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Big Bang: The new rules in April 2013 (CPR 31.5A)

English courts have spent years tackling what many perceive to be unreasonably high and, in some areas, increasing litigation costs.  Much of this has been driven by disclosure (or discovery, whichever term you choose), a procedure that is synonymous with cost and complexity in construction litigation. In large commercial cases, disclosure often accounts for the greatest cost.

The  Civil Procedure Rules (CPR) first addressed this concern in 2005, when e-disclosure was added as paragraph 2A to Practice Direction 31 (PD 31). The courts obliged with some notable judgments like Gavin Goodale v The Ministry of Justice, in which Senior Master Steven Whitaker ordered defendants to produce limited electronically stored information (ESI) by “the least expensive and most proportionate exercise possible.”  Despite this, Jackson LJ, in his report of civil litigation costs, concluded that many parties were simply ignoring paragraph 2A. A working committee led by Senior Master Whitaker was convened to amend the rules. Now we have PD 31B, which came into force on October 1, 2010.

Following more than a year-long analysis by Lord Justice Jackson of litigation costs, the Civil Procedure Rule Committee has now approved a revision to the rules requiring parties to file and exchange detailed litigation budgets at the outset of each case. The new rules also permit the court to impose a cost management order, consisting of the budgetary agreements between the parties or, if necessary, the court’s approval of budget revisions where no agreement exists.

Currently there is no set window for tackling the costs of e-Disclosure, so it is often not addressed until relatively late in proceedings. Under the new rule, two weeks prior to the first CMC, parties will be expected to provide a report detailing a budget for standard disclosure, the details of any documents identified as relevant to the issues of case and the locations of those documents.

As most of you know it has been long-established in the Civil Procedure Rules that the costs of conducting litigation should be proportionate and satisfy the overriding objective. However, accurately forecasting and managing e-Disclosure costs have often been hard to achieve in practice. This reality is in part due to the mushrooming volumes of email and other electronic documents that form a typical e-Disclosure exercise. Another factor is the lack of precise metrics or case law as to what “proportionate” actually means in practice and it is this point that the judiciary has addressed in CPR 31.5A.

Significant change

From April 2013, a new CPR 31.5A will operate in conjunction with Practice Direction 31B (the disclosure of electronic documents) and will apply to all multi-track proceedings, except those relating to personal injuries and clinical negligence. In many respects, CPR 31.5A codifies existing best practice in relation to e-Disclosure, but it also introduces one significant change to the costs and disclosure regime - the requirement to agree to a budget for the disclosure exercise with the judge at the case management conference (CMC). The new disclosure rule is part of a package of case management reforms which will be coming into force at the same time.

New CPR Rule 31.5A will contain menu options for disclosure for large commercial cases and any cases where the cost of standard disclosure is likely to be disproportionate. The new rule 31.5 will come into effect at the same time as the other Costs Review reforms, and will operate in conjunction with PD 31B.5.2.

Under the new rule 31.5, there will no longer be a presumption in favour of standard disclosure. Instead, the court must decide “having regard to the overriding objective and the need to limit disclosure to that which is necessary to deal with the case justly” which of the following orders to make:

  • To dispense with disclosure;
  • To disclose documents on which a party relies, and request any specific disclosure required from the opponent;
  • To disclose documents on an issue-by-issue basis;
  • For disclosure on a “train of enquiry” basis;
  • For standard disclosure; or
  • Any other order the court considers appropriate.

Rule 31.5 also provides that the court may at any point give directions on how to conduct disclosure, and in particular decide:

  • What searches are to be undertaken, where to look, the appropriate time frame, by whom and the extent of any search for electronically stored documents;
  • whether to require lists of documents;
  • how and when to give the disclosure statement;
  • in what format to disclose documents (and whether any identification is required);
  • what to require in respect to documents that once existed but no longer exist; and
  • whether to conduct disclosure in stages.

Interestingly the final menu option could include a “keys to the warehouse” order in which the parties exchange all of their documents and decide which to use.

