1. INTRODUCTION

The question examined in this paper is whether US-style discovery is "good" or "evil" in the context of international arbitration. Our answer is that, although full-fledged US-style discovery is "evil" if transplanted into international arbitration, tribunal-controlled and robust document production is "good" and even "great".

As reflected in major institutional arbitration rules, limited document production facilitates an exchange of information that is necessary for resolving many contentious disputes fairly. Far from opening the floodgates to full US-style litigation, it should result in the beneficial and expeditious resolution of key factual issues. Inefficient "fishing expeditions" can be prevented by careful case management: first, document production requests, which do not require discovery expertise, may be drafted specifically and with an eye towards maximizing procedural efficiency; second, requests that are overly broad or include irrelevant documents may be denied at the discretion of the arbitrators. Limited document production thus includes a beneficial combination of civil law and common law (US law) elements, which increases the fairness of international arbitration procedure and evidence gathering.

Other mechanisms of US-style discovery, which may be useful in the context of US litigation, are "evil" for the purposes of international arbitration because they would be impractical to incorporate or prohibitively complicated to use. For example, US-style discovery can include extensive depositions or disclosures. This is inconsistent with accepted international arbitration [Page340:] practice, in which parties produce the documents they intend to rely on at the time they file their initial memorials. Broad US-style discovery also presumes broad rules regarding privilege, which might conflict with certain civil-law-influenced regimes in use. In addition, numerous procedures, such as depositions and interrogatories, require US training and practice-tilting the playing field against others. Finally, studies have shown that US discovery is particularly vulnerable to abuse in high-stakes cases, which also constitute a large percentage of international commercial arbitration cases. Importing the full panoply of US-style discovery mechanisms would offer minimal improvements to evidence gathering in international arbitration, while multiplying the time and expense involved. In sum, full US-style discovery, which is tailored specifically to the US system, is not suitable for imposing on other regimes.

Section 2 of this paper provides a practitioner-oriented description of discovery in US courts. The explanation of US-style discovery should correct any ill-informed perceptions of US litigation practice. It also shows that US-style discovery, while poorly suited for international arbitration, is not "evil" when used in US courts.

Section 3 contains a brief discussion of major international arbitration rules. Recent developments, such as the new ICDR Guidelines for Arbitrators Concerning Exchanges of Information, show that the trend in international arbitration even in the US is to allow limited document discovery while rejecting full use of US-style discovery devices.

Section 4 returns to the subject of US-based practice, providing a brief description of court-assisted discovery under 28 U.S.C. § 1782. Under this statute, a party to a "foreign tribunal or court proceeding" may apply for an order from a US federal court for witness testimony or production of documents. Practitioners should be aware that Section 1782 allows limited US-style discovery from persons who reside in the United States.

This paper concludes that even as document production becomes increasingly common in international arbitration, there is little risk that full US-style discovery would ever be incorporated as well. [Page341:]

2. DISCOVERY IN THE UNITED STATES

"Although we have before us two highly competent law firms, there is, in this vast expanse of paper, no indication that any lawyer (or even moderately competent paralegal) ever looked at the interrogatories or at the answers. It is, on the contrary, obvious that they have all been produced by some word-processing machine's memory of prior litigation…

Accordingly, the Court, on its own motion, strikes both the interrogatories and the purported answers. To the extent that they may already have been filed, we direct the Clerk to return them to the respective parties. The parties are, furthermore, ordered never to refer to them again in this litigation." 1

- Judge Whitman Knapp of the Southern District of New York

"The discovery rules in particular were intended to promote the search for truth that is the heart of our judicial system. However, the success with which the rules are applied toward this search for truth greatly depends on the professionalism and integrity of the attorneys involved. Therefore, it is appalling that attorneys like defense counsel in this case, routinely twist the discovery rules into some of the most powerful weapons in the arsenal of those who abuse the adversary system for the sole benefit of their clients." 2

- Judge Peter Faye of the Court of Appeals for the 11th Circuit

a. Context

US-style discovery, like any procedural device, reflects the unique features of the legal system in which it was developed. When the US Federal Rules of Civil Procedure (Federal Rules) were adopted in 1938, the drafters' intent was to replace formalistic, court-managed pleading requirements with attorney-managed discovery. 3 The result is that "discovery" now constitutes a distinct phase in many complex civil litigation cases and can require significant time and money. 4[Page342:]

