Section 1782 and How Is It Used in International Arbitration
In international arbitrations, the parties’ ability to obtain documents and testimony from the opposition is often limited. Depending on the applicable law and institutional rules, the scope of any discovery may be considerably narrower than in domestic litigation in certain jurisdictions, such as the United States, where discovery is generally expansive. It is also rare for international arbitral tribunals to request testimony from non-witnesses. Arguably most importantly, an international arbitral tribunal, particularly in investment arbitrations, typically lacks the power to compel production of documents or witnesses.
The United States is well known as having an expansive approach to discovery. Chapter 28 U.S.C. Section 1782 permits parties in international arbitrations to, in certain circumstances, benefit from this broad discovery regime. Section 1782 provides, “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. . . .”
Therefore, parties in international arbitrations may obtain documents from, or subpoena, an individual or company that is resident in the United States. Notably, U.S. courts can compel individuals or companies to adhere to such orders. Section 1782 can therefore be of great utility to parties in international arbitrations. It can allow a party to obtain documents and/or testimony that it would otherwise not be privy to, in circumstances in which either (1) the U.S. individual is not a witness in the arbitration or (2) the rules governing the discovery process in the arbitration are narrower than the scope that may be afforded by U.S. courts in Section 1782 proceedings.
U.S. courts will consider several factors when determining whether to order disclosure pursuant to a Section 1782 application. These factors were established by the U.S. Supreme Court in Intel Corporation v. Advanced Micro Devices, Inc., 124 S. Ct. 2466 (2004), and are as follows:
- whether the documents and/or testimony sought are within the non-U.S. tribunal’s jurisdictional reach;
- the nature of the non-U.S. tribunal, character of the proceeding abroad, and receptivity of the foreign government, court, or agency abroad to U.S. federal court assistance;
- whether the request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States; and
- whether the request contains unduly intrusive or burdensome demands.
Parties have had success in utilizing Section 1782 proceedings in international arbitrations. For example, in Mesa Power v. Canada, the claimant sought and obtained orders from several U.S. district courts in relation to its Section 1782 requests. Canada argued that the documents the claimant received through the Section 1782 proceedings were inadmissible in the arbitration and requested they be struck from the record. The tribunal dismissed Canada’s challenge, and noted that it had in fact chosen Miami as the legal seat for the arbitration “because of the possibility to issue subpoenas and seek the assistance of the courts in procuring evidence of third parties located in the U.S.” Mesa Power Group, LLC v. Government of Canada, UNCITRAL, PCA Case No. 2012-17, Award ¶ 80 (24 March 2016).
Nevertheless, Section 1782 applications are not always successful. In Cascade Investments v. Turkey, the U.S. District Court for the District of New Jersey rejected a Section 1782 application brought by Turkey in support of its defense in an investment arbitration, holding that granting the petition would affect the right against self-incrimination of the relevant individual third party from whom discovery was sought. In Re Petition of the Republic of Turkey for an Order Directing Discovery from Hamit Ҫiҫek Pursuant to 28 U.S.C. § 1782, Opinion of Ms. E Salas, Civil Action No. 19-20107 (ES) (SCM).
Doubt in the Continued Use of Section 1782 Discovery in International Arbitrations
In Servotronics Inc., v. Rolls-Royce PLC, 975 F.3d 689 (7th Cir. 2020), the claimant initiated Section 1782 proceedings in U.S. district courts in the Fourth and Seventh Circuits. In the proceedings, the parties addressed whether an international arbitral tribunal constitutes a “foreign or international tribunal” for purposes of Section 1782 and therefore whether Section 1782 applies to international arbitrations. The U.S. Court of Appeals for the Fourth Circuit determined that Section 1782 discovery was available to Servotronics; the Seventh Circuit determined that it was not. The U.S. Courts of Appeals are currently split 3:2 on this issue.
Servotronics appealed the issue to the Supreme Court in December 2020. The factual details of the Servotronics dispute and the circuit split on this issue have been extensively written about, so will not be covered further in this article. However, earlier this year, a number of amicus briefs were filed in the Supreme Court proceedings by interested parties, including by the U.S. Department of Justice (DOJ). These amicus briefs shed further light on the differing views of interested parties, and will undoubtedly be relied upon in future Section 1782 proceedings now that Servotronics has withdrawn its petition.
