28 U.S.C. section 1782 – assistance to foreign and international tribunals and to litigants before such tribunals
Title 28 U.S.C. section 1782 is a federal statute that permits U.S. district courts to order that subpoenas be issued to parties located in the United States to obtain evidence for use in non-U.S. proceedings. Specifically, section 1782 provides that:
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, including criminal investigations conducted before formal accusation. (emphasis added).
While versions of section 1782 have existed for 150 years, it only began to be widely used after 2004, when the U.S. Supreme Court issued the seminal decision, Intel Corp. v. Advanced Micro Devices, Inc. In Intel, the Supreme Court clarified numerous matters, including the discretionary factors courts should consider when deciding whether to allow a section 1782 subpoena to issue. Notably, however, the Supreme Court did not definitively state whether international arbitration tribunals qualified as foreign tribunals for section 1782’s purposes, which led to a variety of conflicting decisions on the point.
Specifically, the federal appellate courts split on whether section 1782 can be used to support private international commercial arbitrations, with the Fourth and Sixth Circuits expressly answering in the affirmative and the Second, Fifth, and Seventh Circuits maintaining the view that section 1782 cannot be used in that fashion. Importantly, there was no corresponding split with respect to whether section 1782 could be used to support investor-state arbitrations, as federal courts generally agreed that investment treaty arbitrations satisfy section 1782’s foreign tribunal requirement. The open issue, however, is whether section 1782 petitions are still viable for ICSID arbitrations.
ZF Automotive, AlixPartners, and the split among the U.S. courts of appeals
The cases before the Supreme Court – Luxshare, Ltd. v. ZF Auto. US, Inc., No. 2:20-mc-51245, 2021 U.S. Dist. LEXIS 100067 (E.D. Mich. May 27, 2021), and In re Fund for Prot. of Inv’r Rights in Foreign States v. AlixPartners, LLP, 5 F.4th 216 (2d Cir. July 15, 2021) – both involved a party seeking discovery in the United States for use in arbitrations that were seated outside the United States. Yet their facts differ in important ways that help contextualize the split that developed among the U.S. courts of appeals.
The first case, ZF Automotive, presented an instance of a classic commercial arbitration. It originated in a business deal between ZF Automotive US, Inc. and Luxshare, Ltd. Following the execution of the deal, Luxshare claimed that ZF had concealed information, such that Luxshare overpaid for the deal by hundreds of millions of dollars. The parties’ contract provided for all disputes to be settled following the Arbitration Rules of the German Institution of Arbitration e.V. (DIS), a private dispute-resolution organization based in Berlin. In contemplation of a potential DIS arbitration, Luxshare filed a section 1782 application seeking information from ZF in the U. S. District Court for the Eastern District of Michigan. In accordance with Sixth Circuit precedent (see Abdul Latif Jameel Transp. Co. v. FedEx Corp., 939 F.3d 710 (6th Cir. 2019)), the district court granted Luxshare’s application.
Unlike ZF Automotive, the second case, AlixPartners, involved a dispute between an investor and a foreign state. Specifically, it concerned a dispute between Lithuania and a Russian investor in a failed Lithuanian bank, AB bankas SNORAS (Snoras). After finding that Snoras was unable to meet its obligations, Lithuania nationalized it, commenced bankruptcy proceedings, and declared it insolvent. The Russian investor’s interests in Snoras were assigned to a Russian corporation – the Fund for Protection of Investors’ Rights in Foreign States (the Fund) – which, in turn, initiated an ad hoc United Nations Commission on International Trade Law (UNCITRAL) arbitration against Lithuania under a bilateral investment treaty between Lithuania and Russia. After initiating the arbitration, the Fund filed a section 1782 application in the U. S. District Court for the Southern District of New York, seeking information in support thereof. The district court granted the petition, rejecting the argument that the ad hoc arbitration panel did not qualify as a “foreign or international tribunal.” The Second Circuit affirmed.
While the Second Circuit previously had held that a private arbitration panel does not constitute a “foreign or international tribunal” under section 1782, in AlixPartners, it distinguished its previous decisions, employing a multifactor test to hold that the “arbitration between Lithuania and the Fund, taking place before an arbitral panel convened pursuant to the Treaty, a bilateral investment treaty to which Lithuania is a party, qualifies as a ‘foreign or international tribunal’ under § 1782.” AlixPartners, 5 F.4th 216 at 228.
The U.S. Supreme Court: section 1782 reaches only governmental or intergovernmental adjudicative bodies
The Supreme Court granted certiorari “to resolve a split among the Courts of Appeals over whether the phrase ‘foreign or international tribunal’ in § 1782 includes private arbitral panels.” ZF Auto. US, Inc. v. Luxshare, Ltd., Nos. 21-401, 21-518, 2022 U.S. LEXIS 2861, at *11 (U.S. June 13, 2022).
Justice Barrett authored the unanimous opinion and reasoned that under section 1782, private adjudicative bodies do not qualify as “foreign or international tribunals.” In reaching this decision, the Court analyzed three main questions.
a. Whether the terms “foreign tribunal” and “international tribunal” refer to a private adjudicatory body or a body “imbued with governmental authority”
The opinion broadly examined the meaning of the words “foreign tribunal” and “international tribunal.” The analysis began with the word “tribunal.” The Court reasoned that an argument could be made that the word “tribunal” standing alone could also include private arbitral panels. However, the Court concluded that attached to the modifiers “foreign or international,” the term “tribunal” “is best understood as an adjudicative body that exercises governmental authority.” Consequently, and without further analysis, the opinion concluded that the term 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.”
Turning to the meaning of “international tribunal,” the Court determined that “[a] tribunal is ‘international’ when it involves or is of two or more nations.” Concluding that a “foreign tribunal” is a body invested with governmental authority by one nation, while an “international tribunal” is a body instilled with governmental authority by multiple nations.
Simply put, the Supreme Court held that commercial arbitration and investor-state tribunals – or at least ad hoc investor-state tribunals – do not fall within the meaning of “foreign or international tribunal” under section 1782 because the arbitrators in these panels are primarily selected by the parties “who prescribe their own rules” with little to no governmental control.
Notably, concerning investor-state arbitration, the Court acknowledged that the question was harder to respond to because one of the parties typically is a sovereign, and the instrument containing the offer to arbitrate is contained in an international treaty. In the end, the Court emphasized that investor-state tribunals “derive[d] [their] authority from the parties’ consent to arbitrate” and that the tribunal “operate[d] like commercial arbitration panels do.” This outcome is surprising in light of current case law.