When deciding which dispute resolution mechanism is best suited to a favorable outcome, discovery is a consideration of paramount importance. Whether one wishes to seek broad, offensive discovery of their adversary or a limited discovery as to their own records, such decisions can influence the choice between U.S. litigation and arbitration. The choice is particularly relevant when one foresees an international, rather than domestic, dispute. In this context, submitting disputes to international arbitration can help avoid the renowned “fishing expeditions” that are otherwise typical of U.S. domestic litigation.
International arbitration, given its transnational nature, typically involves practitioners from both common and civil law systems. Such an environment could create a tension in discovery expectations, with the common law advocate accustomed to broad fact investigations and civil law counsel exhibiting great reticence to such access. The clash of those two systems in practice has made international arbitration procedures to become a “compromise” between the two systems, and that compromise is particularly evident regarding discovery and production of evidence. International arbitration’s “discovery” process marries the ability to utilize important document requests tools to support counsel’s submissions, but refraining from the U.S. expansive access that concerns parties from civil law countries.
In the United States, the common law jurisdiction with the broadest discovery rules and practices, discovery is wielded as a weighty sword. The threat of wide access into corporate records, communications, and other sensitive materials is utilized by many practitioners to seek out a favorable settlement or resolution of a case. Understandably, the ability of an opposing party to compel production of a wide range of materials that may be adverse to our party’s case, and need not even be admissible in evidence, can be a threatening challenge. On the other hand, in civil law jurisdictions, discovery does not exist. Because in civil law courts parties rarely have to produce damaging documents, discovery is often seen as a violation of party’s expectations of privacy and confidentiality. It is no surprise, then, that parties from civil law countries are especially nervous when faced with the prospect of a litigation in the United States.
International arbitration provides the common ground. As a “creature of contract,” it allows parties to design the arbitral process. Indeed, all procedural decisions, even those concerning how to conduct discovery and production of evidence, are subject to the parties’ agreement before or after a dispute arises.
To help practitioners determine which dispute resolution mechanism is preferable regarding the discovery objectives of parties from different jurisdictions involved in cross-border disputes, we provide a brief comparison of the salient features of discovery in U.S. litigation and in international arbitration.
Governing Rules of Procedure
Unlike discovery in U.S. litigation, which is regulated in and governed by the Federal Rules of Civil Procedure at the federal level and similar rules at the state level, there are no commensurate governing rules on discovery in international arbitration. Institutional arbitration rules provide very little guidance on the subject and give full discretion to the parties and/or arbitrators to decide on evidentiary procedures. The most detailed guidance to date on this subject in international arbitration is found in soft—rather than legislative—law: the 2010 IBA Rules on the Taking of Evidence in International Arbitration (IBA Rules). The application of such soft law, however, needs to be agreed on by the parties, either in the arbitration agreement or during a procedural hearing right after the arbitration is initiated. It can also be applied by the arbitrators if the parties have granted them this discretion.
Scope and Applicable Standard
FRCP Rule 26(b)(1) provides a broad scope for discovery, establishing that while the materials sought must be “relevant” and “proportional,” they explicitly “need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.” To the contrary, international arbitration calls for targeted, specific document requests that must show not only relevance, but materiality to the outcome (an arguably higher standard than proportionality) and a reasonable explanation as to why the document is believed to be in the opposing party’s possession.
Document requests as a tool to seek discovery of documents is available and used in both U.S. litigation and in international arbitration. However, document requests in international arbitration have their own specific format and procedure. Practitioners in international arbitration often utilize the “Redfern Schedule”—a tabular form that succinctly provides requests for disclosure along with detailed reasons supporting each request. The Redfern Schedule is prepared by the party seeking production of documents and is sent to the opposing party from whom discovery is sought. The opposing party then responds to each of the requests, accepting to produce a document, or objecting to the request, incorporating its response in the column of the schedule identified for that purpose. Parties then attempt to resolve disclosure conflicts between themselves, attempting to avoid tribunal involvement. In cases where agreement cannot be reached, however, the parties will then forward the Redfern Schedule with the parties’ entries for the tribunal to decide over each disputed request, and the tribunal will enter its decision into the schedule. This approach allows parties to keep disclosure requests organized and efficient, avoiding the type of discovery battles that prolong many U.S. commercial litigations.
In U.S. discovery, litigants may utilize a slew of probing investigatory instruments: depositions, interrogatories, ordering a party to designate someone to testify or be deposed, and identifying witnesses post-discovery. International arbitration, by contrast, does not allow for witnesses to be deposed or for parties to issue interrogatories; instead, written witness statements, which replace direct examinations, are produced along with written submissions. Thus, unlike U.S. litigation where counsel employs extensive direct examination, international arbitration counsels question their own witnesses as a “warming up” for the cross and tribunal examinations to take place. Cross-examination is similar in both U.S. litigation and international arbitration, although the arbitral tribunal in international arbitrations are often more active in questioning. Moreover, given the free style evidentiary procedure employed in international arbitration hearings, it is possible in international arbitration to have expert witnesses facing each other in a “debate” before the tribunal (called “hot-tubbing”) instead of only having each of them examined separately, as U.S. courts usually do.
Timing for document requests and selection of witnesses plays a key difference between the procedures. Given the broad window allowed for U.S. discovery, parties may seek access to documents and witnesses they learn about while conducting discovery at a later stage. Differently, international arbitration limits this window by generally having document requests and witnesses identification after each of the written submissions. While in U.S. litigation one can wait to identify relevant witnesses in preparation for trial, after document discovery, in international arbitration, relevant party witnesses have to be submitted by each party (the opposing party cannot request that one’s witnesses be submitted) at the time of the written submissions. If a witness was not submitted by a party during the written procedure, it cannot be called later by the opposing party at the hearing phase. Similarly, documents that were not produced together with the written submissions cannot be later incorporated into the procedure, unless a party shows that there were good reasons why it had not done so in due time (e.g., they had no means to know about the existence of that document beforehand) and the tribunal authorizes such addition. Thus, parties must know at an early stage what to request based on their limited knowledge of which documents they reasonably believe are in the opposing party’s possession.
When deciding between U.S. litigation and international arbitration, the foregoing comparison may serve to understand that international arbitration may be preferable in certain cross-border disputes, and a good alternative to U.S. litigation. With respect to discovery specifically, international arbitration will be an attractive option to parties wishing to avoid being the target of broad U.S. discovery, with the risks, length and costs that it entails, and instead be subject to a more limited and controlled procedure. Additionally, international arbitration can provide an appropriate solution in instances where one of the parties to the transaction or already existing dispute raises concerns about lack of impartiality of domestic courts. In these instances, international arbitration can provide a neutral forum to ease those concerns, while still making offensive discovery available.
Lucila Hemmingsen is a partner in Kirkland & Ellis’s international arbitration practice. Jonathan Levin is a litigation associate at the firm. Amanda Sampaio is an international arbitration associate at the firm.