International e-Commerce and e-Discovery

The source of this tension stems primarily from the differing views between U.S. and EU countries with regard to the appropriate scope of discovery. Most U.S. jurisdictions employ a very broad definition of discovery. The Federal Rules of Civil Procedure (FRCP) and most state procedural rules provide that non-privileged information is discoverable if it is relevant to any claim or defense of any party, and is reasonably calculated to lead to the discovery of admissible evidence. Fed.R.Civ.P. 26(b)(1). For this reason, U.S. discovery rules are often perceived as fostering 'fishing expeditions.' Id. at p. 3.

By contrast, most European courts employ a much more narrow scope of discovery. Most EU countries generally prohibit discovery beyond what is absolutely necessary to support a party's case at trial, and do not impose affirmative disclosure obligations. See, David Cohen, 'E-discovery: The Need for a Transnational Approach to Cross-Border Discovery Disputes,' InsideCounsel, July 24, 2012; see also, Karin Retzer and Michael Miller, 'Mind the Gap: U.S. Discovery Demands versus E.U. Data Protection, Bureau of National Affairs, Inc.,' Privacy & Security Law Report (2011). It is no wonder, then, that the broad scope of U.S. discovery, which is in contravention of some of Europe's discovery practices and laws, has led to conflict in cases involving overseas discovery.

This article focuses on the conflict between U.S. and EU discovery procedures, and offers some useful and practical advice for U.S. litigants who may face uncertain territory when seeking discovery abroad.

The Scope of EU Discovery

The European Union member countries are (at the present time): Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom. An examination of discovery practices in some of these countries demonstrates how limited the scope of discovery is in the EU as compared with the U.S.

In the U.S., the FRCP allow parties virtually unfettered discretion to seek the production of documents, witnesses, and other information from parties and subpoenaed non-parties, as long as the requested evidence is not privileged, is relevant to any claim or defense of any party, and is reasonably calculated to lead to the discovery of admissible evidence. On the contrary, in many EU jurisdictions, it is very difficult to require a party to produce broad categories of documents and evidence, and even more difficult to require non-parties to disclose any information. See, Retzer and Miller, 'Mind the Gap,' at p. 2.

In Belgium, for example, there is no formal discovery system. Rather, each party produces only the documents that are necessary to sustain its own allegations, and parties may choose not to produce certain documents. 1 Belgium Law Digest 5.02 (2010). A court may order the production of certain documents if there is a strong basis for believing it will prove a fact relevant to the case, or the opposing party demands an injunction against a party for refusing to produce a relevant document. Id. Moreover, American-style pre-trial depositions do not exist under Belgian law, but a judge can decide to hear pre-trial witnesses. Id.

The UK, on the other hand, does not allow for pre-trial depositions at all. Consequently, parties rely almost exclusively on a tailored exchange of written discovery to work up a case for trial. In 1999, new court rules in the UK renamed the concept of discovery as 'disclosure,' and significantly narrowed the scope of discoverable information. See, Gavin Foggo, Brett Harrison, Victor Jose Rodriguez-Barrera, 'Comparing E-Discovery in the United States, Canada, the UK, and Mexico,' Committee on Commercial & Business Law Litigation, Section of Litigation, American Bar Association (newsletter, vol. 8, no. 4, Summer 2007), p. 5. Since these rule changes, litigants are no longer required to produce documents that do not affect issues in the case, even if they may lead to a 'train of enquiry' to potentially relevant documents. A party is only required to produce non-privileged documents: '1) on which it intends to rely, 2) which adversely affect its case or another party's case, or support another party's case, and 3) those required by a relevant practice direction.' Id. One of the key factors in determining what is discoverable in the UK is the concept of proportionality. While either party can apply to the court for an order compelling disclosure of certain information, courts typically require such orders to be proportionate to the likely importance of the documents, the financial positions of the parties and the amount in dispute, and ease and cost of producing the requested materials. Id. This disclosure process is far more limited in scope than the discovery process in the U.S., where a party must produce non-privileged documents that appear 'reasonably calculated to lead to the discovery of admissible evidence.' Fed.R.Civ.P. 26(b)(1).

