United States: Compelling Discovery For Foreign Arbitrations

In today's global economy, product manufacturers resource materials and components, sell their products, and expose themselves to potential litigation in countries far from the manufacturer's home base. While clients may understand—though they may not like—their obligations to participate in discovery as a party to a products liability dispute, they also may be subject to the same discovery requirements even though they are not a party in matters pending in foreign jurisdictions. One avenue to compel discovery in the United States for use in proceedings in foreign jurisdictions is 28 U.S.C. section 1782.

Section 1782 permits a foreign tribunal to request judicial assistance in compelling discovery by submitting a request or letter rogatory to the U.S. district court in which the party from whom the discovery is sought resides. In addition, an "interested party" in the foreign proceeding can apply directly to the U.S. district court for an order to compel discovery. If the requirements of section 1782 are met, the district court may, at its discretion, order that the party produce an individual or corporate representative for deposition, or compel the production of documents. There is no requirement that the information sought under section 1782 also be discoverable according to the rules governing the foreign proceeding. As with traditional discovery in U.S. litigation, complying with such an order can require significant time and resources. There are, however, several arguments to be made in seeking to quash a section 1782 request or vacate an order for section 1782 discovery, including failure to meet the statutory requirements.

In particular, section 1782's requirement that the discovery sought must be for use in a "proceeding in a foreign or international tribunal" has raised questions as to what constitutes a qualifying foreign proceeding. Generally, U.S. courts have interpreted the requirement broadly, but its application to foreign arbitration proceedings remains ambiguous.

Statutory Requirements and the Intel Factors

Requests for discovery under section 1782 are analyzed in a two-part inquiry: (1) the district court must determine if the three statutory requirements are met authorizing the court to grant the request; and (2) assuming the statutory requirements are met, the court must weigh several factors to determine whether it should exercise its discretion in permitting the discovery. In re Application of Nokia Corp., No. 1:07-MC-47, 2007 U.S. Dist. LEXIS 42883, at *5 (W.D. Mich. June 13, 2007); In re Application of Grupo Qumma, S.A. de C.V., No. M 8-85, 2005 U.S. Dist. LEXIS 6898, at *1 (S.D.N.Y. Apr. 22, 2005).

As to the first inquiry, the district court is authorized to grant the discovery if three statutory prerequisites are met:

  1. The person from whom discovery is sought resides or is found in this district;
  2. The discovery sought is "for use in a proceeding in a foreign or international tribunal"; and
  3. The party seeking the discovery is an "interested person" in the foreign or international proceeding.

28 U.S.C. § 1782; Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004). If these requirements are met, the court is authorized to issue the requested order. The district court still has discretion, however, to decide whether it should issue the order and, if so, whether any restrictions ought to be placed on the discovery request.

In that regard, the district court would consider several factors in weighing whether it should permit the discovery request. These include, but are not limited to: (1) whether the party from whom discovery is sought is a party to the foreign proceeding; (2) whether the foreign court or tribunal has been historically receptive to section 1782 assistance; (3) whether the application is an attempt to circumvent foreign proof-gathering restrictions or is a good faith effort to obtain probative evidence; and (4) whether the documents sought are unduly intrusive or burdensome. Intel, 542 U.S. at 264–67. If the district court decides to grant a request for section 1782 discovery, the Federal Rules of Civil Procedure govern discovery sought by the petitioner. See Heraeus Kulzer, GmbH v. Biomet, Inc., 633 F.3d 591, 597 (7th Cir. 2011); Weber v. Finker, 554 F.3d 1379, 1384–85 (11th Cir. 2009); Bayer AG v. Betachem, Inc., 173 F.3d 188, 191 (3d Cir. 1999).

