Reuters Legal News
Questions remain after Supreme Court resolves circuit split over discovery in arbitration under 28 U . S . C . § 1782
By Rachel B . Goldman , Esq ., David A . Shargel , Esq ., and David J . Ball , Esq ., Bracewell LLP JUNE 28 , 2022
On June 13 , 2022 , the Supreme Court resolved a long-standing circuit split holding that broad U . S . -style discovery under 28 U . S . C . § 1782 is not available in private foreign arbitrations . In the past decade , litigants in international arbitrations had been trying to use section 1782 more frequently to obtain comprehensive discovery that would otherwise typically be unavailable in arbitration abroad . While the Supreme Court has ostensibly put an end to that practice , the possibility of further litigation over section 1782 remains , as parties are likely to test the boundaries of the Supreme Court ’ s decision .
The decision addressed two different appeals that each questioned whether section 1782 , which authorizes federal district courts to order discovery from U . S . entities for use “ in a foreign or international tribunal ,” extends to private arbitrations , as opposed to only governmental or quasi-governmental proceedings . Federal courts have long grappled with this question , resulting in a circuit split . The 2nd , 5th , and 7th Circuit Courts of Appeal had held that a “ foreign or international tribunal ” does not include private international arbitration , while the 4th and 6th Circuits disagreed .
In a unanimous opinion authored by Justice Amy Coney Barrett , the Supreme Court adopted the majority view , concluding that private arbitral bodies are not “ foreign or international tribunals ” within the meaning of section 1782 . As a result , parties engaged in private foreign arbitration may no longer seek expansive discovery in the United States under the statute .
The Court ’ s analysis focused on the plain language of section 1782 , reasoning that a “’ foreign tribunal ’ more naturally refers to a tribunal belonging to a foreign nation than to a tribunal that is simply located in a foreign nation . And for a tribunal to belong to a foreign nation , the tribunal must possess sovereign authority conferred by that nation .” Similarly , as to the meaning of “ international tribunals ,” the Court interpreted the statute ’ s language as involving a tribunal that is “ of two or more nations , meaning that those nations have imbued the tribunal with official power to adjudicate disputes .”
The Court concluded that “’ foreign tribunal ’ and ‘ international tribunal ’ complement one another ; the former is a tribunal imbued with governmental authority by one nation , and the latter is a tribunal imbued with governmental authority by multiple nations .”
The Court found support for its statutory interpretation by examining the history and purpose of section 1782 , noting that the “ animating purpose ” was to promote respect for foreign nations and the governmental and intergovernmental bodies they create , as well as to encourage reciprocal assistance . The Court determined that authorizing discovery in foreign or international disputes between wholly private parties would do little to serve that end .
Although the two cases before the Court presented different fact patterns , both were found to involve “ tribunals ” that do not fall within the ambit of section 1782 .
The Court ’ s analysis focused on the plain language of section 1782 , reasoning that a “‘ foreign tribunal ’ more naturally refers to a tribunal belonging to a foreign nation than to a tribunal that is simply located in a foreign nation .
The first case , Z . F . Automotive U . S . Inc . v . Luxshare Inc ., involved a private arbitration in Germany , pursuant to a contract , between a German bank and a Hong Kong limited liability company . The arbitration was conducted under the rules of the German Arbitration Institute ( Deutsche Institution für Schiedsgerichtsbarkeit or DIS ), a private dispute-resolution organization .
The Court had no difficulty concluding that the adjudicative body was not imbued with governmental authority and section 1782 discovery was not available to the parties given that no government was involved in creating the panel or prescribing the procedures to be used in the arbitration .
The second case , AlixPartners , LLP , et al . v . The Fund for Protection of Investor ’ s Rights in Foreign States , presented a closer question , the analysis of which opens the door to future litigation about the scope of the Supreme Court ’ s decision .
The AlixPartners case stemmed from an investor-state dispute — a mechanism that allows foreign investors to resolve disputes with
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