The Hague Evidence Convention

Most EU countries are parties to the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, Mar. 18, 1970, 23 U.S.T. 2555, 1970 T.I.A.S. No. 7444, codified at 28 U.S.C. Section 1781 ('Hague Evidence Convention') (available online at http://bit.ly/ZfxDK3), which means their discovery processes are governed by its prescribed procedures. Generally, voluntary witnesses from party countries may be deposed in their respective countries, or in the U.S. under certain conditions. In Denmark, parties are permitted to conduct 'voluntary depositions' without court intervention, but the witness cannot be sworn in or take an oath. 1 Denmark Law Digest 5.02 (2010). Moreover, sworn out-of-court statements are inadmissible as evidence if an objection is made. Id. at 10.02. In the Czech Republic, parties who wish to depose witnesses or seek documents outside of the Czech Republic are permitted to issue a letter rogatory to a foreign state requesting such documents or examinations. If a Czech court receives a letter rogatory from a foreign court, it can execute the order according to foreign laws of procedure (e.g., an American-style deposition taken under oath), as long as it is not contrary to Czech law. 1 Czech Republic Law Digest 5.02 (2010).

The tension between broad U.S. discovery procedures and strict disclosure procedures in foreign countries pursuant to the Hague Evidence Convention was evident in In re Global Power Equipment Group, Inc., 418 B.R. 833 (Bankr. D. Del. 2009). In Global Power, a Dutch company refused to produce certain documents or make certain witnesses available for deposition in the United States unless the parties seeking this information complied with the Hague Evidence Convention. The Dutch company argued that the documents and witnesses were controlled by a French company and to produce them outside of the procedure required by the Hague Evidence Convention would violate the French Blocking Statute. (The latter prescribes sanctions for French nationals who disclose information in foreign discovery without honoring Hague Evidence Convention procedures. See, French Penal Code Law No. 80-538.) The U.S. Bankruptcy Court for the District of Delaware found that the witnesses and documents were under the Dutch company's control, and the Dutch company failed to produce evidence showing that it or its French affiliate faced a significant risk of prosecution pursuant to French Penal Code Law if it complied with the discovery requests. Id.

Thus, the court held that a comity analysis weighed in favor of requiring discovery in compliance with the FRCP, rather than the procedures set forth in the Hague Evidence Convention, despite possible criminal penalties under the French Blocking Statute. Id. Although the court held that the depositions of witnesses who reside in France were to proceed under the FRCP, it did not require those depositions to take place in the United States, due to the time constraints and financial hardship it would likely impose upon the witnesses. Rather, the court held the depositions could take place in France or another agreed-upon location. Id. at 851.

EU Privacy and Data Protection Laws

Another factor in the potential conflict between U.S. and EU cross-border discovery procedures is the tension between these systems with regard to privacy and data protection laws. The EU and the U.S. employ very different notions of 'personal data,' which results in different protections afforded to such data. Retzer and Miller, 'Mind the Gap,' at p. 2. The EU jurisdictions generally embrace a broad view of 'personal data,' covering all types of personal information relating to an identifiable individual, including work-related e-mails and memoranda. Conversely, the U.S. focuses on protecting only particularly sensitive information which, if disclosed, could cause individuals harm, such as Social Security numbers and personal medical information. Id. These differing notions have the potential to confound U.S. courts that may not have an understanding of these differences, and thereby result in overbroad discovery orders that conflict with EU privacy and data protection laws. Despite these differences, U.S. federal courts routinely compel discovery against foreign litigants under the FRCP, despite foreign privacy and protection laws to the contrary. See, e.g., In re: Auto Refinishing Paint Antitrust Litig., 358 F.3d 288 (3d Cir. 2004); Societe Nationale Industrielle Aerospatiale v. U.S. District Court, 482 U.S. 522, 542 (1987) (stating that the Hague Evidence Convention does not prevent an American court from upholding application of U.S. discovery rules to collection of evidence from foreign parties).

