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13 November 2017

Discovery (viz., the lack thereof)

"US Spotlight" blog series: demystifying Swiss arbitration for the US litigator (Volume 5 of 10)

This blog series provides the US litigator with a practical understanding of Swiss arbitration. It compares a Swiss arbitral proceeding under the Swiss Rules of International Arbitration ("Swiss Rules"), though other rules, e.g., the International Chamber of Commerce ("ICC") Rules, are often used, with a dispute in US Federal District Court ("USDC").

Discovery (viz., the lack thereof)

Discovery, as the American attorney knows it, and lives and breathes it, is almost non-existent in Swiss arbitration. There is little use for a FRCP 26(f) styled discovery plan. There are no FRCP 26(a) required disclosures, no FRCP 30 (or 27 or 31) depositions, no FRCP 33 interrogatories, not exactly FRCP 34 document requests, no FRCP 36 requests for admission, and no FRCP 45 non-party subpoenas.
    
A document production phase in the proceedings is contemplated. Unlike the sometimes years long battles in US litigation, including negotiating search terms, the recovery of deleted data and restoration of back-up tapes, privilege reviews, document dumps, motions to compel, et al., the document production phase of Swiss arbitral proceedings may be waived entirely. If it does proceed, it will come and go in a matter of weeks. One approach would be for the claimant to submit its requests for production of documents with its Statement of Claim ("SOC"). This would generally be a couple, not fifty or sixty, requests for documents pertaining to a specific and tangible fact, e.g., a specific issue discussed at a specific meeting, identifying the time, place, and attendees of the meeting, that has been recorded in emails or notes. It would not be a series of categories of documents relevant to a parties' claim or defense. The breadth of what is available to US parties pursuant to FRCP 34 and 26(b) ("parties may obtain discovery regarding non-privileged matter that is relevant to any party’s claim or defense…") has no analog in Swiss arbitration. Even more preferred in Swiss arbitration than a request seeking documents pertaining to a specific fact, is a request for a singular document that the propounding party knows exists only in the files of the responding party.
    
After the claimant submits its document requests in conjunction with the filing of its SOC, the respondent would be expected to produce all non-privileged responsive documents in its control with the filing of the Statement of Defence ("SOD"), identifying at that time documents it needs from claimant. The claimant would then have a week or so to produce its documents, the parties may have another week or so to settle any disagreements, and only then, perhaps a week or more on, could the parties bring their grievances with the document production phase of the proceedings to the tribunal. This would be done by way of simultaneous written submissions. The tribunal would consider both submissions, without oral argument, and issue a ruling shortly thereafter. It is also common for this document production phase to take place between the first and second round of briefings.
    
The tribunal's ruling will reflect the narrower scope (than FRCP 34 and 26(b)) of what sorts of documents must be produced. The Swiss arbitral system, employing cost-benefit reasonableness, is more inclined to avoid the production of excessive documents even if it means a needle in the haystack might be missed. Given the parties' right to at least limited document production, however, well-known, or suspected, facts are not ignored. Smoking guns tend not to go undiscovered, even without months - or years! - spent poring over troves of documents. However, a potential claimant would be ill–advised to bring an action in Swiss arbitration under the suspicion that it had a sound claim and with the hope that the facts to support such might possibly come to light during the course of the proceedings.

Impact of limited discovery on pleadings
The limited nature of discovery in Swiss arbitration makes the timing of the proceedings far more predictable than a USDC action. There is no chance that deadlines will be moved because one party must harvest thousands of thirty-year-old documents from a warehouse hundreds of miles from corporate headquarters. There is no "cat and mouse" game of one party chasing down a counterparty's key witnesses for deposition. The unpredictable series of objections, and motions, regarding interrogatories or requests for admission are not at issue. There is no FRCP 45 styled mechanism for subpoenaing non-party documents or testimony, which of course adds complexity—and time—to proceedings in USDC. Though it is rarely requested, a party to a Swiss arbitration can seek leave from the tribunal to enlist a local court to compel the testimony of a recalcitrant witness. While a tribunal may grant such leave, it is unlikely to extend any deadlines because such leave has been granted. There simply is not an unpredictable phase in the middle of the action where neither party nor the neutral could conceivably gauge just how much time will be necessary to discover all of the facts.
    
The nature of the substantive pleadings is also made possible, in part, by the limited discovery in the proceedings. The American practitioner is unlikely to bring a motion for summary judgment or partial summary judgment (FRCP 56) until it has had the chance to exhaust its discovery rights and collect all the facts that it can. In contrast, the first substantive pleadings brought by the claimant (SOC) and defendant (SOD) to a Swiss arbitration lay all the facts on the table and make arguments akin to summary judgment styled arguments, such that the facts of the case clearly establish that claimant, or defendant, must prevail, or cannot prevail, on certain claims. No party to Swiss arbitration anticipates discovering a windfall of evidence during the document production phase of the proceedings. And in fact, to the extent that certain undisclosed facts may well tie together an argument, a party will commonly make the argument in its early substantive pleading and mention that the best evidence in support is expected to be forthcoming. This approach has the benefit of putting pressure on the tribunal to ensure that certain choice documents requested by a party are produced.

Benefits of American styled fact-finding
While the American practitioner may be taken aback by the limited discovery in a Swiss arbitration, her skills developed from robust American styled discovery plans and management can be put to good use.
    
During the period between the filing of the notice and the organizational conference, respondent must prepare its Answer to Notice of Arbitration, both parties must nominate arbitrators, which the Swiss Chambers arbitration institution ("SCAI") must review and approve, a president of the tribunal must be vetted and approved, the file must be transferred from the SCAI to the tribunal, and the tribunal must get organized and set a date for the organizational conference. During this time period, relatively little cost has been incurred by the parties, probably not much beyond the registration fee, and no case schedules have been set. This is to say that there is less pressure to swiftly move the action forward during this phase, and a fair amount of time may pass, viz. perhaps a few months, or even more.
    
There is nothing preventing parties' counsel from conducting thorough interviews of all potential fact witnesses, the client putting a litigation hold in place, and the client and counsel working together to identify and review key documents. The American lawyer's discovery trained eye for fact assessment, collection, organization, and application to the claims of the case can provide a tactical advantage. Once the organizational conference takes place, the proceedings will move swiftly and prove nearly impossible to slow down. Getting ahead of the curve with an assessment of the facts early will pay off at every subsequent phase of the proceedings.

Our Dispute Resolution Team would be happy to discuss any further questions you may have.

Author: Jim Nickovich

Prior volumes: Volume 1, Why Swiss Arbitration? Getting started; Volume 2, The organizational conference; Volume 3, Substantive pleadings; Volume 4, Evidence

 What's up next: Volume 6: Experts, publication date, 27 November 2017.

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