Solving the (section) 1782 puzzle: bringing certainty to the debate over 28 U.S.C.

• Author: Beale, Kenneth
• Position: Section

Much attention has been devoted during the past several years to whether 28 U.S.C. [section] 1782--a statute authorizing US. federal courts to compel discovery in connection with foreign proceedings--applies to foreign arbitral proceedings. Following the U.X Supreme Court's broad interpretation of 28 U.S C. [section] 1782 in 2004 in Intel v. Advanced Micro Devices, Inc., the extension of[section] 1782 's scope to foreign arbitral proceedings has become one of the most hotly debated topics in the field of private international law, with scholars predicting a surge in requests for assistance under [section] 1782 and bemoaning the deleterious effects of importing American-style discovery into international arbitral proceedings. Paradoxically, however, relatively few requests for disclosure have been made under [section] 1782 in connection with foreign arbitral proceedings since the Supreme Court decided Intel, and courts confronted with such requests after Intel have reached different conclusions on whether, and how, [section] 1782 should be extended to foreign arbitral proceedings.

This article seeks to bring certainty to the debate by offering a normative theory for how courts should apply [section] 1782 in the future in connection with foreign arbitral proceedings. According to this theory, U.S. courts can provide assistance under [section] 1782 in connection with foreign arbitral proceedings, but only in light of: (1) the specific guidelines enumerated by the Supreme Court in Intel; (2) the Supreme Court's strong pro-arbitration stance; and (3) parties' arbitration agreements. These factors compel granting [section] 1782 requests only under limited circumstances, most importantly only if arbitrators' control over the taking of evidence is preserved and the integrity of the arbitral process is maintained. It follows from this normative theory that [section] 1782 should play an important but limited role in international arbitration--a role that gives meaningful and targeted assistance to the fact- finding of foreign arbitral tribunals rather than applying American-style discovery in an arena where such methods are neither productive nor welcome.

I. INTRODUCTION II. THE HISTORY OF 28 U.S.C. [section] 1782 III. INTERNATIONAL ARBITRATIONS HISTORICALLY HAVE BEEN OUTSIDE OF THE SCOPE OF [section] 1782 A. National Broadcasting Company v. Bear Stearns & Company B. Republic of Kazakhstan v. Biedermann International IV. THE SUPREME COURT IN INTEL CORP. V. ADVANCED MICRO DEVICES, INC. INTERPRETED [section] 1782 BROADLY, CALLING INTO QUESTION PRIOR INTERPRETATIONS OF IT A. The Supreme Court Interpreted [section] 1782 Liberally B. The Supreme Court Provided Guidelines for Exercising Discretion Under [section] 1782 V. POST-INTEL DECISIONS ON THE APPLICABILITY OF [section] 1782 TO FOREIGN ARBITRAL PROCEEDINGS A. In re Oxus Gold PLC B. In re Roz Trading Ltd C. In re Hallmark Capital Corp D. In re Application of Babcock Borsig AG E. La Comision Ejecutiva Hidroelecctrica Del Rio Lempa v. El Paso Corp F. In re Norfolk Southern Corp G. In re Operadora DB Mexico, S.A. DE C.V H. OJSC Ukrnafta v. Carpatsky Petroleum Corp I. In re Winning (HK) Shipping Co. Ltd J. In re Chevron K. In re Caratube International Oil L. Chevron v. Charles Camp M. Other Pending Chevron Actions N. Summary of Case Law VI. REACTIONS TO POST-INTEL DECISIONS REGARDING THE SCOPE OF [section] 1782 TO FOREIGN ARBITRAL PROCEEDINGS A. Concerns Regarding the Costs and Efficiency of Foreign Arbitral Proceedings B. Concerns Regarding the Asymmetrical Effect of [section] 1782 C. Concerns Regarding the Unsettled Nature of [section] 1782 Case Law VII. A NORMATIVE THEORY FOR HOW [section] 1782 SHOULD BE APPLIED IN CONNECTION WITH FOREIGN ARBITRAL PROCEEDINGS A. Courts Considering [section] 1782 Discovery Requests Must Follow the Guidelines Set Forth in Intel 1. Arbitral Receptivity 2. Party to the Foreign Proceedings 3. The "Nature and Character" of the Tribunal 4. Unduly Intrusive or Burdensome Request 5. Circumventing Foreign Proof-Gathering B. Courts Considering [section] 1782 Discovery Requests Must Follow the Supreme Court's Precedent In Favor of Arbitration C. Courts Considering [section] 1782 Discovery Requests Must Take Into Account the Parties' Arbitration Agreements D. Summary of How [section] 1782 Should Be Applied In Connection With Foreign Arbitral Proceedings VIII. AN EXPLANATION OF THE SPARING USE OF [section] 1782 IN FOREIGN ARBITRAL PROCEEDINGS IX.CONCLUSION I. INTRODUCTION

