U.S. Supreme Court Curtails the Use of Section 1782 for Discovery in Private Foreign Arbitrations
As many maritime practitioners and industry professionals are aware, for years there has been a split among the U.S. federal circuits as to whether 28 U.S.C. §1782, which permits district courts to order testimony or the production of evidence “for use in a proceeding in a foreign or international tribunal,” applies in private adjudicatory forums such as the foreign private arbitrations that are commonly undertaken in the maritime arena.
On 13 June 2022, the U.S. Supreme Court settled this uncertainty in releasing its decision in ZF Automotive US, Inc., et al. v. Luxshare, Ltd., 596 U.S. ___ (2022), by limiting the phrase “foreign or international tribunal.” Justice Barrett, writing for a unanimous Court, held that “[o]nly a governmental or intergovernmental adjudicative body constitutes a ‘foreign or international tribunal’ under 28 U.S.C. §1782,” such that the private arbitral bodies that were at issue in the consolidated cases before the Court do not qualify.
As for the operative facts before the Court in two consolidated cases, each case involved one party seeking to utilize 28 U.S.C. §1782 to obtain evidence for foreign arbitrations. The parties in the case out of the Sixth Circuit were Luxshare, Ltd., a Hong Kong-based company, and ZF Automotive US, Inc., a Michigan-based manufacturer and subsidiary of a German corporation, and the sales contract signed by the parties provided that all disputes would be resolved by an arbitration panel under the Arbitration Rules of the German Institution of Arbitration, a private dispute-resolution organization based in Berlin. The other case, out of the Second Circuit, did involve a sovereign on one side of the dispute, as a Russian corporation initiated a proceeding against the country of Lithuania concerning alleged expropriation of a Russian investor’s investments. While the bilateral investment treaty at issue between Russia and Lithuania delineated several dispute resolution options for pertinent actions, one of which was ad hoc arbitration, the Russian corporation elected to pursue arbitral option, and subsequently sought documents from a U.S.-based consulting firm. In both cases, the respective district courts granted the Section 1782 discovery requests, with the respective appellate courts affirming.
Ultimately reversing the lower court decisions, the Supreme Court declared that extending Section 1782 to encompass private bodies abroad would create “significant tension” with the domestic arbitration framework of the Federal Arbitration Act, as it would allow broader discovery abroad than the FAA permits domestically, which it in turn found impermissible. The Court then characterized the relevant question in interpreting Section 1782 as “whether the features of the adjudicatory body and other evidence establish the intent of the relevant nations to charge the body in question with governmental authority,” such that some level of governmental authority would be necessary to invoke Section 1782 for an evidence-gathering purpose.
Put another way, the U.S. Supreme Court has now definitively established that private adjudicatory bodies do not count as “foreign or international tribunals” for the purpose of compelling the production of evidence in the U.S. under Section 1782. Obviously, that pronouncement from the U.S. Supreme Court will affect the ability of parties participating in private maritime arbitrations abroad to gather U.S.-centric evidence. One caveat though – the ruling does leave space for a foreign arbitral panel to be imputed with the requisite governmental authority for the purpose of allowing domestic discovery under 28 U.S.C. §1782. Nevertheless, this decision makes clear that compelling evidence in the U.S. for foreign arbitration purposes will now require the arbitral body to have a level of governmental authority.
For those interested in reading further, the full U.S. Supreme Court decision can be found here.