In re Application of the Children's Inv. Fund Found. (UK), Sir Christopher Hohn, and Axon Partners, LP for An Order to Take Discovery Pursuant to 28 U.S.C. § 1782, No. 18-00104 (S.D.N.Y. Jan. 30, 2019) [click for opinion]
Applicants were investors in a group of Mauritius private-equity funds that were formed to invest in Indian real estate. Beginning in 2015, applicants became concerned over the mismanagement of the funds and a lack of transparency by the funds' founder, alleging the misappropriation of over $150 million in investor assets. They initiated actions in Mauritius in 2015 to obtain books and records, to wind-up one of the funds, to convene a shareholder meeting and to liquidate another of the funds. They also filed criminal complaints in India in 2018 against the manager of the funds. Further, applicants initiated an arbitration with the London Court of International Arbitration (the "LCIA") in 2018 against one of the funds, its manager and controlling shareholder pursuant to the arbitration clause in that fund's shareholder agreement.
Applicants then came to the U.S. seeking evidentiary support for the various proceedings initiated abroad. To that end, on March 21, 2018, they filed an ex parte application with a New York district court for an order compelling Respondents—a company and an individual located within the district—to produce documents and submit to depositions under Section 1782.
The court ordered Applicants to appear for a hearing and to justify the scope of their requested discovery. In anticipation of the hearing, Applicants narrowed their discovery requests and submitted a revised application, which the court entered on May 17, 2018. Applicants then served subpoenas on Respondents in July 2018. Respondents filed motions to quash the subpoenas and for protective orders against the depositions.
The issue before the court on Respondents' motion was whether the application was proper under Section 1782. The court explained that Section 1782 is a unique statute that provides parties to foreign proceedings the ability to compel the production of discovery within the U.S. for use in the foreign proceedings. The statute requires that (1) the person from whom discovery is sought resides in the district of the district court to which the application is made, (2) the discovery is for use in a foreign proceeding before a foreign or international tribunal, and (3) the application is made by an interested person. If these requirements are met, the district court has discretion in deciding whether to grant the requested discovery, though its discretion is bound by "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."
With these aims in mind, the court considered Respondents' argument that, inter alia, the discovery sought would not be used before the type of foreign tribunal within the contemplation of the statute. The court first addressed Respondents' contention that private, commercial arbitrations such as the LCIA proceedings do not constitute "proceedings in a foreign or international tribunal," as required by the statute.
The court noted that the question of whether an international arbitral tribunal falls under the statute's purview remains unsettled in the Second Circuit. Yet the court found support for reading Section 1782 to include arbitral tribunals. Citing the Supreme Court's reliance on Professor Hans Smit, described as the "chief architect" of Section 1782, the court found that arbitral tribunals were contemplated by the drafters of the statute and meant to be included in the phrase: "a proceeding in a foreign or international tribunal."
Despite Respondents' arguments to the contrary, the court was not persuaded by older Second Circuit case law and instead relied on the Supreme Court's 2004 decision in Intel that determined that the statute's scope was intentionally broad. The court also cited a 2016 decision of another Southern District of New York court which found that a tribunal constituted pursuant to the rules of the London Maritime Arbitration Association was a "foreign tribunal" within the domain of Section 1782. The court thus held that a private arbitration proceeding is a "proceeding in a foreign or international tribunal" for the purposes of Section 1782 and that the LCIA proceeding satisfies this statutory requirement.
Respondents also argued that the criminal proceedings in India and the Mauritius civil proceedings did not qualify as proceedings in "a foreign or international tribunal." The court rejected these arguments because the statute explicitly includes criminal proceedings and the civil proceedings were of the type contemplated by the statute.
The court resolved the motions by granting the applications and requiring Respondents to respond to the subpoenas.