Obtaining Evidence in Aid of International Arbitration: In re in the Matter of the Application of Oxus Gold PLC for Assistance Before a Foreign Tribunal, 2006 U.S. Dist. LEXIS 74118 (D.N.J. 10/10/06); 2006 WL 2927615 (D.N.J. 10/11/06) - ABA YLD 101 Practice Series

By Sandi Varnado

Petitioner in this case, Oxus Gold PLC ("Oxus"), is a mining group based in the United Kingdom. Its wholly owned subsidiary Norox Mining Company, Ltd. ("Norox"), in a joint venture with the State Enterprise Kyrgyzaltyn Joint Stock Company ("KA"), created the Talas Gold Mining Company ("TGMC") in order to develop the Jerooy gold deposit in the Kyrgyz Republic ("the Republic"). TGMC is controlled 66.7 percent by Norox and 33.3% by KA.

After TGMC failed to meet obligations under its license granted by the Kyrgyz State Agency on Geology and Mineral Resources ("the Agency"), the Agency canceled the license. Respondent, the managing director of SIG Overseas Limited ("SIG"), based outside of the United States, contacted the Republic on behalf of a SIG client who was interested in competing for the license to develop the Jerooy mine.

After KA terminated the joint venture, TGMC initiated three court proceedings in Kyrgyzstan regarding the actions of the Agency and the Republic regarding its license and the Jerooy mine; Petitioner did not name the Respondent in any of these proceedings. Petitioner also initiated arbitration proceedings against the Republic based on the Republic's actions concerning TGMC. Finally, the Republic advised TGMC of potential compensation claims against it for failing to fulfill its obligations under the license.

Petitioner filed an ex parte application to take discovery of Respondent and SIG under 28 U.S.C. § 1782, arguing that the discovery was for use in connection with its claims in the Kyrgyz courts, the international arbitration, and the notice of compensation claims against TGMC. Petitioner argued that Respondent and SIG have relevant information to the proceedings. The Court granted the application on August 14, 2006, authorizing service of subpoenas for documents and testimony from Respondent and SIG.

When Petitioners could not serve Respondent in New Jersey, it filed a second ex parte motion, this one under 28 U.S.C. § 1783, seeking authorization to serve Respondent in Moscow, Russia, arguing that although Respondent resides in New Jersey, he was expected to be in Moscow throughout the end of the week. The Court granted this motion on August 17, 2006, authorizing service abroad.

Respondent filed a motion to vacate both orders, quash the subpoena and to award fees and costs.

The August 14, 2006 Order: 28 U.S.C. § 1782
The Court ruled that the August 14 Order was proper. As it explained, a party seeking discovery under 28 U.S.C. § 1782 must prove: (1) the party from whom discovery is sought resides or is found in the District; (2) the discovery sought is for use in a foreign or international tribunal; and (3) the party seeking discovery is an interested person. See 28 U.S.C. § 1782.

The Court found that Respondent resides or is found in New Jersey, satisfying the first requirement. In assessing residency, the Court noted the following activity by Respondent in Russia: (1) he lives there; (2) he is employed there; and (3) he regularly conducts business there. However, it pointed to Respondent's activity in New Jersey: (1) he leases a residential apartment there; (2) he is registered to vote there; (3) he maintains regular doctor appointments there; and (4) he sits there at least two months a year. Recognizing that a person can have more than one residency, the Court found it at least arguable that Respondent resides in New Jersey.

The Court likewise found that the discovery sought was for use in a foreign or international tribunal, satisfying the second requirement of 28 U.S.C. § 1728. It explained that the Petitioner was seeking the information from Respondent for use in: (1) an international arbitration proceeding that was not private in nature; (2) several actions in the Krygyz Courts; and (3) a threatened claim for damages asserted by the Kyrgyz Government.

Finally, it decided that Petitioner is an interested party, given its majority ownership in TGMC, the Company central to the foreign proceedings. The Court quoted the United States Supreme Court in explaining that Section 1782 "plainly reaches beyond the universe of persons designated litigant." 2006 U.S. Dist. LEXIS 74118 at * 16 (quoting Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 256 (2004)). The Court noted Petitioner's investment of more than $50 million in the Jerooy project and its potential lost profits of hundreds of millions of dollars.

The court did exercise its discretion in ruling that the August 14 Order was overbroad and expressed a belief that it should be modified and more narrowly tailored. However, because the parties had expressed a willingness to discuss modification without court intervention, the Court decided not to dictate the necessary modifications at this time. Therefore, the Court denied Respondent's motion to quash the subpoena.

The August 18, 2006 Order: 28 U.S.C. § 1783
In contrast, the Court ruled that the August 18 Order should be vacated, because none of the three requirements of 28 U.S.C. § 1783 were satisfied.

The first requirement of Section 1783 is that Petitioner show a pending proceeding in the United States. The Court noted that it was unaware of any case nor could the parties cite to one that applied this section to a foreign proceeding. As it pointed out, the discovery requested by Petitioner was for use in foreign arbitration and litigation, not for any pending United States proceeding or litigation.

The second requirement of Section 1783 is that Petitioner show that it is not possible to obtain the Respondent's testimony in admissible form without his personal appearance or to obtain the production of the document or other thing in any other manner. The Court noted that the information could be obtained from the Respondent via other means, including written interrogatories.

The final requirement of Section 1783 is that the particular testimony or production of the document or other thing is necessary in the interest of justice. The Court found no compelling basis for finding that the interest of justice demands Petitioner's subpoena stand under Section 1783. As it explained, the circumstances of the case were primarily financial, and the posture of the case did not satisfy the interest of justice requirement, either.

Finally, the Court explained that even if the aforementioned requirements had been met, it would have the discretion to order issuance of the subpoena but would not be required to do so. It noted that the subpoena would not be appropriate under Section 1783, because the Court would be compelling Respondent to travel from Moscow to New Jersey for a deposition connected to foreign proceedings. Finally, it noted that if Petitioner had sought to take discovery of a party located in the District of New Jersey in connection with proceedings pending in the United States, then the subpoena would be proper. But, instead, Petitioner sought to compel Respondent to "travel across continents for the purposes of a deposition in connection with international arbitration, regardless of the fact that Respondent will likely be traveling to New Jersey within the year." Id. at *26-27.

Other Issues:
The court decided that it need not consider whether service was effected or whether fees were tendered, because it found Section 1783 inapplicable; thus service in Moscow was void on that basis.

It also ruled attorneys' fees and costs were inappropriate in the case, given:(1) the lack of case law on the issue in connection with Section 1783; (2) Petitioner's counsel's lack of awareness of the surreptitious means of service upon Respondent; and (3) Petitioner's counsel's lack of awareness that Respondent was represented by counsel when the application under Section 1783 was filed.

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About the Author

Sandi Varnado ois an Associate in the New Orleans (Northshore location) office of Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C. She can be reached at svarnado@bdbc.com.

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