The differences between US-style discovery and other procedures for discovery are apparent from the time of the first filing in a case. In contrast to many civil law jurisdictions, where a party is required to produce the documents it relies upon, the plaintiff in a US court can file a claim without submitting any fact documents. All that the Federal Rules require is a "short and plain statement of the claim". 5

Given the relative brevity of the initial pleadings, parties in US litigation must rely on pre-trial discovery to exchange necessary information and assess the strengths and weaknesses of their positions. As the Supreme Court stated famously in Hickman v. Taylor: "No longer can the time-honoured cry of 'fishing expedition' serve to preclude a party from inquiring into the facts underlying his opponent's case. Mutual knowledge of all the relevant facts gathered by both parties is essential to proper litigation." 6

The vast majority of cases end during or after discovery, usually because they settle or because one party files a successful motion for summary judgment. 7 Thus, in addition to providing a mechanism for ascertaining the truth, US-style discovery weeds out frivolous claims and incentivizes pre-trial settlement.

Another key aspect of US-style discovery is that it is complemented by uniquely broad rules of privilege. In civil law jurisdictions, attorney-client privilege often rests with the attorney, not the client, and may not apply to in-house counsel or to client documents that repeat legal advice. The attorney-client privilege in the United States has greater scope, protecting any communication made in confidence for the purpose of obtaining or providing legal assistance for the client. Only the client can waive the privilege. Typical examples of privileged communications in the United States are a client's request for advice from counsel, a counsel's advice to a client, or a communication within a corporation where one employee within the group describes counsel's advice to another employee. Communications between in-house legal counsel and client corporations are also considered privileged. Because the attorney-client privilege is understood broadly in the United States, discovery requests that might otherwise jeopardize client confidences can be granted routinely. [Page343:]

b. Scope of discovery

Under the Federal Rules, parties are entitled to discovery regarding "any matter, not privileged, that is relevant to the claim or defense of any party". 8 In general, a party must produce all relevant documents and categories of documents that are not privileged. 9

c. Mandatory initial disclosures

Even before the substantive pleadings are filed, both parties must promptly disclose several categories of information, including all documents that are under its control and will be used to support its claims or defences. 10 Parties must also disclose a computation of damages and supporting materials. 11

d. Mechanisms for discovery

Discovery in the United States is driven by the parties and requires minimal court supervision. A specialized magistrate judge may be assigned to preside over discovery issues in complex cases.

i. Depositions

Depositions are oral proceedings where a party can take the testimony of any person, including non-parties. Testimony is provided under oath and the person giving testimony (the deponent) is represented by counsel. In most instances, the deposing party does not need to obtain a court order. Deposition transcripts can be used at trial to impeach a witness's testimony and can be a substitute for live testimony if the witness is not available for the trial.

ii. Requests for production

A "request for production" refers to a party's demand for specific documents, categories of documents or things that will be inspected, copied and returned to the producing party. The Federal Rules provide that any party may serve a request for production on any other party, subject only to the limitation that the requested items are within the permissible scope of discovery. 12 Non-parties may be required to produce documents upon order of the court. 13 The term "document" is construed broadly to include almost any type of written, recorded or digitized information. [Page344:]

Requests for production often form the basis of the typical "fishing expedition". For example, a request for production in even a simple contractual case would likely include over 30 categories of documents. Following are sample US-style document request categories for a contract claim:

1. All documents concerning Company's corporate structure.

2. All documents concerning the Contract, including but not limited to: (a) communications, arrangements, or understandings with representatives of Company in relation to the Contract; (b) any sums paid or benefits conferred in relation to the Contract; and (c) all negotiations leading to the signing of the Contract.

