On Monday, June 13, 2022, the Supreme Court of the United States ruled on whether 28 U.S. Code § 1782(a) (“s. 1782”) permits US district courts to order discovery in aid of foreign private arbitration proceedings.
In ZF Automotive US, Inc., Et al. v Luxshare Ltd. (“ZF Automotive”), the court decided that s. 1782 does not allow US district courts to order discovery for use in foreign private arbitration proceedings. As a practical matter, this ruling means that parties in private arbitrations seated outside of the US cannot obtain discovery through US district courts.
For many years, it had been a tactic in arbitrations seated outside of the United States to seek discovery under s. 1782. When invoked, this led to these arbitrations becoming much more like court litigation given the liberal rights of discovery provided by US court rules. This led to criticism that s. 1782 was harming the purposes underlying arbitration – efficiency, speed and a more tailored evidentiary process.
The specific issue before the court in ZF Automotive was whether “a foreign or international tribunal” includes foreign private arbitrations. Section 1782 states:
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.
The court ruled that “foreign or international tribunals” in s. 1782 are limited to governmental and intergovernmental adjudicative bodies, and foreign private adjudicators cannot benefit from this section.
In a companion case, AlixPartners LLP v. The Fund for Protection of Investors’ Rights in Foreign States (“AlixPartners”), ad hoc arbitrations under bilateral investment treaties were held not to qualify as “foreign or international tribunals” under s. 1782.
The court concluded that the word “foreign” takes on a governmental meaning when accompanied with a governmental or sovereign reference. Similarly, the word “tribunal,” standing alone, does not need to refer to a formal “court.” But, when attached to “foreign or international,” as it is in s. 1782, “tribunal” will take on a formal role referring to an adjudicative body that belongs to a foreign nation and exercises that nation’s governmental authority.
The court clarified that for a “foreign tribunal” to belong to a nation, it needs to posses sovereign authority conferred by that nation and being located in a foreign nation does not automatically give a tribunal sovereign authority.
As in noted ZF Automotive, the difference between a “foreign tribunal” and an “international” one is that while “foreign tribunal” refers to an adjudicative body that has been given governmental authority by one nation, “international tribunal” refers to a tribunal that has been given governmental authority by two or more nations to adjudicate disputes. In other words, to qualify to be a “foreign or international tribunal,” a tribunal must possess governmental authority from at least one nation.
The court also noted that, historically, the purpose of s. 1782 was to respect foreign nations and the governmental and intergovernmental bodies they create. Interpreting s. 1782 to include only bodies exercising governmental authority is consistent with this purpose.
In addition, extending s. 1782 to include private arbitrations would create inconsistencies with the Federal Arbitration Act (“FAA”), which governs domestic arbitration. This is because such an extension would result in s. 1782 providing a broader discovery than the FAA.
Having excluded foreign private arbitral tribunals from s. 1782, the court then determined that neither of the tribunals in AlixPartners and ZF Automotive met the requirement under this statute.
In making these two decisions, the court took into account whether there was any governmental involvement in making the panel and whether the nations intended that an ad hoc panel exercises governmental authority. The rulings also clarify that an adjudicative body does not possess governmental authority solely because they were the result of a treaty agreed by a nation.
If you require advice on this decision, or need advice on an existing arbitration, please contact a member of our Litigation & Dispute Resolution Group.
Craig is one of British Columbia’s most accomplished litigation lawyers and acts for clients in commercial and business disputes. His particular areas of focus include shareholder remedies, trust, pension and fiduciary ...
Scott is a commercial litigation and arbitration lawyer with a focus on complex international and domestic disputes. He has advised clients across a variety of industries, including energy, mining, manufacturing, private ...
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