The foreign discovery rules under 28 US Code Section 1782 provides countries where discovery is either forbidden or severely restricted, with a competitive advantage in international litigation.
In civil law countries, such as France, Germany and the Netherlands, discovery as it is known in the United States does not exist. There is no general rule of procedure enabling a party to obtain information from the other party, except in very limited circumstances.
Three mechanisms allow foreign litigants to obtain evidence from a US-residing entity:
- Their own national procedures, which can be quite limited, especially in civil law countries such as France.
- Where applicable, the procedures provided for by the Hague Convention on the Taking of Evidence Abroad.
- Section 28 US Code Section 1782, under which US district courts can allow litigants to discover certain documents for use in foreign proceedings. The Eleventh Circuit has finally affirmed that Section 1782 does apply to documents located in foreign companies (see p. 18).
Section 1782 therefore authorises the use of US style discovery before, or in the course of, litigation pending in countries where restrictive discovery rules apply (if it is permitted at all).
The requirements mentioned in Section 1782 for a foreign discovery request to be granted are complemented by four additional discretionary factors:
- The scope of the request, which must be deemed not overly intrusive or burdensome.
- The identity of the person from whom discovery is sought. That person must be a party in the foreign proceedings.
- The nature of the foreign proceeding at hand, e.g., the character of the foreign tribunal, the type of proceeding underway, and the receptiveness of the foreign tribunal to assistance from US courts.
- The absence of fraudulent evasion of the law. A Section 1782 request must not be deemed an attempt to circumvent proof-gathering procedures applicable before the foreign court.
SECTION 1782 APPLICATIONS IN FRENCH CASES
French litigants are no strangers to the power of Section 1782 since it was established by Euromepa v Esmerian 51 F. 3rd 1095 (2nd Cir. 1995) with regard to insurance claims, and Edelman v Taittinger 295 F. 3d 171 (2nd Cir. 2002) with regard to corporate litigation, that the existence of pre-trial discovery under French procedural law (even though limited) cannot obstruct the granting of Section 1782 applications.
Recent examples of the usefulness of Section 1782 can be found in the high profile applications filed by XPO and Elliott (a minority shareholder in Norbert Dentressangle), in the context of the battle these two companies are currently fighting before the Paris commercial court as a result of Elliott's efforts to thwart XPO's attempt to acquire all of Norbert Dentressangle's shares.
In French-related cases, litigants must remember that time is of the essence to successfully obtain a discovery order under a competitive advantage.
In re Digitechnic, Judge Coughenour interpreted Digitechnic's choice not to seek immediate discovery, but rather file its application at a later stage of the dispute, as a clear attempt to circumvent the French court's control, leading to the dismissal of Digitechnic's Section 1782 request.
In re XPO Logistics, Judge Schofield considered that the existence of discovery proceedings already pending in France justified staying consideration of the Section 1782 discovery request until the French proceedings advanced sufficiently for the court to better assess whether or not further discovery in the United States would be necessary.
Foreign discovery requests should therefore be filed at the earliest possible stage of the French proceedings to avoid the risk of a dismissal.
USING EVIDENCE OBTAINED THROUGH SECTION 1782 IN FRENCH COURTS
European bodies, such as the UK House of Lords and the Dutch Supreme Court, expressly acknowledged more than 15 years ago that evidence obtained through the foreign discovery route can be used in proceedings before European national courts. French courts (albeit below the French Supreme Court) have come to the same conclusion.
The Versailles Court of Appeals was the first to recognise, in 2010, that the only limitation to the admissibility of evidence obtained through Section 1782 is that of abuse, which would require demonstration that the request was filed in bad faith.
This point was then confirmed by the Paris Court of Appeals. In a 2014 case, inheritors filed a petition before the Paris Court of Appeals to obtain information from a leading art business. This petition was not granted and the heirs successfully filed a Section 1782 application in the United States. The documents then obtained were eventually submitted to the Paris Court of Appeals as supporting evidence. Their admissibility was then challenged by the opposing party on the grounds that
- The use of this evidence would violate the adversarial principle and the secrecy of correspondence rule.
- The documents were obtained unfairly, behind the back of the French court-appointed judicial expert, in breach of the decision initially rendered by the Paris Court of Appeals dismissing the heirs' petition.
The Court rejected these arguments and ruled in favour of the heirs so far as their Section 1782 application was necessary to preserve their rights.
SECTION 1782: A COMPETITIVE ADVANTAGE
Section 1782 allows French litigants to maximise discovery opportunities and have access to a wide-ranging discovery that has no equal under French procedural law. This provides them with a huge advantage, as opponents do not have access to a similarly broad and permissive discovery for documents situated in France.
Since it can be assumed that French litigants do not reside in the district of a US court, their US opponents, or foreign opponents affiliated with a US entity, cannot invoke Section 1782 or a similar provision to gather broad evidence from their French counterparts. The US entity therefore has no other choice but to deal with this issue upstream, where possible, by contractually pre-empting and precluding access to foreign discovery.
Although it has only been successfully applied once, France-based litigants also theoretically benefit from the protection of French law 68-678 of 26 July 1968, known as the French Blocking Statute. The Statute forbids any person, subject to the provisions of applicable international treaties such as the Hague Convention, and under the threat of a six month jail term and a €18,000 fine, from requesting, investigating or communicating documents or information relating to economic, commercial, industrial, financial or technical matters leading to the establishment of proof with a view to foreign administrative or judicial proceedings.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.