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December 21, 2012 Articles

Eleventh Circuit Holds Foreign Arbitration Panel Is a Tribunal

By Elizabeth C. Wolicki

In a ruling that may dramatically expand the scope of discovery in international arbitrations, the Eleventh Circuit recently allowed a party to an arbitration proceeding in Ecuador to obtain discovery through 28 U.S.C. 1782, holding that a foreign arbitration panel is a tribunal under the statute. This ruling, based on the Supreme Court's 2004 decision in Intel Corp. v. Advanced Micro Devices, Inc., is at odds with decisions from the Second and Fifth Circuits, which predate the Intel decision.

In Consorcio Ecuatoriano de Telecomunicaciones v. JAS Forwarding (USA), Inc., 685 F. 3d 987 (11th Cir. 2012), the Eleventh Circuit held that a foreign arbitration panel is a tribunal within the meaning of 28 U.S.C. § 1782 and allowed a party to that proceeding to obtain discovery through that statute. This ruling has the potential to greatly increase the amount of discovery available to parties engaged in international arbitration.

Consorcio Ecuatoriano de Telecomunicaciones (CONECEL) was the respondent in an arbitration proceeding pending in Ecuador brought by Jet Air Service Equador S.A. (JASE). CONECEL filed a petition in the Southern District of Florida pursuant to 28 U.S.C. §1782 in which it requested that a subpoena be issued against JAS Forwarding (USA), Inc., an entity related to JASE, for discovery relating to the arbitration. After the petition was granted, JASE intervened and moved to quash the subpoena and vacate the order. The district court denied JASE's motion and its request for reconsideration, and JASE appealed.

Under Section 1782, a district court may grant an application for judicial assistance with discovery if the person from whom the discovery is sought resides or is found in the district in which the court is located, the request is made by an "interested person" or "a foreign or international tribunal," and the applicant is seeking evidence "for use in a proceeding in a foreign or international tribunal." The discovery sought can be testimony, a witness statement, or the production of "a document or other thing."

The dispute between JASE and CONECEL centered around the statutory requirement that the evidence sought must be for use in a proceeding before a foreign or international tribunal. CONECEL argued that its arbitration was pending before a foreign tribunal; JASE took the opposite position. The question turned on the meaning of the term "tribunal" under the statute.

In its analysis, the Eleventh Circuit relied heavily on the Supreme Court's reasoning in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 124 S. Ct. 2466, 159 L.Ed. 2d 355 (2004). In Intel, the Supreme Court was asked whether the Directorate General for Competition of the European Commission was a "tribunal" under Section 1782. The Supreme Court turned to the legislative history, emphasizing, as the Eleventh Circuit noted, "the breadth of the statutory term 'tribunal.'" The Eleventh Circuit also noted that the Supreme Court used a "broad functional construction of the term 'tribunal,'" which considered how the tribunal operated and what it did, including whether it decided issues of liability and damages that were subject to judicial review. This broad application of "tribunal" by the Supreme Court guided the Eleventh Circuit in reaching its decision.

The Eleventh Circuit then examined the particular characteristics of the Ecuadorian arbitral panel. Paraphrasing the factors discussed by the Supreme Court in Intel, the Eleventh Circuit looked at whether the Ecuadorian arbitral panel was a "first-instance adjudicative decisionmaker, whether it permits the gathering and submission of evidence, whether it has the authority to determine liability and impose penalties and whether its decision is subject to judicial review." To aid its determination, the Eleventh Circuit received declarations from Ecuadorian counsel submitted by the parties. The primary contested issue was whether the Ecuadorian arbitral panel's decision was subject to judicial review, with JASE arguing that it was not because "[t]he sum and substance of [arbitrators'] rulings" was not reviewable. The Court found that the judicial review of arbitration awards in Ecuador was akin to the type of review given to arbitration awards in the United States; in both instances, the review focuses on whether the arbitration meets procedural norms, not on the substance of the decision reached. The Eleventh Circuit held that the review to which the arbitral decision would be subject qualified as judicial review even though it was limited in nature.

The Eleventh Circuit recognized that the Second and Fifth Circuits have held that private arbitral panels are not covered by section 1782. See Nat'l Broad Co. v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999) and Republic of Kazakhstan v. Biedermann Int'l, 168 F.3d 880 (5th Cir. 1999). Those decisions drew a distinction between governmental and private tribunals and found that Section 1782 was only meant to cover governmental arbitral tribunals. In disagreeing with those Circuits, the Eleventh Circuit noted that those decisions were prior to the Supreme Court's decision in Intel.

The Second and Fifth Circuits were concerned with expanding the scope of discovery permissible in foreign arbitration proceedings. The Eleventh Circuit recognized these concerns but noted that the district court should weigh the "need for the evidence against the nature of the foreign proceeding and concerns of undue burden or intrusiveness" in ruling on an application.

It remains to be seen if other Circuits will follow the Eleventh Circuit's reasoning and permit 28 U.S.C. § 1782 to be used to obtain discovery in private international arbitrations, or if the concerns articulated by the Second and Fifth Circuits will prevail.

Keywords: litigation, alternative dispute resolution, electronic/written discovery, international arbitration

Elizabeth C. Wolicki – December 21, 2012