by Patrick Ruppert
Although German civil procedure law does not provide for the upstream evidence preservation process of “e-discovery” relevant for electronic corporate data in the US, more and more companies in Germany are using software solutions that were originally designed for the preparation of digital evidence.
E-discovery software was originally developed for the evidence preservation processes required in US proceedings.
Methodology can be used in cartel proceedings and internal investigations, among other things.
Software can be used for purposes of compliance (with regard to leniency policy).
Review tools filter data and facilitate legal audits.
Basically every known data format can be processed.
“Discovery” – preliminary proceedings common in the US, intended to ensure a fair process – first affected only those companies that transacted business there and were involved in legal disputes with American contract partners.
National companies not doing business directly on the US market have now also begun to use these electronic analysis tools, as they can best be used in such matters where certain content must be specifically filtered out of large data volumes and cultivated as evidence.
Think of criminal investigations, for example, or cartel proceedings, compliance matters, company valuations in cases of sale (due diligence) or other internal investigations.
Helmut Sauro, Senior Consultant at Kroll Ontrack GmbH, underscores this practicable point: “Even if e-discovery is not provided for in our law, the methodology, i.e. the process according to the ‘e-disclosure reference model’ (standard procedure for electronic disclosure), can be transferred to other forms of investigations – from the collection of data to the production of data, for example in connection with infringements of competition law. E-discovery can thus be considered a synonym for the processing of large data volumes in the context of investigations, without necessarily tying it down to US court proceedings.”
Peter Gottschalk of Recommind offers a similar assessment, concluding that e-discovery software can be used in any investigation. “Take the FIFA scandal or a compliance audit,” he says. “By now, more and more companies from very different industries are relying on e-discovery software,” which is particularly in demand in cartel proceedings but also for “simple” internal investigations.
Companies affected by cartel proceedings would have to investigate independently “to benefit from the leniency policy,” says Gottschalk. Particularly with regard to the competition, companies would have a great vested interest in providing a complete clarification to the authorities: “If the other party finds the anti-competitive conduct first, then at most you’ll have a chance at half the remission, if you’re very fast. With the corporate governance concept, companies are always eager to ensure they have no skeletons in their closet. And thus, everything comes down to the issue of the preventive compliance audit.”
How does this work in practice? Is it at all necessary to involve little “programmed helpers” or even external analysts, such usually being associated with an entrepreneurial investment?
A simple example may illustrate the relevance: at a medium-sized retail company (5000 employees), suspicion arises that there has been participation in illegal price agreements. Employees are suspected of having arranged for price manipulations over a period of three years. The competition authorities are investigating because of an anonymous report submitted by a competitor.
Procedure – conventional
The management of the respective company has launched an internal investigation, first interviewing the employees. But this has not yet led to anything more than vague conjecture. Since time is of the essence and the press could make room for negative publicity, positive results must be obtained quickly.
The management could approach the topic the conventional way. This means it would form an investigation team to begin going through each individual transaction manually, reviewing these using criteria to be created (suspicion parameters). In this respect, the team would have to comply with all the statutory provisions, especially those for data protection. The data thus filtered out would have to be stored separately, marked manually and reported to the management within a fixed time frame.
Since electronic communication has been predominant in the company concerned for a long time, the email inboxes of all the staff would have to be examined manually (and read!). Taking into account the time frame of the crime and the daily email traffic, this would mean a huge workload. The team of investigators would be busy for weeks, probably for months.
Furthermore, all the telecommunications data (text messages, chats), business trips, work logs, business letters and contact details would have to be evaluated manually – which would mean an enormous amount of additional work.
All in all, it would a Herculean task, hardly manageable, and the success of such investigations would be significantly linked to the individual abilities of the investigation team.
Procedure – digital
But there is another way to go about it that requires significantly fewer resources, is reasonable in terms of time and is more accurate.
The research work in all digitally available company data is performed by software – either bespoke or standard software, but usually proprietary. But not everything has to be paid. By now, there are also free solutions on the Internet, such as the open source software FreeEed. Even the widespread, typical business software MS Office 365 has been offering e-discovery tools for some time. This is hardly surprising, since e-discovery is part of everyday life in Microsoft’s home country.
The people entrusted with the task of reviewing merely have to enter into search masks the search criteria to be used for checking. Statutory requirements can also be taken into account in the search logic in customised software solutions.
The only data to actually be examined manually will then be a condensed selection of data reduced to search terms.
In the end, the data search is carried out entirely in accordance with the customers’ wishes. E-discovery providers thus offer to search through the data internally at the company’s premises or externally in the cloud.
Working in the cloud
The cloud solution has the tremendous advantage of making it possible to access the service providers’ specially secured server from anywhere. The experts do not have to work specifically on site at the company being supported. This saves costs.
Another advantage is that enormous amounts of data (Big Data), which one computer alone can hardly analyse within a reasonable amount of time, can be distributed to a virtual cloud cluster (Hadoop) and, in a sense, examined in slices.
But be careful! It is recommended to make sure the cloud servers located in Germany or at least a neighbouring European country. This is the only way to ensure that the strict data protection rules to which German companies are bound will also truly be complied with.
The various software solutions generally make it possible to search for certain keywords that are important for the respective investigation. The links to users resulting from the search can be recorded statistically, along with a chronological depiction, and processed graphically. The frequency of certain processes can then be used to draw conclusions about suspicious factors in a discovery process.
The e-discovery providers are there for their customers. This means that the common file formats (html, eml, pdf, doc, xls, ppt, mdb, txt, jpg, gif, png, mov, mpg, wav) do not pose any difficulty at all for the analysis and processing.
Understandably, it presently requires a different kind of effort to search through a simple text – no matter the format – using keywords, than an audio recording that must first be decoded and finally be examined for markers. It is significantly more expensive to investigate image and film material using image recognition tools. This is why the cost of manual control is still comparatively high – if it is not a simple matter of indexing having been attached editorially to the multimedia file beforehand.
Even though, on a national level, the core business has begun to cover the legal areas mentioned above, software vendors are not only taking practical action in these areas. Their competence also includes supporting German companies in legal disputes with regard to evidence where e-discovery is required by law – in the United States.
Photos: © iStock/Marco_Piunti