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23 November 2017
This update explores how best to manage disclosure in international arbitration in light of the growing volume of electronic data. As the number of electronic devices, applications and other technologies increases, there has been a corresponding growth in the volume of potentially disclosable data in a dispute. While parties' disclosure obligations are clearly defined in the context of litigation, international arbitration offers a more flexible approach to disclosure which will often be influenced by the legal jurisprudence of the tribunal.
In addition to traditional IT systems which capture and store large quantities of data, new applications and technologies are fuelling exponential growth in data. Mobile devices – from laptops to wearable technology – and other new technologies such as the Internet of Things are increasingly being used by companies and employees, generating significant levels of new data. Cisco Systems is behind an initiative to track levels of global mobile data. It reports that mobile data traffic has grown 18-fold over the past five years, and grew by 63% in 2016 alone. In addition to the proliferation of physical devices, companies are increasingly using cloud-based technologies to manage and store data. Such technologies provide access to electronic resources via the Internet and facilitate the flow of data between users. In the context of disputes, such data may be disclosable and therefore present problems to arbitration participants in terms of access and collection.
The sheer volume of information that may be relevant to a dispute can present issues for parties to an arbitration, in terms of both the extent of data capture which may be required and the cost of managing the disclosure process. As things already stand, disclosure is often the most expensive part of an arbitration, particularly where the process is disputed. Such costs may increase further in line with the amount of data. It is therefore important that parties, their counsel and arbitrators understand and consider – at a sufficiently early stage in the arbitration proceedings – not only the parties' disclosure obligations, but also processes that might simplify matters or reduce associated costs.
Arbitration is inherently a more flexible process than litigation. Parties to an arbitration are generally at liberty to agree on an approach to disclosure, overseen by the arbitral tribunal. In the absence of (or in addition to) the parties' agreement, arbitrators will be guided by the chosen arbitral rules and the procedural rules of the seat. However, most arbitral rules and arbitration laws afford arbitrators general powers to conduct the arbitration and the disclosure process in the way that they see fit, but without offering any real guidance.
The International Bar Association (IBA) Rules on Taking Evidence in International Arbitration offer some non-binding guidance on disclosure and wider evidence issues. In the rules, 'document' is defined broadly to include "data of any kind, whether recorded or maintained on paper or by electronic, audio, visual or any other means". However, much of the IBA rules' guidance on disclosure is either predicated on the parties reaching agreement or confers a wide discretion on the tribunal. The IBA rules are also generally non-binding, as few parties expressly incorporate them into arbitration agreements.
Given the limited guidance around the disclosure process in arbitration, participants and arbitrators are often influenced – rightly or wrongly – by the courts' approach to disclosure. As a result, the tribunal's legal background, the parties and their counsel can heavily influence the scope and extent of disclosure. A commonly cited example of this is the difference between arbitrators from a common law background and those from a civil law background. Disclosure in common law courts is generally more extensive than in civil law courts, where little to no disclosure may be ordered. Approaches to disclosure will differ even within courts of similar legal jurisprudence. As a result, arbitrators from a civil law background might be perceived as more reluctant to order disclosure than arbitrators from a common law background. They might also be perceived as tending to accept only limited and specific disclosure requests, whereas arbitrators from a common law background may be more amenable to wider-ranging disclosure requests.
However, not all arbitrators will necessarily be influenced by the approach of their home courts – in fact, many might consider this antithetical to the very nature of arbitration. It can therefore be risky to assume that an arbitrator's approach will be aligned with that of their home courts.
Various tools developed recently aim to navigate this tricky issue of the uncertain approach of arbitrators to disclosure. Global Arbitration Review has launched 'GAR-ART', an arbitrator research tool offering profiles of arbitrators, including a section in which the arbitrators may state their procedural preferences. It also provides a list of tribunal chairs, co-arbitrators and counsel with whom each arbitrator has conducted cases, whom parties can contact to obtain up-to-date feedback on the arbitrator's approach to conducting arbitration. This is an interesting development for a number of reasons. First, it will be interesting to see how many arbitrators are willing to set out their stalls in this way – many, justifiably, question whether it is appropriate to do so, as their approach will be tailored on a case-by-case basis. Second, assuming that a sufficient number of arbitrators are willing to disclose preferences, it will be interesting to see what trends develop and whether case management style in fact proves influential in the choice of arbitrator. It will also be interesting to see whether the seemingly inevitable feedback loop occurs (ie, parties end up influencing arbitrators' approach to disclosure via the selection process).
