What is Section 1782 and how is it used in International Arbitration?
In international arbitrations, the parties’ ability to obtain documents and testimony from the opposition is often limited. Depending on the applicable law and institutional rules, the scope of any discovery may be much narrower than in domestic litigation in certain jurisdictions, such as the United States (“U.S.”), where discovery is generally expansive. It is also rare for international arbitral tribunals to request testimony from non-witnesses. Perhaps most importantly, the power of the tribunal in international arbitrations, particularly in investment arbitrations, often falls short in enabling arbitral tribunals to compel discovery.
The U.S. is well recognized as having an expansive approach to discovery. Chapter 28 U.S.C. Section 1782 (“§1782”) permits parties in international arbitrations to, in certain circumstances, benefit from this broad discovery regime. §1782 provides:
“The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal…”
Therefore, parties in international arbitrations may obtain documents from, or subpoena, an individual/company that is resident in the U.S. Importantly, U.S. courts can compel individuals/companies to adhere to such orders. As a result, §1782 can be of great utility to parties in international arbitrations. It can allow a party to obtain documents and/or testimony that they would otherwise not be privy to, in circumstances in which either: (i) the U.S. individual is not a witness in the arbitration; or (ii) the rules governing the discovery process in the arbitration are narrower than the scope that may be afforded by U.S. courts in §1782 proceedings.
In determining whether to order disclosure pursuant to a §1782 application, U.S. courts will consider the following factors, as set forth by the U.S. Supreme Court (“Supreme Court”) in Intel Corporation v. Advanced Micro Devices1 (“Intel”):
i. whether the documents and/or testimony sought are within the non-U.S. tribunal’s jurisdictional reach;
ii. the nature of the non-U.S. tribunal, character of the proceeding abroad, and receptivity of the foreign government, court or agency abroad to U.S. federal court assistance;
iii. whether the request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the U.S.; and
iv. whether the request contains unduly intrusive or burdensome demands.
Parties have successfully utilized §1782 proceedings in international arbitrations. For example, in Mesa Power v. Canada, the claimant sought and obtained orders from several U.S. district courts in relation to its §1782 requests. Canada argued that the documents the claimant received through the §1782 proceedings were inadmissible in the arbitration and requested they be struck from the record. The tribunal dismissed Canada’s challenge, and noted that it had in fact chosen Miami as the legal seat for the arbitration “because of the possibility to issue subpoenas and seek the assistance of the courts in procuring evidence of third parties located in the U.S.”2
Why was the continued use of §1782 discovery in international arbitrations in doubt?
In Servotronics Inc. v. Rolls Royce Plc (“Servotronics”),3 the claimant initiated §1782 proceedings in U.S. district courts in the Fourth and Seventh Circuits. In doing so, it was required to address whether an international arbitral tribunal constitutes a “foreign or international tribunal” for purposes of §1782 and hence whether §1782 proceedings can be utilized in international arbitrations. The U.S. Court of Appeals for the Fourth Circuit ruled that §1782 discovery was available to Servotronics; the Seventh Circuit ruled that it was not. The U.S. Courts of Appeals are currently split 3:2 on this issue.4
Servotronics appealed the issue to the Supreme Court in December 2020. The underlying facts of the Servotronics dispute and the circuit split on this issue have been extensively written about, so will not be covered further in this post. Earlier this year, a number of amicus briefs were filed in the Supreme Court proceedings by interested parties, including by the U.S. Department of Justice (“DoJ”).
The competing amicus briefs before the Supreme Court
In its amicus brief, the DoJ took the position that §1782 was never intended to apply to, and should not be available to, international arbitral tribunals (whether commercial or investment). It argued that the ordinary meaning of “tribunal” under the Act “when properly construed as part of the broader phase ‘foreign or international tribunal,’ in light of the statutory context and history, … does not extend to private commercial arbitration.”5
In 1958, Congress created a Commission on International Rules of Judicial Procedure (“Rules Commission”) and asked it to propose revisions to §1782 in order to “improve procedures for providing assistance to ‘foreign courts and quasi-judicial agencies.’”6 As a result, the term “foreign or international tribunal” replaced the term “court in a foreign country” in the 1964 amendment to §1782. The DoJ takes the position that Congress’ “limited intention to include quasi-judicial governmental bodies … supports construing Section 1782 to encompass only the types of judicial and quasi-judicial decisionmakers that Congress and the Rules Commission contemplated.”7
Professor George Bermann of Columbia Law School—a prominent figure in the international arbitration community—also filed an amicus brief in Servotronics. In contrast to the DoJ, his view is that the plain meaning of the language in §1782 compels the conclusion that it applies to proceedings before international commercial arbitral tribunals. He stated that: “Congress drew no distinctions among, and created no carve-outs from, foreign or international tribunals. That international commercial arbitral tribunals are included in that category was, and is, unambiguous.”8 Bermann concluded that “[t]he plain meaning of ‘tribunal’ has not changed since 1964” – it is a “court of justice or other adjudicatory body” and arbitral tribunals are clearly “other adjudicatory bod[ies].”9 He also noted that other sections of the U.S. Code (namely Sections 1696 and 1781) that use the term “foreign or international tribunals” are also equally applicable to international commercial tribunals.10
It is important to note that Servotronics and, therefore, the DoJ’s amicus brief, related to an international commercial arbitration. The DoJ, however, widened the net of its amicus brief to also capture the effect of the Supreme Court’s decision on §1782 proceedings in investment arbitrations. It argued that the logic behind Servotronics’ arguments creates an analogous issue in investment arbitrations, which arguably share the same characteristics as private commercial arbitrations. The DoJ stated that “Congress could not have envisioned the application of Section 1782 to treaty-based investor-state arbitration when it enacted the provision’s relevant language in the 1964 Act, because that type of arbitration did not exist in 1964.”11 Further, the DoJ opined that:“
The advent of investor-state arbitration has brought advantages to the dispute-resolution process for investor-state disputes. Construing section 1782 to reach such arrangements would jeopardize many of those advantages, including undermining the predictability and efficiency of investor-state arbitration proceedings.”12
Bermann, on the other hand, saw no concern with §1782 proceedings applying to international arbitrations, whether commercial or investment. In fact, he opined that the Supreme Court, in Intel, has already concluded that §1782’s applicability is subject to no per se conditions or restrictions.13 Rather, U.S. courts, in granting §1782 applications, have wide discretion to narrow, limit or condition discovery, which in Bermann’s view provides a sufficient safeguard against the “catastrophic results” that concern opposers to §1782 proceedings.14 For example, U.S. courts have the ability to deny a §1782 request, narrow the list of document requests in the proceedings or limit the scope of questioning in a subpoena arising from the proceedings.
