Southern District grants Section 1782 discovery for private commercial arbitration

Judge Furman makes decision on private international arbitral bodies

Private international arbitral bodies are considered foreign tribunals for the purpose of 28 U.S.C. §1782 (“Section 1782”), the United States statute that allows parties to obtain evidence in the U.S. for use in legal proceedings outside of the U.S., according to a recent decision by Judge Furman of the District Court for the Southern District of New York (“Southern District”).

That case, In re ex parte application of Kleimar N.V., involved a request by Kleimar N.V. (“Kleimar”) to obtain documents for a proceeding before the London Maritime Arbitration Association (“LMAA”), where Kleimar and Dalian Dongzhan Group Co. Ltd. are engaged in a private commercial arbitration. In denying a motion to vacate a prior order of discovery, Judge Furman found that the LMAA constituted a foreign tribunal under Section 1782. This decision is significant because it is a departure from the historical practice of denying the application of Section 1782 to private commercial arbitration

Overview of Section 1782

Section 1782 is a statute designed to allow litigants in foreign proceedings to seek relevant discovery that is located in the United States. In relevant part, the statute states, “The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal.”

Traditionally, courts, including the Second Circuit, did not find that Section 1782 applied to private international arbitrations. In National Broadcasting Co. v. Bear Stearns & Co., Inc. the Second Circuit held that “Congress did not intend for [Section 1782] to apply to an arbitral body established by private parties” in part because such discovery would “undermine one of the significant advantages of arbitration” by eliminating discovery limits.

The Southern District’s Decision

Judge Furman cited the Supreme Court’s 2004 decision in Intel Corp v. Advanced Micro Devices to justify the court’s break from precedent. Though Intel granted a discovery production to the Directorate-General for Competition of the Commission of the European Communities, rather than to an arbitral body, dictum in that case stated that, for the purposes of Section 1782, the term tribunal "includes investigating magistrates, administrative and arbitral tribunals, and quasi-judicial agencies, as well as conventional civil, commercial, criminal, and administrative courts."

Judge Furman also referenced the Second Circuit’s 2011 decision in Chevron Corp v. Berlinger, stating that it “declin[ed] to reach whether a private arbitration qualifies under Section 1782.” For support Judge Furman pointed to the Eleventh Circuit’s decision in In re Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., which found that a private commercial arbitral tribunal fell under Section 1782 and New Jersey and Florida district court decisions, In re Owl Shipping, LLC and In re Application of Winning (HK) Shipping Co. Ltd., respectively, which held that the LMAA was a foreign tribunal.

Where Does the Law Stand?

Across the United States, ambiguity remains about whether or not Section 1782 applies to private commercial arbitral tribunals.

A number of courts, including the Fifth Circuit in El Paso Corporation v. La Comision Ejecutiva Hidroelectrica del Rio Lempa and district courts in Texas, Illinois, California, and Colorado, have found, post-Intel, that the definition of foreign tribunals under Section 1782 does not include private commercial arbitral bodies. These courts write that Intel did not overturn existing precedent because it did not state that intention or even expressly mention private commercial international arbitration.

It remains to be seen how the definition of foreign tribunals under Section 1782 will develop. However, individuals and entities that can be found in the Southern District should remain vigilant of the fact that Section 1782 discovery may be permitted in any private international arbitrations in which they are engaged.