made for the purpose of obtaining or providing legal assistance "if it is made to or to assist a person: (1) who is a lawyer or who the client or prospective client reasonably believes to be a lawyer; and (2) whom the client or prospective client consults for the purpose of obtaining legal assistance." (26)

      The main purpose of the attorney-client privilege is to encourage clients to make full and honest disclosure to their attorneys and thereby promote broader public interest in the observance of the law. (27) The rationale is premised upon three assumptions. First, complying with obligations under modern complex law and uncertainty about the law make it necessary for clients to consult lawyers. (28) Second, a client who consults lawyers would not be able to obtain adequate legal assistance without disclosing all of the facts. (29) Finally, clients would be unwilling to disclose all facts unless they could be assured the privilege. (30)

      By contrast, as Wigmore noted, the attorney-client privilege could obstruct the administration of justice by violating the public's "right to every man's evidence." (31) The privilege, therefore, "should be recognized only within the narrowest limits required by principle," and "[t]he...