Opinion in Latin Lawyer Volume 11 Issue 4

Friday, 1st June 2012

Geert Aalbers, general manager for Brazil and director of corporate investigations in Latin America for consultancy firm Control Risks, discusses how Latin American countries can benefit from developing electronic discovery laws

Over 30 billion e-mails are sent every day. One in five US companies’ employees’ e-mail has been subpoenaed. A typical Fortune 500 company has 125 ongoing cases with at least 75 per cent requiring electronic discovery (e-discovery). These statistics, from the American Bar Association digital evidence project and the National Law Journal Report, help explain why US companies spend approximately US$5 billion just to analyse e-mail traffic. There is a widely held belief among legal practitioners in Latin America that e-discovery tools used frequently in litigation in the US are of limited use in a region with no analogous discovery laws. Perhaps part of the problem lies in the interchangeable use of the terms “e-discovery” and “legal technologies”, which incorrectly conflates a discovery process and a set of technological tools that effectively help attorneys in counselling their clients. In fact, legal technologies are currently being applied to a broad range of legal issues in Latin America.

E-discovery v legal technologies: what’s the difference?
E-discovery is a process whereby legal technologies are used to identify, collect, process, review and produce documents for evidentiary purposes in civil and criminal proceedings. Since relevant data may be stored in several jurisdictions (or increasingly in the Cloud), in various formats, in a variety of languages, over many years and involving multiple individuals, the process often presents legal, technical and operational challenges. Depending on the circumstances, forensic examinations of computers and other hardware may also be required to recover or restore deleted, reformatted or tampered-with data. The case for resorting to technology-based solutions becomes self-evident when one also takes into consideration the widely varying global data privacy laws, the requirement for chain of custody controls and the need to accommodate simultaneous access by multiple reviewers of the data. But e-discovery, and especially the practice of broadly defined “fishing expeditions”, commonplace in civil litigation in the US, remain a largely foreign concept to the civil law systems in Latin America. In these jurisdictions the party making the claim carries the burden of gathering the evidence to substantiate that claim and can only request the counterparty to produce documents or evidence, which have been specifically identified.

Legal technologies, however, offer solutions to many situations outside the realm of litigation discovery. In general, legal technologies can effectively be deployed by companies and legal counsel when reviewing large volumes of data and when one or more of the following are critical: relevant facts need to be identified and understood quickly and comprehensively; the accuracy, consistency and reliability of review needs to be guaranteed; chain of custody must be preserved; precise timelines must be understood; the secure storage of sensitive data is essential; and the examination of data requires multiple reviewers. These tools can be applied across a wide variety of matters, including, but not limited to, antitrust matters, compliance and anti-corruption work, litigation and fraud cases.

Antitrust investigations
Twenty years ago, very few countries had programmes to allow companies or individuals to self-report involvement in antitrust violations, such as price fixing, market allocation and bid rigging, in exchange for immunity to prosecution or reduced sentences. Over the past decade, however, many Latin American countries modified their antitrust legislation to introduce leniency programmes. A proliferation of recent leniency agreements throughout Latin America involving antitrust violations has signalled a greater level of enforcement activity in the region.

Benefiting from cooperation under these regimes depends, not surprisingly, on the relevance of the information submitted to authorities after an internal investigation. In a world of increased cross-border complexity and technological dependence, those investigations often rely on technological solutions to collect and review information.

In a recent case in Brazil, allegations surfaced that an industrial producer had engaged in price fixing and other collusive practices with its key competitors for approximately 10 years. After an initial review of e-mails, Barbara Rosenberg and André Previato, of Barbosa Müssnich & Aragão, concluded that the most advisable course of action would be for the company to apply for leniency from antitrust authorities. “When a client comes to us for advice, they usually know or suspect that something is wrong and our challenge is to quickly find out to what extent alleged conduct took place, who was involved, and who might need to be protected via a leniency application,” says Previato.

To expedite the investigation and guarantee chain of custody, Previato’s team employed legal technologies to craft a solution. This was critical since the results of the internal investigation had to be submitted to the local antitrust authorities within several weeks. The process had to be accurate enough to maximise the chances that the company and the employees involved would be granted full immunity, and the information needed to be sufficiently comprehensive and relevant to allow authorities to successfully launch an investigation into the alleged activities. Previato was surprisingly upbeat about the amount of data to be analysed, explaining that “the volume of electronically stored information [ESI] is growing, but for antitrust issues this is a positive development. The more information we have the greater our ability to precisely define parameters and delineate the information we submit to the antitrust authorities.” Previato is confident that the results of the investigation are sufficiently robust and well-grounded to reach a favourable agreement with authorities.

