Hong Kong recently launched a pilot scheme for the discovery and provision of electronically stored documents in cases in the High Court’s Commercial List. The move has been widely welcomed by law firms, which are now preparing for the challenge.

“Hong Kong authorities want the jurisdiction to be the hub of Asia-Pacific dispute resolution, but we don’t have even one eDiscovery protocol,” says Dominic Wai, partner at Baker & McKenzie in Hong Kong.

According to Wai, Hong Kong needed some kind of protocol that people wanting to come to the city for litigation and arbitration would follow.

The new practice direction applies to cases where the claim or counterclaim is in excess of $ 1 million and has at least 10,000 documents to be searched for the purposes of discovery. According to the directions issued while announcing the pilot scheme, the judge in charge of the Commercial List said its purpose was “to provide a framework for reasonable, proportionate and economical discovery and supply of electronic documents.”

Its general intention is to get the competing parties into a cooperative mode, Wai told ALB. “There is no set requirement, but the courts would expect the parties to discuss and agree at a very early stage on  the kind of eDiscovery tools and software they would be using,” he says, “If the parties cannot agree among themselves, then the court will decide.”

According to Charles Allen, a partner at Sidley Austin in Hong Kong, the progress of new litigation cases would be watched closely since “to have lawyers from both sides to fully collaborate with the opponent will be a challenge.”

It would also be a challenge, Allen told ALB, to educate lawyers and their clients about how the scheme works, what their obligations are in terms of preserving electronic data, as well making it available. “While some judges are extremely familiar with technology, it may take time to fully educate some judges on eDiscovery,” he says.

Cost-saving will be an important aspect of the new scheme as according to Aaron Bleasdale, associate at Baker & McKenzie in Hong Kong, the practice direction requires an organisation to effectively and efficiently handle discovery from the cost perspective. “Even before litigation is contemplated, they will need to have better data management so that they can avoid some of the cost dangers of eDiscovery such as the duplication of documents,” he says.

As per the direction under the scheme, discovery is limited to documents which are directly relevant to an issue arising in the proceedings, and therefore, says Allen, unlike in ordinary discovery, the scope is more restrictive and is intended to ensure that discovery is conducted in a proportionate and cost-effective manner. “Any request for additional discovery will need to be justified on an application for specific discovery supported by evidence,” he says.

Nonetheless, the use of eDiscovery is going to add a significant cost burdens on companies, says Allen. “It will not just be limited to the expenses associated with retaining capable eDiscovery consultants, but also the risk that, even after keyword searches and other techniques are employed, some relevant materials may still slip through,” he says.

However, the costs should be within manageable limits as according to Allen, most international firms are already capable in this area, and the others will catch up without too much difficulty. “Parties are likely to come to realise that the expense is a necessary cost of doing business,” he says.

Many companies that are commonly the target of litigation, such as those with class-action lawsuits against them in the U.S., do have data management solutions as part of risk mitigation to make discovery more cost effective, says Bleasdale. Furthermore, “it will increasingly become a requirement even in smaller businesses not only because of eDiscovery but because of data privacy regulations in Hong Kong and Singapore,” he says.

However according to Wai, corporate executives are still indifferent to the new eDiscovery guidelines and will remain so unless and until there is a case that needs them to deal with the issue. “I am not sure that just a pilot scheme of eDiscovery will make them spend more money,” he says.

Furthermore, says Wai, some people might have a misunderstanding that the new practice direction applies only to commercial cases, which in Hong Kong are mainly banking, commercial trade and insurance. “The pilot scheme has a provision that the courts can also, on their own, direct the use of eDiscovery in the cases that are suitable to apply these procedures and principles,” he says. This fact should be a signal for all law firms to be ready for the use of eDiscovery in practice, he says.

Though an increase in expenditure is predicted on eDiscovery, according to Bleasdale, technology companies are not expecting an immediate upsurge in their business and the impact of the pilot scheme is likely to take one to two years for them.

The new scheme is also likely to open up new opportunities in Hong Kong since sometimes for eDiscovery, law firms not only require technical assistance but also expert evidence. “They need to find a suitable service provider who is able to do the task efficiently and is also able to go and testify in the court,” he says.

Typical cases that would require the use of eDiscovery, according to Wai, include misrepresentation, misselling and fraud. “Apart from these, defamation cases are also suitable for eDiscovery protocol as nowadays, all the communication is done by email, instant messaging and social media like WhatsApp and WeChat,” he says.

With the growing popularity of these electronic means of communication, there has been a huge increase in the sources of data that might be potentially relevant for the litigation. To process all of it, says Bleasdale, could be a challenge for the future use of eDiscovery.

Furthermore, “different regulators and courts in the U.S. and Hong Kong require documents in regulatory investigations to be given to them in different formats causing potential compatibility difficulties,” he says.

Another longstanding problem with document discovery has been the restrictions on transferring  specific data from one jurisdiction to another. “It could relate to issues of trade secrets or privacy,” says Wai, “Companies might need some data for these cases in Hong Kong, but some reviews might only be done in another jurisdiction.”

The situation is likely to push lawyers into a more competitive and challenging environment. According to Bleasdale, “the tech-savvy firms will have an advantage over the firms that are not learning eDiscovery and practice direction.”