3. All documents concerning Company's performance of Sections 15 to 25 under the Contract.

Requests for production can become time-consuming and expensive in complex civil litigation cases. The responding party must produce every relevant category of documents, even if the documents within the category are themselves irrelevant. Preparing the response to a request for production may require hundreds of attorney hours for review of potentially privileged or confidential information. Parties also take advantage of broadly worded requests by "burying" harmful but responsive documents within a voluminous response.

iii. Interrogatories

Interrogatories are written questions that must be answered in writing and under oath. 14 Interrogatories, like requests for production, can relate to any matter that is relevant to a claim or defence of a party. 15 They can be an expedient means of obtaining detailed or non-controversial information such as names, dates, addresses or numbers. Interrogatories can also request factual information with reference to claims or defences. Because interrogatory responses are administered under oath, the written answers are available for use at trial. 16 The answers to interrogatories are almost always drafted by counsel.

The Federal Rules limit a party to 25 interrogatories. Any additional questions require leave of the court or stipulation. 17 Following are sample interrogatories:

1. Please identify the organization or individual which entered into the Contract, and the date on which the Contract was executed.

2. State your defenses to this claim and all facts that support or may tend to support each of the defenses. [Page345:]

iv. Requests for admission

A request for admission, or request to admit, is a written request regarding the truth of any matters that are within the general scope of discovery. 18 Requests for admission usually take the form of a statement that must either be admitted or denied. For example: "Admit that you have no basis to assert lack of personal jurisdiction as a defense or affirmative defense." All facts that are admitted can be used at trial, subject to certain court-ordered exceptions. 19

Requests for admission can demand statements or opinions regarding facts, applications of law to facts and issues regarding the genuineness of any documents. 20 The answer must set forth a specific denial or explain in detail the reasons why the answering party cannot truthfully admit or deny the matter. 21 The Federal Rules do not limit the number of allowable requests for admission.

e. Empirical data

In 1996, the Advisory Committee on Civil Rules of the Judicial Conference of the United States initiated a comprehensive examination of the Federal Rules in light of commonly-discussed discovery abuses. The committee directed the Federal Judicial Center to study the expense of discovery, which resulted in a national survey of over 2000 attorneys in 1000 civil cases. The results of the study were surprising, and suggested that discovery procedures, while subject to manipulation like any other aspect of litigation, are the source of far fewer problems than anecdote suggests.

The survey found that discovery expenses typically amounted to only 3% of the estimated monetary stakes, regardless of the size of the case. 22 Discovery problems could not be attributed to any one discovery mechanism. Rather, they differed by the type of the case, the amount in controversy, the complexity of the case and the contentiousness of the relationship among counsel and parties. 23 Depositions were the most expensive discovery mechanism, and production of documents generally accounted for only 16% of discovery expenses. 24 A majority of attorneys thought that the amount of discovery that had been generated by their case was appropriate for resolving their dispute fairly. 25[Page346:]

A related study, conducted by the RAND Institute for Civil Justice, reviewed documents related to over 5000 civil litigation cases. The RAND study found that 38% of these general civil litigation cases did not have any discovery. 26 Cases that ended early often had three hours or less of discovery. For cases that continued for more than 270 days after filing, the median amount of attorney time spent on discovery was only twenty hours. 27 The study concluded: "It is the minority of cases with high discovery costs that generate the anecdotal 'parade of horribles' that dominates much of the debate over discovery rules and discovery case management." 28

The results of these studies show that US discovery abuses may not be as widespread as they are purported to be. This in turn suggests that fears regarding US-style discovery-particularly with respect to document production-are misplaced. Even broad document production under the Federal Rules accounted for an average of 16% of discovery expenses, which is an even smaller fraction of the total case cost. Furthermore, the Federal Judicial Center noted that the cases that generally had the highest discovery costs dealt with patent, trademark, securities and antitrust issues. 29 These cases are often governed by complex US federal statutes and bear little resemblance to many of the commercial disputes in international arbitration.