As well as the divergent views of the DoJ and Professor Bermann, amicus briefs were also filed by, amongst others, the ICC International Court of Arbitration (“ICC”), the International Arbitration Centre in Tokyo (“IAC”), the U.S. Chamber of Commerce and Halliburton Company (“Halliburton”). We briefly discuss below the views of each of these amici.
The ICC confirmed its “strong interest in this case as the issues raised are of great importance to the conduct of international arbitrations worldwide.”15 The ICC provided a neutral submission, aiming to assist the Supreme Court on the following sub-issue: “Assuming the Court finds that Section 1782 is available in connection with private commercial arbitration, what degree of deference should a U.S. court give to an arbitral tribunal’s views on the discovery sought before it decides whether to grant or deny a Section 1782 application?”16 In summary, the ICC advised that “a U.S. court weighing a Section 1782 petition should afford a very high degree of deference to the arbitral tribunal’s views on the discovery sought” as “the arbitral tribunal constituted for a particular dispute is best placed to assess the propriety and utility of evidence that may result from a Section 1782 application.”17 Such deference affords an additional level of protection against the expansive nature of the potential discovery that could otherwise arise in international arbitrations from §1782 proceedings.
The IAC, in analyzing the language of §1782(a), noted that the “statute provides that the information sought must be ‘for use in a proceeding in a foreign or international tribunal’ [emphasis added].”18 Consequently, the IAC’s position is that §1782 “should be applied, and the application for judicial assistance granted, only if the applicant demonstrates that the introduction of the evidence sought would be consistent with the tribunal’s rules and procedures.”19 U.S. courts can rely heavily on the views of the arbitral tribunal in making this determination, as suggested by the ICC.
Halliburton, currently a party to an appeal pending before the Third Circuit on this issue, supported the respondents in its amicus brief. It opined that “[e]very interpretive guide points in the same direction: a purely private, contract-based arbitration abroad is not ‘a proceeding in a foreign or international tribunal’ under section 1782(a).”20
The U.S. Chamber of Commerce, also in support of the respondents, opined that §1782 proceedings “disadvantage U.S.-based companies relative to their foreign counterparts,” as those U.S. companies (if party to the arbitration) “[lack] a reciprocal opportunity to obtain documents from [their] foreign adversary.”21 The Chamber of Commerce also took the DoJ’s position that “the interpretation of ‘foreign or international tribunals’ in Section 1782 to exclude private arbitral panels best comports with the historical backdrop against which Congress adopted the term.”22
Servotronics has recently withdrawn its Appeal before the Supreme Court
Last week, on 8 September 2021, Servotronics indicated in a letter to the Supreme Court that it “anticipates filing a dismissal motion pursuant to Rule 46 of the Rules of the Court within the next few days.”23 The Supreme Court subsequently removed a hearing from its calendar, scheduled for 5 October 2021.
Our understanding is that Servotronics withdrew the petition as the merits hearing in the underlying arbitration has been held, and a final award may have been issued.
Servotronics’ withdrawal is both disappointing and anti-climactic for international arbitration practitioners—who have been following the development of Servotronics closely—as the uncertainty regarding §1782 proceedings will remain unresolved. The Supreme Court had a litany of amicus briefs before it, and was well-placed to rule on this issue and resolve the Circuit split. Instead, rather unsatisfactorily, we will have to wait for the issue to be raised once more before any certainty is achieved.
There is concern amongst practitioners that, just as in Servotronics, underlying arbitration proceedings will almost always come to a conclusion before a §1782-related petition is heard by the Supreme Court. Consequently, the issue before the Supreme Court risks becoming moot before the Court renders a decision. We may therefore be waiting a long time for the uncertainty around §1782 to be resolved.