Section 1782: Are International Arbitration Proceedings “Legal Tribunals”?
February 27, 2014
Recent circuit court decisions in the Seventh and Eleventh Circuits bring 28 U.S.C. §1782, dealing with assistance to “foreign and international tribunals,” into the spotlight once again. A powerful evidentiary tool, §1782 gives participants in legal proceedings outside the United States the ability to request that an American court allow them to engage in American-style discovery, giving the requesting party the ability to acquire evidence for these non-U.S. proceedings.
In GEA Group AG v. Flex-N-Gate Corp. (GEA Group), issued on January 10, 2014, the Seventh Circuit was able to avoid deciding the issue, which was not central to their opinion, but the court recognized that “applicability of section 1782 to evidence sought for use in a foreign arbitration proceeding is uncertain.” The same day, Eleventh Circuit vacated sua sponte a 2012 decision allowing an Ecuadorean telecoms operator to use §1782 to compel discovery against an air freight carrier in support of commercial arbitration proceedings taking place in Ecuador.
While earlier circuit court rulings had found that private commercial arbitration tribunals did not qualify under §1782, the Supreme Court’s 2004 decision in Intel Corp v. Advanced Micro Devices Inc.(542 U.S. 241 (2004)) initiated a shift towards a new – and not yet solidified – standard. In Intel, which concerned EU competition proceedings rather than arbitration, the Court concluded that, even where the statutory requirements were met, the court retained discretion as to whether or not the§1782 request would be permitted. The statutory requirements set forth in 28 U.S.C. §1782(a) are that the discovery request be made (1) towards a person who could be found in the court’s district, (2) “for use in a proceeding in a foreign or international tribunal,” and (3) by such tribunal or by any person interested in the proceeding. The Intel court, having held that §1782 authorizes, but does not require, such discovery, listed several factors for consideration where the court contemplates exercising such discretion:
(1) Is the person from whom discovery is sought a participant in the foreign proceeding?
(2) What is “the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government, court, or agency” to such judicial assistance?
(3) Is the applicant’s use of §1782 “an attempt to circumvent foreign proof-gathering limits or other policies?”
(4) Is the request “unduly intrusive or burdensome?”
Intel at 264.
It was the Intel court’s broad interpretation of “tribunal” that led to the current state of ambiguity regarding the status of private arbitration tribunals under the statute. In discussing the revised wording of the statute, the Court points out that Congress understood the new wording – “a proceeding in a foreign or international tribunal” – to “provide the possibility of U.S. judicial assistance in connection with [administrative and quasi-judicial proceedings abroad].” While the Court did not directly address whether or not private arbitrations constitute “tribunals” within the meaning of §1782, their acceptance of the European Commission on the grounds that it acted as a “first-instance decisionmaker” suggests that an arbitral tribunal would also fall within the statute’s scope.
Since Intel, some district courts have granted §1782 discovery in the context of international arbitration proceedings, while others have refused it, but the appellate courts have only occasionally been called upon to address the issue. In 2009, the Fifth Circuit declined to overrule its 1999 holding expressly excluding international arbitrations from the application of §1782, because Intel did not involve arbitration, and the language from Intel that arbitral tribunals are §1782 tribunals was dictum (El Paso Corp. v. La Comisión Ejecutivia Hidroéclectrica Del Rio Lempa, 341 Fed. Appx. 31 (5th Cir. 2009) (unreported).
The recent Eleventh Circuit decision in Consorcia Ecuatoriana de Telecommunicaciones S.A. v. JAS Forwarding (USA) Inc., (Consorcia II) is particularly interesting, as the court had previously decided, based on the Supreme Court’s reasoning in Intel, that foreign arbitration fell within the scope of §1782, and upheld the measures ordered by the district court. In Consorcia II, the appellate court provided different grounds for upholding the district court: that contemplated civil and criminal proceedings in Ecuador against the plaintiff’s former employees qualified under §1782, making it unnecessary to address whether the ongoing arbitration between the parties was also within the scope of §1782. In a footnote, the Consorcia II court elaborates on this finding and demonstrates its continued openness to the use of §1782 discovery in arbitral proceedings. Referring to Intel, the court highlights both the functional analysis used, which focused on “whether a body acts as a first-instance adjudicative decision maker, permits the gathering and submission of evidence, has the authority to determine liability and impose penalties, and issues decisions subject to judicial review,” and the suggestion by the Court, in dicta, that “"[t]he term 'tribunal' . . . includes…administrative and arbitral tribunals . . . .”
The demonstrated reluctance of the circuit courts to opine on the issue would make the debate over the scope of §1782 appear ripe for contemplation by the Supreme Court. While extension of §1782 discovery to foreign arbitrations could well be an asset to certain parties, it could also disadvantage–and place an increased burden–on US-based parties engaged in international arbitration, while severely curtailing the time and cost savings implicit in the selection of an international arbitral forum .
- Alexandra Douglas, CPR Legal Intern