The U.S. allows parties to non-U.S. litigation proceedings to obtain documents and witness testimony from sources within the U.S., even if such evidence is unobtainable through the home forum’s own discovery procedures. Types of evidence available include International Wire Transaction Records (U.S. Dollar wires typically transit through the U.S.), emails, correspondence, phone and travel records, accounting, banking, credit card and corporate documents such as shareholder and board meeting records. However, U.S. courts remain split on whether 28 U.S.C. §1782 discovery is permissible for use in private international arbitration proceedings — making it available in some parts of the U.S., but not others. Eventually, the United States Supreme Court will resolve the split among the circuits. However, until then, §1782 discovery remains available for use in private international arbitration proceedings in a limited number of U.S. jurisdictions.
The Supreme Court has not yet decided whether the scope of §1782 authorizes discovery for use in private international arbitrations such as LCIA, ICC, HKIAC and SIAC forums. In Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), the Supreme Court considered whether §1782(a) authorized discovery in connection with a proceeding pending before the European Commission. While the Court held that the European Commission was a foreign tribunal, is was so because “it acts as a first-instance decision maker.” This decision was limited to circumstances of a quasi-governmental agency being the arbitral forum, leaving open the question of whether §1782 encompasses private arbitration forums. Based upon this, a split amongst the Circuits developed.
I. The Second, Fifth and Seventh Circuits Do Not Permit 1782 Discovery For Private International Arbitration
The Second Circuit has reinforced its position that 28 U.S.C. §1782 may not be utilized to obtain evidence for use in private international arbitrations outside the United States. On July 8, 2020 in Hanwei Guo v. Deutsche Bank Sec., 965 F.3d 96 (2d Cir. 2020), it affirmed the Southern District of New York court’s determination that a China International Economic and Trade Arbitration Commission (“CIETAC”) arbitration was best categorized as private commercial arbitration, leaving §1782 discovery unavailable. The court followed its prior decision in National Broadcasting Co., Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir. 1999) (“NBC”), in which it held that the statute’s legislative history, inclusion of “foreign or international tribunal” into the statutory text, and policy considerations of preserving the efficiency and cost-effectiveness of private arbitration, establish §1782 does not extend to private international arbitration.
The Second Circuit noted NBC was not overruled by Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 124 S. Ct. 2466 (2004), because whether a private arbitral tribunal was a “tribunal” under §1782, was not under consideration in Intel. The court noted the recent Fourth Circuit and Sixth Circuit decisions that held §1782 does encompass private international arbitration, and opined that neither decision “rested on the notion that Intel undermined NBC or otherwise required a reading of §1782 that encompasse[d] private arbitration,” but that they came to their holdings based upon their statutory interpretation of §1782, not based on the precedent of Intel. However, the Second Circuit’s ruling in Hanwei Guo only applies to private international arbitration typically based upon contract provisions found in commercial agreements. It does not apply to treaty-based tribunals or state sponsored arbitration proceedings. See In re Ex Parte Warren, 2020 U.S. Dist. LEXIS 195537 (S.D.N.Y. Oct. 21, 2020), permitting §1782 discovery for use in international arbitration against Mexico under the North American Free Trade Agreement (“NAFTA”) and Arbitration Rules of the United Nations Commission on International Trade Law (“UNCITRAL”).
The Fifth Circuit in Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880 (5th Cir. 1999) held that only “state sponsored” arbitrations fall within the scope of §1782 but not private international arbitrations. This was based upon its analysis of the legislative history which revealed no contemporaneous evidence that Congress contemplated extending §1782 to the then novel arena of international commercial arbitration and also upon references in the United States Code to “arbitral tribunals” which almost uniformly concern an adjunct of a foreign government or international agency.
Recently, on September 22, 2020, the Seventh Circuit in Servotronics, Inc. v. Rolls-Royce PLC, 975 F.3d 689 (7th Cir. 2020), held a “foreign or international tribunal” within the meaning of §1782(a) is a state-sponsored, public, or quasi-governmental tribunal, not private foreign arbitration. The court determined the phrase “foreign or international tribunal” as used in this statutory scheme means state-sponsored tribunals and does not include private arbitration panels and avoids collision with the Federal Arbitration Act. The court affirmed the district court’s denial of Servotronics’ application for §1782 discovery for use in binding arbitration in Birmingham, England, under the rules of the Chartered Institute of Arbiters (“CIArb”).
