Reasserting control over mounting costs in complex cases

Author:

Klaus Reichert SC
Law Library / Brick Court Chambers
Dublin

The perception of rising costs associated with international arbitration is now ever-present in conferences, journals, blogs and so on. Putting it neutrally, one sees that vigorous and divergent views are held. However this particular commentary does not seek to add to the hubbub but starts from a rather different and specific premise.

Certain cases are fought to a conclusion and no amount of talking about ADR will deflect from the desire or need of the parties to have a binding determination of their claims. The reasons for this fight to the death are as complex as life itself and might include legitimately held claims for damages for breach which the wrongdoer simply will not address, either due to pig-headedness, vanity, or less-than-laudable commercial reasons (hoping the claim will be dropped because it is too much trouble to prosecute, for example); or a complete breakdown in trust between parties who simply want to rehearse grievances at great length or cost – this is often the case where differing commercial cultures clash or corporate or legal egos run riot.

In such cases, has a client ever decided that its counsel should not carefully examine a potentially relevant issue, argument, request to produce, and so on, on the basis that it might be too costly? Will any client really say "leave that stone unturned" if they are advised that it may be relevant and material to the outcome of the case?

The harsh reality of actual case work is that a fully-fought arbitration requires assessment of every document and argument lest one be caught off guard by the other side or by the tribunal. Disputes are often highly complex, fact-intensive and incapable of being reduced to high-level summaries. Easily accessible memoranda might be all very well for those short of time; however they simply will not do before a forensically-minded international tribunal. Arbitrators have to decide whether the evidence and arguments presented to them lead to the granting or withholding of the relief sought. They cannot undertake that task on what they feel might be right, absent proper proof. If they were to do so, then the arbitral process would be a capricious sham and no amount of talk about efficiency could mask that conclusion.

That does not mean that clients should have to look as happy as they can as their lawyers and experts burn up billable hours. With than in mind what follows is a concrete suggestion to deal with one increasing source of cost.

In the complex fight-to-the-death case, a vast array of exhibits is often attached to memorials. Requests to pro-duce (universally known as Redfern Schedules) in such cases are increasingly large affairs displaying ingenuity in ascribing relevance and materiality to hundreds, if not thousands, of documents. Given that the arbitrators are already, by that stage, deluged with a plethora of exhibits attached to the first round of memorials, it often is difficult to work out definitively what is relevant and material to the outcome of the case (adopting the IBA Evidence Rules standard). This can make the arbitrator err on the side of caution and order production adding to the pile of documentation. The final round of memorials tends to fare a little better in terms of the number of documentary exhibits, but by that stage the damage is done.

The end-product of all of this? Piles of documentary exhibits of little true relevance to the outcome of the case sitting neatly in lever-arch files in the hearing room never to be opened. These are often euphemistically called the "core bundles". These are the exhibits which the parties believe are at the heart of the case. The only connection to the word "core" is that it is printed on the spine label.

This only has to be stated to be immediately seen as an absurd state of affairs, yet it happens over and over again. So what should be done about all of this?

Early tribunal admonition to the parties that they should exercise restraint and sense in the number of exhibits attached to the memorials and that needless disputes or complications in how the case or defence is pleaded will be viewed with disfavour, particularly with regard to costs. Secondly, parties should be directed to avoid attaching spreadsheets or full copies of long documents merely to refer to one line or one part. Reference could be made to the longer document (without attaching it as an exhibit) allowing the other side to inspect it but not burden the arbitral file unless absolutely necessary. Thirdly, with regard to requests to produce, the tribunal should at an early stage indicate that the parties may only seek documents which have a compelling or fundamental bearing on the outcome of the case – otherwise almost anything could be made relevant or material through clever drafting. Fourthly, the tribunal should be quite strict with parties in relation to core hearing bundles and direct them to focus on what they will actually use at the hearing. Finally, arbitrators should not be afraid to be critical in their award and in their allocation of costs if they find that, despite their admonitions, the parties (one, other or both) have needlessly drowned the process in exhibits with no apparent utility.

In conclusion, unless a firm steer is given by arbitrators at the earliest possible opportunity, experience shows that parties tend to run riot with exhibits and production requests. Laissez faire does have the attraction for arbitrators in that it presumes that the parties will do the work in appropriately pleading their case and marshalling their proof as they see fit. However experience shows that laissez faire will just not do and robustness is called for from arbitrators from the outset. This is not a panacea for all the apparent ills from which international arbitration now suffers, but it is a start.