How the U.S. Supreme Court Section 1782 Decision Could Impact International Arbitrations
Section 1782 (28 U.S.C. § 1782) provides a powerful tool for parties embroiled in cross-border disputes. It authorizes, but does not require, a federal U.S. District Court to order a person or entity who “resides or is found” within the district to produce documents or testimony for use in a “proceeding in a foreign or international tribunal.” The order can be requested by the foreign or international tribunal through a letter rogatory (or similar formal request) or by any “interested person” who files an application for such an order. Section 1782 applications have been granted more often than not, making them a reliable resource for gathering evidence.
Discovery in the U.S. is incredibly broad when compared with foreign jurisdictions. Thus, Section 1782 has been used by parties to obtain documents and testimony that might not otherwise be available to them abroad. The use of Section 1782 has been on the rise for the past decade, with some folks reporting that the number of applications has more than tripled. This increase seems to coincide with a general rise in cross-border disputes over the same period.
In its 2021 International Arbitration Survey, White & Case and the School of International Arbitration, Centre for Commercial Law Studies at the Queen Mary University of London, reported that for 90 percent of respondents, international arbitration is the preferred method of resolving cross-border disputes.
In addition, the International Chamber of Commerce’s latest International Arbitration Report showcases a rise in arbitration specifically in Latin America and Caribbean countries, representing 15 percent of all international disputes reported. In 2020, the ICC Court registered a total of 946 new cases – the highest number of cases registered since 2016,
Yet, whether Section 1782 could be used to secure evidence for international arbitrations has not been uniformly answered by U.S. Courts. The issue is that Section 1782 does not define what constitutes a “foreign or international tribunal” and whether that term includes a foreign arbitral panel in a private commercial arbitration, or if it requires the request to originate from a governmental arm of a foreign country.
The U.S. Circuits have been split on the issue, with two circuits (the Fourth and Sixth) holding that Section 1782 can be used for international arbitrations, albeit based on slightly different rationales, and three circuits (Second, Fifth and Seventh) holding that it cannot. Two other circuits have cases pending involving the same question.
The uncertainty might be resolved by the U.S. Supreme Court later this year. On December 10, 2021, the Court agreed to hear two consolidated cases – Luxshare, Ltd. v. ZF Automotive US, Inc. and AlixPartners, LLP v. The Fund for Protection of Investors’ Rights in Foreign States — which raise the question of whether discovery assistance from U.S. courts under Section 1782 is available in private commercial arbitrations.
This is not the first time the U.S. Supreme Court agreed to hear the matter. Last year, the Court granted a petition raising the same question; however, the case was settled and dismissed before oral argument. Several amicus curiae (“friend of the court”) briefs have been filed on both sides of the issue. The Court heard oral arguments on March 23, 2022, from the parties in both cases and the Solicitor General, who was granted leave to participate.
The Justices were fully engaged in the arguments that centered on the textual and linguistic analysis of the statute and its legislative history as well as on public policy and international comity considerations. It is difficult to predict precisely how the Court will answer the question when it issues its opinion later this year.
With continued supply-chain disruptions and conflict in Ukraine/Russia, the number of international arbitrations is not expected to decrease any time soon. The Supreme Court’s ruling will undoubtedly have an impact in how international arbitrations are managed and even how arbitration clauses are drafted. At the very least, the Supreme Court’s decision, expected Summer 2022,will hopefully provide some clarity and uniformity on the issue.
- White & Case + School of International Arbitration, Centre for Commercial Law Studies at the Queen Mary University of London, 2021 International Arbitration Survey
- International Chamber of Commerce; ICC Dispute Resolution Statistics – 2020