Issue of Applicability of 28 U.S.C. §1782 to Private International Commercial Arbitrations Is Ripe for Supreme Court’s Review After Second Circuit Decision

On July 8, 2020, the U.S. Court of Appeals for the Second Circuit held that 28 U.S.C. §1782, which affords discretion to U.S. courts to order discovery in the U.S. in connection with foreign proceedings, does not extend to private international commercial arbitrations. See In re Application of Hanwei Guo for an Order to Take Discovery for Use in a Foreign Proceeding Pursuant to 28 U.S.C. § 1782, —F.3d—, No. 19-781, 2020 WL 3816098, at *1 (2d Cir. July 9, 2020) (“Hanwei Guo”). In so doing, the Second Circuit confirmed that its prior decision in National Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999) on this issue is still good law in the Circuit and has not been undermined by the Supreme Court’s decision in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004) (“Intel”). There is now a four-circuit split¹ on this important issue for international commercial arbitration, and the issue is ripe for resolution by the Supreme Court.²  

In affirming its 1999 holding in NBC, that Section 1782 does not apply to private international commercial arbitrations, the Second Circuit pointed to its prior conclusion that the phrase “foreign or international tribunal” in the statute had been introduced for the purpose of expanding the original formulation, which provided for assistance only with respect to proceedings in any court in a foreign country. The Second Circuit also pointed to the absence of any reference to private arbitration in the House and Senate reports. The Second Circuit also found it compelling that the phrase “international tribunal” in Section 1782 came directly from 22 U.S.C. §§270-270g, which applied only to “intergovernmental tribunals.” The Second Circuit pointed out that the tribunal at issue in Intel was intergovernmental — the Directorate General-Competition of the Commission of the European Communities — and that the Supreme Court never dealt with an issue determining whether a private international arbitration tribunal qualifies under Section 1782. Lastly, the Second Circuit concluded that the Supreme Court’s parenthetical quotation of a footnote in an article by Professor Hans Smit, setting forth the proposition that “[t]he term tribunal … includes arbitral tribunals …” could not sufficiently undermine its 1999 decision of precedential force in NBC.

Having concluded that Section 1782 does not apply to private international commercial arbitration, the Second Circuit analyzed whether the China International Economic and Trade Arbitration Commission (CIETAC), where the underlying dispute was pending, qualified as a private tribunal. Using a functional approach adopted by Intel, the Second Circuit concluded that CIETAC is indeed a private tribunal because it is not directed and governed by the Chinese government, the jurisdiction of the panel derives exclusively from the parties’ agreement, the arbitrators are not appointed by the government, and the government does not intervene to alter the outcome of the arbitration after the panel has rendered a decision. 

The Second Circuit’s decision will further enhance forum shopping (within the U.S.) by foreign parties, to attempt to secure discovery in aid of foreign proceedings in the “right” circuit court. A four-circuit split and the recent history of the Supreme Court taking on arbitration issues suggests that the Supreme Court will decide next term if Section 1782 is applicable in aid of private international commercial arbitration proceedings.

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¹ In addition to the Second Circuit, the Fifth Circuit held that Section 1782 does not apply to private international commercial arbitrations. See Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880, 883 (5th Cir. 1999). In contrast, the Sixth Circuit and the Fourth Circuit held that Section 1782 does apply to private international commercial arbitrations. See Servotronics, Inc. v. Boeing Co., 954 F.3d 209, 210 (4th Cir. 2020); see also Abdul Latif Jameel Transportation Company Ltd. v. FedEx Corporation , 939 F.3d 710, 714 (6th Cir. 2019).

² Indeed, a petition for certiorari review of the Fourth Circuit’s decision in Servotronics has already been filed.