The US Court of Appeals for the Fourth Circuit recently issued a decision that may have a significant impact on the taking of evidence in international arbitration. The court held that an international arbitration panel is a “foreign or international tribunal” for the purposes of 28 U.S.C. § 1782 and therefore authorized discovery assistance – including the availability of depositions – requested by one of the parties to the arbitration being administered by that panel.
The decision follows the Sixth Circuit’s recent decision in Abdul Latif Jameel Transportation Co. Ltd. v. FedEx Corp., 939 F.3d 710 (6th Cir. 2019). Even though the Fourth Circuit is only the second circuit court to take this view, it may indicate a significant new trend allowing parties to an international arbitration to obtain broad discovery, including from non-parties, in the US in support of international arbitrations around the globe.
28 U.S.C. § 1782(a) permits any party or other interested person involved in proceedings before a foreign or international tribunal, or the tribunal itself, to make a request to a US federal district court to compel discovery from a person or entity found in the district in which the court sits. For years, and especially since the US Supreme Court’s decision in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), parties have argued whether or not international arbitration proceedings were “foreign or international tribunals” under the statute.
Prior to the recent decisions of the Fourth and Sixth Circuits, the only circuit courts that had addressed this issue had decided not. In National Broadcasting Company, Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir. 1999), and Republic of Kazakhstan v. Biedermann International, 168 F.3d 880 (5th Cir. 1999), the Second and Fifth Circuits both held that commercial arbitration tribunals are not “tribunals” for the purposes of § 1782.
The first circuit court to hold otherwise was the Sixth Circuit in Abdul Latif, in which Circuit Judge John K. Bush engaged in a thorough textual analysis to ultimately conclude that the “text, context, and structure” of the statute “provide no reason to doubt that the word ‘tribunal’ includes private commercial arbitral panels established pursuant to contract and having the authority to issue decisions that bind the parties.”
Just six months later, the Fourth Circuit, in Servotronics, Inc. v. The Boeing Company; Rolls-Royce Plc, No. 18-2454 (4th Cir. 2020), joined the Sixth Circuit’s interpretation of the statute, though it differed slightly in the analysis used to reach its conclusion. In Servotronics, the underlying arbitration arose out of an indemnification claim between Servotronics, Inc. and Rolls-Royce Plc related to a valve supplied by Servotronics to Rolls-Royce. Rolls-Royce commenced an arbitration in the United Kingdom pursuant to the parties’ agreement.
During the arbitration, Servotronics filed an application in the South Carolina district court under § 1782 seeking to depose three Boeing employees residing in South Carolina who they believed had relevant knowledge. Largely relying on Second and Fifth Circuit precedents available at the time, the district court denied Servotronics’ application. Servotronics appealed.
Decision of the Fourth Circuit
The Fourth Circuit’s analysis turned on the meaning of “foreign or international” tribunal for the purposes of § 1782. The court held that the UK arbitral tribunal, before which the dispute between Rolls-Royce and Servotronics is pending, is a foreign tribunal for the purposes of § 1782. To reach this decision, the Fourth Circuit began with an acknowledgement that the statute reflects long-term Congressional policy of facilitating cooperation with foreign countries by providing federal court assistance in gathering evidence for use in foreign tribunals. The court emphasized that while the drafters had initially considered limiting the availability of this assistance to judicial proceedings, ultimately Congress selected broader language, which, in the circuit court’s view, signaled an intent to offer assistance not just in connection with foreign court proceedings, but also in administrative, quasi-judicial, and arbitral proceedings. This, the court explained, was consistent with Congressional goals of contributing to the orderly disposition of disputes, and the rule of law.
The court’s reasoning ultimately focused on two grounds.
