- Two recent US court decisions, one successfully argued by Freshfields, have the potential to expand US-style discovery in support of foreign-seated international commercial arbitrations.
- Under these decisions, a party involved in an international commercial arbitration seated outside the United States, including an arbitration seated in Asia, can request documents located outside the United States or another type of US-style discovery from a party or non-party located in the United States.
- These decisions have wide reaching implications for parties to international arbitrations.
- First, they could increase the likelihood that a party may access documents or benefit from other types of US-style discovery tools, including oral and written examinations of individuals.
- Second, they may expand the scope of discovery available in international arbitrations since US-style discovery goes beyond what is generally permitted in international commercial arbitration.
- Third, a party may be able to access documents that are physically located outside of the United States, potentially including materials located in Asia.
Applications for discovery under Section 1782
A party involved in an international commercial arbitration may make an application for discovery to a US court under 28 USC § 1782 (Section 1782).
Section 1782, entitled “Assistance to foreign and international tribunals and to litigants before such tribunals,” is a unique US statute that allows US-style discovery if: (i) the applicant seeks documents or testimony; (ii) from a person or entity who “resides or is found” in the court district where the application is brought; (iii) for use in a proceeding in a foreign or international tribunal.
If the US court concludes that these conditions are met, it may, in its discretion, grant the application.
Two big questions have been raised with respect to Section 1782 applications:
1. Does Section 1782 apply to international commercial arbitration?
Yes, said the US Sixth Circuit Court of Appeals, finding in favour of Freshfields’ client.
For the past twenty years, US courts have grappled with whether a private international arbitral tribunal—i.e., in an international commercial arbitration—is a qualifying “foreign or international tribunal” within the meaning of Section 1782. The Supreme Court’s decision in Intel Corp. v Advanced Micro Devices, Inc., established that Section 1782 permits discovery in the United States not only in connection with court cases but also in connection with regulatory and administrative proceedings, but left open the question whether Section 1782 discovery was available in support of private arbitral proceedings.
In a first-of-its-kind decision, the US Sixth Circuit Court of Appeals (the Sixth Circuit) in Abdul Latif Jameel Transportation Company Limited v FedEx Corporation held that discovery under Section 1782 is available in aid of private international arbitrations.
The Sixth Circuit considered whether an international arbitration seated in Dubai and conducted under the auspices of the DIFC-LCIA Rules was a “foreign or international tribunal” within the meaning of Section 1782. The Sixth Circuit expressly rejected both the interpretive approach and conclusions of other U.S. courts, and found that the plain meaning of “tribunal” encompasses private, contracted-for commercial arbitrations. In the result, the DIFC-LCIA arbitration was a “foreign or international tribunal,” in respect of which Section 1782 disclosure may be ordered.
The Sixth Circuit is the first appellate-level court in the United States to hold that Section 1782 covers private international arbitral tribunals. The Sixth Circuit is a federal court with appellate jurisdiction over district courts in Kentucky, Michigan, Ohio and Tennessee. Persons or companies residing or “found” in these US states may now be subject to US-style discovery in aid of foreign-seated international commercial arbitration. Several other US appellate-level courts are also currently considering this same question.
2. Does Section 1782 apply to documents that are physically located outside of the United States?
Yes, said the US Second Circuit Court of Appeals (the Second Circuit).
On Monday, the Second Circuit ruled that there is no per se bar to the extraterritorial application of Section 1782—an issue in respect of which there were conflicting decisions, even within the Second Circuit.
In re del Valle Ruez concerned an application to obtain documents from Santander Investment Securities Inc (the US brokerage arm of Santander, based in New York), in particular those concerning the financial status of Banco Popular Español in which the applicants had invested.
The Second Circuit held that Section 1782 is “simply a discovery mechanism and does not subject a person to liability,” and so the ordinary presumption against extraterritoriality did not apply. Thus, provided the documents are in the possession, custody or control of a party over whom the court can exercise jurisdiction, the physical location of the documents sought would not operate as a per se bar to their discovery under Section 1782.