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April 20, 2020

Recent Decisions Reveal Deepening Split on the Issue of Discovery Through U.S. Courts for International Arbitrations

A current hot topic concerning international arbitration is whether parties can obtain discovery through the U.S. courts. Under 28 U.S.C. § 1782, an interested person may petition a district court for an order requiring a person to “give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal…” U.S. courts are split on whether a private arbitration qualifies as a “foreign or international tribunal” under the statute. Late last year, the Sixth Circuit in In re Application to Obtain Discovery for Use in Foreign Proceedings, 939 F.3d 710 (6th Cir. 2019), created a U.S. Circuit Court split, finding that § 1782 could be used to obtain testimony and other evidence in aid of private arbitrations held outside of the U.S. This was a departure from the Second and Fifth Circuits, which held in Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880, 883 (5th Cir. 1999) and National Broadcasting Co., Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir. 1999) that private foreign arbitrations did not qualify for discovery under § 1782.

Two recent opinions — issued less than two weeks apart — illustrate that the split in opinion continues to widen. On March 30, 2020, the Fourth Circuit concluded that parties in private arbitration could use § 1782 to obtain discovery in Servotronics, Inc. v. Boeing Co., 954 F.3d 209 (4th Cir. 2020). On April 13, 2020, the U.S. District Court for the District of Delaware concluded the opposite in In re Storag Etzel GmbH, No. CV 19-MC-209-CFC, 2020 WL 1849714 (D. Del. Apr. 13, 2020).

Fourth Circuit: Parties Can Obtain Discovery Through U.S. Courts Through § 1782

In Servotronics, Inc., the plaintiff supplied valves to Rolls Royce for an engine for Boeing’s 787 Dreamliner aircraft. The engine caught fire and damaged the aircraft. Rolls Royce settled the claim with Boeing and then sought indemnity against Servotronics in an international arbitration under the rules of the Chartered Institute of Arbitrators. As part of the arbitration, Servotronic filed an ex parte petition in the District of South Carolina seeking the testimony of three current or former Boeing employees. The district court denied the petition, concluding that private arbitrations did not qualify as “foreign or international tribunals” under § 1782.

The Fourth Circuit reversed, “conclud[ing] that the U.K. arbitral panel convened to address the dispute between Servotronics and Rolls-Royce is a ‘foreign or international tribunal’ under § 1782(a) and, therefore, that the district court has authority to provide, in its discretion, assistance in connection with the U.K. arbitration.” The case was remanded for the district court to determine if the sought discovery was justified. The Fourth Circuit’s opinion follows the Sixth’s Circuit’s recent opinion in Application to Obtain Discovery, 939 F.3d at 715 (seeking testimony from a corporate representative and production of documents from non-party Fedex Corporation for an arbitration under the rules of DIFC-LCIA between a Saudi company and Fedex International).

U.S. District Court for the District of Delaware Issues Opposite Ruling

In Storag Etzel GmbH, the U.S. District Court in Delaware reached the opposite result in a detailed textual analysis of § 1782. The district court concluded, after noting that the Third Circuit had not weighed in on the issue, that a private arbitration did not qualify as a foreign or international tribunal under § 1782. Instead, the court determined that “that a foreign tribunal for § 1782(a) purposes was a foreign government, court, or agency.” As a result, the court denied the petition for discovery for use in a private arbitration. The District of Delaware’s opinion follows the Fifth Circuit’s opinion in Republic of Kazakhstan, 168 F.3d at 881 (denying the Republic of Kazakhstan’s petition to take testimony and documents from a non-party for use in an international arbitration before the Arbitration Institute of the Stockholm Chamber of Commerce) and the Second Circuit’s opinion in Nat’l Broad. Co., 165 F.3d at 185 (denying NBC’s petition to seek documents from non-party investment bankers for the respondent Mexican television broadcasting company for an international arbitration before the ICC in Mexico).

What’s Next?

This split in the U.S. Circuit Courts raises the possibility that the Supreme Court may ultimately weigh-in on this issue. In the meantime, parties to an international arbitration may have differing levels of success when seeking court-ordered discovery based upon the district and circuit in which the person resides or is found. Additionally, whether a private international arbitration qualifies for discovery under § 1782 is not the end of the story. The court may or may not order discovery after evaluating certain discretionary factors identified by the Supreme Court in Intel v. Advanced Micro Devices, 542 U.S. 241, 264-65 (2004).

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