September 27, 2022

Volume XII, Number 270

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September 26, 2022

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U.S. Supreme Court Narrows Scope of 28 U.S.C. § 1782 to Proceedings Before "Governmental or Intergovernmental Adjudicative Bodies"

On 13 June 2022, the U.S. Supreme Court narrowed the scope of 28 U.S.C. § 1782 (Section 1782), holding that the statute does not permit federal courts to order discovery for use in foreign private commercial arbitrations or investment treaty arbitrations. As detailed in our previous alerts on this issue,1 U.S. Circuit Courts of Appeal have diverged on whether discovery assistance is available to parties in private international arbitration. Specifically, the Fourth and Sixth Circuits ruled that a private international arbitral tribunal is a “foreign or international tribunal” within the meaning of Section 1782,2 while the Second, Fifth, and Seventh Circuits reached the opposite conclusion.3 The Supreme Court’s decision this week in ZF Auto. US v. Luxshare, Ltd.4 resolved that split, with the Court unanimously holding that “only a governmental or intergovernmental adjudicative body” is a “foreign or international tribunal” under Section 1782.5 This decision puts an end to a years-long debate and is welcome news for many U.S. companies that have been the target of numerous discovery requests through Section 1782 in private international arbitrations.

The U.S. Supreme Court’s Decision

The Supreme Court began its analysis by recognizing that Congress used “tribunal” in Section 1782 in a broad sense that does not exclude private adjudicatory bodies.6 The Supreme Court, however, then carefully considered the impact of the statutory modifiers “foreign or international” on the meaning of “tribunal.” Addressing the impact of the word “foreign” first, the Supreme Court concluded that “‘foreign’ takes on its more governmental meaning when modifying a word with potential governmental or sovereign connotations,” such as “tribunal.”7 Turning to the impact of the word “international,” the Supreme Court concluded that a “tribunal is ‘international’ when it involves or is of two or more nations, meaning that those nations have imbued the tribunal with official power to adjudicate disputes.”8 Based on these modifiers, the Supreme Court ultimately concluded that the language of Section 1782 limits the statute’s application to proceedings before “a tribunal imbued with governmental authority by one nation, [or] a tribunal imbued with governmental authority by multiple nations.”9

The Supreme Court found further support for its limited construction of Section 1782 in the statutory history and in comparison to the Federal Arbitration Act (FAA). The Supreme Court traced the history of Section 1782, noting that “the statute has been about respecting foreign nations and the governmental and intergovernmental bodies they create,” and “the animating purpose of [Section 1782] is comity.”10 The Supreme Court was thus led to conclude that “[i]t is difficult to see how enlisting district courts to help private bodies would serve that end.”11 The Supreme Court also noted that applying Section 1782 to private international arbitrations would cause “significant tension with the FAA, which governs domestic arbitration, because such an extension would result in “much broader discovery than the FAA allows” to litigants in domestic arbitrations. This was a “notable mismatch” the Supreme Court could not allow.12

After analyzing the text and history of Section 1782, the Supreme Court then turned to the question of whether the adjudicative bodies at issue in the cases before it (namely tribunals established under the Arbitration Rules of the German Institution of Arbitration and the Arbitration Rules of the United Nations Commission on International Trade Law) qualified as “foreign or international tribunals.” The Supreme Court quickly concluded that the private commercial arbitral tribunal in ZF Auto was not governmental or intergovernmental because the panel there operated under private arbitral rules and was formed by the parties with no governmental involvement.13 Turning next to AlixPartners, the Supreme Court that the circumstances there presented a “harder question” because the case involved a sovereign state (Lithuania) and the option to arbitrate was contained in a bilateral investment treaty between Lithuania and Russia.14 The Supreme Court, however, noted that “[w]hat matters is the substance of [Russia and Lithuania’s] agreement: Did these two nations intend to confer governmental authority on an ad hoc panel formed pursuant to the treaty?”15 The Supreme Court concluded they did not because the treaty did not create the arbitral panel, the panel did not exercise governmental authority, and the panel did not operate in a manner consistent with governmental bodies, e.g., the proceedings remained confidential.16

Implications of The Decision

The Supreme Court’s decision in ZF Auto provides much welcome relief to third-party commercial partners in the U.S. that have found themselves on the receiving end of a Section 1782 subpoena. Pre-ZF Auto, parties to private international arbitrations have taken advantage of Section 1782 to impose sometimes considerable discovery burdens on third parties in the U.S. that otherwise have no stake in the subject arbitral proceedings and that can be made to bear discovery burdens disproportionate to the parties to the proceedings. Post-ZF Auto, these burdens will be considerably reduced. As for the parties to foreign private arbitration, including investment treaty arbitrations, going forward, they must be ever more mindful of the arbitral rules they choose to govern their arbitrations as their discovery options may be limited to those shaped by those rules.


