On June 13, 2022, the U.S. Supreme Court issued a unanimous decision narrowing the scope of discovery under 28 U.S.C. § 1782 (“Section 1782”), which permits application to a U.S. district court for assistance with obtaining a document or testimony “for use in a proceeding in a foreign or international tribunal.” In ZF Automotive US, Inc. v. Luxshare, Ltd., 596 U.S. ___ (2022), the Court held that an arbitration tribunal presiding over a dispute between private parties or an ad hoc investor-state arbitration tribunal did not qualify as a “foreign or international tribunal” within the meaning of Section 1782.
The decision resolves a split between circuits by finding that a private arbitration tribunal does not qualify as a “foreign or international tribunal” under Section 1782. The Supreme Court issued the decision upon granting certiorari in two cases that were consolidated, one from the Sixth Circuit and the other from the Second Circuit. The two Circuits had previously taken different positions on the issue, with the Sixth Circuit holding that a private arbitration tribunal constituted a “foreign or international tribunal” under Section 1782 and the Second Circuit holding that it did not.
In the Sixth Circuit case, Hong Kong-based electronics manufacturer Luxshare Ltd. alleged that the U.S. subsidiary of the German automotive parts manufacturer ZF Group committed fraud in the sale of two business units. The sales contract provided for arbitration under the Arbitration Rules of the German Institution of Arbitration (“DIS”). Luxshare, intending to initiate arbitration against ZF, filed an ex parte Section 1782 application in the U.S. District Court for the Eastern District of Michigan. The Second Circuit case involved a dispute between Lithuania and a Russian investor in AB Bankas Snoras, a failed Lithuanian bank. The Fund for Protection of Investors’ Rights in Foreign States (the “Fund”), a Russian corporation and assignee of the investor’s claims, initiated an arbitration against Lithuania under a bilateral investment treaty (“BIT”) between Lithuania and Russia, alleging expropriation. The Fund pursued ad hoc arbitration under the UNCITRAL Arbitration Rules and filed a Section 1782 application for discovery in the U.S. District Court for the Southern District of New York.
The Supreme Court’s analysis was twofold. First, the Court found that a private arbitration tribunal did not constitute a “foreign or international tribunal” within the meaning of the statute. While a “tribunal” could refer to any adjudicatory body, the Court reasoned that “foreign tribunal” was best understood as a body possessing sovereign authority conferred by a foreign nation and “international tribunal” as having official power imbued by two or more nations.
The Court found additional support for its holding in the statute’s legislative history and the text of the Federal Arbitration Act, 9 U.S.C. §1 et seq. (“FAA”). In addition to noting references in the legislative history of Section 1782 to the aim of providing assistance to “foreign courts and quasi-judicial agencies,” the Court reasoned that extending Section 1782 to include proceedings before private arbitration tribunals would create a mismatch between foreign and domestic arbitration. The mismatch would arise because interpreting Section 1782 in this manner would mean that the statute provides for broader discovery than does the FAA, which does not permit pre-arbitration discovery and only allows an arbitration panel, and not any interested person, to request discovery.
Second, the Court found that neither of the tribunals at issue constituted a “foreign or international tribunal.” With respect to the DIS tribunal, the arbitration was entered into by private parties pursuant to the dispute resolution rules of a private organization. As to the arbitration between the Fund and Lithuania, the Court found the question to be more difficult. While acknowledging that the choice of ad hoc arbitration was provided for in the Lithuania-Russia BIT, the Court found no intent on the part of Lithuania or Russia that such a tribunal would exercise governmental authority. Neither sovereign was involved in the formation of the ad hoc tribunal, which would function independently. The lack of any official affiliation with Lithuania and Russia and the absence of government funding were other indicators that the ad hoc arbitration tribunal was not governmental.
The Court’s decision provides much-needed clarity about to the (in)applicability of Section 1782 to arbitration disputes. One remaining area of uncertainty is whether a tribunal constituted under the International Centre for Settlement of Investment Disputes (“ICSID”) could qualify as a “foreign or international tribunal.” One of the constituent institutions of the World Bank Group, ICSID was established by a multilateral treaty and administers international investment dispute settlement. The Lithuania-Russia BIT did not provide for ICSID arbitration, so this issue was not before the Court. Similar questions arise in connection with the Multilateral Investment Court proposal being promoted by the European Union, as that Court would be a body created by governments to resolve investor-state disputes.
Moving forward, the Supreme Court’s holding will preclude parties from obtaining a document or testimony via Section 1782 for use in a proceeding before a private arbitration tribunal. In future Section 1782 litigation, the key criterion for determining whether the assistance requested is for a “foreign or international tribunal” will be whether an adjudicative body is “governmental or intergovernmental” in nature.