Going local on cross-border disputes

Adam Stronach says local expertise is key to plotting a successful course through the minefield of international litigation. Adam Stronach is senior manager of the expert witness team at Deloitte & Touche.

Picture the scene – you get instructions in a large multi-jurisdictional piece of litigation and are faced with the task of sifting through the huge pile of papers discovered by a zealous associate in downtown Moscow.

Probably the last thing on your mind is the need to hire an expert to help with discovery. Yet this could be the answer to your prayers. Many of the largest accountancy firms have offices in the former Soviet Union – their network of experts could be invaluable to your case.

In addition to the expert accountant's usual role of quantifying damages, firms with an international presence can assist solicitors with identifying and securing accounting records as part of the discovery process.

Disputes involving parties based in emerging markets, such as Eastern Europe or South East Asia, present their own peculiar problems. Although this is the age of seamless global communications, trying to finalise witness statement details with a client half way around the world can still be a challenging experience.

One major concern for expert accountants is the quality of the financial records and data held by litigants, who are often unfamiliar with good financial housekeeping, let alone the minutiae of rules of evidence in litigation or arbitration proceedings.

Embryonic company law and prescribed charts of accounts found in emerging markets often do not identify in sufficient detail the financial effect of the contract or issue in dispute. At this stage, it can prove invaluable to employ an expert who can think around such problems and who can piece together half-completed analyses, which although seemingly unconnected with statutory accounts, provide an insight into the disputed matter. This work also needs to be underpinned by interviewing local staff to understand how the business concerned operates.

This may pose additional problems. For example, while people in the former Eastern Bloc countries are always very helpful, they may view lawyers, accountants and other professionals in a position of authority with suspicion. And just as they used to do with their old communist masters, they may be economical with the truth when answering queries posed by the legal and expert's team. It can be very frustrating and a waste of resources unless handled in a firm but sensitive way.

Overcoming differences in culture, particularly business culture, is very important to the success of cross-border cases. The international accountancy firms have extended their network of offices carefully and will include local office industry specialists, with years of experience, as part of their team. Detailed local knowledge can be the key to finding a way through an intractable international dispute. Putting the local industry pieces of a jigsaw together to form the complete dispute picture is often the best way to proceed.

Of course, many issues encountered by the expert are similar to those in English High Court litigation. But adjusting your approach to take account of local cultural issues, using local office staff in your team and having a clear understanding of industry accounting and qualification issues peculiar to the jurisdiction in which you are operating, may make the difference between a successful case, or one that is lost and forgotten down a Siberian salt mine.

Case Study

We were instructed to quantify loss of profits under a contract operated in Eastern Europe, although the case was to be heard before the London High Court.

A major part of the job was to liaise and manage part of the discovery process and to ensure that all the financial information needed was sent to the UK.

The corporate structure and accounting framework that we examined was determined by local law. Local office staff were used to help explain the accounting documentation that was available and the unusual business issues involved in the case.

Using this international approach at the outset of our work helped with the determination of case strategy, and a convincing and simplified presentation of quantum. Our client eventually achieved a very satisfactory settlement.