Marc J. Goldstein Arbitrator & Mediator NYC
May 11, 2010

More Fuel on the Fire Concerning Section 1782 in Arbitration

Last week a federal district court judge in New York granted an application made by Chevron Corporation, pursuant to 28 U.S.C. Section 1782, to obtain discovery from a non-party in the United States for use as evidence in a ICSID arbitration between Chevron and the Republic of Ecuador. (In re Application of Chevron Corp., Misc. No. 19-111 (S.D.N.Y. May 6, 2010). A copy of the not- officially-published decision is linked here.) That arbitration is taking place under the UNCITRAL Rules, based on the Bilateral Investment Treaty (“BIT”) between Ecuador and the United States. Two commentaries on a Partial Award in that arbitration have appeared in Arbitration Commentaries in recent weeks.

It is of course a much-debated, and sporadically litigated, question whether a private commercial arbitration tribunal constituted pursuant to a private commercial contract is a “foreign or international tribunal” as that term is used in Section 1782. That question was not presented in the Chevron matter. It is not controversial that an ICSID tribunal, whose facilities for arbitration exist by reason of one international treaty – the Washington Convention — and the use of which is agreed upon in another international treaty – the BIT between nation states – is indeed an “international tribunal” under Section 1782. The U.S. Supreme Court’s analysis of the legislative history of Section 1782 in the Intel case (Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004)) makes it plain that arbitral bodies established by inter-governmental agreements were clearly intended to be covered by the statute.

The Chevron court need only have drawn this clear distinction to resolve the case. But instead, after drawing this distinction, it wrote more expansively, giving advocates of the use of Section 1782 in private arbitration new ammunition. The Court wrote:

“As an initial matter, the arbitration here at issue is not pending in an arbitral tribunal established by private parties. It is pending in a tribunal established by an international treaty, the BIT between the United States and Ecuador, and pursuant to the UNCITRAL Rules. Further, in [Intel…], which post-dated National Broadcasting (the NBC v. Bear Stearns case from 1999 in which the Second Circuit held that 1782 does not apply to a private ICC arbitration), the Supreme Court in dictum quoted a law review article for the proposition that ”[t]he term ‘tribunal’. . . includes investigating magistrates, administrative and arbitral tribunals, and quasi-judicial agencies, as well as conventional civil, commercial, criminal, and administrative courts.” In the wake of Intel, at least two district court in our Circuit and one in the Third Circuit have followed the Supreme Court’s dictum and held that international arbitral bodies operating under UNCTITRAL rules constitute “foreign tribunals” for purposes of Section 1782. This Court agrees.”

Unfortunately, this analysis begins with clarity and dissolves into confusion. Two of the three post-Intel district court cases mentioned in this quoted excerpt were BIT cases. But the third, decided by a federal district court in Delaware, involved an electric power supply contract between what appears to have been either an El Salvador energy agency or a state-owned company in El Salvador, and the affiliate of a U.S. energy company. The contract provided for arbitration under the UNCITRAL Rules. The published opinion in the Delaware case cited by the Chevron court was a decision denying a motion for reconsideration of the order granting Section 1782 discovery, and that opinion contains merely a conclusory assertion that Intel and post-Intel district court decisions indicate that Section 1782 “does indeed apply to private foreign arbitrations.” The original order granting Section 1782 discovery was made entirely without findings of fact, conclusions of law, or any statement of reasons. (It is found on PACER in the case docket.) And the El Salvador entity, in its application (also on PACER), elided the question of its relationship to the El Salvador government.

So, future arbitral Section 1782 applicants, and commentators bullish on use of Section 1782 in arbitration, should tread carefully if they attempt to place the Chevron case in the private commercial arbitration camp. It truly does not belong there. Its citation of the Delaware case appears to have been made without careful study of the record in that case. (To make matters even more complicated, that decision was vacated and remanded as moot by the Third Circuit, a subsequent history overlooked by the Chevron court). And perhaps an argument can be made that if Section 1782 reaches an investor-state arbitration under a BIT, it may fairly be said to reach the scenario of the Delaware case, i.e. an investor-state arbitration under a bilateral contract with a foreign state, providing for arbitration under United Nations (UNCITRAL) Rules. But that is still a far cry from saying that Section 1782 applies to private commercial arbitration based on a bilateral contract between non-state actors to arbitrate under private auspices such as those of the ICDR or the ICC.

I do not here revisit the entire debate, but only sound a cautionary note on whatever new contribution the Chevron case can fairly be said to make.

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