Supreme Court Narrows Reach of Section 1782 Discovery Tool: Private Arbitrations Are Not Foreign or International Tribunals for Purposes of the Statute
On Monday, June 13, the United States Supreme Court concluded in ZF Automotive US, Inc. v. Luxshare, Ltd. that federal district courts cannot order discovery for use in a private foreign arbitration via 18 U.S.C. § 1782—a statute that permits litigants to seek discovery in federal court for “use in a proceeding in a foreign or international tribunal.” The unanimous decision narrows a useful discovery tool by prohibiting parties in or contemplating private, foreign arbitration from obtaining discovery through federal courts for use in that arbitration.
The decision, consolidating two cases, concludes that the words “foreign or international tribunal” in the statute mean tribunals imbued with governmental authority by one or multiple nations, respectively. The opinion recognizes that courts enforce arbitrations but rejects the argument that such enforcement imbues the arbitration with governmental authority. The Court also focused on the nature of the two arbitration panels at issue in the cases, noting that the panels were ad hoc, not preexisting, creations and derived their authority from the consent of the arbitrating parties. While the opinion ignores some tension in its analysis, given the differences between the two arbitral panels at issue—one purely private and the other authorized by international treaty—it nonetheless concludes that the panels were not governmental and thus fail the Court’s newly articulated test.
The decision is unfortunate in several respects. It cuts off access to evidence in a manner at odds with the purpose of the statute, which was intended in significant part to provide efficient assistance to international litigants. Arbitration is the preferred means of dispute resolution among cross-border commercial actors, both for its relative efficiency and as a way of mitigating the risk of bias in a counterparty’s national courts. This decision limits the tools available to aid such proceedings, even though Section 1782 requests are typically modest and do not burden the courts. Moreover, the Court’s concern about creating a lack of parity—allowing discovery under Section 1782 to foreign arbitral parties but not, pursuant to the United States’ arbitration statute, to domestic arbitral parties—rings hollow. Section 1782 already bestows a host of benefits upon litigants in international disputes that are not available to those before US courts, such as the ability to issue subpoenas before filing a lawsuit.
Nevertheless, the decision is unlikely to have a significant impact. Section 1782 is an under-utilized statute, with around 200 petitions filed per year. Very few of these have been from arbitral litigants. Parties that ultimately end up in arbitration may still avail themselves of Section 1782 if the underlying dispute could give rise to a potential criminal claim or a non-arbitrable claim that could be filed in court. Thus, if a party to an international arbitration finds itself in need of evidence located in the United States, it should consult with experienced US counsel to navigate the narrowed passageway to obtain it.
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