It is important to understand that the new disclosure rule is part of a package of case management reforms which will take effect 1 April 2013, though the rules are already being applied in some TCC Courts and classes of dispute. Lord Justice Jackson’s approach aims to ensure that the court and the parties focus at an early stage on the extent of disclosure required, which is crucial to controlling disclosure costs.

International Arbitration

Dubai court overturns an arbitration award on public policy grounds and threatens confidence in UAE arbitration

The judgment threatens not only confidence in decisions of arbitrators in the Middle East region, but will also make companies concerned the security of arbitration awards made overseas and secured in Dubai under the 1958 New York Convention for Recognition and Enforcement of Foreign Arbitral Awardsapropos enforcement.

The Cassation Court, Dubai’s highest court, overturned an arbitration award which had been upheld by the court of first instance and court of appeal. It said that the arbitrator did not have jurisdiction to make the award because the issues in dispute which the arbitrator decided were matters of 'public policy' and so were therefore within the exclusive jurisdiction of the courts, not arbitrators.

The arbitrator had ordered a property developer to repay the purchaser the purchase price for a development because the Sale and Purchase Agreement had not been registered in the Real Estate Register, as is required by law and therefore the Sale and Purchase Agreement for the property was invalid.

The Court said, though, that the arbitrator was ultra vires to render an award to that effect because Article 3 of the UAE Civil Transactions Code states that issues of 'public order' can only be decided by the courts.

The classification of a real estate dispute as an issue of 'public order' has caused some alarm. The Civil Transactions Code says that "public order shall be deemed to include matters relating to personal status such as marriage, inheritance, and lineage, and matters relating to systems of government, freedom of trade, the circulation of wealth, rules of individual ownership and the other rules and foundations upon which society is based".

The Court said that the dispute was to do with the circulation of wealth and private ownership, and so could only be validly decided by the courts system.

Unhelpfully the Dubai Court did not sufficiently distinguish between the arbitrability of matters and questions of public policy. Further, to classify the failure to register the property contract as a matter of public policy seems an unjustifiably broad interpretation and introduces significant uncertainty for investors.

That uncertainty is unhelpful in the Emirates. The New York Convention is used as a tool to enforce an arbitration award made in one country in another country that is a signatory to that convention. If the UAE maintains this overly-broad definition of public policy it could use that as a justification for not enforcing foreign arbitral awards under the New York Convention. This is so because Article V(2)(b) of the Convention contains an exception on which the enforcement of a foreign arbitral award can be refused if the enforcement of that award is contrary to the public policy of that country

The UAE's track record of enforcing foreign arbitral awards under the Convention is not brilliant and this decision will raise further doubts that the Convention will take hold there.

Nobody knows if this public policy exemption from arbitration will apply to all real estate cases or just to all cases involving issues such as the law requiring the registration of transactions.

What Dubai and the UAE as a whole needs to do now is send clear signals that arbitration awards will be respected.

Consultation

London: consultation on use of planning obligations in Crossrail and the use of the Mayoral Community Infrastructure Levy

The Mayor of London has published a supplementary planning guidance consultative draft on the use of planning obligations in the funding of Crossrail and on the use of the Mayoral Community Infrastructure Levy (MCIL). The draft guidance covers matters such as information on charges and how contributions will be calculated, guidance on the relationship between Crossrail contributions and the MCIL and guidance on practical implementation. The consultation closes on 15 January 2013.

Case Notes

CLICK HERE for the following case notes:

WUHAN GUOYU LOGISTICS GROUP CO LIMITED v EMPORIKI BANK OF GREECE SA  [2012] EWCA Civ 1629

BARBUDEV v EUROCOM CABLE MANAGEMENT BULGARIA EOOD  [2012] EWCA Civ 548

PERSIMMON HOMES (SOUTH COAST LTD) v HALL AGGREGATES SOUTH COAST LTD  [2012] EWHC 2429 (TCC)

ADS AEROSPACE LTD v EMS GLOBAL TRACKING LTD  [2012] EWHC 2904 (TCC)

WAH (AKA ALAN TANG) v GRANT THORNTON INTERNATIONAL LTD  [2012] EWHC 3198 (Ch)

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