Electronic Discovery (also referred to as E-discovery) has become an integral part of the discovery process in complex commercial disputes in U.S. Courts. Recently, it has also been gaining increased recognition by domestic and international arbitration institutions, such as the American Arbitration Association (AAA), its international arm, the International Centre for Dispute Resolutions (ICDR), and other international arbitration institutions, such as the Chartered Institute of Arbitrators (CIArb) and the International Court of Arbitration of the International Chamber of Commerce (ICC). In this article, the use of E-discovery in U.S. litigation and its growing, but reluctant use in international arbitration are discussed. In addition, recommended suggestions for increasing the effectiveness and efficiency of E-discovery in international arbitrations are provided.

E-Discovery and Electronically Stored Information (ESI)

What is E-discovery? E-discovery “is the obligation of parties to a lawsuit to exchange documents that exist only in electronic form (known as ESI).”¹ Electronic documents that can be subject to e-discovery include “e-mails, voicemails, instant messages, e-calendars, audio files, data on handheld devices, animation, metadata, graphics, photographs, spreadsheets, websites, drawings, and other types of digital data.”²

As digital technology has evolved, computers and smart phones have become common tools for businesses and individuals. More of the company information used and communicated in the normal course of business, such as e-mails, financials and other internal business documents, is now maintained electronically.

Table 1 above presents several estimated measurements that illustrate the proliferation of electronic documents. For example, 90% of all documents generated today are electronic.³ Consequently, most of the information sought through discovery in commercial disputes is going to be electronic documents and data.

E-Discovery in U.S. Litigation

The discovery process in complex commercial litigation, such as patent infringement suits in U.S. district courts, is often lengthy and can entail substantial disclosures by the parties involved. These disclosures can include requests for and production of documents, interrogatory responses, answers to admissions and deposition of fact witnesses. The Federal Rules of Civil Procedure were amended in December 2006 to reflect that “electronically stored information” was discoverable.⁴

The proliferation of electronic documents has led to the increased use of E-discovery to manage the preservation, collection, review, and production of information in complex commercial disputes.5 This increased use is being driven by how information is maintained, and E-discovery is often used now regardless of the expected volume of documents that need to be reviewed and produced.

E-Discovery in International Arbitration

International arbitration is an alternative dispute resolution (ADR) forum to litigation in U.S. and other national courts for companies involved in international commercial disputes. The guiding principles of arbitration institutions, such as the AAA and the ICDR, are that “commercial arbitration, and particularly international commercial arbitration, should provide a simpler, less expensive and more expeditious form of dispute resolution than resort to national courts.”6 Compared to U.S. litigation, for example there historically has been much less discovery and disclosure of information, including documents, in international arbitration.7 Moreover, other forms of disclosure, such as “Depositions, interrogatories, and requests to admit, as developed in American court procedures, are generally not appropriate procedures for obtaining information in international arbitration.”⁸

This characteristic of international arbitration, however, has been changing recently, as damages demands have “skyrocketed in the last 15 years,” and “[r]esolving these complex disputes often requires increased fact-finding and greater scrutiny of damages issues.”⁹ As a result, arbitration proceedings can now have “longer briefing schedules, much bigger briefs, far greater reliance on experts and their testimony, and more procedural challenges to the arbitration.”¹⁰

And, since the majority of documents generated today are electronic, then “if there is to be disclosure [in international arbitration proceedings], electronic disclosure is unavoidable.”¹¹ Not surprisingly, the “proliferation of electronically stored information [that] is a major cost driver in U.S. litigation…[is] becoming a major cost driver in international arbitration.”12 This has caused many of the international arbitration institutions to issue discovery guidelines that specifically address E-discovery and electronically stored information.

The ICDR was “the first organization to develop comprehensive directions on the exchange of information in international alternative dispute resolution” in May 2008.¹³ It developed its “ICDR Guidelines for Arbitrators Concerning Exchanges of Information” (“ICDR guidelines”) because of “concerns within the ADR community about the increasing use in international arbitration of lengthy and expensive discovery, which is typical in court litigation.” The ICDR guidelines provided that (among other things) the “arbitration tribunal shall manage the exchange of information among the parties in advance of the hearings with the view to maintaining efficiency and economy.” The specific references to “Electronic Documents” in the ICDR guidelines emphasize that “Electronic Documents” should be made “available in the form (which may be paper copies) most convenient and economical” for the producing party. They also noted that “[r]equests for documents maintained in electronic form should be narrowly focused and structured to make searching for them as economical as possible.” Finally, the ICDR guidelines also stated that “Arbitrators should be receptive to creative solutions for achieving exchanges of information in ways that avoid costs and delay, consistent with the principles of due process expressed in these Guidelines.”

Other international arbitration institutions have also implemented discovery guidelines for E-discovery or taken steps to study E-discovery. Table 2 below shows the dates that selected international arbitration institutions adopted discovery guidelines that specifically addressed E-discovery.

The Chartered Institute of Arbitrators (CIArb) issued its “Protocol for E-Disclosure in Arbitration” (“CIArb protocol”) in October 2008.¹⁴ It noted that E-discovery was “for use in those cases (not all) in which potentially disclosable documents are in electronic form and in which the time and cost for giving disclosure may be an issue.” The CIArb protocol also outlined a four-part process for any request for disclosure of electronic documents that included a description of the document(s) and an explanation of how the document(s) are relevant and material to the case.