First, the Fourth Circuit concluded that Boeing’s argument of arbitration as a “private agreement” between parties represented too narrow an understanding of arbitration. Contrary to Boeing’s assertion that arbitration is not a product of “government-conferred authority,” the court found that it clearly is under both US and UK law. To this end, the court outlined the various ways in which US and UK law sanction, regulate and oversee arbitration, thus elevating the arbitration of claims as a favored alternative to litigation. The court concluded that even if it were to apply the more restrictive definition of “foreign or international tribunal” advanced by Boeing, and adopted by the Second and Fifth Circuits in Bear Stearns and Biedermann, respectively, it would find that the arbitral panel charged with resolving the dispute between Servotronics and Rolls-Royce meets that definition.
Second, the Fourth Circuit dealt with Boeing’s argument that applying § 1782(a) to arbitration proceedings would make full US-style discovery process available in US proceedings, thereby injecting new costs and delays into the process and otherwise eradicating the very benefits of arbitration for which the parties had negotiated. The court rejected this argument, finding that it rests on a misunderstanding of the function and scope of § 1782. The court clarified that § 1782 is not designed to authorize full discovery. Rather, the scope of available assistance is much more limited and essentially permits a US district court to serve as a substitute of the foreign tribunal by taking testimony and statements for use in the foreign proceeding (but not, as would be normal in US-style discovery to permit the parties to collect evidence that might or might not be admissible). In this way, it held that the district court functions no differently than a foreign or US arbitral panel. In any event, the court stated that any undue burdens that might result should and could be managed by the district court with the discretion conferred to it under § 1782.
Finally, the Fourth Circuit declined Servotronics’ request that it avoid remand and exercise its discretion to grant the three subpoenas, citing several authorities to support the proposition that a trial court is better positioned than an appellate court to review the merits of a § 1782 application.
The significance of Servotronics v. Boeing
The Fourth Circuit’s decision in Servotronics is not likely to end the debate about whether § 1782 applies to international commercial arbitration. However, its approval of the Sixth Circuit’s recent decision in Abdul Latif will likely reframe the argument. Whereas US circuit and district courts have frequently relied – though not always – on the Second and Fifth Circuit opinions to the contrary, future courts assessing this issue (as well as the parties bringing the § 1782 applications) now have additional support from which to draw in order to permit a party to obtain discovery in the US in aid of the arbitration.
While the detailed textual analysis in the Sixth Circuit’s opinion in Abdul Latif will likely be very persuasive in the coming years, the Fourth Circuit’s analysis in Servotronics will also be influential in two ways.
First, the Fourth Circuit’s emphasis on the role of arbitration was effectively a broad endorsement of arbitration notwithstanding some recent debates about the desirability of that mode of dispute resolution for certain kinds of disputes in the US.
Second, the Fourth Circuit addressed how district courts should exercise their discretion under § 1782 and questioned the scope of the assistance courts may provide in international arbitration matters. Specifically, the court recognized that arbitrations typically permit narrower discovery and suggested that courts providing discovery in aid of arbitration might thus provide more limited assistance than the discovery otherwise permitted in US litigation proceedings. Courts faced with requests for assistance under § 1782 have generally permitted broad discovery of the kind authorized under the Federal Rules of Civil Procedure – including interrogatories, requests for production, and depositions. By pointing to the generally narrow scope of discovery in international arbitration and emphasizing that the court plays a “limited role” under the statute, the Fourth Circuit may be pointing to a “third way” – short of full US discovery – that district courts may authorize in their discretion.
As a practical matter, the debate concerning the scope of § 1782 will continue, but parties seeking to rely on the statute to obtain documents and testimony in the US now have two new powerful precedents on which they can rely. The Seventh Circuit is also expected to address this issue in the near future in a related case to the case decided by the Fourth Circuit: Servotronics v. Rolls-Royce, No. 19-1847 (7th Cir.). Parties in international arbitration proceedings should consider the possible role of § 1782 in their cases and monitor future cases interpreting these two new circuit court opinions.
This information does not, and is not intended to, constitute legal advice. All information, content, and materials are for general informational purposes only. No reader should act, or refrain from acting, with respect to any particular legal matter on the basis of this information without first seeking legal advice from counsel in the relevant jurisdiction.