Two Recent Decisions Highlight Federal Courts Disagreement on Availability of Third Party Discovery

International Arbitration Alert

You’re in an international arbitration and you believe a third party in the United States could provide important testimony or documents.  What do you do?  A federal statute, 28 U.S.C. § 1782(a), permits federal district courts, in their discretion, to compel a third party to testify or produce documents “for use in a proceeding in a foreign or international tribunal.”  But does a private arbitral body like the ICC or SIAC qualify as a “foreign or international tribunal” for purposes of this statute?  The federal courts to have considered this question are split, and two recent decisions have brought the courts’ disagreement on this question to the forefront. 

On March 30, 2020, the Fourth Circuit held that a private international arbitral body is a “foreign tribunal” for purposes of § 1782(a).  Servotronics, Inc. v. Boeing Co., 954 F.3d 209 (4th Cir. 2020).  In that case, the underlying arbitration was pending in the United Kingdom (“UK”) under the rules of the Chartered Institute of Arbitrators.  One of the parties to the arbitration applied to the U.S. District Court for the District of South Carolina for an order authorizing the issuance of subpoenas to third parties in South Carolina for testimony.  The district court denied the motion, concluding that the Chartered Institute of Arbitrators, a private arbitral body, was not a “foreign tribunal” within the meaning of § 1782(a) and therefore the subpoenas could not be issued.  The Fourth Circuit reversed, holding that “the arbitral panel in the [UK] is indeed a foreign tribunal for purposes of § 1782.”  However, the Fourth Circuit declined to issue the requested subpoenas in the first instance and, instead, remanded to the district court for further consideration because the decision to allow third-party discovery under § 1782(a) is within the district court’s discretion. 

The Fourth Circuit’s decision in Servotronics is consistent with the Sixth Circuit’s recent decision in Abdul Latif Jameel Transportation Company Limited v. FedEx Corporation, 939 F.3d 710 (6th Cir. 2019), in which the court held that an arbitration panel operating under the rules of the Dubai International Financial Centre-London Court of International Arbitration qualified as a “foreign tribunal” under § 1782(a).

On the other hand, the Second and Fifth Circuits have held that private international arbitral bodies are not “foreign tribunals” under § 1782(a).  See Nat’l Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999); Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880 (5th Cir. 1999).  But those decisions, both from 1999, predated the Supreme Court’s opinion in Intel Corporation v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), in which the Court held that § 1782(a) permits discovery in the United States for use in proceedings before a foreign regulator “to the extent that it acts as a first-instance decisionmaker.”

No other federal court of appeals has spoken on the issue, and district courts are about evenly split—some holding that private international arbitral bodies are “foreign tribunals,” others holding they are not.  In the most recent district court decision to address the issue, the U.S. District Court for the District of Delaware held on April 13, 2020, that third-party discovery in Delaware was not permitted in connection with an arbitration before the German Arbitration Institute because the Institute, a private arbitral body, was not a “foreign tribunal” under § 1782(a).  In re Application of Storag Etzel GmbH, Case No. 19-mc-209-CFC (D. Del. 2020).

While the weight of recent authority holds that private international arbitral bodies are “foreign tribunals” under § 1782(a), it’s still an open question in most circuits.  And the courts’ decisions in Servotronics and Storag Etzel demonstrate that the split of authority is not going away and may wind up before the Supreme Court.  In the meantime, the extent to which parties to international arbitrations may seek third-party discovery in the United States remains uncertain and, in some cases, may depend on where the third party from whom discovery is sought resides.  For third parties residing within the Fourth and Sixth Circuits (Kentucky, Maryland, Michigan, North Carolina, Ohio, South Carolina, Tennessee, Virginia and West Virginia), the path to seeking discovery from them is clearly open, but whether the discovery will be allowed in a given case is still subject to the district court’s discretion.  For third parties residing elsewhere, the party seeking the discovery may first need to convince the court that its international arbitration qualifies as a proceeding before a “foreign tribunal” under § 1782(a).