The growing disclosure threat to non-US issuers
Lee Dunst explains why companies that cooperate with US government investigations are falling foul of discovery rules.
This article appears courtesy of International Financial Law Review
Companies based outside the US traditionally have assumed that they can rely on the Hague Convention on Taking of Evidence Abroad in Civil or Commercial Matters (to which more than 40 nations are signatories) to protect them from the document production regime in lawsuits filed in the US. These protections have begun to break down in recent years, however, as non-US companies have found themselves operating within the jurisdiction of US courts.
An example of this conflict between Hague Convention protections and the more liberal US discovery system arises when non-US companies agree to cooperate with US regulatory and prosecutorial agencies, such as the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ), and send documents to the US for production to these governmental entities. Doing so generally results in the loss of Hague Convention or US privacy and confidentiality protections and, as a result, allows private litigants to gain access to the foreign companies' documents. Despite this, in the prevailing atmosphere, where companies are given little option but to cooperate with government inquiries, non-US companies generally cooperate with the US government and risk the possible disclosure of their documents to private parties.