Monday, 31 May 2021

Without the right approach, discovery projects in major litigation or arbitration can be over-engineered, unnecessarily expensive and may not extract the most crucial insights from the information being considered.

Where parties are looking to resolve a dispute quickly and effectively, a comprehensive approach to the exchange of relevant information is just as important as considering costs. One of the advantages of an arbitral process over a litigious one is that the parties, along with the arbitrator, have more freedom to determine the approach to discovery that best suits the needs of the matter in hand.

A common misconception about discovery is that costs can be managed by limiting the number of documents to be produced. However, when it comes to the actual production of discoverable documents, there is little more cost or effort in producing 500,000 documents than there is in producing 500 documents. Both sets of documents will fit on a small USB flash drive. The extra cost is certainly not a proportional one, it does not cost a thousand times more to produce 500,000 documents compared to 500. Therefore, it is the quantity of documents to be considered, rather than that to be produced, and the level of human review conducted that often dictates the cost. In the search for truth, legal teams must be confident that all of the relevant information has been considered before identifying and exchanging the final set.

Early engagement between the parties to an arbitration, and with their discovery experts, is key to understanding the potential volume of data, the nature of that data and its likely relevance. Data that resides in archive or on backups of superseded systems can be particularly costly and time-consuming to extract. It is important to understand the potential relevance to determine whether the cost of extraction and processing is justified. Where there is disagreement between the parties, some form of cost-shifting could be considered whereby the opposing party agrees to underwrite the cost of extraction and processing and a subsequent review conducted to determine whether the information is relevant to the outcome of the case and, therefore, worth the cost.

Arbitration discovery orders may also, indirectly, contribute to costs as they are inherently subject to interpretation. In a recent litigation matter, not only was the initial discovery limited to 500 documents per party, but they had to be ‘the most important’ 500 documents. This would have required the parties to locate all relevant documents and then rank them in order of importance – a process that is both subjective and open to interpretive bias. There is even a degree of subjectivity among any review team whereby individuals may disagree on the relevance of certain documents, causing delays in the review process, overlooking relevant documents or risking inadvertently passing on relevant material. The result is an expensive and far from perfect process. Arbitrators have the option to draft discovery orders in a way that removes as much subjectivity as possible – criteria such as date ranges, file types, source information systems or custodians and the presence of keywords or phrases are all good examples.

Review approaches

Different review approaches can also impact time and cost savings or overruns.

Search terms reports

Search terms reports are a useful tool that can provide valuable insights, such as the number of documents when attachments are included (with the documents caught by the searches) and the number of unique hits (caught by one term only) per search term. Terms that return a large number of unique hits or a disproportionate number of hits are easy to identify and can either be removed or refined. Identifying and removing repeated content, such as email disclaimers, can also reduce the number of ‘false positive’ hits which, in turn, reduces time and costs and improves quality.

Technology Assisted Review

There are many instances where courts have prescribed the use of certain review techniques (particularly Technology Assisted Review (TAR)), attempting to remove bias from the discovery process and reduce the cost. However, a TAR process still requires some level of human input and any small amount of bias can be amplified across the project. Sophisticated and well-resourced parties to arbitrations have the means to interrogate large volumes of data, and it is logical for parties to hand over more data without the need for an expensive and time-consuming review process.  Each party can then use the tools they have, including TAR, to find those documents that they consider relevant to their respective arguments. This also reduces the cost involved with agreeing discovery categories and resolving differences regarding how those categories should be interpreted.

Privileged review

Traditionally, potentially privileged documents would be searched for and separately listed. An option is to produce a list of documents to be withheld that, based on their characteristics (e.g. sent by a lawyer), are likely to be privileged. Where an opposing party identifies a document on the list that they may be interested in, a review can be conducted to determine the true nature of the document. This approach is imperfect and may result in both over-claiming privilege and inadvertent disclosure, but it is cost effective. If the parties to an arbitration are comfortable, inadvertent disclosure can be mitigated via a clawback agreement. Ideally, though, parties would manage their privileged documents by segregating them in the first place. The alternative is conducting a detailed privileged review which is an expensive process. A TAR approach is generally not effective in this context and it requires more senior lawyers to conduct the review.

Methodology matters

The cost of review is usually the biggest component of the overall cost of discovery and, therefore, presents the best opportunity to make significant savings. The methodology for determining relevance and identifying privileged or confidential material is important and also contributes to managing costs and identifying efficiencies.

Data that is collected should be processed in a mutually acceptable way and each document identified by a unique reference following an agreed numbering format. A document should only ever be referred to by one number, improving both tracking and cross referencing.

The use of structured numbers, such as ABC.001.002.0003, has become increasingly popular in Australia, especially when compared to the US style of ‘Bates’ numbering, such as ABC.0000012345. Firstly, it is easier to spot and rectify a typographical error in a structured number that is referred to in a statement or report. Additionally, an advocate in an arbitration can refer to a structured number in shorthand. ABC.001.002.0003 becomes, “ABC dot one dot two dot three,” when read out in an arbitration hearing. The court stenographers are familiar with the format and can type the full document ID in the transcript for automatic hyperlinking.

There are several other benefits to structured and consistent document numbering. International arbitrations, by their very nature, involve parties, experts, counsel and judges from various geographic locations, different jurisdictions and, indeed, different legal frameworks (civil, commonwealth etc.). Therefore, one cannot assume either a common understanding of discovery or a set of clear and consistent rules regarding the processes involved.

By using common referencing, hyperlinking of electronic statements and communication of these documents via FTP, the entire preparation process is streamlined and more secure. This is particularly important in a virtual hearing environment, now a common feature of international arbitrations.

Overall, any discovery exercise in an arbitral process must be a proportional and economic one. The cost of exchanging documents must be relative to their evidentiary value and the total cost of discovery should be reasonable regarding the value of the claim, in dollar terms or otherwise. After all, arbitrations, as an alternative to court proceedings, are designed to resolve disputes in an economic fashion.


The explosion in the use of electronic communication has produced a wealth of reliable and recoverable information that records the precise nature of what was communicated between claimants and respondents, other related entities and amongst themselves. It is no longer necessary to heavily rely on a witness’s ‘hazy’ recollection of what was said and agreed – it is often conveniently typed in black and white. If the desired outcome of any dispute is a just and fair resolution and in a cost-effective fashion, then the eDiscovery process should be viewed as an opportunity to facilitate that process and not one that should be minimised in an attempt to save money.