International Arbitration Update: Fourth Circuit Approves U.S. Discovery In Aid Of Foreign-Seated Private Commercial Arbitration, Widening Circuit Split

An important question in international arbitration is whether courts in the United States can order discovery in aid of foreign-seated arbitrations under 28 U.S.C. § 1782 (“Section 1782”). The law in this area is quickly evolving. A new Fourth Circuit Court of Appeals decision, Servotronics, Inc. v. Boeing Co., permitting such discovery—and widening a circuit split which opened just last year—suggests that this issue may soon be headed to the Supreme Court.

Section 1782 allows discovery in the United States where the discovery is sought for use in a proceeding before a “foreign or international tribunal.” The statute does not say what those terms mean. Over twenty years ago, the Second Circuit and the Fifth Circuit both held that private commercial arbitrations seated outside the United States do not qualify as “foreign or international tribunals” and, therefore, discovery under Section 1782 was not available. Subsequent federal district court decisions have split on the question.

In the two decades following the Second and Fifth Circuit decisions, no federal court of appeals definitively decided the question. Then, in September 2019, the Sixth Circuit became the first circuit court of appeals to permit Section 1782 discovery in aid of a foreign-seated private commercial arbitration. In Servotronics, Inc. v. Boeing Co., the Fourth Circuit cites the Sixth Circuit’s decision with approval and reaches the same result. Currently pending cases before the Seventh Circuit and the Ninth Circuit raise the same question.

For parties to private commercial arbitrations seated outside the United States, seeking discovery under Section 1782 is now an available option in more jurisdictions within the United States than ever before. At some point soon, the Supreme Court may be called upon to answer once and for all what qualifies as a “foreign or international tribunal.”

Section 1782 Discovery

Section 1782 empowers federal district courts to grant an applicant the authority to issue subpoenas in the United States to obtain documents and/or testimony in aid of foreign proceedings. Specifically, an applicant pursuing Section 1782 discovery must establish that:

A. The discovery is for use in an actual or contemplated proceeding in a “foreign or international tribunal”;

B. The applicant is an “interested person” in that proceeding; and

C. The person from whom the discovery is sought resides or is otherwise found in the district of the court where the application is filed.

If the applicant satisfies all of these statutory requirements, a district court has the discretion to grant or deny the application after considering the following factors established by the U.S. Supreme Court in Intel Corp.v. Advanced Micro Devices, Inc.:

• Whether the discovery sought is within the foreign tribunal’s jurisdictional reach and, thus, accessible without resorting to Section 1782;
• The nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal court judicial assistance;
• Whether the applicant’s request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States; and
• Whether the request is unduly intrusive or burdensome.

The core issue for parties to an international arbitration proceeding is whether a private commercial arbitration abroad qualifies as a “foreign or international tribunal” within the meaning of Section1782. The statute does not define those terms, and there is a clear circuit split on the correct interpretation.

The Second and Fifth Circuits Reject Section 1782 Discovery in Aid of Foreign-Seated Private Commercial Arbitration

Both the Second and Fifth Circuits considered this question in 1999—before the Supreme Court’s 2004 decision in Intel—and ruled that Section 1782 does not apply to privately constituted tribunals in international commercial arbitrations. In reaching its decision, the Second Circuit pointed out that: (a) the ordinary meaning of the phrase “foreign or international tribunal” is ambiguous; (b) the legislative history of Section 1782 reveals that Congress “intended to cover governmental or intergovernmental arbitral tribunals and conventional courts and other state‑sponsored adjudicatory bodies”; and (c) allowing discovery under Section 1782 for use in international arbitration “would be at odds with the efficiency and cost-effectiveness of arbitration.”

Similarly, the Fifth Circuit ruled that international arbitration was outside the scope of Section1782 discovery. Echoing the Second Circuit’s policy considerations, the Fifth Circuit noted, “[e]mpowering arbitrators, or worse, the parties, in private international disputes to seek ancillary discovery through the federal courts does not benefit the arbitration process. Arbitration is intended as a speedy, economical, and effective means of dispute resolution.”Further, the Fifth Circuit agreed with the Second Circuit that Congress drafted Section 1782 to facilitate “discovery for international government-sanctioned tribunals” but “[t]here is no contemporaneous evidence that Congress contemplated extending [it] to the then-novel arena of international commercial arbitration.”

The Sixth and Fourth Circuits Reject the Longstanding View and Permit Section 1782 Discovery in Aid of Commercial Arbitrations Abroad

For two decades, no other federal court of appeals conclusively decided the issue.Then, in September 2019, in Abdul Latif Jameel Transp. Co. Ltd. v. FedEx Corp., the Sixth Circuit held that Section 1782 permits discovery for use in private international commercial arbitration.After examining the dictionary meaning of “tribunal” and the term’s legal usage, the Sixth Circuit concluded “American lawyers and judges have long understood, and still use, the word ‘tribunal’ to encompass privately contracted-for arbitral bodies with the power to bind the contracting parties.”The Sixth Circuit also relied on the Supreme Court’s Intel decision for guidance. According to the Sixth Circuit, the Intel Court’s approval of Section 1782 discovery in a non‑judicial proceeding conducted by the Directorate-General for Competition of the European Commission supports this broad definition of “tribunal.”With regard to the efficiency arguments advanced by the Second and Fifth Circuits, the Sixth Circuit brushed them aside by emphasizing that the statutory requirements are a bare minimum threshold and that if a discovery request is likely to become unduly burdensome, “district courts enjoy substantial discretion to shape discovery under § 1782(a).”

