January 01, 2015

Using Information Technology in Arbitration

Thomas D. Halket

Arbitration has many advantages over litigation for the resolution of disputes. Although speed of resolution and low cost have often been claimed as among these advantages, there is now some dispute as to whether arbitration is indeed quicker and cheaper than litigation in court. But even if arbitration is not always quicker and cheaper (this author believes it is), there are a number of procedures or mechanisms that can be employed to increase the efficiency of arbitration, to speed its resolution, and to reduce its cost. More specifically, as information technology (IT) has developed in recent years, IT applications have also increasingly been used in arbitrations with effective results. This article will discuss three examples of such IT applications, their benefits, and some caveats pertaining to their use.

First, however, some general considerations: Although information technology has become fairly commonplace in today’s business world, parties in an arbitration may have differing financial or technical resources or technical “competences,” which may affect their access to or ability to use a particular IT application. More broadly, IT applications may be used in ways that are inherently unfair. For example, e-mails, if not appropriately handled, may be improper ex parte communications between a party and the arbitral tribunal (the arbitrator or arbitrators). In any of these circumstances, a tribunal may need to take steps to ensure that the application in question is not used in a way that results in unequal treatment of the parties or that deprives a party of its ability to fully and fairly present its case. With this caveat in mind, let us now consider the IT applications themselves.

E-Mail

E-mail is an obvious modern method for communication among the tribunal and the parties for filings, applications, notices, and the like. It is fast and inexpensive, essentially instantaneous and free, and provides both a complete electronic record of all the filings and the ability to transmit them in electronic form. Its use, however, is not without some issues.

First, some arbitral administering bodies, for example the American Arbitration Association (AAA), require the parties to agree in writing to the AAA e-mail protocol before e-mail can be used directly between the parties and the tribunal. In the absence of such consent, all communication could still be made via e-mail but must be directed through the administrator, with the resulting possibility of a significant decrease in the speed of communication. Even if the parties have consented to direct party-tribunal e-mail communications under the AAA protocol, all such e-mails must be copied to both parties and the administrator, and ex parte e-mail communication must be avoided.

There are some steps that should be taken in light of the sensitive and confidential nature of party-tribunal communications. Some are precautions that apply to all confidential files generally. For example, one needs to receive and keep these e-mails on secure devices. Laptops, PDAs, tablets, and smartphones should be password protected. Free e-mail services, such as Gmail, should be avoided as these services routinely scan all e-mails. Free services also may be more readily subject to subpoenas whether in matters related or unrelated to the arbitration.

Other precautions pertain more specifically to matters in arbitration. As an example, particularly in large cases there is a tendency to have many recipients at each law firm. Recipient lists may at times include outside experts, secretaries, and other administrative staff. As address lists tend to get copied from e-mail to e-mail, an e-mail recipient once added may be hard to drop. Accordingly, although it is important to make sure that all e-mails between the tribunal and the parties are sent to all who need to receive them, one should avoid sending to long e-mail lists. One or two lawyers should be responsible for circulation at each firm. Also, filings and orders should be transmitted in a form that is not subject to easy alteration. PDF format works well enough in this regard, but clearly MS Word or text file formats are not appropriate for the “official” version of any transmittal.

There are also some steps that can or should be taken to improve the e-mail process. Most Internet service providers have limits on the size of attachments they will process, and one needs to be aware that filings may surpass these limits. If so, such transmissions will need to be broken down into more than one e-mail. If a filing is more than 25 pages in total or has formatting that might not come through on the electronic copy, a hard copy by overnight mail is worthwhile. One must also remember that parties or counsel may be in more than one time zone. Although an e-mail time stamp can be used as the official time of service of the filing contained in the e-mail, one should agree upon a specific time zone as the “official” one so as not to give parties farther west an unfair advantage.

Hearings by Videoconference

In today’s flat world, witnesses can be scattered all over the globe, even if most are located in or near one place. Also, arbitrators with the requisite background and experience may be remote to the location of the hearings agreed upon by the parties. Of course, one can require the arbitration participants to travel to the hearing site, but this can be expensive and time consuming. Travel may only be justified for large cases or important witnesses.

