General Publications March 14, 2016

"Using U.S. Discovery Procedures in International Arbitration," New York Law Journal, March 14, 2016.

New York and U.S. litigators might take for granted the ability to use discovery requests, but the United States is the exception to the global rule when it comes to the gathering of evidence. Nearly every other legal system in the world does not allow parties to ask each other for categories of documents relevant to the claims in the litigation, let alone allow the use of interrogatories or pre-trial depositions. Instead, foreign parties in foreign litigations typically present the court with a small selection of their own documents that they believe most support their positions. Many international arbitrations operate under similar assumptions, and do not allow the parties access to their opponents' files or documents.

When relevant evidence is located in a foreign country, international procedures such as Hague Evidence Convention requests (in those countries that have signed onto the Convention) or letters rogatory may allow the court where a litigation is pending to ask a foreign authority to require the collection of evidence. However, these procedures are time-consuming and often restrict the evidence that can be obtained—and they are not available to parties to private arbitrations.

Again, however, the United States is the exception to the global rule. In order to provide "'equitable and efficacious' discovery procedures in American courts 'for the benefit of tribunals and litigants involved in litigation with international aspects' while 'encourag[ing] foreign countries by example to provide similar means of assistance to our courts[,]'"1 28 U.S.C. §1782 allows an independent avenue to U.S.-style discovery for use in "a proceeding before a foreign or international tribunal."2 As a result, parties to a foreign proceeding need not go through a cumbersome and restrictive international process, but may directly ask a U.S. district court to grant an ex parte petition allowing a federal subpoena to be served on a U.S. party that possesses relevant evidence. And, most critically, several courts, including courts in the Second Circuit, define "foreign proceeding" to include international arbitrations.

28 U.S.C. §1782 Analysis

Federal courts follow a multistep but straightforward analysis, as set forth in the Supreme Court's seminal Intel decision,3 to determine whether to allow discovery pursuant to §1782. First, the petition must satisfy each of three threshold factors: (1) the person from whom discovery is sought must reside (or be found) in the district of the district court to which the application is made, (2) the discovery must be for use in a proceeding before a foreign or international tribunal, and (3) the application must be made by a foreign or international tribunal or any interested person.4 When a party seeks U.S. discovery in aid of an international arbitration, a court will examine whether under the second factor the arbitration is "a proceeding before a foreign or international tribunal."

If the application meets all of the three threshold factors, the court is then free to grant discovery in its discretion,5 guided by a secondary four-factor analysis. The four discretionary factors the district courts consider are:

  • Whether the person from whom discovery is sought is not a participant in the foreign proceeding and is therefore outside the foreign tribunal's jurisdictional reach.
  • The nature of the foreign tribunal and its receptivity to judicial assistance by U.S. federal courts.
  • Whether the request conceals an attempt to circumvent foreign evidence-gathering rules.
  • Whether the request is unduly intrusive or burdensome.6

These four non-mandatory factors were specifically delineated by the U.S. Supreme Court in Intel. In analyzing these factors, district courts are permitted to give each factor different weight depending on the circumstances of each case.7 The court must also keep in mind the policy goals of the statute, i.e., allowing foreign litigants access to broad discovery and encouraging foreign courts to provide similar assistance.8

28 U.S.C §1782 Process

In order to obtain discovery via §1782, the party requesting discovery must submit an application to the district court where the party the discovery is sought from resides. This application is styled as a motion and must set forth why the requested discovery satisfies the Intel analysis. An application for §1782 discovery is typically submitted ex parte and is accompanied by one or more declarations and/or affidavits supporting the factual statements in the application. The requested discovery is attached to an attorney declaration in the form of draft non-party subpoenas. If the court approves the application, the subpoenas are served in the same manner as non-party subpoenas. A subpoenaed party who objects to the requested discovery may bring a motion to quash, challenging the basis for the discovery under both Rule 45 and the Intel analysis governing §1782.9 To the extent that the requested discovery survives the challenge under the Intel analysis, it is governed under the same relevance and discoverability analysis as any other non-party subpoena.10

Applicability to International Arbitrations

While even prior to Intel courts in the Second Circuit permitted discovery applications under §1782 for foreign litigations as well as intergovernmental arbitrations, post-Intel the Second Circuit has yet to definitively rule on the applicability of §1782 to international arbitrations. Two recent district court decisions suggest, however, that the Second Circuit will ultimately adopt the analysis of courts of other circuits that have addressed this issue and found that §1782 does apply to such arbitrations.11

Prior to the Supreme Court's decision in Intel, the Second Circuit interpreted the phrase "foreign or international tribunal" to only include intergovernmental arbitrations arising from treaty obligations in bilateral or multilateral investment treaties.12 In reaching this interpretation, the Second Circuit declined to extend the scope of §1782 to include arbitrations between private parties.

