Parties involved in an international arbitration anywhere have an often unknown, but equally powerful, weapon at their disposal if their opponent, or evidence they need, is present in the United States. This is so irrespective of whether that opponent is American or foreign. Such parties may be able to use American-style discovery against their opponents, even if no such procedural or evidentiary weapon is available to the other side.
U.S. statutory law in many instances makes available U.S. style discovery to such parties. Pursuant to 28 U.S.C. §1782(a), a federal statute, federal district courts in the United States are authorized to order discovery “for use in a proceeding in a foreign or international tribunal,” unless the information sought is privileged. The privilege invoked to protect against such discovery may be American or foreign. In re Federation Internationale de Basketball, 117 F. Supp. 2d 403, 407 (S.D.N.Y. 2000) (federal common law governs any assertions of privilege under §1782); Ecuadorian Plaintiffs v. Chevron Corp., 619 F.3d 373, 378–79 (5th Cir. 2010) (statute’s protection extends to privileges recognized by foreign law).
The court’s inquiry as to whether it will permit discovery under §1782(a) proceeds in two stages. First, whether the court has the authority to grant the application. Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264 (2004). Second, whether the court should exercise its broad discretion to do so. Id.; In re Application of Bayer AG, 146 F.3d 188, 192 (3d Cir. 1998) (court may refuse to issue an order or it may impose conditions on discovery it deems desirable).
Under the first prong of the inquiry, a district court in the United States has the authority to grant discovery when the following statutory conditions are met: (1) the target of the discovery “resides or is found” within the district; (2) the requesting party is a foreign or international tribunal or an “interested person” in the foreign proceeding; and (3) the discovery is requested “for use in a proceeding in a foreign or international tribunal” or one that is “within reasonable contemplation.” 28 U.S.C. §1782(a); Intel, 542 U.S. at 259. If the applicant satisfies these prerequisites, the district court will turn to the second prong. Four factors articulated in the Supreme Court’s Intel decision on §1782 determine whether the court will exercise its discretionary power to order discovery: (1) whether the person from whom discovery is sought is a participant in the foreign proceeding; (2) the nature of the foreign tribunal, character of the proceedings, and receptivity of the foreign tribunal to U.S. federal court judicial assistance; (3) whether the application conceals an attempt to circumvent foreign proof-gathering restrictions or other policies; and (4) whether the discovery sought is unduly intrusive or burdensome. Intel, 542 U.S. at 264-65. In engaging in this analysis, courts look to the statute’s twin aims: that is (i) to provide an efficient means for federal courts to assist foreign tribunals and litigants before such tribunals; and (ii) to encourage foreign countries to provide similar assistance. Schmitz v. Bernstein, Liebhard & Lifshitz, LLP, 376 F.3d 79, 84 (2d Cir. 2004).
However, courts across the United States disagree whether private, contract-based international arbitration tribunals constitute a “foreign tribunal” as required under §1782. As a result, parties in international arbitrations that seek discovery in the United States should pay close attention to where the evidence is located.
Although the Supreme Court did not address this precise issue, it provided guidance in dictum, defining the term “tribunal” as including “investigating magistrates, administrative and arbitral tribunals, and quasi-judicial agencies, as well as conventional ... courts.” Intel, 542 U.S. at 258 (quoting Hans Smit, International Litigation under the United States Code, 65 Colum. L. Rev. 1015, 1026–27 (1965)) (emphasis added).
In the current split of authority, a majority of federal courts concluded that private arbitrations fall within the scope of §1782. Consorcio Ecuatoriano de Telecomunicaciones S.A., v. JAS Forwarding (USA), Inc., 2012 WL 2369166, at *5-7 (11th Cir. June 25, 2012) (billing dispute arbitral panel in Ecuador was a tribunal for purposes of §1782 as reasoned in Intel as “a first-instance decisionmaker” whose decisions were “judicially reviewable”); In re Republic of Ecuador, 2011 WL 4089189, at *1-2 (E.D. Cal. Sept. 13, 2011) (international arbitration proceeding brought pursuant to UNCITRAL rules under Bilateral Investment Treaty [“BIT”] constitutes a “foreign tribunal”); In re Application of Chevron Corp., 709 F. Supp. 2d 283, 291 (S.D.N.Y. 2010) (if arbitration proceeding brought pursuant to UNCITRAL rules under BIT then constitutes a “foreign tribunal”); In re Application of Babcock Borsig AG, 583 F. Supp. 2d 233, 239-240 (D. Mass. 2008) (ICC is a “tribunal” within the meaning of §1782(a)); Comision Ejecutiva Hidroelectrica del Rio Lempa v. Nejapa Power Co., LLC, 2008 WL 4809035, at *1 (D. Del., Oct. 14, 2008) (§1782 applies to private foreign arbitrations); In re Hallmark Capital Corp., 534 F. Supp. 2d 951, 956-57 (D. Minn. 2007) (rejecting an “inflexible rule that would categorically exclude all private arbitrations from the definition of ‘tribunal’” and instead concluding that a private Israeli arbitral body was a “tribunal” for the purpose of §1782); In re Roz Trading Ltd., 469 F. Supp. 2d 1221, 1224-25 (N.D. Ga. 2006) (Austrian commercial arbitral body was a “tribunal” within the meaning of §1782 as reasoned in Intel as “first-instance decisionmaker” that issues decisions “both responsive to the complaint and reviewable in court,” regardless of whether it is a governmental or private entity).
Other courts have decided arbitrations are not covered by §1782. In re Operadora DB Mexico, S .A. DE C.V., 2009 WL 2423138, at *9-12 (M.D. Fla. Aug. 4, 2009) (ICC Panel is not a foreign or international tribunal under §1782 because it is the product of a private agreement for dispute resolution and whose final and binding decisions are not judicially reviewable); Comision Ejecutiva Hidroelectrica del Rio Lempa v. El Paso Corp., 617 F.Supp.2d 481, 487 (S.D. Tex. 2008), appeal dismissed as moot, 341 F. App’x 31, 2009 WL 2407189 (5th Cir. Aug. 6, 2009) (Swiss arbitral tribunal did not constitute “tribunal” within meaning of §1782, finding Intel inapposite because it focused on European Commission and not an international arbitral tribunal).
In particular, the Second and Fifth Circuits have held that private, contract-based arbitration tribunals are not within the ambit of §1782. National Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184, 190-91 (2d Cir. 1999) (ICC arbitration panel in Mexico was beyond the scope of §1782 because “Congress did not intend for that statute to apply to an arbitral body established by private parties” and conflicted with the more limited methods for obtaining evidence under §7 of the FAA, 9 U.S.C §7); Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880, 881-83 (5th Cir. 1999) (arbitration is intended as a “speedy, economical, and effective means of dispute resolution,” and extensive discovery through the federal courts, pursuant to §1782, would complicate and undermine private international arbitration; moreover, references in the United States Code to “arbitral tribunals” almost uniformly concern an adjunct of a foreign government or international agency).
Accordingly, §1782 can serve as a tool for obtaining evidence during international arbitrations depending upon where in the United States such information is sought. Or, it can serve as a defense against such attempts in those U.S. jurisdictions where courts have refused to apply §1782 to international arbitrations.
Either way, parties who embark on an international arbitration outside the United States, be it as claimants or respondents, should be aware that evidence located in the United States may be within reach and could be obtained by their opponent. This possibility needs to be taken into account in evaluating the evidentiary strength of a party’s claims or defenses.
For further information, please contact: Robert A. de By, Chair, International Arbitration Practice Group; Tel:+ 44.20.3328.9010 (UK) & +1.626.638.1762 (US); email: email@example.com
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