Show and tell

New rules covering electronic files could signal a change in how documents are produced in international arbitration cases, say Ian Meredith and Sarah Aspinall

The decision by the US Federal Court to adopt new rules providing for widespread discovery of electronic documents and the parallel development of forensic and other IT techniques may herald a change to the manner in which parties to international arbitration proceedings will approach document production.

Many in the international arbitration community were beginning to point to a developing consensus over the proper scope of document production some way between traditional civil law and common law. Now, with the advent of new technology allowing for electronic document ‘scavenging’, and with many major corporations with a presence in the US being forced by the Federal Court Rules to establish systems enabling them to comply with e-discovery orders, it may be that there is set to be a further shift. Whether this will lead to a polarisation with the creation of a US and a non-US position, or a more subtle evolution, is too early to say.

Statistics show that more than 93 per cent of information now being created is done so and stored in electronic format. The proliferation of email and other types of electronic records, combined with the relative ease with which massive quantities of electronic information can be backed up and stored, has led to increasing record creation and retention.

Litigants, whether in court or in arbitration, have started to view the electronic records of opposing parties as potential treasure troves of records that can be searched to support their cases, or undermine the cases of opposing parties. Several recent US cases have resulted in multimillion-dollar verdicts because of ‘smoking gun’ electronic records, or sanctions against parties that have failed to preserve and produce electronic records they were obliged to preserve and produce. Similarly, the focus on electronic discovery in the UK is increasing, as can be seen in some high-profile cases that have begun to turn on the contents of emails and other electronically stored documents.

Disclosure discrepancies

Traditionally, the purpose of common law disclosure was to ensure that all relevant documents, including those that are prejudicial to a party, should be produced at court. This approach was greeted with bewilderment by the civil law jurisdictions, which only produced documents on which they intended to rely. The conflicting approaches to disclosure between civil and common law jurisdictions has been one of the great challenges faced by international arbitration.

The civil law model differs fundamentally in its mechanisms of disclosure to the common law model. Not only is the taking of evidence governed by a strict relevance standard (the parties produce documents on which they intend to rely and not documents that are likely to damage their case as per the much broader relevance standard in the common law model), but most civil law jurisdictions do not recognise pre-trial disclosure. In most civil law jurisdictions the tribunal has the power to order production of documents on its own initiative (by contrast with the party-based discovery in the common law model) but cannot compel the parties to produce such documents. However, the tribunal may draw adverse inferences from a party’s refusal to do so.

Pursuant to the institutional rules, arbitral tribunals have the power to order document disclosure. For example, International Criminal Court Rule 20(5) provides that “the arbitral tribunal may summon any party to provide additional evidence”; American Arbitration Association Rule 19(3) provides that “the arbitral tribunal may order parties to produce other documents, exhibits or other evidence it deems necessary or appropriate”, and London Court of International Arbitration Rule 22.1(e) provides that “unless the parties at any time agree otherwise in writing, the Arbitral Tribunal shall have the power, on the application of any party or of its own motion, but in either case only after giving the parties a reasonable opportunity to state their views to order any party to produce to the Arbitral Tribunal, and to the other parties for inspection and to supply copies of any documents or classes of documents in their possession, custody or power which the Arbitral Tribunal determines to be relevant”.

Given the wide discretion of the tribunal to determine what evidence it should hear, the critical challenge for a party in an international arbitration is to develop a strategy for presenting and submitting evidence that will persuade members of the tribunal.

While the powers provided by these rules are certainly broad enough to allow arbitrators to order disclosure of potentially relevant electronic evidence, the traditional practice has been to limit pre-hearing disclosures. As a guideline for a compromise between the common law model and the civil law model, arbitral tribunals have increasingly looked to the International Bar Association (IBA) rules, which codify what was felt to be common practice. Article 1 of the IBA rules provides that a ‘document’ means “a writing of any kind, whether recorded on paper, electronic means, audio or visual recordings or any other mechanical or electronic means of storing or recording information”. Article 3 (1) provides a form of mandatory disclosure, requiring each party to submit to the arbitral tribunal and the other parties “all documents available to it on which it relies, including public documents and those in the public domain, except for any documents that have already been submitted to another Party”.

The IBA rules were intended to strike a balance between different cultural approaches. Requests are limited by:

  • the requirement that parties specifically identify the documents that they seek;
  • the limitation to “narrow and specific” categories “reasonably believed to exist”;
  • the burden on the requesting party to show relevance and materiality; and
  • the various grounds for objection allowed under Article 9.

    When seeking to resist efforts by an opposing party to gain access to further document production, parties commonly seek to argue that the requested documents fall within one of the seven sub-categories within Article 9 (2) of the IBA rules (whether they base their arguments specifically upon the IBA rules). The arbitral tribunal shall, at the request of a party or on its own motion, exclude from evidence or production any document, statement, oral testimony or inspection for any of the following reasons:

  • lack of sufficient relevance or materiality;
  • legal impediment or privilege under the legal or ethical rules determined by the arbitral tribunal to be applicable;
  • unreasonable burden to produce the requested evidence;
  • loss or destruction of the document that has been reasonably shown to have occurred;
  • grounds of commercial or technical confidentiality that the arbitral tribunal determines to be compelling;
  • grounds of special political or institutional sensitivity (including evidence that has been classified as secret by a government or a public international institution) that the arbitral tribunal determines to be compelling; or
  • considerations of fairness or equality of the parties that the arbitral tribunal determines to be compelling.

    In the area of electronic disclosure, the most commonly relied upon ground to resist disclosure is “unreasonable burden to produce the requested evidence”. In light of the Federal Court Rule changes, many corporations are now taking steps to connect IT systems and put in place a means of accessing and producing documents for the purposes of US court actions.

    Having done so, to what extent can they then argue, in the context of international arbitration proceedings, that they do not have an ability to locate and produce documents and rely upon the ‘overly burdensome’ test? Similarly, where a requesting party is willing to meet the cost of forensic IT consultants to utilise ‘scavenging technology’ to search through electronic records for electronically held documentary records, how can a request that otherwise satisfies the relevance and marketing tests be defeated on an ‘overly burdensome’ basis?
    The Federal Court rule changes look set to have far wider repercussions across the world and may enable requesting parties (particularly if party to arbitral claims against US companies) to access significantly more documents.

    Ian Meredith is a partner and Sarah Aspinall is an associate at Kirkpatrick & Lockhart Nicholson Graham