Fortunately, the ability to use IT to take live testimony from remote locations has greatly improved in recent years, while at the same time the cost of doing so has significantly decreased. Not too many years ago it was impossible to take remote testimony other than by phone. And although videoconferencing predates the Internet, its use then was complicated and expensive. With the advent of the Internet, particularly with increases in transmission speeds and the constant improvement in equipment, together with lower costs for both the service and the equipment, live testimony by videoconference over the Internet has become a genuine tool for efficient and cost-effective arbitration. But as with e-mail there are precautions, some mandatory and some merely recommended, applicable to videoconferencing.

Thus, the parties and the tribunal should be aware that the local laws regarding the taking of testimony, particularly from third-party witnesses, can vary by location. Everybody should be operating under commonly shared expectations regarding the applicable law. To avoid ex parte communications with the tribunal or the possibility of improper witness coaching, neither witnesses nor the tribunal should be alone with only one party at any location. To protect the confidentiality of the proceedings, the video feed must not be subject to intrusion. If more than two locations are in play, a log should be kept as well as a list on the record of all who sign on and all who are in attendance and where they are.

Other precautions are not mandatory but are recommended. For example, any documents that may be used during the testimony need to be available at all locations. Distributing copies of these documents before the hearing starts will be more efficient than attempting to distribute them as they are used during the testimony. One also needs to be aware of time and other differences that depend on location. This author once participated in an arbitration in which he, as the tribunal, was in New York City and all the parties and counsel were in a single room in Denver. The hearing went smoothly until a blizzard started in Denver, at which time the parties and counsel were increasingly anxious to leave. As it was a beautiful, sunny day in New York and the tribunal was unaware of the Denver weather, the tribunal was more concerned with finishing the testimony.

E-Briefs

Reasoned awards—an arbitral award that states the reasons for the result—are commonplace in international arbitration and more and more common in domestic arbitration as well. A reasoned award may be a simple, short statement of reasons or something as complicated as a full “judicial” opinion with findings of fact and conclusions of law. For a tribunal confronted with lengthy briefs and a substantial evidentiary record, preparing a reasoned award and verifying that the parties’ positions in their briefs are supported by the actual hearing transcript or documentary evidence can be no small chore. Bouncing between the briefs, on the one hand, and the transcript as well as multiple evidence binders, on the other, is time consuming and tedious. On top of this, one must also check the parties’ descriptions of the law against the actual authorities to which they have referred.

The solution to this is e-briefs. An e-brief is much more than a searchable electronic or software copy of the brief. To be sure it is that. But, in addition, it also provides the backup documents to which the brief refers, linked to the textual references to those documents. In other words, each reference in an e-brief to the record or authority is a “hot” link on which the reader can mouse click, causing the record or authority in question to pop up in a separate window. There is no need to go back to the record itself or to dig out the legal authority; they are instantly available by just a mouse click.

Unfortunately, as they say, there is no free lunch. And that is true of e-briefs, for they usually need to be prepared by an outside vendor and are quite expensive. Accordingly, they should not be considered except for large cases where both the size of the record and the amount in controversy justify their use. In addition, one should be mindful that the parties may have unequal resources and that the cost of an e-brief, while justified by the size of the matter, may still be a burden, perhaps unbearably so, to the smaller party.

If e-briefs are used, the text of the briefs, and as much of their linked materials as is possible, should be capable of being keyword searched and copied. Assuming that both parties use outside vendors to prepare the e-briefs, it is better if one vendor does the job for both parties. Each vendor tends to do e-briefs differently. Sometimes the differences are minor, sometimes not. It is easier for the tribunal to learn one set of use protocols rather than two. In any event, an e-brief that is significantly harder to use may inadvertently be used less by the tribunal, with some resulting potential prejudice to the party in question. Although the use of a common vendor may in some circumstances be perceived as a conflict of interest or be difficult if the parties come from widely different cultures and backgrounds, such problems may be overcome by use of a vendor designated by the tribunal. Finally, if at all possible, all the e-briefs of both parties and supporting material should be on the same USB drive so it is possible to go from one to another without having to load or unload different CD-ROMs or drives.

Conclusion

E-mail, videoconferencing, and e-briefs are not the only ways in which IT can aid the arbitral process. IT can also be used in document handling and processing, in exhibit organization and display, and in hearing management. As with the three applications discussed above, other IT applications can save costs or add to the efficiency of the process (or both), but they must be used with care to do so.

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Thomas D. Halket

Thomas D. Halket is a partner in the New York law firm of Halket Weitz LLP, an adjunct professor of law at the Fordham University School of Law, a Fellow of the College of Commercial Arbitrators, and a Chartered Arbitrator.