Competing Amicus Briefs Before the Supreme Court
In its amicus brief, the DOJ asserted that Section 1782 was never intended to apply to, and is not available to, international arbitral tribunals (whether commercial or investment). It argued that the ordinary meaning of “tribunal” under the act “when properly construed as part of the broader phase ‘foreign or international tribunal,’ in light of the statutory context and history, . . . does not extend to private commercial arbitration.” U.S. Department of Justice, Amicus Curiae, June 2021, page 14.
In 1958, Congress created a Commission on International Rules of Judicial Procedure and requested that it propose revisions to Section 1782 in order to “improve procedures for providing assistance to ‘foreign courts and quasi-judicial agencies.’” Id. The term “foreign or international tribunal” ultimately replaced the term “court in a foreign country” in the 1964 amendment to Section 1782. The DOJ contended that Congress’ “limited intention to include quasi-judicial governmental bodies … supports construing Section 1782 to encompass only the types of judicial and quasi-judicial decisionmakers that Congress and the Rules Commission contemplated.” Id. page 24.
Professor George Bermann of Columbia Law School—a prominent figure in the international arbitration community—also filed an amicus brief in Servotronics. In contrast to the DOJ, his opinion is that the plain meaning of the language in Section 1782 compels the conclusion that it applies to proceedings before international commercial arbitral tribunals. He stated that, “Congress drew no distinctions among, and created no carve-outs from, foreign or international tribunals. That international commercial arbitral tribunals are included in that category was, and is, unambiguous.” George Bermann, Amicus Curiae, 13 May 2021, page 3. Bermann concluded that “[t]he plain meaning of ‘tribunal’ has not changed since 1964”—it is a “court of justice or other adjudicatory body” and arbitral tribunals are clearly “other adjudicatory bod[ies].” Id. page 9. He also noted that other sections of the U.S. Code (namely Sections 1696 and 1781) that use the term “foreign or international tribunals” are also equally applicable to international commercial tribunals. Id. pages 19–20.
Importantly, Servotronics and, therefore, the DOJ’s amicus brief, related to an international commercial arbitration. The DOJ, however, widened the net of its amicus brief to also include the effect of the Supreme Court’s decision on Section 1782 proceedings in investment arbitrations. It claimed that the logic behind Servotronics’ arguments creates an analogous issue in investment arbitrations, which arguably share the same characteristics as private commercial arbitrations. The DOJ stated that “Congress could not have envisioned the application of Section 1782 to treaty-based investor-state arbitration when it enacted the provision’s relevant language in the 1964 Act, because that type of arbitration did not exist in 1964.” U.S. Department of Justice, Amicus Curiae, June 2021, page 15. Further, the DOJ stated that, “The advent of investor-state arbitration has brought advantages to the dispute-resolution process for investor-state disputes. Construing Section 1782 to reach such arrangements would jeopardize many of those advantages, including undermining the predictability and efficiency of investor-state arbitration proceedings.” Id. page 16.
By contrast, Bermann saw no concern with applying Section 1782 to international arbitrations, whether commercial or investment. In fact, he opined that, in Intel, the Supreme Court concluded that Section 1782’s applicability is subject to no per se conditions or restrictions. George Bermann, Amicus Curiae, 13 May 2021, page 5. U.S. courts, in granting Section 1782 applications, have wide discretion to narrow, limit or condition discovery, which in Bermann’s view provides a sufficient safeguard against the “catastrophic results” that concern opposers to Section 1782 proceedings. Id. page 6. For example, U.S. courts have the authority to deny a Section 1782 request, narrow the document requests in the proceedings or limit the scope of questioning in a subpoena arising from the proceedings.
As well as the divergent views of the DOJ and Bermann, amicus briefs were also filed by, among others, the International Chamber of Commerce (ICC) International Court of Arbitration, the International Arbitration Centre in Tokyo (IAC), the U.S. Chamber of Commerce, and Halliburton Company. We briefly discuss below the views of each of these amici.