Application of Section 1782 to Foreign Arbitrations

U.S. courts are divided on whether private arbitrations constitute a foreign or international "tribunal." Multiple jurisdictions hold that private arbitration proceedings do not constitutea foreign tribunal pursuant to section 1782. See, e.g., El Paso Corp. v. La Comision Ejecutiva Hidroelectrica Del Rio Lempa, 341 F. App'x 31 (5th Cir. 2009); Republic of Kazakhstan v. Biedermann Int'l, 168 F.3d 880 (5th Cir. 1999); NBC, Inc. v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999); In re Application by Rhodianyl S.A.S., No. 11-1026-JTM, 2011 U.S. Dist. LEXIS 72918 (D. Kan. Mar. 25, 2011); In re London Arbitration Between Norfolk S. Corp., Norfolk Ry. Co. & Gen. Sec. Ins. Co., 626 F. Supp. 2d 882 (N.D. Ill. 2009); In re Application of Operadora DB Mexico, S.A. DE C.V., No. 6:09-cv-383-Orl-22GJK, 2009 U.S. Dist. LEXIS 68091, at *9 (M.D. Fla. Aug. 4, 2009); In re Application of Oxus Gold PLC, No. 06-82, 2006 U.S. Dist. LEXIS 74118 (D.N.J. Oct. 10, 2006) (holding that section 1782 applied to arbitration conducted by the UN Commission on International Trade Law (UNCITRAL), but noting that "international arbitral panels created exclusively by private parties . . . are not included in the statute's meaning").

Other courts have found that private arbitrations do constitute a foreign tribunal pursuant to section 1782, because "there is no clearly expressed legislative intent that the term 'tribunal' does not include arbitral panels." In re Babcock Borsig AG, 583 F. Supp. 233 (D. Mass. 2008); In re Hallmark Capital Corp., 534 F. Supp. 2d 951 (D. Minn. 2007); In re Roz Trading Ltd., 469 F. Supp. 2d 1221 (N.D. Ga. 2006). Arguably, the federal courts permitting section 1782 discovery in foreign private arbitrations have based their decisions by misreading dicta in the United States Supreme Court's decision in Intel Corp. v. Advanced Micro Devices, Inc.

Intel arose from antitrust litigation before the Directorate-General for Competition of the Commission of the European Communities. The Supreme Court granted certiorari in the case to resolve a split among the circuit courts as to whether section 1782 included a requirement for reciprocal foreign discoverability. Intel, 542 U.S. at 253 n.7. In discussing whether the Commission of the European Communities was a "foreign or international tribunal," the Supreme Court quoted a law review article that defined the statutory term "tribunal" to include "investigating magistrates, administrative and arbitral tribunals, and quasi-judicial agencies, as well as conventional civil, commercial, criminal, and administrative courts." Intel, 542 U.S. at 258 (quoting Hans Smit, "International Litigation under the United States Code," 65 Colum. L. Rev. 1015, 1026 n.71 (1965)).

Careful analysis, however, demonstrates the Supreme Court stopped short of declaring that any foreign "tribunal" falls within the purview of the statute because the Court carved out the broadest portion of Smit's definition: "[t]he term 'tribunal' embraces all bodies exercising adjudicatory powers, and includes investigating magistrates, administrative and arbitral tribunals, and quasi-judicial agencies, as well as conventional civil, commercial, criminal, and administrative courts." In re London Arbitration, 626 F. Supp. 2d at 885. Noting this distinction, federal courts interpret the omission as evidence the Supreme Court "was not willing to embrace the full breadth of Smit's definition." In re London Arbitration, 626 F. Supp. 2d at 885; see also El Paso, 341 F. App'x at 34 (upholding the district court's decision that section 1782 could not be used as a basis for discovery in assistance of a foreign private arbitration); In re Application of Winning (HK) Shipping Co., No. 09-22659-MC, 2010 U.S. Dist. LEXIS 54290 (S.D. Fla. Apr. 30, 2010) (finding that Intel does not mandate the inclusion of private arbitration proceedings as within the scope of section 1782). Contrary to the argument that there is no clearly expressed legislative intent to preclude private arbitration, some courts have concluded that "Congress did not clearly intend to include private arbitral proceedings within the ambit of 'foreign or international tribunals.'" In re Operadora, 2009 U.S. Dist. LEXIS 68091, at *9.

Conclusion

Without a clear mandate from the United States Supreme Court, section 1782's use in compelling discovery for use in foreign private arbitration remains uncertain. It remains a possible discovery mechanism for practitioners in foreign arbitrations, but those defending companies from these requests must have a thorough understanding of the very specific requirements included in the statute.

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