3. DISCOVERY IN INTERNATIONAL ARBITRATION: INSTITUTIONAL RULES AND GUIDELINES

Under most major institutional arbitration rules, the parties initially exchange information by submitting the documents that support their case. Depending on the arbitration clause at issue, the parties may later request additional document production. The arbitrators then have significant discretion in deciding whether to grant a party's request. However, none of the institutional arbitration rules contemplate that parties will use the US-style discovery devices discussed above.

a. Voluntary disclosure

All of the commonly adopted arbitration rules allow document discovery insofar as it relates to a party's production of the documents that support its case. Some rules require that a party produce the documents it relies upon; others make this type of document production optional. 30[Page347:]

b. Tribunal-ordered document production

With respect to less voluntary forms of document production, the major institutional rules allow the arbitrators to determine the extent to which document discovery will be permitted. 31 The ICC Rules, for example, state simply that "[a]t any time during the proceedings, the Arbitral Tribunal may summon any party to provide additional evidence." 32 Similarly, the LCIA Rules give the Tribunal the power to "order any party to produce [documents] … 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." 33 None of the institutional rules contemplates that parties will go beyond basic document production, for example by serving interrogatories or requests for admission.

i. ICDR Guidelines

The new International Centre for Dispute Resolution Guidelines for Arbitrators Concerning Exchanges of Information (ICDR Guidelines), released in May 2008 (see annex), combine certain civil law and common law procedures to allow limited, tribunal-controlled disclosure.

As emphasized in the introduction to the ICDR Guidelines:

"The American Arbitration Association (AAA) and its international arm, the International Centre for Dispute Resolution (ICDR) are committed to the principles 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. …

[C]are must also be taken to prevent the importation of procedural measures and devices from different court systems, which may be considered conducive to fairness within those systems, but which are not appropriate to the conduct of arbitration in an international context and which are inconsistent with an alternative form of dispute resolution that is simpler, less expensive and more expeditious." [Page348:]

The ICDR Guidelines mandate disclosure of "all documents upon which each [party] intends to rely" in advance of the hearing. 34 However, if the required document disclosures are insufficient, the ICDR Guidelines permit limited, arbitrator-controlled document discovery. Guideline number 3 states:

"[T]he tribunal may, upon application, require one party to make available to another party documents in the party's possession, not otherwise available to the party seeking the documents, that are reasonably believed to exist and to be relevant and material to the outcome of the case." 35

The ICDR Guidelines attempt to prevent burdensome or unnecessary document requests by requiring specific information from the requesting party regarding the nature of the documents and the rationale for the request. According to Guideline number 3, a party's request for production of documents must contain "[a] description of specific documents or classes of documents, along with an explanation of their relevance and materiality to the outcome of the case." 36 Thus, under the ICDR Guidelines, parties are able to request production of documents and categories of documents (from the common law tradition); however, they must describe the documents with specificity and explain their materiality to the outcome of the case (from the civil law tradition).

Specialized US-style discovery devices are discouraged by the ICDR Guidelines. According to Guideline number 6:

"Depositions, interrogatories, and requests to admit, as developed in American court procedures, are generally not appropriate procedures for obtaining information in international arbitration." 37

ii. IBA Rules of Evidence

Like the ICDR Rules, the well-known International Bar Association Rules on the Taking of Evidence in International Commercial Arbitration (IBA Rules of Evidence), allow limited document production and attempt to harmonize certain common law and civil law procedures. [Page349:]

Article 3 of the IBA Rules of Evidence, which governs document production, was drafted in accordance with three principles:

"1. Expansive American- or English-style discovery is generally inappropriate in international arbitration. …

2. At the same time … there is a general consensus, even among practitioners from civil law countries, that some level of document discovery is appropriate in international arbitration. …

3. The decision on the scope of document discovery-whether or not a party must introduce internal documents into the arbitral proceedings against its will-shall lie solely with the arbitral tribunal. Therefore, any request of one party for documents in the possession of another party is to be directed towards the tribunal, not towards the other party." 38

These principles, like the major institutional rules discussed above, reflect a beneficial balance between civil law procedures and US-style (and other common law) discovery.