Compliance and anti-corruption
In the anti-corruption arena, legal technologies are increasingly being deployed to conduct preventative reviews rather than responding to regulatory probes, of which there have been few to date in Latin America. Referring to a recent internal investigation conducted for a major consumer goods producer, Marcos Masenello Restrepo of Pinheiro Neto Advogados noted: “Most of our clients are not reviewing data related to possible anti-corruption practices with a primary concern of producing evidence; rather, they are conducting reviews mainly to assess the extent they may be exposed or might need to disclose information to the authorities.” Restrepo’s team regularly provides legal advice alongside US external counsel to conduct secondary review under Brazilian law of documents tagged as relevant by his US counterparts. Restrepo frequently works with legal technologies and is seeing a slow increase in acceptance in the use of these tools in Latin America. In his view, this trend is set to intensify as the legal profession becomes more familiar with the tools and the results they produce. And this is likely to be further fuelled by a growing local awareness of international anti-corruption laws and the implications of being subject to international enforcement.

Legal technologies are also increasingly used to gain efficiency and a competitive advantage in traditional litigation disputes, which in most Latin American countries still tend to be heavily dependent on the slow process of physical document exchange and review. In this regard, Domingos Fernando Refinetti of Machado, Meyer, Sendacz e Opice Advogados commented, “Despite the lack of an ESI culture in Brazil, no one doubts that legal technologies are increasingly becoming an essential tool for litigation attorneys.” In litigation matters in particular, cost-benefit considerations will continue to determine the extent to which clients are likely to approve the use of legal technologies. As Refinetti observed, “Most clients involved in litigation would think to themselves: why invest in the use of technologies to conduct internal fact-finding if the burden of proof is on the counterparty?” Nevertheless, Refinetti made reference to targets recently set by the National Justice Council aimed at reducing the significant backlog in cases. To achieve this goal, counsel may be more inclined to use legal technologies to hasten their work as they come under greater time pressure and significantly compressed timelines. According to Refinetti, other areas in which they can be used to enhance the results of litigation efforts include reviewing data to select and assess credibility of witnesses, and in tracing and identifying assets following a judicial award.

Finally, legal technologies are increasingly being used to support internal investigations into allegations of fraud and other integrity breaches, such as misappropriation, conflicts of interest and procurement fraud. David Rechulski, of David Rechulski Advogados, frequently advises companies on internal investigative matters, including when legal technologies should be used. “There has been a sharp increase in demand for internal investigations,” he said.

Rechulski describes a typical scenario in which a company is embroiled in a public scandal due to the misbehaviour of one, or a few of its employees. “In Brazil, many companies’ natural first line response to being prosecuted by the government is to deny wrongdoing. But you should not deny the obvious. First and foremost, company leadership should seek to protect the reputation of the company by demonstrating clearly that the acts of individuals involved deviate from company ethics, policies and procedures as well as from their specific mandates. Transparency is the best means to prove non-complicity.” In this context, Rechulski recommends that companies, where possible, file criminal charges against employees who engage in illicit behaviour as a means to isolate and distance themselves from those acts. Although he acknowledges that this is a more demanding and costly route for the company in the short term, a thorough investigation involving legal counsel, an investigative firm and appropriate legal technology tools is, in his view, the best means to achieve the longer term strategic objective of preserving corporate reputation. Rechulski concludes: “A greater dependency on information technology has, on the one hand, made companies more vulnerable to fraud, but on the other also given them new tools to detect and investigate fraud.”

Whereas paper and stamps are still very much the norm in most Latin American legal systems, a slow transformation, fuelled by the growth of ESI and a gradual cultural change in the judiciary and legal profession, is taking place. In the absence of discovery laws, the use of legal technologies in Latin America will not proliferate and be as transformative as they have been in the US. However, they are increasingly being used to increase productivity and work quality in the legal and investigations areas. Whether deployed to support in antitrust, corruption, litigation or fraud-related matters, legal technologies are much more useful than just to find the proverbial needle in the haystack. They allow us to more quickly and accurately find out how big the haystack is, how many needles there are and exactly where they are located.

(Latin Lawyer 01.06.2012)

(Notícia na Íntegra)