It has been said that United States’ case law pertaining to arbitration occurs in “trilogies”. The latest of these trilogies – three decisions on the scope and application of 28 USC § 1782, or “Section 1782” – recently played in Federal courts located in Florida. The decisions in these cases clarify the expansion in the scope and utility of this procedural provision.

Section 1782 is a procedural tool that can be used to obtain evidence from persons located in the United States for use in foreign proceedings. Below, we describe the basic principles of Section 1782, how these recent decisions broaden the scope and application of Section 1782 and the effect of these decisions on parties contemplating or in the midst of arbitration proceedings.

A means of obtaining evidence for non-US parties

Section 1782 grants a United States Federal District Court the right to compel a person residing or to be found in that court’s jurisdiction to give testimony, provide a statement or produce a document or other relevant material for use in proceedings before a foreign or international tribunal.

The statue has three threshold requirements: (i) that the person from whom discovery is sought resides or is found in the district court’s jurisdiction; (ii) that the discovery is for use in proceedings in “a foreign or international tribunal”; and (iii) that the application is made by an “interested person”.

Where the three requirements listed above are satisfied, the district court has the discretion, but not the obligation, to grant the Section 1782 application. A two-step hurdle must therefore be overcome to obtain a court order in response to a Section 1782 request. The three requirements must be met and the district court must be convinced to exercise its discretion.

In Intel v Advanced Micro Devices (AMD), the US Supreme Court issued guidance on the factors that the district court should consider when deciding whether or not to grant the request. These factors include considerations with regard to the nature of the foreign or international tribunal, the involvement in the proceedings of the party from whom the evidence is requested, the motive underpinning the request and the request’s potentially burdensome or intrusive character.

Within the contours of these guidelines, discrete questions may arise about how Section 1782 can be properly used by parties. Does an arbitral tribunal qualify as a “foreign or international tribunal”? How should the discretionary factors be applied? Does the actual evidence need to be subject to the court’s jurisdiction, or simply the party that has access to the evidence? Recent decisions provide helpful guidance on these questions.

Is an arbitral tribunal considered a “foreign or international tribunal”?

While a plain reading of Section 1782 might suggest that private arbitral tribunals seated outside of the United States are “foreign or international tribunals”, the Supreme Court has not explicitly ruled on this issue. Applying the factors of Intel, federal district courts have come to different conclusions on the issue; two cases in particular have created the impression among practitioners that private arbitral tribunals may meet the criteria. However, prior to this summer, this inference had not been confirmed by a circuit court.

In Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), the Eleventh Circuit Court of Appeals directly addressed this question. The court held that a private arbitral tribunal seated in Ecuador constituted a “foreign or international tribunal” for the purposes of Section 1782.  In making this finding, the court found it persuasive that the tribunal was a first-instance decision maker, was able to gather and consider evidence, and had the authority to determine liability.

The Consorcio decision differs from the findings of other circuit courts prior to the Intel decision and a decision of the Fifth Circuit Court of Appeals post-Intel (each of these circuit courts had determined, for varying reasons, that private international arbitral tribunals were not “foreign or international tribunals” for the purposes of Section 1782). The Eleventh Circuit decision sets up a potential ruling from the Supreme Court on these issues, which would helpfully clarify this area of the law. For the present, the decision is helpful to litigants in arbitration as a new authority that may be relied on to seek discovery from persons subject to the jurisdiction of US courts.

How should the discretionary factors be applied?

Another recent case, this time decided by a magistrate judge of the federal court for the Southern District of Florida, found that a NAFTA tribunal seated in Canada also constituted a “foreign or international tribunal” for the purposes of Section 1782. The detailed order of Magistrate Judge Torres demonstrates the analysis that federal judges undertake when considering an application for Section 1782 discovery, particularly with regard to the application of the discretionary factors outlined by the Supreme Court in Intel.

In In re Application of Mesa Power Group, LLC, Mesa brought a claim against the Canadian government concerning the alleged actions of the Government of Ontario that prevented Mesa from obtaining contracts with the Ontario Power Authority. The proceedings were brought under NAFTA and were seated in Ottawa, Ontario. During the proceedings, Mesa sought evidence from NextEra, a successful bidder for the same contracts, but a non-participant in the arbitration between Mesa and the Canadian government, through a Section 1782 application filed in the Southern District of Florida. The application was filed in the Federal District Court of the Southern District of Florida because NextEra was headquartered within that court’s jurisdiction.

NextEra argued that weighing up the discretionary factors set out by the Supreme Court in Intel – most notably, the burden that providing the evidence would place on NextEra, a non-participant to the arbitration – the application should be rejected. The court disagreed. The court found that NextEra’s status as a non-participant in the arbitration weighed in favour of granting the application because, without exercising the court's discretion under Section 1782, the documents may not be available to Mesa due to the limitations of the foreign arbitral tribunal’s jurisdiction. The court also found that there was no reason to delay discovery under Section 1782 until a hearing date was secured – the mere contemplation of the arbitral proceedings was sufficient and it was unlikely that the scope of the requested discovery would be altered by allowing the proceedings to mature. Perhaps most importantly, the Magistrate Judge considered the scope of Mesa’s application and concluded that, in the main, the request was not too burdensome. With some exceptions, the request was itself to the main documents relevant to the dispute. The Magistrate Judge ordered that, to the extent it concerned these main documents, the application should be complied with.

While subject to review by a higher court, this application is a helpful study on how the federal courts consider applications under Section 1782. It also indicates the extent to which such requests are likely to be approved, which may be a useful guideline to parties framing a request for evidence or document under Section 1782.

Is the Court’s jurisdiction over documents or persons?

Section 1782 requires that the party subject to the Section 1782 application must be subject to the jurisdiction of the relevant court. However, do the documents sought in the application also need to be subject to that same jurisdiction?

This was the key question in the latest decision in the long running arbitration between Chevron and Ecaudor-Logaio Agrio. Chevron has alleged, and is seeking to prove, fraudulent activities by other participants to that arbitration. To obtain evidence of the alleged fraud, Chevron made an application requiring Banco Pichincha C.A. Miami Agency (“Banco Miami”), a banking agency in Miami for Banco Ecuador, to produce records relating to banking transactions by other participants in the arbitration.  These accounts and records were maintained outside of the United States by Banco Ecuador, in Ecuador.

In In re Application of Chevron Corp, the Magistrate Judge ordered Banco Miami to provide these records. The bank agency was clearly under the jurisdiction of the court. Because the agency and Banco Ecuador regularly shared the type of document requested and Banco Miami had access to the documents being sought by Chevron, the documents could be obtained through a Section 1782 application.

The decision is helpful guidance concerning the expansion of Section 1782 and its usefulness to litigants in foreign proceedings. In so far as a US entity can be considered to routinely share information for business purposes with a foreign entity, documents possessed by the foreign entity but accessible to the US entity may be obtained for use in foreign proceedings. This tool may be especially useful where judicial assistance in a foreign country may be considered unavailable or in disputes concerning highly “networked” business models – such as banking, finance or trade.