ABA Resolution

Perhaps recognizing the potential for such conflicts, the American Bar Association (ABA) House of Delegates recently approved a resolution and recommendation for foreign data protection in U.S. litigation. The recommendation, which was approved in February 2012, urges U.S. courts, 'where possible, to consider and respect the data protection and privacy laws of any foreign sovereign and the interests of any person who is subject to or benefits from such laws, with regard to data sought in discovery in civil litigation.' See, 'Delegates Adopt Range of Policies at Association's 2012 Midyear Meeting,' Americanbar.org, available at http://bit.ly/ZWxLPt (last visited March 21, 2013). The resolution, while not binding on U.S. courts, certainly reflects the current global marketplace and its impact on cross-border litigation, and may cause U.S. courts to think twice before favoring broad discovery over foreign privacy rights and data protection laws.

Conclusion

Corporations faced with overseas litigation, or the potential for cross-border discovery disputes, should consider the following measures so they can be in a position to seek the discovery they need, while avoiding conflicts resulting from the EU's narrow discovery procedures and privacy laws:

• Know the parties and potential fact witnesses. If the opposing party is a foreign corporation or if documents, witnesses, or other evidence necessary to support your case are controlled by a foreign country, make sure you understand that country's discovery procedures. Is it a party to the Hague Evidence Convention? Does it have a 'blocking statute,' intended to block broad U.S. discovery, like France? The more you know about the country's laws and discovery procedures, the more prepared you will be for potential discovery conflicts that may arise.
• If the country is a party to the Hague Evidence Convention, proceed under its prescribed procedures when seeking documents or information from non-party witnesses. Otherwise, consider using a letter rogatory to request the information you seek from a foreign country.

Christopher P. DePhillips is a Principal of Porzio, Bromberg & Newman, P.C. in Morristown, NJ. He is a member of the Board of Editors for our sibling newsletter, LJN's Product Liability Law & Strategy, in which this article also appears. Heather B. Siegelheim is an Associate in Porzio, Bromberg & Newman's Litigation Practice Group.'

In a time of ever-increasing globalization, the likelihood that a multi-national corporation will be named as a party in a lawsuit overseas is greater than ever. An increase in product liability litigation ' or any litigation, for that matter ' in the U.S. involving foreign corporations has consequently resulted in an increased need for U.S. litigants to conduct discovery and collect evidence located outside the U.S. See, ABA Section of Antitrust Law: Obtaining Discovery Abroad (2d ed.), at p. 1 (2005).

However, antithetical notions of the appropriate scope of discovery in the EU and U.S. may lead to conflict when European companies are named as parties in U.S. lawsuits, or vice versa, or when a U.S. corporation needs to gather information and discovery in Europe for litigation pending in the U.S. Accordingly, it is crucial that product manufacturers, sellers, and distributors whose products are sold and used overseas recognize and understand these differences and appreciate the potential for conflict between broad U.S. discovery procedures and stringent EU privacy and data protection laws.

The Source of the Tension

The source of this tension stems primarily from the differing views between U.S. and EU countries with regard to the appropriate scope of discovery. Most U.S. jurisdictions employ a very broad definition of discovery. The Federal Rules of Civil Procedure (FRCP) and most state procedural rules provide that non-privileged information is discoverable if it is relevant to any claim or defense of any party, and is reasonably calculated to lead to the discovery of admissible evidence. Fed.R.Civ.P. 26(b)(1). For this reason, U.S. discovery rules are often perceived as fostering 'fishing expeditions.' Id. at p. 3.

By contrast, most European courts employ a much more narrow scope of discovery. Most EU countries generally prohibit discovery beyond what is absolutely necessary to support a party's case at trial, and do not impose affirmative disclosure obligations. See, David Cohen, 'E-discovery: The Need for a Transnational Approach to Cross-Border Discovery Disputes,' InsideCounsel, July 24, 2012; see also, Karin Retzer and Michael Miller, 'Mind the Gap: U.S. Discovery Demands versus E.U. Data Protection, Bureau of National Affairs, Inc.,' Privacy & Security Law Report (2011). It is no wonder, then, that the broad scope of U.S. discovery, which is in contravention of some of Europe's discovery practices and laws, has led to conflict in cases involving overseas discovery.

This article focuses on the conflict between U.S. and EU discovery procedures, and offers some useful and practical advice for U.S. litigants who may face uncertain territory when seeking discovery abroad.

The Scope of EU Discovery

The European Union member countries are (at the present time): Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom. An examination of discovery practices in some of these countries demonstrates how limited the scope of discovery is in the EU as compared with the U.S.