The International Institute for Conflict Prevention & Resolution (CPR) issued its “CPR Protocol on Disclosure of Documents and Presentation of Witnesses in Commercial Arbitration” (CPR protocol) in December 2008.¹⁵ In its “Philosophy Underlying Document Disclosure,” it noted that “arbitration…[is expected to] be expeditious and cost-effective as well as fundamentally fair” and that “arbitration is not the place for an approach of ‘leave no stone unturned’.”

The International Bar Association (IBA) just issued its “IBA Rules on the Taking of Evidence in International Arbitration” in May 2010. Its Article 3 specifically referenced electronic documents and contained language similar to the CIArb protocol.

Additionally, the ICC formed a “Task Force on Production of Electronic Documents in Arbitration” in August 2008, and is expected to issue guidelines addressing E-discovery later this year.

In short, these arbitration institutions were “trying to come up with ways to make e-discovery fast and inexpensive, yet still allow parties to obtain the documents they need.”¹⁶ This is the challenge going forward for E-discovery as a discovery tool in all commercial disputes, including international arbitrations.

E-Discovery Going Forward in International Arbitration

While dealing with E-discovery in any commercial dispute can be a challenge, there can be added complexities when the matter involves international parties, and there are language and cultural differences among the parties. It is important to understand and be aware of these differences, because they can provide insights into understanding how information is maintained and communicated internally. This knowledge, in turn, can improve a party’s efficiency and effectiveness in discovery by helping it to make the appropriate and targeted information requests.

Based on our experience addressing damage issues during the discovery process in commercial disputes, there are several steps that have improved the efficiency and effectiveness of E-discovery. These steps are listed below in Table 3.

First, involve damages experts early in the discovery process to conduct a preliminary economic analysis of the market within which the dispute has occurred. As noted above, these disputes are involving larger damages demands, and greater reliance on experts and their testimony. Early involvement by damages experts can result in more effective fact finding, and allow greater scrutiny of damages issues.

A short focused search of publicly available information of both English and native language information sources, such as industry studies, company financial statements, and trade press articles, can provide insights into key economic and financial issues. In particular, what are the main supply and demand factors that affect market performance and the business activities central to the dispute. Experts experienced in analyzing international markets and global supply chains for disputes or business transactions can provide knowledge of important business and government information sources to be used in this analysis. Language capabilities are also obviously a plus, and can enhance the collection and analysis of relevant source materials.

Second, the information gained in a preliminary economic analysis can be used to focus discovery requests, which can increase the likelihood that you will succeed in getting the information sought. For example, if a few products account for most of a firm’s profits, it may not be necessary to request data on all products. The preliminary economic analysis may also reveal references to internal forecasts or business plans used to support a point in an article or a company’s investor conference call or presentation. This reference can then be used in a discovery request as an example of the type of information ordinarily used by the company and that these documents should be produced. Targeted discovery will also be less likely to be termed “burdensome” and thereby risking not getting the information requested.

Third, investing the time and effort up front in discovery can also better position you to be able to verify the types of information being produced and to conduct reality checks. For example, sales or profit information from public sources in the preliminary economic analysis can be compared to the information produced to determine if it is complete. Sometimes, the best publicly available information are financials, industry reports or trade press articles in the native language where the same financial information may include more detailed information than an English language version of the same document. For example, a Chinese company issued an annual financial report in Mandarin that was over 200 pages, and an English version that was about 15 pages. Not surprisingly, the Mandarin version contained additional useful information and financial analyses not included in the English version.

Conclusion

Given the proliferation of electronic documents today, if there is going to be discovery in international disputes, including international arbitration, E-discovery appears to be here to stay. A central question that these international arbitration institution guidelines have tried to address is how do you balance the ability of E-discovery to essentially leave no stone unturned in searching for discoverable electronic information with the time and costs it can impose on the discovery process? Otherwise, legitimate inquiries may be unnecessarily restricted. It has been estimated that “[o]f the [electronic discovery] data analyzed, only 10-20 percent of that ends up being relevant while a staggering 80-90 percent is irrelevant and non-responsive to the case.”¹⁷ This is consistent with our experience with and without E-discovery, which is that most cases always boil down to a handful of key documents. But how do you find those documents? E-discovery is an essential discovery tool in the digital age, and targeted E-discovery can help efficiently find these documents.

¹ Sally Kane, “E-Discovery Defined,” About.com Guide.

² Ibid.

³ It was also estimated that “More than 80% of documents and data now exists only in electronic format” (William H. Knull, III, “Recent Developments in International Arbitration,” Mayer Brown LLP, May 2009, p. 11).

⁴ “Federal Rules of Civil Procedure, with Forms,” Rule 34, December 1, 2006, p. 50. This amendment was the result of extensive study in Advisory Committee and through a period of public comment that dated back to 1996. The amendment also required that E-discovery issues be addressed early in the discovery process (Eric Rosenberg, “Get Smart About Analyzing ESI,” Law Technology News, February 15, 2008).