by Andrew Flake
With the advent of the holiday season come festivities and family events. Inevitably, as you’re contentedly sipping spiced eggnog or hot cocoa, also comes the question from your Uncle Milton: “So what is the deal? Can I take U.S.-style discovery in a private international arbitration or not?” That question, of course, was (not is — more on this below) the very one teed up in the Servotronics case this term by the Supreme Court. So you’re not caught off guard, here’s a quick primer for you on this perennially-popular holiday convesation topic.
What is the undecided legal question, and why does it matter? A specialized statute, 28 U.S.C. Section 1782, lets parties to certain foreign-country disputes obtain discovery under the U.S. rules. The statute applies to foreign “tribunals,” and an open question, decided differently over time by different federal Courts of Appeals, is what “tribunal” means. Specifically, does the term includes private international arbitration, as opposed to proceedings in a foreign court? Making the topic more interesting, in 2004, the Supreme Court in its Intel decision looked at the meaning of “tribunal,” leaving some clues about, but not directly considering, whether it includes private international arbitration. The question presented on certiorari was:
Whether the discretion granted to district courts in 28 U.S.C. §1782(a) to render
assistance in gathering evidence for use in “a foreign or international tribunal”
encompasses private commercial arbitral tribunals, as the Fourth and Sixth Circuits
have held, or excludes such tribunals without expressing an exclusionary intent, as the
Second, Fifth, and, in the case below, the Seventh Circuit, have held.
Practically speaking, this is a tremendously important question for attorneys in commercial arbitration, because it determines whether the door is open, or closed, to obtaining documents and testimony from or in the custody of U.S. persons and companies.
What are the arguments that private international arbitrations are “tribunals” under this statute? The Supreme Court’s discussion in Intel, for one, which was quite broad. One of the statute’s authors, Professor Hans Smit, has opined that it does. And the term “tribunal” has historical resonance and is frequently used to refer to an arbitral panel, either single- or multi-member. So it seems to me that the Court could well follow the arc of the Intel decision and deem Section 1782 to cover private commercial arbitration.
What are the arguments against it? As some international arbitrators have argued, it would seem to cut against the principals of efficiency and the general skew of many arbitration rule-sets, which tend to disfavor broad discovery. It does also create a potential for discovery outside the auspices and oversight of an arbitrator, in that a party under Section 1782 can take discovery when a proceeding is not just pending but within “reasonable contemplation.” Where an arbitration is pending, this concern is less salient, because an arbitrator can impose constrains on a party, and if they seek that discovery without leave, the arbitrator may view the unilateral action unfavorably.
How about comity? This is an interesting issue, and may be more conceptual, not favoring one side or the other. Some amici argued in their briefing to the Supreme Court that an arbitral tribunal, unlike courts, cannot provide reciprocity. On the other hand, though I’m not aware of this happening over the more than half-century we’ve had the statute, a country could certainly be encouraged to offer the same alternatives, through statute, as the U.S. has via Section 1782.
Would this create ancillary or collateral litigation? It could. Where a party resists the discovery, the dispute can become quite extensive, a result that undercuts a principal objective of commercial arbitration. It adds expense, creating the possibility of a resource-imbalance. It may delay proceedings, in the event arbitrators stay a matter pending a Section 1782 resolution, and because it is public record, undercut confidentiality. One amicus brief I reviewed, filed by experienced arbitrators from China, has a useful and practical discussion of these topics.
Are there advantages to this more inclusive definition of “tribunal”? Most lawyers I’ve spoken with who practice in the area think so. As we’ve seen in circuits that already allow this kind of discovery under Section 1782, if it becomes the law of the land, I think practitioners and neutrals will be able to accomodate the result and even find it advantageous in some cases. Certainly the arguments based on cost, and the possibility of collateral litigation are valid ones. But having the option to seek U.S. discovery does not mean that discovery is required. A check is present in the form not only of the reviewing U.S. court, but of the arbitration tribunal. A party has always had the ability to ask an arbitrator for specialized discovery, subject to the jurisidiction of the arbitral tribunal and local jurisdictional law, and additional norms will develop. Where a proceeding is pending, a prudent party is going to first seek direction from the tribunal. Arbitrators can then, as a practice mattter, review what type of discovery the parties seek and set parameters for it in a scheduling order. Tribunals could also begin to ask the parties, as as standard part of their preliminary conference, whether they contemplate discovery through any foreign channels,
OK, so when do we get a Supreme Court opinion? Sadly, as I previewed earlier and saved for last, it will not be this term: By agreement of the parties (both Servotronics and Rolls-Royce), and prior to decision and even oral argument, the case was dismissed! This probably occurred because the underlying arbitration or arbitrations concluded. Whatever the reason, we’re not getting any answers this term; resolution of the circuit split on discovery availability under Section 1782 is going to need to await another case and another day.
Now, I’m guessing your Uncle Milton has not gotten this news. So please, try to let him down gently. Happy Holidays!
[A link to the Supreme Court docket, including detailed briefing on these questions, is here: https://www.supremecourt.gov/docket/docketfiles/html/public/20-794.html]