The ICC noted its “strong interest in this case as the issues raised are of great importance to the conduct of international arbitrations worldwide.” ICC International Court of Arbitration, Amicus Curiae, 13 May 2021, page 3. The ICC’s submission was neutral, aiming to assist the Supreme Court on the following sub-issue: “Assuming the Court finds that Section 1782 is available in connection with private commercial arbitration, what degree of deference should a U.S. court give to an arbitral tribunal’s views on the discovery sought before it decides whether to grant or deny a Section 1782 application?” Id. page 4. The ICC advised that
a U.S. court weighing a Section 1782 petition should afford a very high degree of deference to the arbitral tribunal’s views on the discovery sought” as “the arbitral tribunal constituted for a particular dispute is best placed to assess the propriety and utility of evidence that may result from a Section 1782 application.
Id. pages 4–5. Affording such a degree of deference offers an additional level of protection against the potentially expansive nature of the discovery that could otherwise arise in international arbitrations from Section 1782 proceedings.
The IAC, in analyzing the language of Section 1782(a), noted that the “statute provides that the information sought must be ‘for use in a proceeding in a foreign or international tribunal’ [emphasis added].” International Arbitration Centre in Tokyo, Amicus Curiae, 25 June 2021, page 4. As a result, the IAC’s position was that Section 1782 “should be applied, and the application for judicial assistance granted, only if the applicant demonstrates that the introduction of the evidence sought would be consistent with the tribunal’s rules and procedures.” Id. pages 4–5. The factors set forth in Intel envisage that U.S. courts will rely on the views of the arbitral tribunal in making such a determination.
Halliburton, currently a party to an appeal pending before the Third Circuit on this issue, supported the respondents in its amicus brief. It stated that “[e]very interpretive guide points in the same direction: a purely private, contract-based arbitration abroad is not ‘a proceeding in a foreign or international tribunal’ under section 1782(a).” Halliburton Company, Amicus Curiae, 28 June 2021, page 3.
The U.S. Chamber of Commerce, also in support of the respondents, opined that Section 1782 proceedings “disadvantage U.S.-based companies relative to their foreign counterparts,” as those U.S. companies (if party to the arbitration) “[lack] a reciprocal opportunity to obtain documents from [their] foreign adversary.” U.S. Chamber of Commerce, Amicus Curiae, 28 June 2021, page 2. The Chamber of Commerce similarly took the DOJ’s position that “the interpretation of ‘foreign or international tribunals’ in Section 1782 to exclude private arbitral panels best comports with the historical backdrop against which Congress adopted the term.” Id. page 11.
Withdrawal of Servotronics’ Appeal Before the Supreme Court
Earlier this month, on 8 September 2021, Servotronics indicated in a letter to the Supreme Court that it “anticipates filing a dismissal motion pursuant to Rule 46 of the Rules of the Court within the next few days.” Letter from Servotronics to the Supreme Court of the United States, dated 8 September 2021. The Supreme Court subsequently removed a hearing from its calendar, scheduled for 5 October 2021.
Our understanding is that Servotronics intends to withdraw the petition as the merits hearing in the underlying arbitration has been held, and a final award may have been issued.
What’s Next
Servotronics’ withdrawal was disappointing and anti-climactic for international arbitration practitioners—who have been following the development of Servotronics closely—as it seemed like the uncertainty regarding Section 1782 proceedings would remain unresolved. The Supreme Court had divergent and fulsome amicus briefs before it and was well-placed to rule on this issue and resolve the circuit split.
There was concern among practitioners that, just as in Servotronics, underlying arbitration proceedings will almost always come to a conclusion before a Section 1782-related petition is heard by the Supreme Court. Consequently, the issue before the Supreme Court risks becoming moot before the Court renders a decision.
However, on September 14, 2021, the U.S. affiliate of ZF Friedrichshafen (ZF), a German car parts group, filed a so-called leapfrog petition to the Supreme Court that raises an issue “substantively identical” to the issue in Servotronics. Petition for a Writ of Certiorari Before Judgment, ZF Automotive US, Inc., Dekker, and Christophe Marnat v. Luxshare, Ltd. ZF has asked the Supreme Court to hear its appeal of a Michigan district court ruling before a federal appeals court rules on the matter. Such an approach would hopefully alleviate the concern that the underlying arbitration will conclude before the Supreme Court has time to rule on the issue.
If the Supreme Court grants certiorari, the uncertainty around Section 1782 may yet be resolved. In the meantime, the international arbitration community must continue to wait.