1 U.S. Supreme Court to Review Circuit Split Over Scope of 28 U.S.C. § 1782 for Obtaining Discovery in International ArbitrationsU.S. Supreme Court Hears Oral Argument on Circuit Split Over Scope of 28 U.S.C. § 1782 for Obtaining Discovery in International ArbitrationsArbitration World: U.S. Cases and International Arbitration — U.S. Supreme Court set to Decide Section 1782 Circuit Split.

2 See Servotronics, Inc. v. Boeing Co., 954 F.3d 209, 213 (4th Cir. 2020); Abdul Latif Jameel Transp. Co. Ltd. v. FedEx Corp. (In re Application to Obtain Discovery for Use in Foreign Proc.), 939 F.3d 710, 730 (6th Cir. 2019).

3 See Servotronics, Inc. v. Rolls-Royce PLC, 975 F.3d 689, 692–96 (7th Cir. 2020); In re Application and Petition of Guo, 965 F.3d 96, 103 (2nd Cir. 2020); El Paso Corp. v. La Comision Ejecutiva Hidroelectrica Del Rio Lempa, 341 F. App’x 31, 34 (5th Cir. 2009).

ZF Auto was decided with a consolidated case--AlixPartners v. The Fund for Prot. of Inv. Rights in Foreign States, 142 S. Ct. 638 (2021)--which arose in a different factual circumstance but asked fundamentally the same question. See U.S. Supreme Court to Review Circuit Split Over Scope of 28 U.S.C. § 1782 for Obtaining Discovery in International Arbitrations.

5 ZF Auto US v. Luxshare, Ltd., 596 U.S. ___, 16--17 (2022).

6 Id. at 6.

7 Id. at 7.

8 Id. at 9.

9 Id.

10 Id. at 9-10.

11 Id. at 10.

12 Id. at 11.

13 Id. at 12.

14 Id.

15 Id. at 13.

16 Id. at 14.

Copyright 2022 K & L GatesNational Law Review, Volume XII, Number 166
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Carolyn M. Branthoover Arbitration & Litigation Attorney, K&L Gates Law Firm Pittsburgh
Partner

Ms. Branthoover practices in the area of complex commercial litigation and international arbitration. In addition to representing Fortune 100 companies and investors in litigation, including trials, arising out of complex commercial transactions, she has considerable experience with respect to insurance coverage disputes arising under a wide variety of liability and property policies related to environmental, toxic tort, employment, business interruption, and product liabilities. She has represented major industrial and commercial clients in numerous state and federal...

412.355.8902
Jacquelyn S. Celender, KL Gates, Domestic Arbitration Lawyer, Document Collection Attorney
Associate

Jacquelyn (“Jackie”) Celender is an associate in the firm’s Pittsburgh office. She concentrates her law practice in the area of commercial litigation, with a particular focus in the insurance coverage and construction practice areas. Ms. Celender is experienced in all stages of litigation and in domestic and international (AAA and ICDR) arbitrations. Her experience includes fact investigation, managing e-Discovery matters and complex document collections and productions, preparing witnesses for and conducting fact and expert witness depositions and examinations at trial...

412-355-8678
Lindsay Sampson Bishop, Insurance Coverage Attorney, Commercial Litigation Lawyer, KL Gates Law firm
Partner

Ms. Bishop is a partner in the litigation department of the firm's Boston office. She concentrates her practice in general commercial disputes with a focus on insurance coverage and consumer finance litigation. Ms. Bishop's insurance coverage experience includes representing policyholders in coverage disputes arising under commercial general liability insurance policies, professional errors and omission policies, and directors and officers' liability insurance policies. Ms. Bishop's consumer finance experience includes the defense of banking, mortgage lending and...

617-951-9198
Michael Creta general civil and commercial litigation. He has experience in state and federal courts throughout the United States
Associate

Michael Creta is an associate in the litigation department of the firm’s Boston office. Mr. Creta focuses his practice on general civil and commercial litigation. He has experience in state and federal courts throughout the United States.

617.951.9101
 John L. Gavin Associate Boston  Complex Commercial Litigation and Disputes
Associate

John Gavin is an associate at the firm’s Boston office. He is a member of the complex commercial litigation and disputes practice group.

617-951-9204
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