Disclosure obligations in arbitration and civil litigation in England and Wales

June 2024 | SPOTLIGHT | LITIGATION & DISPUTE RESOLUTION

Financier Worldwide Magazine

June 2024 Issue

Disclosure is an important (and sometimes frightening) component of civil litigation and arbitration in England and Wales. Generally speaking, disclosure refers to a particular stage of litigation in England and Wales where a party makes available, to the opposing party, evidence which either supports or weakens either party’s case.

The Civil Procedure Rules (CPR), which are used by most civil courts in England and Wales, explain that a “party discloses a document by stating that the document exists or has existed”. Generally, and subject to certain limitations (such as legal privilege and others not discussed in this article), “a party to whom a document has been disclosed is entitled to inspect that document”.

That said, the potential obligation to disclose documents within legal proceedings differs depending on the jurisdiction in which the proceedings are taking place, and whether the dispute is conducted within the court system in England and Wales or by way of arbitration (i.e., the dispute is not being decided by a judge, but by an arbitrator, usually appointed by the parties, or by a panel of three arbitrators).

This article briefly discusses the disclosure obligations of parties in proceedings before the English Courts and on arbitrations subject to the Arbitration Act 1996 (i.e., with a seat in England and Wales).

Disclosure in common and civil law systems

In common law legal systems such as England and Wales, extensive disclosure of documents is usually required. Parties are required to search for all potentially relevant documents, whether they impact the case in a positive or negative way, and to produce them to the other side for inspection, subject to certain exceptions.

Documents are defined under the CPR as “anything in which information of any description is recorded”. Accordingly, potentially disclosable documents include electronic documents (such as emails, voicemails, photographs and texts) as well as physical documents. Disclosure can inevitably prove a time-consuming and expensive exercise, but it is important to bear in mind that it can prove helpful in establishing the disputed facts of a case (including the possibility of unearthing the ‘smoking gun’) and limits surprise documents being presented to the court by the other side.

In the US, both the state and federal legal systems generally follow the common law approach in respect of disclosure – although referred to as ‘discovery’. It is generally assumed that discovery practice in the US is broader than disclosure in England and Wales.

Under the US Federal Rules of Civil Procedure (2024 Edition), parties are permitted to seek discovery of “any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit”.

This contrasts with the approach taken in civil law jurisdictions, where the requirement to disclose documents in legal proceedings does not exist (unless directed to by a judge) and, generally speaking, there is no obligation upon a party to preserve and produce documents. Instead, claimants are expected to have already gathered all necessary evidence and documentation when bringing a claim. As such, cases are typically decided based on the evidence submitted by each party on a voluntary basis.

Disclosure obligations in England and Wales

In the legal system of England and Wales, disclosure plays a pivotal role in litigation and arbitration, although the mechanisms and scope of disclosure (or document production as it is known in international arbitration) within each process differ to some extent.

In civil litigation, the rules governing disclosure are set out in the CPR. These rules require parties to disclose documents on which they rely and those that adversely affect their own or another party’s case, or which support the other party’s case. This is known as ‘standard disclosure’. Further disclosure directions can be ordered by the judge.

Instructed solicitors owe independent duties to the court in relation to disclosure, which includes, among others, to inform their clients of their obligation to ensure that all potentially relevant documents in their client’s control, whether helpful to a party’s case or not, are preserved. This duty is owed to the court as soon as litigation is contemplated, which means that clients should be duly informed of their disclosure obligations as soon as possible.

Parties to the proceedings are under an ongoing duty to disclose these documents until the proceedings are concluded. This means that if the parties discover new disclosable documents, they are obligated (subject to certain exceptions) to produce them to the other side, even after the deadline for disclosure set by the court has passed.

It has been argued that disclosure obligations under the CPR are cumbersome and costly. However, recent reforms, such as those introduced by the Disclosure Pilot Scheme in the Business and Property Courts in 2019 (with permanent effect from 1 October 2022), have reduced the time and costs spent on the process. The scheme emphasises a more tailored approach where the extent of disclosure is linked to the specific issues in dispute, to reduce the likelihood of parties sending their opponents on a ‘fishing expedition’ in looking for relevant documents.

Document production in arbitrations in England and Wales

On the other hand, disclosure and document production obligations in arbitrations in England and Wales are, in general terms, very flexible. They do not adhere to a universal set of rules. Instead, the obligation is generally dictated by the terms of the arbitration agreement, including the applicable law of the seat and commonly agreed institutional rules such as those from the London Court of International Arbitration (i.e., the LCIA Arbitration Rules) or the International Chamber of Commerce (i.e., the ICC Arbitration Rules).

By way of an example, the LCIA Arbitration Rules and the ICC Arbitration Rules confirm that a tribunal has broad discretion to settle the disclosure and document production process.

In the absence of an agreement, the Arbitration Act 1996 establishes (section 34) that “[i]t shall be for the tribunal to decide all procedural and evidential matters [including whether any and if so which documents or classes of documents should be disclosed between and produced by the parties and at what stage], subject to the right of the parties to agree any matter”.

Furthermore, many parties in international arbitrations (whether the seat is in England and Wales or elsewhere) decide to follow the ‘International Bar Association (IBA) Rules on the Taking of Evidence in International Arbitration 2020’, which provide useful guidance for the purposes of the disclosure and document production process.

According to the IBA Rules, the requests made by each party for the other to produce certain documents must comply with certain requirements. For example, the requests to produce documents must be clear and narrow and the parties must explain how the documents requested are relevant to the case and material to its outcome, among others.

Depending on the dispute in question, the chosen disclosure regime may be narrower or broader in scope than the ‘standard disclosure’ imposed by the CPR in litigation. The flexibility in arbitration allows parties to tailor the process to their specific needs, which can be particularly beneficial in complex commercial disputes. In litigation, however, parties are bound by the more rigid CPR rules, offering less room for customisation based on individual case dynamics.

Conclusion

Disclosure obligations vary significantly from jurisdiction to jurisdiction. In a common law system, such as England and Wales, understanding the disclosure obligations is critical to ensure prompt compliance in the event of litigation or arbitration proceedings.

If a party does not comply with its disclosure obligations, the court can impose sanctions in the context of litigation. In an arbitration, the arbitrators are more likely to draw adverse inferences if a party fails to produce documents ordered by the arbitrators.

To be fully prepared should a dispute arise, it is recommended that effective document management and data retention policies are in place so that potentially relevant documents can be easily and automatically preserved and located.

Companies should also carefully consider taking appropriate legal advice as to which documents would be exempt from disclosure, in particular those covered by legal privilege. This is particularly important for documents produced in the course of litigation or arbitration, such as internal documents discussing the merits of the case or other documents relating to the subject matter of the dispute.

Marco Piccolo is an associate and Grace Horvath-Franco is a trainee solicitor at Stewarts Law LLP. Mr Piccolo can be contacted on +44 (0)20 7822 8185 or by email: mpiccolo@stewartslaw.com. Ms Horvath-Franco can be contacted on +44 (0)20 7822 8153 or by email: ghorvath-franco@stewartslaw.com.

Marco Piccolo and Grace Horvath-Franco

Stewarts Law LLP