4. COURT-ASSISTED DISCOVERY IN THE UNITED STATES-28 U.S.C. § 1782

Practitioners should be aware of another aspect of US discovery that may allow court-assisted US-style discovery for use in international arbitration proceedings. Section 1782 of Title 28 of the United States Code permits an "interested person" to apply for an order from a US federal court for witness testimony or production of documents "for use in a proceeding in a foreign or international tribunal". The relevant clause of Section 1782 states:

"(a) The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation. The order may be made pursuant to a letter rogatory issued, or request made, by a foreign or international tribunal or upon the application of any interested person and may direct that the testimony or statement be given, or the document or other thing be produced, before a person appointed by the court. …

A person may not be compelled to give his testimony or statement or to produce a document or other thing in violation of any legally applicable privilege." [Page350:]

There are three key requirements for a successful Section 1782 application: (i) the person from whom discovery is sought must "reside" or be "found" in the relevant court district; (ii) the discovery sought must be for use in a proceeding in a "foreign or international tribunal"; and (iii) the party seeking discovery must be an "interested person".

The most important criterion will often be number the "foreign or international tribunal requirement", as there has been no definitive statement from the Supreme Court that a foreign international arbitration qualifies under Section 1782.

Prior to the Supreme Court's 2004 ruling in Intel v. Advanced Micro Devices, 39 the two leading decisions on the "foreign or international tribunal" requirement had found that an international arbitration does not qualify as a "foreign or international tribunal" under Section 1782. 40 Intel, however, indicated in dicta that a "foreign or international tribunal" might include foreign international arbitration proceedings. Some federal district courts have since held that an international arbitration is included under Section 1782, 41 although the pre-Intel cases are still binding law in the Second Circuit and the Fifth Circuit.

5. CONCLUSION

US-style discovery is not the "evil" that many in international arbitration describe. At its best, it can facilitate novel claims on behalf of parties that would have no other means to access the evidence to support their case. At its worst, it becomes another time-consuming and expensive aspect of an overly adversarial process and can actually hinder useful evidence-gathering. In the vast majority of civil litigation cases, however, US-style discovery is used in moderation and with favourable results.

There appears to be little danger that full US-style discovery will become commonplace in international arbitration practice. Recent institutional arbitration guidelines, for example the ICDR Guidelines, specifically reject most forms of US-style discovery. In addition, anecdotal evidence suggests that sophisticated US-trained lawyers readily forego complex civil discovery procedures when they are serving as counsel (or arbitrators) in an international arbitration. [Page351:]

Furthermore, even as document discovery becomes increasingly common, the ills that are often associated with depositions, interrogatories and carte blanche document productions are not likely to infect arbitration procedure. Current discovery practice in international arbitration bears little resemblance to discovery in US courts. The one device that is shared by the two systems-document production-has been adapted significantly for each procedural context. Compare the typical "Redfern Schedule", for example, to the Federal Rules' sweeping instruction that parties must produce all documents that are "relevant". Arbitrators are more likely to be restrictive in ordering document productions-perhaps in reaction to perceived abuses in the United States-than to permit full-scale "fishing expeditions" as the norm.

Regardless of the extent to which it is accepted by non-US lawyers, the US experiment with broad discovery devices can and should be instructive because of its long history and the amount of attention it has received. The US-commissioned empirical studies mentioned above illustrate two principles that are useful to international arbitration practitioners.

First, discovery is beneficial in a majority of cases. This suggests that institutional arbitration rules are on the right track in permitting document production in general and then providing arbitrators with the discretion to determine the scope of discovery on a case-by-case basis. The default rule should be in favour of document production, as it currently is. An alternative rule, which might allow document production only in exceptional circumstances, would stifle efforts to get to the truth.

Second, discovery is case-specific. The US Federal Rules are one-size-fits-all: procedures that are effective in the vast majority of cases can be abused by a relatively small number of high-stakes, highly contentious litigants. International arbitration, in contrast, affords a high degree of flexibility to parties and arbitrators alike. Counsel and arbitrators can maximize this advantage by agreeing on case-specific discovery procedures early in the process.

1
Blank v. Ronson, 97 F.R.D. 744 (S.D.N.Y. 1983) at p. 745.

2
Malautea v. Suzuki Motor Co., 987 F.2d 1536 (11th Cir. 1993) at p. 1546 (internal quotations and citations omitted).

3
See, e.g., Paul V. Niemeyer, 'Here We Go Again: Are the Federal Discovery Rules Really in Need of Amendment?' 39 Boston College Law Review (1998) p. 517 at p. 518; Stephen N. Subrin, Martha L. Minow, Mark S. Brodin and Thomas O. Main, Civil Procedure: Doctrine, Practice, and Context, 2nd edn. (2004) at pp. 293-295.