In Intel, the Supreme Court rejected this narrow interpretation of §1782 and held that any foreign ruling body can be considered "a foreign or international tribunal" under the §1782 threshold analysis as long as it satisfies the following four requirements: (1) it is a first instance decision maker, (2) it permits parties to gather and submit evidence (even if not as broadly as in the United States), (3) it has authority to decide liability and impose penalties on the parties, and (4) it issues a decision subject to judicial review.13 Although factually, Intel did not involve an international arbitration, the Supreme Court's reasoning opened the door to the use of §1782 in the context of international arbitrations. Moreover, in discussing what bodies constitute foreign tribunals, the Supreme Court, in dictum, quoted a law review article that included arbitration proceedings in an illustrative list of "tribunals."14 Applying the four-factor test from Intel, courts in several circuits have allowed discovery in aid of private international commercial arbitrations that satisfy this analysis.

In contrast, neither the Second Circuit nor district courts within the circuit have directly addressed this issue. As recently as 2011, the Second Circuit declined to reach the question of whether an arbitral tribunal established through international treaty, let alone a private international arbitration, could form the basis for a §1782 application.15 Similarly, in the 11 years following Intel, reported district court decisions within the circuit failed to address the availability of §1782 in connection with an international arbitration. Last year, however, two decisions from the Southern District of New York suggest that National Broadcasting Company v. Bear Stearns & Co. is no longer good law and that §1782 is available in aid of international arbitrations.

In Jiangsu Steamship Co., Ltd. v. Success Superior Ltd., discovery was sought not for use in a pending commercial arbitration in London, but in a foreign attachment proceeding in anticipation of an award in the arbitration in favor of the petitioner. While the court denied the application under the Intel threshold analysis because the discovery sought was for enforcement or attachment proceedings, which are not adjudicative in nature, the court implied that the result might be different if the discovery sought was in the London arbitration itself. The court noted that "any proceeding for which §1782 discovery is sought must be 'adjudicative,'" and that the Supreme Court's decision in Intel "acknowledges the reality that proceedings in tribunals other than law courts can be adjudicative in nature. Arbitrations, for example, are 'adjudicative' in nature."16

In In re Asia Maritime Pacific Ltd., the petitioner also sought discovery for use in a collateral attachment proceeding. While the application was denied for reasons similar to those in Jiangsu Steamship, the court again implied that §1782 was available in connection with private international arbitrations: "Revealingly, Petitioner does not argue that the requested material could be used in the London arbitration to some advantage or 'used to increase its chance of success' in the arbitration."17

Given the limited reported authority within the circuit addressing the applicability of §1782 to private international arbitrations, it appears from these two recent decisions that courts in the Second Circuit are likely to grant §1782 applications in connection with such arbitrations. As courts in other circuits have held, this approach fits within the expansive framework set forth by the Supreme Court in Intel. As such, §1782 appears to be a viable option for parties to international arbitrations who seek to obtain evidence located within the United States.

