Supreme Court Decision Narrows the Applicability of Section 1782 Discovery in International Arbitration

First Tuesday Update is our monthly take on current issues in commercial disputes, international arbitration, and judgment enforcement. This Tuesday we cover the recent Supreme Court decision holding that 28 U.S.C. § 1782 does not apply to the international arbitration tribunals. See ZF Automotive US v. Luxshare, Ltd., 21-401, and Alixpartners v. Fund for Protection of Investor Rights in Foreign States, 21-518.

As we have discussed previously, there was a circuit split over whether 28 U.S.C. § 1782 discovery could be used in international arbitration. See Supreme Court Rules in One Arbitration Case and Hears Oral Argument in Another; Take 2—Supreme Court Will Determine Whether US Discovery Is Available in International Arbitration Under Section 1782; SCOTUS to Determine Applicability of Section 1782 Discovery in International Arbitration; and Sixth Circuit Allows § 1782 Discovery in Private International Arbitration.

On June 13, 2022, the Supreme Court issued a unanimous decision holding that only "governmental" or "intergovernmental" adjudicative bodies fall within the scope of 28 U.S.C. § 1782.¹ In construing the words “foreign or international tribunal," the Court focused the inquiry on whether the features of the adjudicatory body and other evidence established the intent of the relevant nations to imbue a tribunal "with governmental authority by one nation" or “with governmental authority by multiple nations.”²

Commercial Arbitration Proceedings

The Supreme Court's decision in the ZF Automotive US case has put a conclusive end to the application of 28 U.S.C. § 1782 in international commercial arbitration. The ZF Automotive US case concerned a commercial arbitration under the Arbitration Rules of the German Arbitration Institute (DIS), a private dispute-resolution organization based in Berlin. The Court held that the instant arbitration did not qualify under 28 U.S.C. § 1782 because the arbitration tribunal was not created by a sovereign government. It further held that the procedure adopted by the arbitration tribunal was not prescribed by any governmental authority.³

Taking a very restrictive approach, the Supreme Court held that the phrase "foreign of international tribunals" covers only "governmental or intergovernmental adjudicative bod[ies]…imbued with governmental authority," and exclude contract-based tribunals governing private disputes. It further held that "… 'foreign tribunal' and 'international tribunal' complement one another; the former is a tribunal imbued with governmental authority by one nation, and the latter is a tribunal imbued with governmental authority by multiple nations."⁴

Investor State Arbitration Proceedings

Applying the same narrow definition, the Supreme Court held that the tribunal in AlixPartners, an ad hoc investor-State arbitration governed by the UNCITRAL Rules under the Lithuania-Russia Bilateral Investment Treaty, did not qualify as a "foreign or international tribunal" under 28 U.S.C. § 1782. The Supreme Court held that "the [Lithuania-Russia] treaty does not itself create the panel; instead, it simply references the set of rules that govern the panel's formation and procedure if an investor chooses that forum." In addition, the ad hoc panel "functions independently" of, and is not affiliated with, either Lithuania or Russia.⁵

In its decision, the Court failed to address whether 28 U.S.C. § 1782 may apply in arbitration proceedings instituted under The International Centre for Settlement of Investment Disputes (ICSID) convention and whether such tribunals "exercise governmental authority." Indeed, the Court acknowledged the possibility that other arbitral panels constituted in investor-State cases involving international investment agreements could qualify as a governmental or intergovernmental body under Section 1782 if they are "clothed … with governmental authority" by the sovereigns that provide for their creation.

Finally, the Court noted, adopting the position that the United States advanced during oral argument, that the purpose of 28 U.S.C. § 1782 is "comity: permitting federal courts to assist foreign and international governmental bodies promot[ing] respect for foreign governments and encourag[ing] reciprocal assistance."⁶ This may be a material factor that distinguishes between the ad hoc investor-state arbitration in AlixPartners and other investor-state arbitrations if they are permitted to obtain discovery under 28 U.S.C. § 1782. That is an issue we suspect will continue to be litigated.

With its June 13 decision, the Supreme Court has resolved a long-standing circuit split relating to the application of 28 U.S.C. § 1782 to private or commercial arbitrations. However, the lack of clarity relating to the application of 28 U.S.C. § 1782 to investor state arbitrations will be tested in future proceedings. 

Steptoe litigators have extensive experience both obtaining and opposing discovery pursuant to 28 U.S.C. § 1782 to support foreign proceedings. We can help with these and other cross-border arbitration issues, including enforcing international arbitral awards as judgments in courts throughout the world.

Endnotes

¹ Slip Op. at 16.

²Slip Op. at 7-9.

³ Slip Op. at 8.

⁴ Slip Op. at 9.

⁵ Slip Op. at 14.

⁶ Slip Op. at 10.