In recent years, a hotly contested issue in international arbitration practice has been the extent to which parties to foreign seated arbitrations can employ 28 U.S.C. § 1782 to obtain discovery in the U.S. for use in the arbitration. In a decision of potentially great significance, the U.S. Court of Appeals for the Eleventh Circuit recently held that a party engaged in a private foreign arbitration may employ Section 1782 to obtain discovery in the U.S. The decision creates a split with the Fifth and Second Circuits, which had both previously precluded discovery in aid of private foreign arbitrations, allowing it only in the service of foreign state-sponsored adjudicatory proceedings. The Eleventh Circuit’s decision heralds potentially significant opportunities for parties to obtain discovery in aid of foreign commercial arbitrations, while exposing those within the Eleventh Circuit’s jurisdiction to potentially enlarged discovery burdens, even as non-parties to foreign arbitral proceedings.
The Section 1782 Discovery Mechanism: Section 1782 is a powerful tool for Federal Court assistance in gathering evidence for use in foreign proceedings. Under the Section, a U.S. court may grant discovery where: (a) the person from whom the discovery is sought is found in the Court’s district; (b) the application is made by a foreign or international tribunal or “any interested person”; and (c) the evidence is for use in a proceeding before a “foreign or international tribunal.” Although the Section’s language is relatively clear, controversy has long persisted over (i) whether Congress intended the term “tribunal” to include arbitral panels, and, if so, (ii) whether that definition is broad enough to encompass both governmental or state-sponsored arbitral panels (such as those established under NAFTA or the World Bank’s International Convention for the Settlement of Investment Disputes (ICSID)) as well as arbitration panels presiding over private commercial cases.
The U.S. Supreme Court’s 2004 decision in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), suggested that a private arbitral tribunal may fall within the scope of Section 1782, but the Court did not decide the issue. Before the Intel decision, both the Second and Fifth Circuits held that Section 1782 does not permit discovery assistance to foreign private commercial arbitration tribunals. See Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880 (5th Cir. 1999); Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184, 191 (2d Cir. 1999). District Courts reviewing the issue since the Intel decision have divided on the question.
The Eleventh Circuit’s Decision: Splitting with the Second and Fifth Circuits, the Eleventh Circuit recently held that a party engaged in a private foreign arbitration can rely on 28 U.S.C. § 1782 to obtain discovery from persons or companies located in the U.S. for use in that arbitration. Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 685 F.3d 987 (11th Cir. 2012). The case concerned a foreign shipping contract billing dispute between wireless communications operator, Consorcio Ecuatoriano de Telecomunicaciones S.A. (“CONECEL”) and an air freight carrier, Jet Air Service Equador S.A. (“JASE”). JASE commenced arbitration proceedings against CONECEL in Ecuador. Thereafter, CONECEL filed an ex parte application in the U.S. District Court for the Southern District of Florida pursuant to 28 U.S.C. § 1782 to obtain discovery from JASE’s U.S. counterpart, JAS Forwarding (USA), Inc. The District Court granted the application and denied JASE’s subsequent motion to quash.
In affirming the District Court’s order, the Eleventh Circuit, relying heavily on the Intel decision, held that the arbitral tribunal before which the dispute was pending was a “foreign tribunal” for purposes of Section 1782. It reasoned that the statutory requirements for judicial assistance were met here because: (i) the arbitral panel acted as a first-instance decisionmaker; (ii) it permitted the gathering and submission of evidence; (iii) it would resolve the dispute; (iv) it would issue a binding order; and (v) its order would be subject to judicial review. Section 1782, according to the panel, “requires nothing more.” Id. at 990. The Eleventh Circuit distinguished the contrary holdings of the Second and Fifth Circuits as being at odds with the broader and more functional definition of a “tribunal” posited in Intel.
Impact of Decision and the Path Forward: Although the CONESCO decision is binding only within the Eleventh Circuit, its impact is nevertheless likely to be significant. It provides a potent tool—essentially opening up the panoply of discovery devices under the Federal Rules of Civil Procedure—to parties to foreign arbitral proceedings who may wish to obtain discovery within the Eleventh Circuit’s jurisdiction (Alabama, Florida and Georgia), whether or not they are parties to those proceedings. Indeed, one of the hallmarks of Section 1782 discovery is that it does not inquire whether such discovery would be available in the foreign proceedings. Thus, it is possible for parties to obtain far broader discovery through Section 1782 than would normally be authorized in the arbitration itself.
It is yet to be seen whether other Courts will adopt the Eleventh Circuit’s position. It seems likely though that this question will at some point return to the Supreme Court. The Eleventh Circuit’s split with the Fifth and Second Circuits is arguably not yet ripe for review, because both of those Circuit’s decisions disallowing Section 1782 discovery in aid of foreign private arbitral tribunals pre-dated the Supreme Court’s 2004 Intel decision. However, future published decisions confirming those earlier holdings could well provide a basis for the Supreme Court to again weigh in. In the meantime, for better or worse, the courts in the Eleventh Circuit may well become a magnet for discovery applications in aid of foreign arbitrations.
Other International Arbitration Practice News: In other news, the United States District Court for the District of Columbia recently cited favorably to an article published by New York international arbitration associate, Lucas Bento, in the Berkeley Journal of International Law. Mr. Bento’s article, Toward an International Law of Piracy Sui Generis: How the Dual Nature of Maritime Piracy Law Enables Piracy to Flourish, 29 Berkeley J. Int’l L. 399, 418 (2011), examines international law and jurisprudence on maritime piracy. It is quoted twice in the D.C. Court’s opinion in United States v. Ali Mohamed Ali, No. 11-0106, 2012 WL 2870263 (D.D.C., July 13, 2012).