Section 1782 of the United States Code no longer allows discovery assistance to international arbitrations
Jacques Bouyssou, Marie-Hélène Bartoli Vallet and Constance Benoist
US Supreme Court, 13 June 2022, ZF Automotive US Inc et al v Luxshare Ltd
There has been much debate in recent years about whether 28 United States Code Section 1782 (“Section 1782”), which allows US district courts to order testimony or the production of evidence “for use in a proceeding in a foreign or international tribunal” could extend to international arbitration proceedings.
US Courts rendered conflicting decisions, resulting in divergent case law and legal insecurity.
On 13 June 2022, the US Supreme Court handed down a widely anticipated decision, ruling unanimously that “only governmental or intergovernmental adjudicative body constitutes a foreign or international tribunal” under Section 1782, which excludes arbitral tribunals.
Section 1782 of the United States Code
Section 1782 grants a federal court the power to enjoin a person residing or located within its jurisdiction “to give his testimony or statement or to produce documents or other thing for use in a proceeding in a foreign or international tribunal.”
The US Section 1782 discovery process is a powerful tool. It allows a party in a foreign proceeding to seek discovery in the United States to compel production of documents and information from the opposite party if the latter has a presence in the United States.
Section 1782 sets out the three following conditions:
- the application must be against an entity which resides or is found in the district of the court;
- the evidence sought will be used before a “foreign or international tribunal”; and
- the application comes from “a foreign or international tribunal” or “any interested person.”
A party who would try to resist a discovery request would face sanctions, ranging from adverse inferences (the court could consider the alleged facts as established) to contempt of court.
In Intel Corp v. Advances Micro Devices (2004), the Supreme Court ruled that Section 1782 authorises, but does not require, a federal district court to provide discovery assistance to foreign or international tribunals. In addition, the Supreme Court held that:
- the proceedings for which discovery is sought must be within reasonable contemplation, but do not need to be pending; and
- the scope of discovery is not limited by the rules restraining the gathering of evidence in the foreign jurisdiction; the application may therefore circumvent such foreign provisions.
Situation in France
A French statute was enacted on 16 July 1980, modifying a statute dated 26 July 1968 (“the Blocking Statute”), to channel foreign discovery requests (inter alia) by obliging foreign authorities to use judicial cooperation channels. It does not however prevent the transmission of data to foreign judicial authorities in case of litigation. It is commonly acknowledged that the Blocking Statute does not protect French companies against extensive discovery requests.
The European General Data Protection Regulation (“GDPR”) may also provide some basis to resist abusive requests, but its efficiency in the context of a US discovery remains to be ascertained.
The parties concerned are therefore to rely on US law to avoid unduly intrusive or burdensome claims (see notably in the Intel Corp case) and more generally, to resist “fishing expeditions” which instrumentalize disputes for the sole purpose of obtaining information.
Application of Section 1782 to Arbitration Proceedings?
The Intel Corp v. Advances Micro Devices case did not involve any arbitration proceedings, but the definition of “foreign or international tribunal” referred to by the Court was broad and could include arbitral panels.
The US district Courts split on the issue of whether the term “foreign or international tribunal” included arbitral tribunals and was thus applicable to foreign litigants in international arbitration.
On 13 June 2022, the US Supreme Court put an end to this debate, holding that Section 1782 is not applicable to foreign litigants in international arbitration.
The Court stated that the term “tribunal” should not be interpreted in its broadest sense which may include arbitral tribunals, but in its more formal sense, namely: “an adjudicator administering justice,” “on behalf of one or more nation-states.”
Regarding the terms “foreign” and “international”, the Court said that they refer to “the judicial or quasi-judicial body of a ‘foreign’ country, or an ‘international’ state-to-state commission or similar adjudicator body established by two or more nations”.
An arbitral panel is a “nongovernmental adjudicator to which parties consent, whether in a contract or a treaty.” Therefore, it does not fall within the above definition, neither in private commercial arbitration nor in investment arbitration.
The Supreme Court’s decision deprives arbitration practitioners of a powerful tool for obtaining evidence from parties located in the United States.
However, other mechanisms are available in international arbitration, with the possibility of drawing adverse inferences from a party’s reluctance to produce documents while ordered to do so, or before foreign courts, although they are often less spectacular than US discovery. This decision may also be viewed as restoring equality of arms in the access to evidence in arbitration, as it prevents a party with a presence in the United States from being disadvantaged compared to another party which would not be present in the United States and therefore, would not be subject to Section 1782.