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Eastern District of New York Rules on Use of Section 1782 in Aid of ICSID Arbitration

The United States District Court for the Eastern District of New York provided further clarity to a lingering question in the aftermath of the U.S. Supreme Court’s recent decision in ZF Automotive: whether the ZF Automotive decision precluded discovery under 28 U.S.C. § 1782 (Section 1782) in aid of an arbitration conducted under the auspices of the International Centre for the Settlement of Investment Disputes (ICSID). In In re Alpene, the Eastern District of New York found that a petitioner could not seek the production of documents in aid of an ICSID arbitration under Section 1782.

SECTION 1782

Section 1782 was enacted by the United States Congress in order to allow parties to obtain certain documents from parties in the United States in aid of proceedings before certain foreign and international tribunals. In relevant part, Section 1782(a) states:

(a) The district court of the district in which a person resides or is found may order him 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 ….

For quite some time after it was enacted, courts grappled with whether Section 1782 permitted a district court to order the production of documents in aid of a foreign private arbitration. Earlier this year, the United States Supreme Court decisively answered that question in the negative, finding that a “foreign or international tribunal” within the meaning of Section 1782 is a tribunal “imbued with governmental authority.”That decision has, however, with certain exceptions, left courts to determine which foreign or international tribunals are “imbued with governmental authority.”

THE ALPENE DECISION

In In re Alpene, Petitioner Alpene, a Hong Kong corporation, is a claimant in an investor-state treaty arbitration pending against the Republic of Malta before an ICSID tribunal. Alpene brought a Section 1782 petition to obtain discovery from McCaul, a New York resident, for use in the ICSID arbitration.

The district court initially granted the petition but stayed enforcement pending the U.S. Supreme Court’s decision in the ZF Automotive case. While the Alpene court noted that district courts had granted Section 1782 petitions in aid of ICSID arbitrations prior to the ZF Automotive decision, it reexamined that precedent in light of the Supreme Court decision, which the Alpene court noted “did not set out any test or provide any guidelines for lower courts to follow” in determining whether a tribunal is “imbued with government authority.” The Alpene court also noted that it had not found any post-ZF Automotive decisions that examined whether an ICSID tribunal was “imbued with governmental authority.”

The Alpene court noted that the Bilateral Investment Treaty (the Treaty) between Malta and China provides that a dispute between an investor and one of the contracting parties can be submitted at the investor’s choice to: (1) a court of appropriate jurisdiction in the country that is a party to the dispute, (2) arbitration under the auspices of ICSID, or (3) ad hoc arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL). The Alpene court noted that the inclusion of domestic courts as one option under the Treaty “undercut the contention that the arbitration panel had government authority,” but the Alpene court also noted that that one factor itself was not dispositive.

The Alpene court next examined the ICSID arbitration option that Alpene had chosen. The court noted that ICSID is an independent, self-contained system that operates under the authority of the World Bank, an intergovernmental organization. ICSID is an international arbitration institution established in 1966 for legal dispute resolution and conciliation between states and investors who are nationals of other states. The court also noted that similar to the tribunal in ZF Automotive, the applicable treaty did not itself create the ICSID panel, which “consists of individuals chosen by the parties and lacking any official affiliation with [the treaty nations.]”

The court also noted a number of similarities between the ad hoc UNCITRAL arbitration panel in ZF Automotive and the ICSID arbitration panel. Both provided immunity to arbitrators in the absence of intentional wrongdoing, and both required the parties to pay arbitration costs and arbitrator fees. Key differences between the ad hoc UNCITRAL panel in ZF Automotive and the ICSID arbitration panel in Alpene included that ICSID had 150 member states that ratified the ICSID Convention, that member states themselves can designate individuals to serve on ICSID panels, and member states select representatives for the ICSID Administrative Council, which meets annually to adopt regulations for ICSID. ICSID, in other words, created a “permanent institution.” In addition, ICSID awards have status as final judgments and are binding as a matter of law in ICSID member states, including the United States.

The court also examined whether granting requests in aid of ICSID arbitration would promote international comity and reciprocal assistance. The court noted that ICSID arbitral tribunals could not order discovery in aid of U.S.-based proceedings, so there was no reason to find that interests of comity and reciprocal assistance would be served.

The Alpene court last noted that Section 1782 must be interpreted narrowly in line with the United States Arbitration Act (more commonly referred to as the Federal Arbitration Act). Ultimately, the court found that there was “insufficient support” for the argument that Malta and China had “intended to imbue the ICSID arbitration panel with government authority.”

CONCLUSION

As the first court to examine whether an ICSID tribunal is “imbued with governmental authority” post  ZF Automotive, this decision is likely to be examined closely by any other court considering this question. It is interesting to note that this decision appears to put the burden on the petitioner to show sufficient support for a finding that a foreign or international tribunal is “imbued with government authority.” It is also important to note, however, that the Alpene decision will not be binding on other courts unless it is adopted by the Second Circuit Court of Appeals or the United States Supreme Court. 

Copyright 2023 K & L GatesNational Law Review, Volume XII, Number 322
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About this Author

Matthew J. Weldon Arbitration Lawyer K&L Gates
Partner

Matthew Weldon is a partner in the firm’s New York office and is a member of the international arbitration group. He focuses his practice primarily on international dispute resolution, and has extensive experience conducting international commercial arbitrations, investment treaty arbitrations, and acting in complex cross-border litigation. Matthew also counsels a variety of businesses on structuring and strategies related to international disputes resolution, and he provides commercial legal advice to foreign companies conducting business in the United States.

Matthew has served as...

+1.212.536.4042
Thomas Gates, KL Gates Law Firm, Litigation Attorney
Associate

Thomas Warns is a first year associate in the firm’s New York office.

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