On Monday June 13, 2022, the U.S. Supreme Court ruled that federal courts are not allowed to order discovery for investor-state and private commercial arbitrations abroad under 28 U.S.C. § 1782 of the U.S. Code, governing the scope of discovery in the United States for use in a proceeding before a foreign or international tribunal. The decision instantly and materially narrows the scope of the foreign discovery statute, which allows federal courts to order entities in their districts to turn over evidence to be used in proceedings before a “foreign or international tribunal,” by holding that “private adjudicatory bodies do not fall within [Section] 1782.”
The opinion involves two consolidated cases involving challenges to the use of Section 1782 in aid of foreign private arbitration – one involving a foreign private commercial arbitration seated in Munich, Germany, and another involving a dispute between an investor and a sovereign state in an ad hoc arbitration under a bilateral investment treaty. The Supreme Court consolidated both disputes in order to resolve a split of authority in the lower courts between the Fourth and Sixth Circuit Courts of Appeal, which previously ruled that Section 1782 could be used in aid of foreign private commercial arbitration, and the Second, Fifth and Seventh Circuits, which previously ruled that it cannot.
In a unanimous decision, the Supreme Court found that “a ‘foreign tribunal’ is one that exercises governmental authority conferred by a single nation, and an ‘international tribunal’ is one that exercises governmental authority conferred by two or more nations. Private adjudicatory bodies do not fall within [Section] 1782.” The opinion stated that a “‘[f]oreign tribunal’ more naturally refers to a tribunal belonging to a nation than to a tribunal that is simply located in a foreign nation. And for a tribunal to belong to a foreign nation, the tribunal must possess sovereign authority conferred by that nation.” Additionally, only a “tribunal imbued with governmental authority by multiple nations” qualifies as an international tribunal. The Court reasoned that the word “tribunal” alone would not exclude private adjudicatory bodies, but that the modifiers “foreign or international” attach a connotation of governmental authority. The Court opined that “[p]ermitting federal courts to assist foreign and international governmental bodies promotes respect for foreign governments and encourages reciprocal assistance. It is difficult to see how enlisting district courts to help private bodies would serve that end.”
Finally, the court also noted that a broad reading of the statute conflicts with the Federal Arbitration Act, which allows for much narrower discovery requests in domestic arbitration, creating a mismatch between the discovery procedures available under foreign and domestic arbitration. Under this precedent, federal courts can no longer order testimony or the production of evidence under Section 1782 in aid of foreign private adjudicatory bodies.
If you have any questions regarding the matters covered in this e-mail, please contact Bruce G. Paulsen (212) 574-1533, Brian P. Maloney (212) 574-1448, or your primary Seward & Kissel attorney in the Litigation Group.
