The civil law tradition’s aversion to common law approaches to pretrial discovery—and especially the expansive, party-conducted gathering of evidence used in American civil litigation— is reflected in the enactment by some countries of so-called “blocking statutes” purporting to limit the collection and disclosure of evidentiary materials for foreign litigation. Of these laws, French Statute No. 68-678 (the “French Blocking Statute”) has gained particular notoriety in U.S. litigation, but U.S. judges have proven almost uniformly unsympathetic to defenses based on foreign blocking statutes generally. In a February 21, 2014 decision, In re Activision Blizzard, Inc. Stockholder Litigation, 86 A.3d 531 (Del. Ch. 2014), the Delaware Court of Chancery joined the long line of U.S. courts refusing to subordinate the discovery process to the French Blocking Statute.

The French Blocking Statute lays down a broad prohibition on seeking, communicating or producing documents or information of an economic, commercial, industrial, financial or technical nature for the purpose of establishing evidence in foreign judicial or administrative proceedings, except as permitted in accordance with French law or a treaty such as the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (the “Hague Evidence Convention”). Violation of the French Blocking Statute is punishable, in theory, (though, as the Court of Chancery noted, very rarely in practice) by up to six months’ imprisonment and fines of up to €18,000 for individuals and €90,000 for companies.

The case in question involved a shareholder challenge to an $8 billion transaction in which Delaware corporation Activision and a related party acquired more than 50% of Activision’s outstanding shares from Activision’s controlling stockholder, French media and telecom giant, Vivendi. The plaintiff alleged that Vivendi and the members of Activision’s board of directors violated their fiduciary duties in approving the transaction and that they should have sought and obtained a transaction that generated more value for Activision and its stockholders.

Six of Activision’s eleven defendant directors were senior Vivendi executives, almost all of whom resided in France. Most of the relevant documents under the control of the French defendants were located on Vivendi’s servers in France. In response to the plaintiff’s discovery requests, the French defendants argued that producing the requested information and documents would constitute a criminal offense under the French Blocking Statute and that the plaintiff could only take discovery from the French defendants in compliance with the Hague Evidence Convention (rather than the more permissive Delaware rules) and with French electronic data protection law (the “French Data Protection Act”).

The plaintiff then sought an order to compel the defendants to produce documents in their possession, custody and control, wherever located, in accordance with the Court of Chancery rules and without regard to any contrary provisions of French law. Vivendi and the French-resident Activision directors opposed the motion to compel and sought, in return, a protective order providing that discovery proceed only under the Hague Evidence Convention and that any production of electronic information comply with the French Data Protection Act.

Vice Chancellor Laster’s opinion noted that neither the Delaware Supreme Court nor the Court of Chancery had previously had occasion to address how a Delaware court should proceed when confronted by foreign-law discovery restrictions. In a comity analysis drawing chiefly on U.S. Supreme Court precedents, the Court of Chancery opted to apply a multi-factor balancing test found in the Restatement (Third) of Foreign Relations Law: (1) the importance to the litigation of the documents or information requested; (2) the degree of specificity of the request; (3) whether the information originated in the United States; (4) the availability of alternative means of securing the information; and (5) the extent to which important interests of, respectively, the United States and the country where the information is located would be implicated by compliance or non-compliance with the discovery request.

Finding that the analysis, on balance, did not support deference to French law, the Court of Chancery declined to require that discovery proceed against the French defendants solely, or even as a first resort, under the Hague Evidence Convention. Instead, the court compelled the parties to proceed under both the Delaware discovery rules and the Hague Evidence Convention, ordering the French defendants to make a good faith effort to obtain permission from the competent French authorities to disclose the information sought by the plaintiff. The Court warned the French defendants, however, that even if such permission was not forthcoming, they would nonetheless face sanctions if they failed to meet the court’s deadline for document production. The court also found that minor modifications to the discovery process were sufficient to accommodate France’s interests reflected in the French Data Protection Act.

Moreover, the Court of Chancery ordered the individual directors to make themselves available for deposition in the United States. The court held that the directors submitted to the jurisdiction of the Delaware courts—including, by implication, those courts’ procedural rules—by consenting to serve as directors of a Delaware corporation. It added that Vivendi had accepted a Delaware forum and application of Delaware law in the contracts relating to the challenged transaction, and noted that Vivendi’s arguments in the Activision case were inconsistent with its own past behavior as a plaintiff in other U.S. litigation, in which Vivendi had not hesitated to take advantage of broad American-style discovery. Finally, the court reiterated Delaware’s substantial interest in providing an effective forum for disputes concerning the internal affairs of Delaware corporations and in policing the conduct of Delaware fiduciaries.

The Court of Chancery’s decision in the Activision case represents a notable, if unsurprising, development and highlights the obstacles litigants in Delaware face in raising the French Blocking Statute and similar foreign laws as a defense to disclosure. A recent legislative proposal (currently stalled in the French senate) to narrow the scope of the French Blocking Statute could further compromise the viability of such defenses. For the time being however, it seems likely that some French parties to U.S. proceedings will continue to reflexively raise the French Blocking Statute in an effort to limit the scope of discovery. For example, after the Activision decision, French media technology company, Technicolor, recently and unsuccessfully attempted to invoke the French Blocking Statute in the Northern District of California in opposition to a motion to compel discovery. See In re: Cathode Ray Tube (CRT) Antitrust Litigation, 2014 U.S. Dist. LEXIS 151222 (N.D. Cal. Oct. 23, 2014). Both foreign and domestic litigants and their counsel should be aware, however, that even though U.S. courts have overwhelmingly declined to defer to foreign statutory restrictions on discovery, conducting discovery in a U.S. proceeding in contravention of another country’s blocking statute may complicate subsequent enforcement in that country of a resulting judgment.