Recent developments in Section 1782 discovery

January 2020 | EXPERT BRIEFING | LITIGATION & DISPUTE RESOLUTION

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28 U.S.C. § 1782 is a federal statute that allows petitioners to obtain evidence (discovery) in the US in aid of non-US legal proceedings. This litigation tool has become increasingly popular in recent years and, as a result, cases clarifying its scope have been making their way through US courts with increasing frequency. Recently, the US Courts of Appeals for the Second and Sixth Circuits issued opinions interpreting Section 1782 in rulings that address its applicability to private international arbitrations and the discovery of evidence that is located abroad.

Section 1782 grants petitioners the right to request that a US federal court order a person or entity “to give his testimony or statement or to produce a document or other thing” in order to provide assistance to a “foreign or international tribunal”. The court may order that documents or other evidence be provided, or that a person give direct testimony in the form of a deposition.

In order to utilise Section 1782 to obtain discovery, a petitioner must file a request with a US district court describing the requested discovery, the relevant non-US legal proceedings and why the court should allow discovery. A court can grant the request if three requirements are met: (i) the request must be made by an “interested person” or a foreign or international tribunal; (ii) the target of the discovery must “reside” or be “found” in the judicial district where the petition is filed; and (iii) the evidence sought must be for “use in a proceeding in a foreign or international tribunal”.

Additionally, in its ruling in Intel Corp. v. Advanced Micro Devices, Inc, the US Supreme Court laid out several discretionary factors that courts should weigh when considering whether to grant Section 1782 discovery: (i) whether the target of the discovery is a participant in the non-US legal proceeding; (ii) the nature of the foreign tribunal, the character of the proceedings and the receptivity of the foreign government or the court or agency to judicial assistance from a US court; (iii) whether the request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the US; and (iv) whether the request is unduly intrusive or burdensome.

Use in private international arbitrations

Prior to Intel, the US Courts of Appeals for the Second and Fifth Circuits held that Congress had not intended for private international arbitrations to fall within the scope of “foreign or international tribunals” under Section 1782. Those courts held that foreign tribunals were meant to be limited to “governmental or intergovernmental arbitral tribunals and conventional courts and other state-sponsored adjudicatory bodies”, as stated in National Broadcasting Co. v. Bear Stearns & Co.

Several years later, in Intel, the Supreme Court ruled that an executive branch of the European Commission qualified as a tribunal under Section 1782 “to the extent it acts as a first-instance decisionmaker”. Further, the Supreme Court stated that when Congress revised the statute in 1964 by replacing “any judicial proceeding” with “a proceeding in a foreign or international tribunal”, it opened the door for judicial assistance in “foreign administrative and quasi-judicial proceedings”. Since then, US courts have been split over whether Section 1782 encompasses private international arbitrations, and this question is currently pending in cases before the Second, Fourth and Seventh Circuits.

In September 2019, the Sixth Circuit became the first circuit court, post-Intel, to directly address the issue of whether private arbitrations should be considered “foreign or international tribunals” under Section 1782. In Application to Obtain Discovery for Use in Foreign Proceedings, a Saudi corporation filed an application for discovery against a US-based corporation, seeking to subpoena documents and deposition testimony from its corporate representative for use in a private arbitration pending in the United Arab Emirates (UAE). At issue was whether a “privately contracted-for commercial arbitration” operating under the rules of the Dubai International Financial Centre-London Court of International Arbitration (DIFC-LCIA) qualifies as a “foreign or international tribunal” under Section 1782.

The US company argued that Section 1782 only applies to governmental entities and that the Supreme Court’s reasoning in Intel limited Section 1782 to “state-sponsored” arbitrations. The US company also cited the Second Circuit’s analysis of the legislative history of Section 1782 and argued that granting discovery would be contrary to public policy. Specifically, it argued that permitting Section 1782 discovery for private international arbitrations ran counter to (i) the goals of the Federal Arbitration Act; (ii) the overall purpose of arbitrating rather than litigating, disputes; and (iii) the purpose of Section 1782 itself to promote efficiency and encourage foreign countries to provide similar assistance to US courts.

In its opinion, the Sixth Circuit held that the DIFC-LCIA arbitration panel qualifies as a “foreign or international tribunal” under the statute. In coming to this decision, the Court looked to dictionary definitions of the word ‘tribunal’ and its usage within the legal community. The Court further determined that Congress’ use of the term in the statute did “not compel a narrower understanding of that word’s meaning than its linguistic meaning”. Additionally, the Court disagreed with the policy arguments made by the US company and its reading of Intel and said that the Supreme Court’s decision supported its textual analysis of the word ‘tribunal’.

Discovery of evidence located abroad

Another significant Section 1782 development came in October 2019, when the Second Circuit published an opinion in which it considered whether petitioners could use the statute to obtain documents that are located abroad. In del Valle Ruiz, a group of Mexican investors in a Spanish bank and two investment and asset-management firms filed separate applications seeking discovery under Section 1782. The petitions sought evidence from the bank’s purchaser and its New York-based affiliate concerning the financial status of the bank for use in various foreign proceedings contesting the acquisition of the bank in a government-forced sale.

The bank’s purchaser argued that Section 1782 does not allow for such discovery, based on the Supreme Court’s “presumption against extraterritoriality”, a judicial principle that US law generally should not be applied in other countries unless Congress clearly intended otherwise. The Second Circuit rejected this argument and held that courts are not categorically barred from allowing discovery of evidence that is stored overseas.

This decision accords with a similar 2016 ruling from the Eleventh Circuit, which noted that Section 1782 discovery is to be produced pursuant to the Federal Rules of Civil Procedure, and that those rules do authorise extraterritorial discovery.

In the Second Circuit case, the Court reasoned that the Supreme Court has never applied the presumption against extraterritoriality to a “strictly jurisdictional” statute such as Section 1782. However, the Court also noted that courts “may properly, and in fact should, consider the location of documents and other evidence when deciding whether to exercise its discretion to authorise such discovery [abroad]”.

Matthew H. Kirtland is a partner, Katie Connolly is an associate and Eddie Skolnick is a law clerk at Norton Rose Fulbright. Mr Kirtland can be contacted on +1 (202) 662 4659 or by email: matthew.kirtland@nortonrosefulbright.com. Ms Connolly can be contacted on +1 (202) 662 0461 or by email: katie.connolly@nortonrosefulbright.com. Mr Skolnick can be contacted on +1 (202) 662 4521 or by email: eddie.skolnick@nortonrosefulbright.com.

Matthew H. Kirtland, Katie Connolly and Eddie Skolnick

Norton Rose Fulbright