Second Circuit: § 1782 Not Available for Private Foreign Arbitration Proceedings
For more than half a century, 28 U.S.C. § 1782 has authorized federal courts to compel the production of discovery materials “for use in a proceeding in a foreign or international tribunal” upon the application of any interested person. While the language of § 1782 is relatively simple, its application has proven less so. In recent years, federal courts have grappled with the scope of the statute, including what constitutes a “foreign or international tribunal” and whether that term includes private commercial arbitrations conducted outside the United States.
On July 8, 2020, the US Court of Appeals for Second Circuit addressed that very question in a matter captioned In re Application and Petition of Hanwei Guo.1 There, a unanimous panel reiterated the court’s long-standing position that § 1782 does not authorize federal courts to order discovery for use in private foreign arbitration proceedings. The court did so notwithstanding the US Supreme Court’s intervening decision in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004) and recent contrary decisions from the Fourth and Sixth Circuits. The Second Circuit’s ruling, coupled with a similar Fifth Circuit decision several years ago, injects even more uncertainty into the § 1782 landscape nationwide and may presage another trip to the Supreme Court.
Discovery under § 1782
28 U.S.C. § 1782 permits (but does not require) federal courts to order discovery for use in foreign tribunals if: (1) the person from whom discovery is sought resides or is found within the relevant federal court district; (2) discovery is sought in connection with a “foreign or international tribunal”; (3) the materials sought are “for use” in the tribunal; and (4) discovery is sought by an “interested person” or the tribunal itself. 2
If a district court finds that the discovery request satisfies all four prerequisites, it then considers four discretionary factors in deciding whether to compel discovery: (1) whether the subject of the request is a party to the underlying proceeding and within its jurisdiction; (2) the nature of the tribunal and its receptivity to US judicial assistance; (3) whether the request attempts to circumvent foreign proof-gathering restrictions, or policies of the foreign country and/or the United States; and (4) whether the request is unduly intrusive or burdensome.3
In re Guo
The arbitration underlying the In re Guo petition arose from petitioner Guo’s early investment in several Chinese music streaming ventures, and his later decision to sell his investment stake in what he alleges were a series of fraudulent transactions that undervalued his shares. The companies were later acquired by Tencent Music—now one of the largest music streaming services in the world.
In September 2018, Guo and other investors initiated arbitration against Tencent and its affiliates before the China International Economic and Trade Arbitration Commission (“CIETAC,” an independent, government-created arbitral body) pursuant to their investment agreement. Through the CIETAC arbitration, Guo and his co-plaintiffs seek monetary damages from the defendants and restoration of their equity stakes.
In December 2018, Guo filed a § 1782 petition in the Southern District of New York, seeking documents from several investment banks related to their underwriting of Tencent’s IPO. The district court denied the petition, concluding that it was bound by the Second Circuit’s 1999 decision in NBC v. Bear Stearns,4 which held that § 1782 could not be used to obtain discovery for use in private foreign arbitration, and that Guo’s proceeding before CIETAC was such an arbitration.
Second Circuit Decision
Guo appealed to the Second Circuit, arguing that (1) the district court erred in relying on NBC to deny his § 1782 petition, in light of the Supreme Court’s decision in Intel and (2) CIETAC is not a private arbitral body in any event. The Second Circuit found each argument unavailing.