In the U.S., the FRCP allow parties virtually unfettered discretion to seek the production of documents, witnesses, and other information from parties and subpoenaed non-parties, as long as the requested evidence is not privileged, is relevant to any claim or defense of any party, and is reasonably calculated to lead to the discovery of admissible evidence. On the contrary, in many EU jurisdictions, it is very difficult to require a party to produce broad categories of documents and evidence, and even more difficult to require non-parties to disclose any information. See, Retzer and Miller, 'Mind the Gap,' at p. 2.

In Belgium, for example, there is no formal discovery system. Rather, each party produces only the documents that are necessary to sustain its own allegations, and parties may choose not to produce certain documents. 1 Belgium Law Digest 5.02 (2010). A court may order the production of certain documents if there is a strong basis for believing it will prove a fact relevant to the case, or the opposing party demands an injunction against a party for refusing to produce a relevant document. Id. Moreover, American-style pre-trial depositions do not exist under Belgian law, but a judge can decide to hear pre-trial witnesses. Id.

The UK, on the other hand, does not allow for pre-trial depositions at all. Consequently, parties rely almost exclusively on a tailored exchange of written discovery to work up a case for trial. In 1999, new court rules in the UK renamed the concept of discovery as 'disclosure,' and significantly narrowed the scope of discoverable information. See, Gavin Foggo, Brett Harrison, Victor Jose Rodriguez-Barrera, 'Comparing E-Discovery in the United States, Canada, the UK, and Mexico,' Committee on Commercial & Business Law Litigation, Section of Litigation, American Bar Association (newsletter, vol. 8, no. 4, Summer 2007), p. 5. Since these rule changes, litigants are no longer required to produce documents that do not affect issues in the case, even if they may lead to a 'train of enquiry' to potentially relevant documents. A party is only required to produce non-privileged documents: '1) on which it intends to rely, 2) which adversely affect its case or another party's case, or support another party's case, and 3) those required by a relevant practice direction.' Id. One of the key factors in determining what is discoverable in the UK is the concept of proportionality. While either party can apply to the court for an order compelling disclosure of certain information, courts typically require such orders to be proportionate to the likely importance of the documents, the financial positions of the parties and the amount in dispute, and ease and cost of producing the requested materials. Id. This disclosure process is far more limited in scope than the discovery process in the U.S., where a party must produce non-privileged documents that appear 'reasonably calculated to lead to the discovery of admissible evidence.' Fed.R.Civ.P. 26(b)(1).

The Hague Evidence Convention

Most EU countries are parties to the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, Mar. 18, 1970, 23 U.S.T. 2555, 1970 T.I.A.S. No. 7444, codified at 28 U.S.C. Section 1781 ('Hague Evidence Convention') (available online at http://bit.ly/ZfxDK3), which means their discovery processes are governed by its prescribed procedures. Generally, voluntary witnesses from party countries may be deposed in their respective countries, or in the U.S. under certain conditions. In Denmark, parties are permitted to conduct 'voluntary depositions' without court intervention, but the witness cannot be sworn in or take an oath. 1 Denmark Law Digest 5.02 (2010). Moreover, sworn out-of-court statements are inadmissible as evidence if an objection is made. Id. at 10.02. In the Czech Republic, parties who wish to depose witnesses or seek documents outside of the Czech Republic are permitted to issue a letter rogatory to a foreign state requesting such documents or examinations. If a Czech court receives a letter rogatory from a foreign court, it can execute the order according to foreign laws of procedure (e.g., an American-style deposition taken under oath), as long as it is not contrary to Czech law. 1 Czech Republic Law Digest 5.02 (2010).

The tension between broad U.S. discovery procedures and strict disclosure procedures in foreign countries pursuant to the Hague Evidence Convention was evident in In re Global Power Equipment Group, Inc., 418 B.R. 833 (Bankr. D. Del. 2009). In Global Power, a Dutch company refused to produce certain documents or make certain witnesses available for deposition in the United States unless the parties seeking this information complied with the Hague Evidence Convention. The Dutch company argued that the documents and witnesses were controlled by a French company and to produce them outside of the procedure required by the Hague Evidence Convention would violate the French Blocking Statute. (The latter prescribes sanctions for French nationals who disclose information in foreign discovery without honoring Hague Evidence Convention procedures. See, French Penal Code Law No. 80-538.) The U.S. Bankruptcy Court for the District of Delaware found that the witnesses and documents were under the Dutch company's control, and the Dutch company failed to produce evidence showing that it or its French affiliate faced a significant risk of prosecution pursuant to French Penal Code Law if it complied with the discovery requests. Id.