4
Niemeyer, supra note 3, at p. 519.

5
Federal Rules of Civil Procedure, Rule 8(a).

6
Hickman v. Taylor, 329 U.S. 495 (1947) at p. 507.

7
See Federal Rules of Civil Procedure, Rule 56.

8
Federal Rules of Civil Procedure, Rule 26(b)(1).

9
Ibid., Rules 26 and 34.

10
Ibid., Rule 26(a)(1).

11
Ibid., Rule 26(a)(1).

12
Ibid., Rule 34(a).

13
Ibid., Rules 34(c) and 45.

14
Ibid., Rule 33.

15
Ibid., Rule 33(c).

16
Interrogatory answers can be admitted under the US Federal Rules of Evidence because, as statements of an opposing party, they are a party admission.

17
Federal Rules of Civil Procedure, Rule 33(a).

18
Ibid., Rule 36(a).

19
Ibid., Rule 36(b).

20
Ibid., Rule 36(a).

21
Ibid., Rule 36(a).

22
Thomas E. Willging et al., 'An Empirical Study of Discovery and Disclosure Practice Under the 1993 Federal Rule Amendments,' 39 Boston College Law Review (1998) p. 525 at p. 549.

23
Ibid., at p. 554.

24
Ibid., at p. 575 (Table 27).

25
Ibid., at p. 552.

26
James S. Kakalik et al, 'Discovery Management: Further Analysis of the Civil Justice Reform Act Evaluation Data,' 39 Boston College Law Review (1998) p. 613 at p. 636.

27
Ibid.

28
Ibid.

29
Willging et al., supra note 22, at p. 577.

30
Compare ICC Rules of Arbitration, Art. 20(2) (referencing the Tribunal's examination of "the written submissions of the parties and all documents relied upon"), with UNCITRAL Arbitration Rules, Arts. 18(2) and 19(2) (stating that the claimant or respondent "may annex … all documents he deems relevant or may add a reference to the documents or other evidence he will submit").

31
See, e.g., UNCITRAL Arbitration Rules, Art. 24(3) ("At any time during the arbitral proceedings the arbitral tribunal may require the parties to produce documents, exhibits or other evidence within such a period of time as the tribunal shall determine."); ICSID Rules of Procedure for Arbitration Proceedings, Rule 34(2) ("The Tribunal may, if it deems it necessary at any stage of the proceeding: (a) call upon the parties to produce documents, witnesses and experts…"); WIPO Arbitration Rules, Art. 48(b) ("At any time during the arbitration, the Tribunal may, at the request of a party or on its own motion, order a party to produce such documents or other evidence as it considers necessary or appropriate and may order a party to make available to the Tribunal or to an expert appointed by it or to the other party any property in its possession or control for inspection or testing.").

32
ICC Rules of Arbitration, Art. 20(5).

33
LCIA Arbitration Rules, Art. 22.1(e).

34
International Centre for Dispute Resolution Guidelines for Arbitrators Concerning Exchanges of Information (ICDR Guidelines), No. 2.

35
Ibid., No. 3(a).

36
Ibid., No. 3(a).

37
Ibid., No. 6(b).

38
IBA Working Party, 'Commentary on the New IBA Rules of Evidence in International Commercial Arbitration', 16 Business Law International (2000) at pp. 20-21.

39
542 U.S. 241 (2004).

40
See NBC v. Bear Stearns, 165 F.3d 184 (2nd Cir. 1999); Kazakhstan v. Biedermann, 168 F.3d 880 (5th Cir. 1999).

41
See, e.g. In re Roz Trading, 469 F.Supp.2d 1221 (N.D.Ga. 2006); In re Hallmark, 534 F.Supp.2d 951 (D.Minn. 2007); In re Oxus Gold, 2007 U.S. Dist. LEXIS 24061 (D.N.J. 2007); In re Application of Babcock Borsig AG, 583 F.Supp.2d 233 (D.Mass. 2008).