The difficulties of having limited guidance on disclosure in arbitration are compounded by the confidentiality of and lack of precedent in arbitration – arbitrators are navigating these tricky issues in isolation.
Various novel approaches to disclosure in litigation are being developed in a number of jurisdictions. However, parties and arbitrators should bear in mind that not all aspects of litigation disclosure protocols will be appropriate to arbitration. Arbitration has particular attributes that can present unique problems for the disclosure process. For example, tribunals generally only have jurisdiction over the parties to the arbitration agreement and not third parties. Where data is held by third parties (eg, in a distributed-host cloud system or by an internet service provider), a tribunal will generally not have the power to order disclosure against that third party. In this situation, a party to an arbitration will generally need to seek the assistance of the court, to obtain an order for non-party disclosure. Whether such remedies are available will depend on the procedural law and supervisory courts of the arbitration.
Another important development in litigation is that many courts are actively embracing technology. 'Predictive coding', a search technology which can be used to identify electronic documents relevant to the dispute, has been in use in litigation for some time and has recently been approved for use in the courts. In Pyrrho Investments Limited v MWB Property Limited ( EWHC 256 (Ch)) more than 3.1 million electronic documents needed to be reviewed (before an automated process of de-duplication, the number was 17.6 million). The judge stated that the cost benefits of technology-assisted review were significant and, moreover, that there was some evidence to suggest that this form of review was more accurate and consistent than a review carried out by humans.
As the volume of data increases, such technologies will become crucial to reducing the time and cost burden of disclosure – thus, in addition to causing the problem, new technologies might be part of the solution. Arbitrators, counsel and parties to arbitration must also continue to embrace new technology. Indeed, if technology-assisted review is in fact more accurate and efficient, it might become negligent not to do so.
It is clear that in the context of both litigation and arbitration, the sheer volume of data which may be disclosable between parties and which must therefore be dealt with will continue to grow exponentially. Arbitrators are in the somewhat unenviable position of having little guidance and almost complete discretion in dealing with this tricky issue. They bear the responsibility of ensuring that an effective but proportionate disclosure exercise is carried out without incurring unnecessary costs. The key seems to be engaging parties and their counsel at a sufficiently early stage in the arbitration, to agree not only the parties' disclosure obligations, but also what processes or technology might simplify matters or reduce associated costs. Arbitrators are advised to keep abreast of innovations being used in the courts, as well as new legal technologies.
Of course, parties and their counsel must also take responsibility and seek, in the spirit of arbitration, to agree a proportionate approach to disclosure. The flexibility of arbitration means that parties can – at least in theory – save significant time and costs as compared to litigation, but this relies on parties engaging properly to agree the process. Unfortunately, in practice, disclosure is too often a fertile ground for satellite disputes; in the desire to beat their opponent at all costs, parties and their counsel seem to lose sight of the clear benefits of a consensual process. There might therefore be an argument for arbitrators wielding their case management powers in a stronger, more pro-active way and imposing appropriate sanctions where parties are obstructive. New arbitrator profiling tools, such as GAR-ART, have the potential to track whether such active case management has proven popular among parties. However, the ability to track arbitrator conduct and what has proven popular with parties means that parties may influence arbitrator conduct in a way that they could not influence judges in litigation.
This leads to perhaps the final piece of the puzzle: the solution may be greater guidance for arbitrators, whether it is binding guidance by arbitral rules or laws or more detailed non-binding guidance in respect of e-disclosure protocols which parties can incorporate into their arbitration agreement, or adopt later. Parties and counsel are already using court-specific disclosure protocols in arbitration, which suggests that there is a place for greater formal guidance.
For further information on this topic please contact Dylan McKimmie at Norton Rose Fulbright LLP's Perth office by telephone (+61 8 9426 3222) or email (email@example.com). Alternatively, contact Alison FitzGerald at Norton Rose Fulbright LLP's Ottawa office by telephone (+1 514 847 4747) or email (firstname.lastname@example.org). The Norton Rose Fulbright LLP website can be accessed at www.nortonrosefulbright.com.
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