Thus, the court held that a comity analysis weighed in favor of requiring discovery in compliance with the FRCP, rather than the procedures set forth in the Hague Evidence Convention, despite possible criminal penalties under the French Blocking Statute. Id. Although the court held that the depositions of witnesses who reside in France were to proceed under the FRCP, it did not require those depositions to take place in the United States, due to the time constraints and financial hardship it would likely impose upon the witnesses. Rather, the court held the depositions could take place in France or another agreed-upon location. Id. at 851.

EU Privacy and Data Protection Laws

Another factor in the potential conflict between U.S. and EU cross-border discovery procedures is the tension between these systems with regard to privacy and data protection laws. The EU and the U.S. employ very different notions of 'personal data,' which results in different protections afforded to such data. Retzer and Miller, 'Mind the Gap,' at p. 2. The EU jurisdictions generally embrace a broad view of 'personal data,' covering all types of personal information relating to an identifiable individual, including work-related e-mails and memoranda. Conversely, the U.S. focuses on protecting only particularly sensitive information which, if disclosed, could cause individuals harm, such as Social Security numbers and personal medical information. Id. These differing notions have the potential to confound U.S. courts that may not have an understanding of these differences, and thereby result in overbroad discovery orders that conflict with EU privacy and data protection laws. Despite these differences, U.S. federal courts routinely compel discovery against foreign litigants under the FRCP, despite foreign privacy and protection laws to the contrary. See, e.g., In re: Auto Refinishing Paint Antitrust Litig., 358 F.3d 288 (3d Cir. 2004); Societe Nationale Industrielle Aerospatiale v. U.S. District Court , 482 U.S. 522, 542 (1987) (stating that the Hague Evidence Convention does not prevent an American court from upholding application of U.S. discovery rules to collection of evidence from foreign parties).

ABA Resolution

Perhaps recognizing the potential for such conflicts, the American Bar Association (ABA) House of Delegates recently approved a resolution and recommendation for foreign data protection in U.S. litigation. The recommendation, which was approved in February 2012, urges U.S. courts, 'where possible, to consider and respect the data protection and privacy laws of any foreign sovereign and the interests of any person who is subject to or benefits from such laws, with regard to data sought in discovery in civil litigation.' See, 'Delegates Adopt Range of Policies at Association's 2012 Midyear Meeting,' Americanbar.org, available at http://bit.ly/ZWxLPt (last visited March 21, 2013). The resolution, while not binding on U.S. courts, certainly reflects the current global marketplace and its impact on cross-border litigation, and may cause U.S. courts to think twice before favoring broad discovery over foreign privacy rights and data protection laws.

Conclusion

Corporations faced with overseas litigation, or the potential for cross-border discovery disputes, should consider the following measures so they can be in a position to seek the discovery they need, while avoiding conflicts resulting from the EU's narrow discovery procedures and privacy laws:

• Know the parties and potential fact witnesses. If the opposing party is a foreign corporation or if documents, witnesses, or other evidence necessary to support your case are controlled by a foreign country, make sure you understand that country's discovery procedures. Is it a party to the Hague Evidence Convention? Does it have a 'blocking statute,' intended to block broad U.S. discovery, like France? The more you know about the country's laws and discovery procedures, the more prepared you will be for potential discovery conflicts that may arise.
• If the country is a party to the Hague Evidence Convention, proceed under its prescribed procedures when seeking documents or information from non-party witnesses. Otherwise, consider using a letter rogatory to request the information you seek from a foreign country.

Christopher P. DePhillips is a Principal of Porzio, Bromberg & Newman, P.C. in Morristown, NJ. He is a member of the Board of Editors for our sibling newsletter, LJN's Product Liability Law & Strategy, in which this article also appears. Heather B. Siegelheim is an Associate in Porzio, Bromberg & Newman's Litigation Practice Group.'