II. The Fourth and Sixth Circuits Permit 1782 For Private International Arbitration
On March 30, 2020, the Fourth Circuit in Servotronics, Inc. v. Boeing Co., 954 F.3d 209, 210 (4th Cir. 2020) held that the CIArb, a private arbitration panel convened in England, is a “foreign or international tribunal” under §1782(a) and, therefore, the district court had authority to permit discovery of Boeing employees in South Carolina in connection with that private arbitration. The court rejected the argument that the term “foreign or international tribunal,” as found in §1782, does not encompass a private arbitral panel convened on the basis of the parties’ agreement, because the “current version of the statute, as amended in 1964, thus manifests Congress’ policy to increase international cooperation by providing U.S. assistance in resolving disputes before not only foreign courts but before all foreign and international tribunals.”
On September 19, 2019, the Sixth Circuit in Abdul Latif Jameel Transp. Co. v. FedEx Corp., 939 F.3d 710 (6th Cir. 2019), reversed a district court’s denial of an application by a Saudi corporation to take discovery from U.S. based FedEx Corporation for use in an arbitration proceeding in Dubai, under the rules of the Dubai International Financial Centre-London Court of International Arbitration (“DIFC-LCIA Arbitration”). The Sixth Circuit determined that the DIFC-LCIA is a “Foreign or International Tribunal” for which §1782 discovery may be permitted, because the “statutory language provides a clear answer … the text, context, and structure of § 1782(a) provide no reason to doubt that the word ‘tribunal’ includes private commercial arbitral panels established pursuant to contract and having the authority to issue decisions that bind the parties.”
III. The Supreme Court will resolve the split
Servotronics, having been permitted in the Fourth Circuit, but denied in the Seventh Circuit, §1782 discovery against Boeing for use in the same UK arbitration proceeding brought the issue to the Supreme Court to resolve the circuit split over the meaning of “foreign or international tribunal” and whether that term includes private international arbitrations. However, prior to oral argument in September 2021, the litigants settled the case and the Supreme Court never addressed whether §1782 authorizes district courts to order discovery for use in private international arbitration.
In December 2021, the U.S. Supreme Court granted certiorari in two cases, ZFAutomotive US v. Luxshare, Ltd., 21-401, and Alixpartners v. Fund for Protection of Investor Rights in Foreign States, 21-518, which were consolidated, to consider the scope of discovery allowed under §1782 in international arbitration. The main issue is whether the arbitration matter needs to involve a foreign state, a treaty, or is it allowed in any international arbitration between two private parties.
ZF Automotive US v. Luxshare, Ltd. involved a private party seeking discovery from another private party for use in an international private commercial arbitration. The district court granted the discovery application following Sixth Circuit precedent. Alixpartners v. Fund for Protection of Investor Rights in Foreign States involved investor-state arbitration, i.e., arbitration involving a foreign state and a private party pursuant to a treaty. While the Second Circuit has previously held that arbitration between two private parties does not fall within §1782, it reached a different conclusion following its reasoning in Hanwei Guo, and held treaty based arbitration does fall within §1782 based upon the “functional approach” for determining whether it is public or private in nature. The four factors considered were: (1) the “degree of state affiliation and functional independence possessed by the entity”; (2) “the degree to which a state possesses the authority to intervene to alter the outcome of an arbitration after the panel has rendered a decision”; (3) the “nature of the jurisdiction possessed by the panel”; and (4) the “ability of the parties to select their own arbitrators.” The third factor weighed heavily with the court which concluded, “the arbitral panel in this case derives its adjudicatory authority from the [bilateral investment] Treaty . . . rather than [from] an agreement between purely private parties or any other species of private contract.”
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Thomas C. Sullivan is an attorney in the Philadelphia office of Marks & Sokolov LLC. Mr. Sullivan represents Western, Russian and Ukrainian clients in complex commercial disputes including civil RICO, securities fraud, Foreign Corrupt Practices Act, Convention on the International Sale of Goods and ICC Arbitration matters. He has litigated numerous Section 1782 discovery matters throughout the United States and was recently published in Obtaining U.S. Discovery For Use In Non-U.S. Tribunals Pursuant To 28 U.S.C. § 1782 (Chapter 7), Juris Publishing, LLC, 2020.
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