That's despite the fact that they will pay the penalty for failures to preserve information as evidence in disputes, according to an industry survey.
Companies are advised to have electronic data policies to manage the storage of information to aid e-discovery in case of disputes or court cases. Both the chief executives who bear responsibility for compliance and many legal departments who implement policies are not knowledgeable enough, according to a survey by e-discovery specialists Kroll Ontrak.
"Clearly in the UK, in-house counsel and their external counsel are lacking significantly in their training and understanding of rules and regulations regarding their electronic information," said Martin Carey, managing director of Kroll Ontrack in London. "They do not yet seem to be grasping the fact that all this data is no longer just information; rather it can now all be considered as evidence. This fact alone shows a severe lack of ownership and understanding."
The UK's Civil Procedure Rules govern e-disclosure, a process by which a company's documents are trawled for evidence in disputes or investigations. Information contained in electronic documents and emails can be vital in instances of competition or fraud investigations.
Kroll Ontrack found that there had been 50,000 changes to financial regulator the Financial Services Authority's rule book since 2001, a massive burden with which companies are not keeping up.
Its survey found that only 17% of in house lawyers believe that they know the case law well enough and 26% say they have a low level of understanding of the issues, while 14% of the lawyers said they knew little or nothing about the rules.
"These statistics are frightening yet not surprising," said Kristin Nimsger, president of Kroll Ontrack. “The explosion of electronic information and the onslaught of new rules, regulations and laws have made it incredibly difficult for companies and counsel to stay on top of everything."
The research showed that though chief executives of companies will bear the responsibility for breaches of data handling, they are not involved in creating or implementing policy, which is often delegated to the IT department.
"The fact that there is no clear definition of who should be developing or enforcing the policies shows there is a lack of ownership," said Nimsger. "With the size of fines and severity of sanctions that can be imposed, this has moved from being a concern for IT or the legal team to a core business issue in which today’s executives and boards of directors must now be involved.”
Recent research by KPMG Forensic found that just 17% of surveyed in house lawyers thought that the creation of rules governing e-disclosure in the Civil Procedure Rules had had a positive impact.
KPMG Forensics's Paul Tombleson told OUT-LAW Radio that e-disclosure can be incredibly expensive. "Figures that we've compiled suggest that a large proportion of cases would be above £500,000 from an e-disclosure perspective, and quite a number would be above £1 million," he said.