Section 1782 Subpoenas: Questions May Remain Regarding Foreign or International Arbitrations | Holland & Knight LLP

Every day, American companies suffer a collateral effect from the proliferation of international arbitrations. Parties to these arbitrations use 28 USC § 1782 to issue subpoenas to US companies, seeking information that might be relevant to the underlying dispute.

The use of § 1782 for international commercial arbitration depends on where the targeted US company resides or is incorporated. Two federal circuits allow foreign parties to issue subpoenas to seek discovery of international arbitration.1 Three federal circuits do not.2 For other federal courts, the validity of § 1782 subpoenas depends on each particular federal district in which the targeted business resides or is incorporated.

There is no clear trend in federal circuits regarding § 1782 subpoenas related to treaty-based arbitrations. Presumably, each federal circuit would treat these subpoenas the same as those related to international commercial arbitrations. The United States Court of Appeals for the Second Circuit recently allowed a § 1782 subpoena related to treaty-based arbitration, departing from its practice of refusing such subpoenas for international commercial arbitrations. Elsewhere, it is up to each federal district court to issue such subpoenas according to its case law.

The root of the courts’ disagreement lies in the meaning of the phrase “a proceeding in a foreign or international court” in § 1782.3 As noted in previous alerts, the United States Supreme Court will soon have an opportunity to clarify the matter. (See Holland & Knight’s previous alert, “Supreme Court to decide whether US discovery law encompasses private foreign arbitrations“, March 25, 2021) However, if the court determines that “proceedings in a foreign or international court” include international arbitrations, § 1782 will continue to create issues.

The meaning of “foreign” or “international”

In ZF Automotive US, Inc. v. Luxshare, Ltd., the arbitration clause established the place of arbitration in Munich, Germany. It seems to be referred to as ‘foreign’ or ‘international’.

However, in AlixPartners, LLC c. Fund for the Protection of the Rights of Investors in Foreign Statesconventional arbitration is ad hoc under the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules with no known place of arbitration. Although the place of arbitration is unlikely to be the United States, it could matter if it was.

For example, many contracts between non-US parties choose a US city as the place of arbitration for any dispute. Performance under these contracts has nothing to do with the United States. As another example, many contracts may have a non-U.S. portion where performance is entirely in the United States. If the arbitration clause in those contracts selects the American Arbitration Association (AAA) to administer the arbitration or agrees to apply its arbitration rules, by default the AAA will apply its International Center for Dispute Resolution (ICDR) arbitration rules. It is unclear whether these examples would qualify as “foreign or international court proceedings”, allowing parties to invoke § 1782 and issue subpoenas.

Use of § 1782 for pre-arbitration discovery

On its facts, the injured party in ZF Automotive United States issued a subpoena § 1782 before initiating arbitration. Section 1782 does not clearly state that the issuer of a subpoena must have “proceedings in a foreign or international court” pending.

Using ex-parte Subpoena Requests

In ZF Automotive United States, Plaintiff requested permission to issue a § 1782 subpoena without notice to the targeted company. Article 1782 is silent on the question of whether such ex parte apps are correct.

Remarks

1 These federal courts are found in Michigan, Ohio, Kentucky, Tennessee, West Virginia, Virginia, North Carolina, and South Carolina.

2 These federal courts are in New Hampshire, Vermont, New York, Connecticut, Texas, Louisiana, Mississippi, Wisconsin, Illinois, and Indiana.

3 In relevant part, § 1782 provides: “The district court of the district in which a person resides or is may order him to give his testimony or statement or to produce a document or other thing to be used in a proceeding in a foreign or international country. court, including criminal investigations conducted prior to the formal charge.


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