On March 30, 2020, in Servotronics, Inc. v. Boeing Co., the Fourth Circuit considered whether a party to a private arbitration in the United Kingdom can obtain testimony from residents of South Carolina for use in the arbitration.The Fourth Circuit emphasized that Section 1782 “reflects a long-term—over 150-year—policy of Congress to facilitate cooperation with foreign countries by ‘provid[ing] federal-court assistance in gathering evidence for use in foreign tribunals.’”Following Justice Ginsburg in Intel, the Fourth Circuit noted that Congress in 1964 replaced the phrase “in any judicial proceeding pending in any court in a foreign country” in Section 1782 with “in a proceeding in a foreign or international tribunal,” and found that Congress specifically intended to provide “U.S. assistance in resolving disputes before not only foreign courts but before all foreign and international tribunals.”Comparing the Federal Arbitration Act with the UK Arbitration Act of 1996, the Fourth Circuit noted that “arbitration in the United States is a congressionally endorsed and regulated process that is judicially supervised” and the UK Arbitration Act is no different in this regard.Thus, even under pre-Intel decisions’ more restrictive definition that views “government-conferred authority” as a prerequisite for being considered a tribunal within the meaning of Section 1782, the UK panel—constituted under the rules of the Chartered Institute of Arbitrators and governed by the UK Arbitration Act—qualifies as a tribunal for the purposes of Section 1782.The Fourth Circuit also adopted the Sixth Circuit’s holding that district courts remain empowered with wide discretion to administer and manage the discovery process so as to avoid unduly burdening a party.

Looking Ahead to the Supreme Court and Beyond

At least two other circuit courts may soon take up the question. In a case arising from the same facts as Servotronics, Inc. v. Boeing Co., after a district court in Illinois denied Section1782 discovery in Illinois, Servotronics is appealing to the Seventh Circuit.And a federal district court in California, which had uniformly followed the reasoning of the Second and Fifth Circuits in rejecting requests for Section 1782 discovery in aid of private commercial arbitration, recently rejected prior California district court decisions and allowed discovery in aid of a private commercial arbitration pending in China.That case is on appeal with the Ninth Circuit.

Regardless of how the Seventh and Ninth Circuit cases are resolved, the widening circuit split has set the stage for the Supreme Court to weigh in on the meaning of “foreign or international tribunal.”

In the meantime, parties that are or may become involved in arbitration seated outside the United States should be aware that seeking discovery under Section 1782 is an available option in more jurisdictions within the United States than ever before.

No. 18-2454, 2020 WL 1501954 (4th Cir. Mar. 30, 2020).

See In re EWE Gasspeicher GmbH, No. CV 19-MC-109-RGA, 2020 WL 1272612, at *2, n. 2 (D. Del. Mar. 17, 2020) (compiling cases on both sides).

28 U.S.C. § 1782(a).

542 U.S. 241, 264–65 (2004) (internal quotations and citations omitted).

Nat’l Broad. Co., Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184, 188, 190–91 (2d Cir. 1999).

Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880, 883 (5th Cir. 1999).

Id. at 882–83.

But seeIn re Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 685 F.3d 987 (11th Cir. 2012) (finding as a matter of first impression in circuit that arbitral panel was a “tribunal” under Section 1782), vacated by Application of Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 747 F.3d 1262 (11th Cir. 2014).

Abdul Latif Jameel Transp. Co. Ltd. v. FedEx Corp., 939 F.3d 710 (6th Cir. 2019). For a more in-depth discussion of the case, our prior client alert.

Id. at 722.

Id. at 723–26.

Id. at 729–30.

No. 18-2454, 2020 WL 1501954, at *1.

Id. at *3 (quoting Intel, 542 U.S. at 247).

Id. at *3–4 (emphasis in original).

On this point, the Supreme Court in Intel, the Sixth Circuit in Abdul Latif, and the Fourth Circuit in Servotronics, Inc. v. Boeing Co. all cite approvingly a law review article by a professor, Hans Smit, who had participated in drafting the 1964 amendments.See Hans Smit, International Litigation Under the United States Code, 65 Colum. L. Rev. 1015, 1026 n.71 (1965) (“The 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.”). Recounting the change years later in another law review article, Professor Smit explained that “[t]he substitution of the word ‘tribunal’ for ‘court’ was deliberate, for the drafters wanted to make the assistance provided for available to all bodies with adjudicatory functions.” Hans Smit, American Assistance to Litigation in Foreign and International Tribunals: Section 1782 of Title 28 of the U.S.C. Revisited, 25 SYRACUSE J. INT’L L. & COM. 1, 5 (1998).

Id. at *4.

Id. at *4–5.

Id. at *5–6.

For a recent example of such discretion in action, see In re Bio Energias Comercializadora de Energia Ltda., No. 19-CV-24497, 2020 WL 509987 (S.D. Fla. Jan. 31, 2020) (finding that even if a Brazilian arbitration qualifies as a foreign or international tribunal, a district court could decline to permit Section 1782 discovery based on its analysis under Intel).

In re: Servotronics, Inc., No. 1:18-cv-07187 (N.D. Il. Apr. 22, 2019), appeal filed sub nom. Servotronics, Inc. v. Rolls-Royce PLC, No. 19-1847 (7th Cir.).

HRC-Hainan Holding Co., LLC v. Yihan Hu, No. 19-mc-80277-TSH, 2020 U.S. Dist. LEXIS 32125, at *2 (N.D. Cal. Feb. 25, 2020), appeal filed sub nom. In re: Application of HRC-Hainan Holding Co., LLC, No. 20-15371 (9th Cir.). For a more in-depth discussion of the case, our prior client alert.

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