The Second Circuit began by reviewing its decision in NBC, which concluded that when enacting § 1782, Congress only “intended to cover governmental or intergovernmental arbitral tribunals and conventional courts and other state-sponsored adjudicatory bodies,” and that broadening its application to private arbitrations would undermine the efficiency and cost-effectiveness sought by parties in those types of proceedings.5
This holding was not disturbed by Intel, the Second Circuit found, because Intel involved an arbitration proceeding before a public body, not a private one. Specifically, the Intel Court considered whether § 1782 permitted discovery on behalf of a party engaged in an antitrust arbitration proceeding before the Directorate General for Competition of the European Commission. The Court held that it did, as the Commission fell under the meaning of “foreign or international tribunal” where it “acts as a first-instance decisionmaker” in resolving the parties’ dispute.6 Thus, the Second Circuit concluded that NBC remains good law and, in fact, “comports with both Intel’s reiteration of broad principles and its specific analysis of § 1782.”7
The Second Circuit similarly rejected Guo’s argument that CIETAC should be considered a state-sponsored arbitral body. Applying the framework set out in Intel, the court asked “whether the body in question possesses the functional attributes most commonly associated with private arbitration” by examining factors such as “the degree of state affiliation and functional independence possessed by the entity, as well as the degree to which the parties’ contract controls the panel’s jurisdiction.”8
While CIETAC was originally created by the Chinese government, the Second Circuit explained, it “possesses a high degree of independence and autonomy,” only exercises jurisdiction by the parties’ consent, and employs processes “nearly identical to that of private arbitration panels in the United States.”9 The court went on to explicitly reject Guo’s argument that CIETAC should be considered a government tribunal because “parties to the arbitration in some cases rely on Chinese courts” to enforce awards, as that would bring “the majority of arbitration which takes place abroad … within the scope of § 1782” and render the distinctions drawn by NBC irrelevant.10
Although the Second Circuit acknowledged Congress’s intent in passing § 1782 to ensure federal courts could assist the “panoply of unilateral, multilateral, international, and novel administrative bodies created by governments in the wake of the Second World War,” it nonetheless concluded that “the statute does not sweep so broadly as to include private commercial arbitrations” and affirmed the district court’s decision.11
A Growing Circuit Split over Private Foreign Arbitration and § 1782
In re Guo manifests a growing split among the circuits over whether § 1782 applies to private foreign arbitration proceedings. The Second Circuit has now joined with the Fifth Circuit in holding that Intel did not compel a reading of § 1782 that permits discovery in such circumstances.12 These holdings, however, arguably conflict with two recent decisions by the Fourth and Sixth Circuits.
In Servotronics v. Boeing,13 the Fourth Circuit held that parties to a private UK-based arbitration proceeding could pursue discovery in the United States under § 1782. Rather than directly addressing the question whether all private foreign arbitration proceedings were within the scope of the law, the court determined that even if it were to adopt the “more restrictive definition” of a tribunal endorsed by the Second and Fifth Circuits, the UK arbitration proceeding nonetheless qualified. The court concluded that the UK arbitral panel was acting with sufficient government-conferred authority to fall within the reach of § 1782, as “to a greater degree than arbitrations in the United States, UK arbitrations are sanctioned, regulated, and overseen by the government and its courts.”14
The Sixth Circuit’s decision in In re Application to Obtain Discovery for Use in Foreign Proceedings15 went even further than Servotronics, holding that § 1782 authorized discovery for use in private foreign arbitration proceedings, regardless of whether they were operating in a quasi-governmental capacity. The court determined that “the text, context, and structure of § 1782(a) provide no reason to doubt that the word ‘tribunal’ includes private commercial arbitral panels” located in foreign jurisdictions, and that the Supreme Court’s ruling in “Intel contains no limiting principle suggesting that the ordinary meaning of ‘tribunal’ does not apply” to private arbitration proceedings.16
Implications
Unless and until the Supreme Court resolves the circuits’ disagreement, businesses and individuals will face varying degrees of risk in seeking and defending against § 1782 discovery. Because § 1782 requires that the subject of a discovery request reside or be found within the district in which the request is filed, persons “found” in the Second and Fifth Circuits may be insulated from § 1782 requests arising from private foreign arbitrations while those within the Fourth and Sixth Circuits may be forced to comply with an analogous request.
Moreover, as addressed in several of the cases discussed above, the expansive approach embraced by the Fourth and Sixth Circuits may alter the discovery process for private international arbitrations, where broad, US-style discovery typically is not available.17 That said, even courts endorsing a broader reading of § 1782 have been quick to note that federal courts are already empowered with discretion to reject or modify an “unduly intrusive or burdensome” discovery request and may do so on the basis that the request “conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States.”18 Thus, even persons subject to a discovery order under § 1782 will nonetheless have potentially viable means of defeating intrusive, burdensome, or otherwise inappropriate requests for discovery.
This much is clear: until and unless the Supreme Court finally steps in and resolves the splits among the circuit courts, parties to international arbitration proceedings should carefully consider the state of the law in relevant jurisdictions to determine the availability of, and exposure to, § 1782 discovery.
12 See El Paso Corp. v. La Comision Ejecutiva Hidroelectrica Del Rio Lempa, 341 F. App’x 31, 34 (5th Cir. 2009)
(explaining that the “question of whether a private international arbitration tribunal also qualifies as a “tribunal” under § 1782 was not before the Court” in Intel).
