Supreme Court Issues Ruling Regarding Section 1782
A Commercial and an UNCITRAL Treaty-Based Foreign Arbitral Tribunals Are Not Foreign or International Tribunals
- The U.S. Supreme Court issued a long-awaited decision on June 13, 2022, concerning the scope of 28 U.S.C. § 1782 (Section 1782), holding that only a governmental or intergovernmental adjudicative body constitutes a "foreign or international tribunal" under Section 1782.
- It unanimously held that Section 1782 did not apply to a commercial international arbitration or an United Nations Commission on International Trade Law (UNCITRAL) investor-state arbitration.
The U.S. Supreme Court issued a long-awaited decision on June 13, 2022, concerning the scope of 28 U.S.C. § 1782 (Section 1782), holding that only a governmental or intergovernmental adjudicative body constitutes a "foreign or international tribunal" under Section 1782. It unanimously held that Section 1782 did not apply to a commercial international arbitration or an United Nations Commission on International Trade Law (UNCITRAL) investor-state arbitration.
In a prior alert, Holland & Knight reported on the Supreme Court's agreement to hear a petition that would determine whether discovery may be obtained in the United States for use in a foreign, private commercial arbitration. (See Holland & Knight's previous alert, "Supreme Court to Decide if U.S. Discovery Law Encompasses Private Foreign Arbitrations," March 25, 2021.) In that case, Servotronics, Inc. v. Rolls-Royce PLC (Servotronics),1 the court was slated to address the scope of 28 U.S.C. Section 1782(a) and specifically, the issue of whether a private foreign commercial arbitration constitutes a "proceeding in a foreign or international tribunal" under Section 1782. Servotronics reportedly was settled and the case dismissed. Servotronics was expected to resolve the split among five U.S. federal circuits over whether a foreign private arbitration is a "tribunal" under Section 1782.
In late 2021, the Supreme Court granted certiorari in two cases that addressed the scope of Section 1782.2 On June 13, 2022, the court issued its decision, holding that in the context, legislative history and purpose of Section 1782, neither a private commercial arbitral tribunal nor an ad hoc arbitral tribunal, constituted pursuant to a bilateral investment treaty, qualified as a "foreign or international tribunal" under Section 1782. The decision is ZF Automotive US, Inc. v. Luxshare, Ltd., No. 21-401, 2022 WL 2111355 (U.S. June 13, 2022).
Section 1782 gives a U.S. federal district court the power to order a person within the district to give testimony or provide evidence for use in foreign dispute resolution proceedings. The key portion of Section 17823 is as follows:
The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation.
The issue that arises in many of these Section 1782 cases is whether a private foreign arbitration constitutes a "proceeding in a foreign or international tribunal" under that section.
The Supreme Court's Decision
On June 13, the Supreme Court unanimously held that Section 1782 did not apply to a commercial international arbitration or an UNCITRAL investor-state arbitration. Only a governmental or intergovernmental adjudicative body constitutes a "foreign or international tribunal" under Section 1782. According to the Supreme Court, "'foreign tribunal' more naturally refers to a tribunal belonging to a foreign nation than to a tribunal that is simply located in a foreign nation. And for a tribunal to belong to a foreign nation, the tribunal must possess sovereign authority conferred by that nation." Id. at *6.
The court also looked to the statute's history, finding that interpreting Section 1782 to reach only bodies exercising governmental authority is consistent with Congress' intent to improve existing practices of providing judicial assistance between the United States and foreign countries. In addition, the court found that comity is fostered when federal courts assist foreign and international governmental bodies, not when they help private bodies decide private disputes abroad. Finally, the court found that extending Section 1782 to permit discovery in private international arbitration disputes would be at odds with the Federal Arbitration Act (FAA), which governs domestic arbitration, because Section 1782 permits much broader discovery than the FAA allows. In the court's view, if Section 1782 applied to international arbitration tribunals, parties to private foreign arbitrations would have access to more extensive discovery than is available in domestic arbitration.
Accordingly, the Supreme Court concluded that the commercial German Arbitration Institute (DIS) arbitral tribunal in ZF Auto did not qualify as a "foreign or international tribunal" under Section 1782 because "[n]o government is involved in creating the DIS panel or prescribing its procedures." Id. at *8.
Similarly, the Supreme Court found that the ad hoc investment treaty tribunal in AlixPartners was not a governmental or intergovernmental tribunal that fell within the scope of Section 1782. Under Section 1782, the test is whether "the features [of the adjudicatory body] and other evidence establish the intent of the relevant nations to imbue the body in question with governmental authority." Id. at *10. But nothing in the relevant treaty showed "Russia and Lithuania's intent that an ad hoc panel exercise governmental authority." Id. at *9.
Impact of the Supreme Court's Decision
The Supreme Court's ruling resolves a circuit split over the scope of Section 1782, with the U.S. Courts of Appeals for the Second, Fifth and Seventh Circuits holding that "foreign or international tribunal" in Section 1782 excludes foreign commercial arbitrations, and the Fourth and Sixth Circuits' holding that it does not. From now on, parties to foreign private commercial arbitrations and some investor-state arbitrations will not be able to seek discovery in U.S. courts under Section 1782.
The Supreme Court, however, reserved its position on certain ad hoc tribunals because "sovereigns might imbue an ad hoc arbitration panel with official authority" since governmental and intergovernmental bodies "may take many forms." Id. at *10. This carve-out may allow for Section 1782's use in some investor-state arbitrations.
Importantly, the Supreme Court's decision in ZF Auto does not affect the availability of Section 7 of the FAA as a discovery tool in international arbitrations seated in the U.S. Under Section 7, the arbitrators "may summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence in the case." Further, the federal district court where the arbitral tribunal is seated may compel the person to comply with the order of the arbitrators to appear before them and to provide documents that may be material to the case.
1 975 F.3d 689 (7th Cir. 2020), cert. granted, 141 S.Ct. 1684 (Mar. 22, 2021).
2 ZF Automotive US, Inc. v. Luxshare, Ltd., 15 F.4th 780 (6th Cir. 2021), cert. granted, 142 S. Ct. 637 (2021), and AlixPartners LLP v. The Fund for Protection of Investor Rights in Foreign States 5 F.4th 216 (2d Cir. 2021), cert. granted, 142 S. Ct. 638 (2021).
3 28 U.S.C. § 1782(a).
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