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October 17, 2011

Can We Discern a Section 1782 Jurisprudence From the Chevron-Ecuador Cases?

Numerous federal district courts and a handful of federal courts of appeals have played a part in the ongoing investment treaty arbitration between Chevron Corporation and the Republic of Ecuador. They have entertained and for the most part have granted discovery applications addressed to non-parties residing in the United States, made pursuant to 28 U.S.C. Section 1782. (For the latest installment known to this writer, see In re Applications of the Republic of Ecuador, 2011 WL 4434816 (N.D. Cal. Sept. 23, 2011)). This surfeit of judicial decisions from different district courts in different parts of the country, but involving the same statute and relating to the same international arbitration, warrants some examination to see if a distinctive jurisprudence has evolved whose principles are identifiable and transferable beyond the context of the Chevron-Ecuador case. Based on a review of many but certainly not all the decisions, it appears that for the most part the review of the applications is mechanical and proceeds much in the same fashion as a motion in domestic litigation to enforce a subpoena against a non-party – with a focus on the statutory criteria, first, and then on relevance of the information sought and the burden on the non-party.  But at least a few principles unique to, or more prominent because of, the international arbitration context, can be derived and deserve mention:

1.     The scope of permissible discovery will not be more restrictive than what U.S. courts permit in U.S. litigation merely because the evidence is sought for use in an international arbitral tribunal. Arguments that arbitral tribunals generally permit more narrow document production will not find favor.

2.     Claims of interference with the arbitral tribunal’s control over the discovery process will not receive a warm reception unless there has been an expression of position by the arbitral tribunal. If the arbitral tribunal has not issued any orders that clearly stake out its position concerning the procurement of evidence from non-parties, courts are likely to regard such claims of interference with arbitral control as speculative.

3.     “Bad faith,” even though not expressly identified by the U.S. Supreme Court as one of the discretionary factors to be considered by the courts, will indeed be so considered. Courts will be sensitive to claims that the discovery is sought for tactical reasons to harass non-parties in order to exert pressure on a party to the arbitration, and will examine closely the applicant’s claims that the requested material is indeed relevant to the issues framed in the arbitration.

4.     A request for “reciprocal discovery,” lodged against the Section 1782 applicant by the non-applicant party, will not be routinely accepted on the basis of fairness or proportionality, but will instead itself have to face scrutiny according to the mandatory and discretionary factors governing a Section 1782 application.  Thus, such a request for reciprocity may fail simply because the discovery sought is indeed obtainable in the arbitration.

5.     An application for Section 1782 discovery will not be seen to be in conflict with the rules the arbitral tribunal might apply, notably Rule 3.9 of the IBA Rules of Evidence, concerning recourse for assistance from the tribunal to gather non-party evidence that a party cannot obtain “on its own.” The phrase “on its own” in the IBA Rule is seen as referring to a judicial process such as Section 1782 that permits a party to obtain non-party evidence without necessarily having the support of the arbitral tribunal, and so Section 1782 discovery is not in conflict.

 

It is worthwhile also to be reminded that the availability of Section 1782 in connection with private commercial arbitrations remains uncertain.  The courts have little difficulty, on the other hand, concluding that an arbitral tribunal constituted pursuant to an international agreement like a bilateral investment treaty is a “foreign or international tribunal” under Section 1782, a conclusion reinforced, in the view of some judges, by a BIT tribunal’s use of the UNCITRAL (United Nations) arbitration rules.