U.S. Supreme Court Closes the Door on Foreign Arbitration Discovery in the U.S.

By John S. Delikanakis

On June 13, the U.S. Supreme Court resolved a split among U.S. Circuit Courts of Appeal by holding that only an adjudicative body imbued with governmental authority is deemed a foreign or international tribunal under 28 U.S.C. § 1782. Parties to private international arbitrations can no longer use § 1782 to compel discovery in U.S. Courts. The opinion can be accessed here.

Procedural Facts

The opinion arises from two consolidated cases. The first involved a Hong Kong company alleging fraud in a sales transaction with a Michigan-based manufacturer. The contract provided that all disputes would be resolved by three arbitrators using the rules of the German Institute of Arbitration, a private dispute resolution firm in Berlin. In preparation for arbitration, one of the parties applied to a U.S. District Court in Michigan seeking to compel information from the opposing party’s officers. The application was granted and a motion to quash was denied, as was a motion to stay filed with the Sixth Circuit Court of Appeals.

The second case involved a failed Lithuanian bank and a Russian corporation that was assigned the rights of various Russian investors. A bilateral treaty between Lithuania and Russia governed the arbitration process. The parties proceeded with an ad hoc arbitration under the Rules of the United Nations Commission on International Trade Law. Each party selected one arbitrator, and those two arbitrators picked the third arbitrator. During the arbitration, the Russian party applied to a U.S. District Court in New York seeking information from the temporary administrator appointed to evaluate the failed Lithuanian bank. The District Court granted the application and the Second Circuit Court of Appeals affirmed.

The U.S. Supreme Court granted certiorari in both cases and consolidated.

The Court’s Analysis

At the heart of Justice Barrett’s opinion is the finding that 28 U.S.C. § 1782 is a statute of comity; that its legislative history demonstrates that its "animating purpose" was to permit U.S. federal courts to assist foreign governmental bodies in anticipation and expectation of reciprocal assistance. The Court further considered § 1782’s language. It noted that the statute allows U.S. District Court judges to “prescribe the practice and procedure, which may be in whole or part the practice and procedure of the foreign country or the international tribunal, for taking the testimony or statement or producing the document or other thing.” The statute presumes, the Court reasoned, that the foreign tribunal referenced is one that follows the practice and procedure of a foreign country. This presumption reasonably leads, the Court continued, to the conclusion that the tribunal and the parties litigating or arbitrating in that tribunal are also bound by the practice and procedure of the foreign country; a tribunal with governmental authority. A private arbitral body is generally not bound by the practices and procedures of a country, but by the agreement of the parties. Arbitration is a creature of contract. Thus the plain language of the statute compels the exclusion of private international arbitrations.

Finally, the Court noted that extending § 1782’s reach to private arbitral bodies is at odds with the U.S. Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., which governs domestic arbitration. Under the FAA, only the arbitration panel may compel discovery and compel enforcement assistance from a U.S. District Court¹. In contrast, § 1782 allows parties to apply to U.S. District Courts to compel discovery. Further, the Court noted that under the FAA pre-arbitration, discovery is off the table, absent permission from the arbitral panel. In contrast, § 1782 permits parties to conduct and compel broad discovery in arbitration. The Court concluded that it was hard to "conjure a rationale" for giving parties to foreign private arbitration broad discovery assistance that was barred to parties in domestic arbitrations under the FAA.

The Court’s Final Key Points

• Only a governmental or intergovernmental adjudicative body constitutes a foreign or international tribunal under § 1782.
• § 1782 requires a foreign or international tribunal to be a tribunal with governmental or intergovernmental authority.
• Private adjudicatory tribunals are not contemplated by or fall within § 1782.