On June 13, 2022, the United States Supreme Court unanimously held (9-0) that parties to private international arbitrations may not seek the assistance of US federal courts to gather evidence. See ZF Automotive US, Inc. v. Luxshare, Ltd., No. 21-401; and AlixPartners, LLP v. The Fund for Protection of Investors’ Rights in Foreign States, No. 21-518. The full opinion can be viewed here.
Prior to this landmark international arbitration decision, parties to international arbitrations could enlist the aid of US courts to obtain relevant evidence from a person or company sitting in the US (even if that US actor was not a party to the arbitration) under 28 U.S.C. § 1782(a). Section 1782(a) 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, including criminal investigations conducted before formal accusation.”
1782(a), as it is referred to in the arbitration community, permitted US federal courts to order US-based actors to produce evidence “for use in a proceeding in a foreign or international tribunal.” While a prior version of 1782(a) covered “any judicial proceeding” in “any court in a foreign country,” §1782 (1958 ed.), Congress later expanded the provision to cover proceedings in a “foreign or international tribunal.”
That revision created the possibility of US judicial assistance in connection with administrative and quasi-judicial proceedings abroad.
The Supreme Court’s Decision
For years, US courts struggled with whether a private international arbitration was a “foreign or international tribunal” that would qualify under 1782(a). This week’s SCOTUS opinion, written by Justice Barrett, answered that question with a resounding no.
The highest court in the US reasoned that 1782(a) “reaches only governmental or intergovernmental adjudicative bodies, and neither of the arbitral panels involved in these cases fits that bill.”
The ZF Automotive case was an easier decision as it involved an arbitration between private parties. The AlixPartners, LLP case, in which a sovereign nation was a party to the arbitration and the option to arbitrate was contained in an international treaty, on the other hand, was a bit more complicated.
Nonetheless, the Court found the key determination was whether the two parties intended to “confer governmental authority on an ad hoc panel.” There was no indication that was the case with the AlixPartners, LLP, and hence the arbitral body was not a “foreign or international tribunal.”
In addition, allowing 1782(a) to be used in aid of international arbitrations, the Court reasoned, would create tension with the Federal Arbitration Act which governs domestic arbitrations in the US “because §1782 permits much broader discovery than the FAA allows. Interpreting §1782 to reach private arbitration would therefore create a notable mismatch between foreign and domestic arbitration.”
The Impact of This Decision
The Court’s decision will impact all international arbitrations wolrdwide regardless of whether they include a US party. No longer can parties to international arbitration use the US courts under 1782(a) to obtain discovery to which they might not otherwise be entitled, a reprieve US-based companies should welcome.
This decision should also help international arbitration deliver on its promise of being a more efficient dispute resolution mechanism as foreign parties will not have to worry about participating in a US action which may require them to retain US counsel and which could significantly delay the arbitration.
Finally, the absence of 1782(a) discovery should further buttress the confidentiality that arbitration offers. Without 1782(a), international arbitration parties do not have to fear their dispute being published on a US court’s docket which is generally available to the public.
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