New Developments in U.S. Discovery in Aid of Foreign Arbitration

In litigation or arbitrations outside of the United States, one of the lesser-known strategies to obtain U.S.-style discovery in aid of the foreign proceeding is to use a U.S. statute, 28 U.S.C. § 1782. That statute permits a party contemplating or involved in a foreign proceeding to seek documents and even depositions from its opponent or third parties located within the United States. Cases have held that such discovery from parties located in the United States could extend even to their documents located outside of the United States.¹

While it is clear that this statute applies to foreign court proceedings, U.S. federal circuit courts are divided on whether it applies to commercial (sometimes referred to as “private”) arbitration outside of the United States. The Fourth and Sixth Circuits have held that it does. This means that parties could seek Section 1782 discovery if the party with the documents or information is located in Kentucky, Maryland, Michigan, North Carolina, Ohio, South Carolina, Tennessee, Virginia, or West Virginia. On the other hand, the Second and Fifth Circuits have held that Section 1782 does not apply to private arbitration outside of the United States. In other words, a party to an arbitration seated outside the United States should not attempt to seek Section 1782 discovery from parties located in Connecticut, Louisiana, Mississippi, New York, Texas, or Vermont. In the remaining circuits that have not ruled on this issue, there is uncertainty as to the outcome of a Section 1782 petition for discovery in aid of commercial arbitration. Sophisticated lawyering is needed to seek discovery in the district courts of those circuits, and litigants may have to be prepared for the time and cost of an appeal thereafter. 

Analysis

On July 8, 2020, in the case In re Application and Petition of Hanwei Guo (Hanwei Guo), the Second Circuit held that its 1999 decision in National Broadcasting Co. v. Bear Stearns & Co. (NBC), in which the court held that Section 1782 does not provide for discovery in aid of private arbitrations, remains binding circuit law.² The Second Circuit’s holding hinged primarily on the standards governing the reexamination of circuit precedents.³ However, Hanwei Guo provides a detailed overview of a deepening circuit conflict with respect to the scope of Section 1782. 

Section 1782(a) permits United States courts to compel the production of materials “for use in a proceeding in a foreign or international tribunal ....”⁴ As noted in Hanwei Guo, four of the U.S. Courts of Appeals have addressed the question of whether private arbitral tribunals are “tribunal[s]” for purposes of Section 1782(a), and those four decisions have yielded three distinct approaches to the issue.⁵

In its 1999 decision in NBC, the Second Circuit, relying largely on the legislative history of Section 1782(a), held that the reference to “tribunals” in the statute encompassed only “intergovernmental arbitration and other state-sponsored dispute resolution mechanisms” and did not encompass private arbitral tribunals.⁶ The Fifth Circuit reached the same conclusion for similar reasons later that year in Republic of Kazakhstan v. Biedermann International.⁷

Recently, however, both the Fourth and Sixth Circuits held that Section 1782(a) does permit federal courts to compel disclosure in aid of private arbitrations, albeit each for different reasons. In 2019, the Sixth Circuit concluded “that the word ‘tribunal’ in [Section] 1782(a) encompasses private, contracted-for commercial arbitrations” and explicitly rejected the Second and Fifth Circuit’s analysis, creating an acknowledged circuit split.⁸

Earlier this year, the Fourth Circuit put forth yet another approach to the issue in holding that Section 1782(a) permitted an order for discovery in aid of a private arbitration in the UK.⁹ The Fourth Circuit reasoned that even if the “definition of ‘foreign or international tribunal’ ” only encompassed “entities acting with the authority of the State,” private arbitral tribunals governed by arbitral statutes such as the Federal Arbitration Act or the UK Arbitration Act would satisfy the definition.¹⁰

Strategic Considerations

Recent decisions indicate that it is possible to obtain discovery in aid of an overseas arbitration from the English courts.¹¹ Therefore, litigants may wish to consider whether the optimal target for discovery is located in the United States or the United Kingdom. In a high-stakes arbitration, it may even be useful to pursue discovery in both countries.  

It also remains a fairly open question whether Section 1782 discovery is available to aid investor-state arbitration, which is typically based on government-to-government treaties, even in circuits that have held that it does not apply to private commercial arbitrations outside of the United States.¹²

Section 1782 against entities located in the United States remains a potentially powerful tool to gain strategic advantages in litigation and arbitration proceedings outside the United States. To deploy a successful Section 1782 discovery strategy, parties in a non-U.S. arbitration should consider carefully where the discovery target is located and what information it may have that is useful for the arbitration. 

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¹ In re del Valle Ruiz, 939 F.3d 520, 532 (2d Cir. 2019) (Section 1782 “can be used to reach documents stored overseas…”).

² In re Application and Petition of Hanwei Guo, No. 19-781 (2d Cir. July 8, 2020).  

³ The Second Circuit rejected the claim that the U.S. Supreme Court’s decision in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), a decision that did not address discovery in aid of arbitration, constituted an intervening decision that rendered NBC nonbinding. See Hanwei Guo, slip op. at 15-20.

⁴ 28 U.S.C. § 1782(a).  

⁵ As noted in Hanwei Guo, the Court of Appeals for the Eleventh Circuit addressed the issue in 2014 and initially concluded that Section 1782(a) did permit discovery in aid of private arbitrations. However, the Eleventh Circuit subsequently withdrew this opinion. See Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 685 F.3d 987, 993–98 (11th Cir. 2012), vacated and superseded by Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA) Inc., 747 F.3d 1262, 1270 n.4 (11th Cir. 2014).  

⁶ Hanwei Guo, slip op. at 11.

⁷168 F.3d 880 (5th Cir. 1999).

⁸ In re Application to Obtain Discovery for Use in Foreign Proceedings, 939 F.3d 710, 730 (6th Cir. 2019).

⁹Servotronics, Inc. v. Boeing Co., 954 F.3d 209, 214 (4th Cir. 2020).

¹⁰ Id.

¹¹ See A and B v C, D and E [2020] EWCA Civ 409.

¹² The Fifth Circuit has previously ordered 1782 discovery in connection with an investor-state arbitration. However, that decision was based on judicial estoppel, and the Fifth Circuit did not take a position with respect to whether Section 1782 applies to investor-state arbitrations. See Republic of Ecuador v. Connor, 708 F.3d 651 (5th Cir. 2013).