Four years ago, two United States federal courts broke new ground by ordering discovery pursuant to 28 U.S.C. [section] 1782 in connection with foreign arbitral proceedings. (1) Previously, this statute was not thought to apply to proceedings before foreign arbitral tribunals. (2) In the four years following this purported extension of [section] 1782's scope, much ink has been spilled on this topic, with commentators offering predictions about the deleterious effects of importing American-style discovery into international arbitral proceedings. (3) One might have concluded that a Pandora's box had been opened and a new era of activist involvement by U.S. courts in foreign arbitral proceedings had begun. Paradoxically, however, this has not happened. To the contrary, over the past few years, relatively few requests for disclosure have been made under [section] 1782 in connection with foreign arbitral proceedings, even fewer U.S. courts have addressed this issue, and several that

have done so have called into question [section] 1782's extension to foreign arbitral proceedings. This article explains this apparent paradox regarding the initial excitement about [section] 1782's purported extension and the reality of its relatively infrequent use. It then offers a normative theory for how courts should apply [section] 1782 in the future in connection with proceedings before foreign arbitral tribunals, concluding that [section] 1782 should play a limited--albeit important--role in connection with proceedings of this sort.

The normative theory presented in this article is a theory that, we contend, many lawyers already tacitly accept and that partially explains why [section] 1782 has not been used more in connection with international arbitrations. According to this theory, courts considering disclosure requests under [section] 1782 in connection with foreign arbitral proceedings must consider them in light of: (1) the specific guidelines enumerated by the Supreme Court in Intel v. Advanced Micro Devices, Inc., (4) (2) the Supreme Court's strong pro-arbitration stance, (5) and (3) parties' arbitration agreements.6 When these factors are taken into account, it becomes clear that requests for discovery pursuant to [section] 1782 in connection with foreign arbitral proceedings should only be granted in limited circumstances (e.g., when a foreign arbitral tribunal first approves of the assistance and the request is narrowly tailored in scope).

When [section] 1782 is applied in light of these factors, American-style discovery should not become the order of the day in international arbitral proceedings, and commentators' fears about [section] 1782--especially about harm to U.S. parties- -are misplaced. This conclusion is buttressed by several other factors limiting parties' requests for disclosure under [section] 1782, including: (1) parties' fear of upsetting arbitral tribunals by requesting discovery from U.S. courts under [section] 1782; (2) provisions in some parties' arbitration agreements that impair their ability to request judicial assistance pursuant to [section] 1782, such as the designation of certain institutional rules to govern an arbitration; and (3) the current lack of consensus among U.S. district courts, and the potential for a future circuit split, regarding the applicability of [section] 1782 to foreign arbitral proceedings.

This Article is divided into six sections. First, we provide an overview of the history of [section] 1782 (Part II). We then explain why, until recently, the consensus opinion in the United States was that foreign arbitral proceedings were outside of the scope of [section] 1782 (Part III). Next, we discuss the U.S. Supreme Court's seminal opinion in Intel, which--although it did not expressly discuss the extension of [section] 1782 to foreign arbitral proceedings--interpreted [section] 1782 broadly and called into question prior narrow interpretations of it (Part IV). After discussing Intel, we examine post-Intel U.S. federal court opinions--In re Roz Trading, (7) In Re Oxus Gold, (8) In re Hallmark Capital Corp., (9) In re Babcock Borsig AG, (10) La Comision Ejecutiva Hidroelecctrica Del Rio Lempa v. El Paso Corp. (both in Texas and Delaware), (11) In re Norfolk Southern Corp., (12) In re Operadora, (13) OJSC Urknafta, (14) In re Application of Winning, (15) In re Application of Chevron, (16) In re Application of Caratube, (17) Chevron Corp. v. Charles Camp, (18) and several other Chevron- related decisions (19) that address whether [section] 1782 should be extended to foreign arbitral proceedings (Part V). We then provide a normative theory of how [section] 1782 should be interpreted in the future in connection with foreign arbitral proceedings (Part VI) and explain why, in light of this theory, [section] 1782 has been used relatively sparingly in recent years in connection with foreign arbitral proceedings (Part VII). Finally, we conclude by offering practical advice regarding [section] 1782's application in connection with foreign arbitral proceedings, both to courts considering discovery requests made pursuant to it and to parties and their counsel in international arbitrations where such disclosure requests have been, or may be, made.

II. THE HISTORY OF 28 U.S.C. [section] 1782 For over 150 years, U.S. federal courts have had the authority to order discovery in connection with foreign proceedings. (20) The first federal statute giving...