1. In re Application for an Order Pursuant to 28 U.S.C. 1782 to Conduct Discovery for Use in Foreign Proceedings, 773 F.3d 456, 461 (2d Cir. 2014) (affirming district court's decision permitting discovery under §1782 for use in a foreign criminal investigation conducted by an investigating Swiss magistrate).
2. See Mees v. Buiter, 793 F.3d 291, 298 (2d Cir. 2015) (concluding the for use prong did not require that the discovery sought be necessary for the petitioner to prevail in the foreign proceeding, as such a narrow reading would be "unwise" and in tension with the aim of §1782).
3. Intel v. Advanced Micro Devices, 542 U.S. 241, 242-44 (2004).
4. See Brandi-Dohrn v. IKB Deutsche Industriebank AG, 673 F.3d 76, 80 (2d Cir. 2012) (permitting discovery under §1782 after finding that the three Intel threshold factors were satisfied).
5. See Mees, 793 F.3d at 297 ("Once those statutory requirements are met, a district court may grant discovery under §1782 in its discretion.").
6. Intel, 542 U.S. 241, 264-65.
7. See, e.g., Marubeni America Corp. v. LBA Y.K., 335 Fed. App'x 95, 97 (2d. Cir. 2009) ("Notably, the Court did not conclude that any of these factors should be given more weight than the others, and it did not hold that any one factor should be dispositive in a district court's analysis.").
8. See Mees, 793 F.3d at 297 ("This discretion, however, is not boundless, but must be exercised in light of the twin aims of the statute: providing efficient means of assistance to participants in international litigation in our federal courts and encouraging foreign countries by example to provide similar means of assistance to our courts.").
9. See, e.g., In re Application of Operacion y Supervision de Hoteles, S.A. de C.V. for an Order to Conduct Discovery for Use in…, No. 14 Misc. 82 (PGG), 2015 WL 82007, at *4 (S.D.N.Y. Jan. 6, 2015) ("A court considering a request for discovery under §1782 must also be mindful of U.S. federal discovery procedures under Rules 26 and 45 of the Federal Rules of Civil Procedure."); In re Application of Consorcio Minero, S.A. v. The Renco Group, No. 11 Mc. 354, 2012 WL 1059916, at *1 (S.D.N.Y. March 29, 2012) (defendant moving to modify the order granting discovery under §1782 pursuant to Rules 26, 30, and 45 of the Federal Rules of Civil Procedure).
10. See In re Auto–Guadeloupe Investissement S.A., No. 12 MC 221(RPP), 2012 WL 4841945, at *4 (S.D.N.Y. Oct. 10, 2012) (considering a request for discovery under §1782 not only subject to the Intel factors, but also being mindful of U.S. federal discovery procedures under Rule 45 of the Federal Rules of Civil Procedure); In re Gushlak, No. 11–MC–218 (NGG), 2011 WL 3651268, at *6 (E.D.N.Y. Aug. 17, 2011) ("Section 1782(a) mandates that discovery under the statute be produced 'in accordance with the Federal Rules of Civil Procedure.").
11. See In re Babcock Borsig AG, 583 F. Supp. 2d 233, 240 (D. Mass. 2008) ("There is no textual basis upon which to draw a distinction between public and private arbitral tribunals, and the Supreme Court in Intel repeatedly refused to place 'categorical limitations' on the availability of §1782(a)."); Comision Ejecutiva Hidroelectrica del Rio Lempa v. Nejapa Power Co., No. 08–135–GMS, 2008 WL 4809035, at *1 (D. Del. Oct. 14, 2008) ("[T]he Supreme Court's decision in Intel (and post-Intel decisions from other district courts) indicate that Section 1782 does indeed apply to private foreign arbitrations."); In re Hallmark Capital, 534 F. Supp. 2d 951 (D. Minn. 2007) (holding a private Israeli arbitral body was a tribunal for purposes of §1782); In re Roz Trading, 469 F. Supp. 2d 1221, 1228 (N.D. Ga. 2006) ("Where a body makes adjudicative decisions responsive to a complaint and reviewable in court, it falls within the widely accepted definition of 'tribunal,' the reasoning of Intel, and the scope of §1782(a), regardless of whether the body is governmental or private.").
12. See National Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184, 189 (2d Cir. 1999).
13. See Intel v. Advanced Micro Devices, 542 U.S. 241, 247 (2004).
14. Intel, 542 U.S. 241, 258.
15. Chevron v. Berlinger, 629 F.3d 297, 310-11 (2d Cir. 2011).
16. Jiangsu Steamship Co.. v. Success Superior, No. 14-CV-9997(CM), 2015 WL 3439220, at *6 (S.D.N.Y. Jan. 6, 2015).
17. In re Asia Maritime Pacific, No. 15-CV-2760(VEC), 2015 WL 5037129, at *4 (S.D.N.Y. Aug. 26, 2015).

Reprinted with permission from the March 2016 edition of the New York Law Journal© 2016 ALM Media Properties, LLC. All rights reserved.
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