Overview
First Tuesday Update is our monthly take on current issues in commercial disputes, international arbitration, and judgment enforcement. In April 2021, we wrote that the Supreme Court granted cert in Servotronics, Inc. v. Rolls-Royce PLC and Boeing, to resolve a circuit split over the meaning of "foreign or international tribunal" in 28 U.S.C. § 1782 and whether that term includes private international arbitrations. See "SCOTUS to Determine Applicability of Section 1782 Discovery in International Arbitration." About a month before oral argument was scheduled in September 2021, the litigants settled the case and the Supreme Court never addressed whether § 1782 authorizes district courts to order discovery for use in private international arbitration.
In December, the Court granted cert in two cases, now consolidated, to consider the scope of discovery allowed under § 1782 in international arbitration. Does the arbitration need to involve a foreign state, a treaty, or is it allowed in any international arbitration between two private parties? The two cases are: ZFAutomotive US v. Luxshare, Ltd., 21-401, and Alixpartners v. Fund for Protection of Investor Rights in Foreign States, 21-518.
Thus, we should have significant insight from the Court this term concerning the scope of § 1782 discovery as part of international arbitration, though it is not clear if all of the potential issues will be resolved by the two cases before the Court.
28 U.S.C. § 1782(a)—Assistance to foreign and international tribunals and to litigants before such tribunals—provides district courts the authority to order a person “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, . . . ." Id. (emphasis added). The statute does not define "foreign or international tribunal” and the courts of appeals have reached differing interpretations about whether that phrase includes private international arbitrations.
In ZF Automotive US v. Luxshare, Ltd., the issue was exactly the same as Servotronics—a private party seeking discovery from another private party for use in an international, private, and commercial arbitration. The district court granted Luxshare’s request for discovery, following binding Sixth Circuit precedent that allows § 1782 discovery in private arbitration. ZF Automotive sought a writ of certiorari before judgment from the Sixth Circuit because "when a similar or identical question of constitutional or other importance was before the Court in another case," and when granting review in the second case would facilitate review of an important question presented, the Court has granted cert before judgment. That's what the Supreme Court did here given that Servotronics was dismissed before the Supreme Court could rule.
Alixpartners v. Fund for Protection of Investor Rights in Foreign States is different from ZF Automotive US or Servotronics in that Alixpartners involves an investor-state arbitration—that is, an arbitration involving a foreign state and a private party under the auspices of a treaty. And even though the Second Circuit has held that arbitration between two private parties does not fall within § 1782, the Second Circuit reached a different decision in Alixpartners, finding the involvement of a treaty to be dispositive. Following its reasoning in In re Guo for an Order to take Discovery for Use in a Foreign Proceeding Pursuant to 28 U.S.C. 1782, 965 F.3d 96 (2d Cir. 2020), as amended (July 9, 2020), the Second Circuit applied a multi-factor test to hold that a treaty arbitration—even an ad hoc one—does fall within §1782. The four factors are: (1) the "degree of state affiliation and functional independence possessed by the entity"; (2) "the degree to which a state possesses the authority to intervene to alter the outcome of an arbitration after the panel has rendered a decision"; (3) the "nature of the jurisdiction possessed by the panel"; and (4) the "ability of the parties to select their own arbitrators.” The third factor was material: "Critically," the court concluded, "the arbitral panel in this case derives its adjudicatory authority from the Treaty . . . rather than an agreement between purely private parties or any other species of private contract." Id.
As we wrote previously, the Supreme Court has never decided whether § 1782 authorizes discovery for use in private arbitrations. In Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), the Court considered whether §1782(a) authorized discovery in connection with a proceeding pending before the European Commission. The Court held that the European Commission was a foreign tribunal "to the extent it acts as a first-instance decisionmaker." Id. at 243. But Intel was limited to a quasi-governmental agency and not private arbitration.
The Fourth and Sixth Circuits have held that private arbitrations constitute a "foreign or international tribunal" under § 1782. The Sixth Circuit considered this issue in Abdul Latif Jameel Transportation Co. v. FedEx Corp., 939 F.3d 710 (6th Cir. 2019), which we have written about in these pages before, and the Fourth Circuit held the same in Servotronics, Inc. v. Boeing Co., 954 F.3d 209 (4th Cir. 2020) ("Servotronics I") (holding that district courts may order discovery to aid a private international arbitration under § 1782).
The Second, Fifth, and Seventh Circuits have all reached a different conclusion than the Fourth and Sixth Circuits when construing "tribunal" in §1782(a). In short, those Circuits hold that §1782(a) does not authorize discovery for use in private international arbitrations. See National Broadcasting Corp. v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999); Republic of Kazakhstan v. Biedermann International, 168 F.3d 880 (5th Cir. 1999); Servotronics, Inc. v. Rolls-Royce PLC, 975 F.3d 689 (2020).
Once again, this will be a case to watch as the decision could have a significant impact on private international arbitration and investor-state arbitration. The Supreme Court could approve of using § 1782 in all arbitrations; only in those arbitrations involving a governmental entity and/or deriving its authority from an international agreement or treaty; or in no arbitrations. It is the rare case where the Supreme Court was ready to resolve the issue yet the case was mooted and yet is back before the Court in the very next term.
Steptoe litigators have extensive experience both obtaining and opposing discovery pursuant to 28 U.S.C. § 1782 to support foreign proceedings. Michael Miller, Evan Glassman, and Charles Michael have repeatedly obtained or defeated § 1782 discovery for proceedings abroad, including recently successfully quashing an application for § 1782 discovery in the Southern District of Florida. See In re Olga Kurbatova, Case No. 18-mc-81554, (S.D. Fla. 2019). We can help with these and other cross-border arbitration issues, including enforcing international arbitral awards as judgments in courts throughout the world.
