Marc J. Goldstein Arbitrator & Mediator NYC
July 02, 2012

Eleventh Circuit Ruling that Section 1782 Applies to Private Arbitral Tribunals Adds to Controversy

Should we rejoice or commiserate over the decision during the past week, by a panel of the US Eleventh Circuit Court of Appeals, holding that a party to a domestic arbitration in Ecuador could obtain US discovery for the Ecuador case pursuant to Section 1782 of the US Judicial Code? (Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 2012 WL 2369166 (11th Cir. Jun. 25, 2012)).  Surely litigation lawyers in Florida will be pleased, as the news will spread rapidly in Central and South America, and whereas US sources of evidence for Latin arbitrations are somewhat more likely to be found in Florida than elsewhere.  But some readers of the Section 1782 canon will wonder if the Eleventh Circuit panel majority has overstepped a boundary in concluding that its holding is a logical extension of the Supreme Court’s decision in the Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004).

The issue is whether an arbitral tribunal that is a creature of a private commercial contract is a “foreign or international tribunal” as that term is used in Section 1782. The US Supreme Court in the Intel case held that the European Commission and the EU courts with adjudicatory jurisdiction over claims involving violations of EU competition law and regulations are such tribunals,  and that evidence to be gathered in the US for presentation to the EU’s investigative Directorate

General — Competition (“DG-Competition) was “for use in” such a “tribunal” because the investigative record of the DG-Competition proceedings would be the basis for European Commission adjudication imposing or declining to imposed penalties, which would be subject to judicial review in the EU Court of First Instance and on further appeal to the European Court of Justice.

But in Intel, there was no doubt about the sovereign DNA of the DG-Competition, the European Commission, or the EU courts; they were creatures of the EU Treaty; and so the Supreme Court’s decision only had to focus on whether the connection between evidence presented to the DG-Competition and the ensuing adjudications was sufficiently clear that evidence gathered for presentation to DG-Competition was “for use in” an EU adjudication, even though the adjudicative proceedings was not yet pending.

The Supreme Court in Intel did not state this premise explicitly. One can perhaps read the Court’s dicta about “foreign or international tribunal” to relate only to adjudicatory function, irrespective of the sovereign or private character of the tribunal. And it was this uncertainty about the Intel Court’s analysis that fueled debate in commentaries and conferences, and a few district courts, over whether a privately-constituted arbitral tribunal seated outside the US is a “foreign or international tribunal” under 1782 in light of Intel.

The phrase “foreign or international” by itself suggests that the tribunal must be a unit of a sovereign State or States. If the intention of Congress had been only to identify tribunals situated outside the US, sovereign or private, the phrase “foreign or international” is redundant and imprecise. But we also know that Section 1782 in its pre-1964 iteration was available to get evidence for use in “foreign or international judicial proceedings.”  And the language change made in 1964 via the drafting of the late Professor Hans Smit, to substitute “tribunals” for “judicial proceedings,” appeared to have as its purpose to take cognizance of the fact that foreign States, like the US, had a variety of adjudicatory bodies that might be left out if the catch phrase remained “judicial.” But the contemporaneous record of the 1964 amendment — six years prior to US accession to the New York Convention — furnishes no indication that Congress intended to obliterate distinctions between sovereign and private arbitral adjudications.

The Eleventh Circuit records in a footnote that its decision is in conflict with pre-Intel decisions of the Second and Fifth Circuits, whose decisions placed private arbitral tribunals outside Section 1782 because the statute was only “intended to cover governmental or inter-governmental arbitral tribunals and conventional courts and other state-sponsored adjudicatory bodies.” But, says the Eleventh Circuit panel majority: that was then (pre-Intel) and this is now (post-Intel), and the Eleventh Circuit majority reads Intel as “set[t]ing forth a far broader and wholly functional definition of the term ‘tribunal.'” (emphasis supplied).

It is at least arguable that the Supreme Court in Intel did not intend to cast aside the sovereign connection requirement.  First, the sovereign- private distinction was not before the Court. The EU’s DG-Competition and the EU’s competition law courts were clearly inter-governmental bodies. Second, Intel records that the 1964 amendment of Section 1782 flowed from the establishment by Congress in 1958 of a “Commission on International Rules of Judicial Procedure” whose mandate as set forth in the enactment was to “investigate and study existing practices of judicial assistance between the United States and foreign countries with a view to achieving improvements.” (emphasis supplied). Third, Intel notes that the Senate Report on the 1964 change “explains that Congress introduced the word ‘tribunal’ to ensure that ‘assistance is not confined to conventional courts,’ but extends also to ‘administrative and quasi-judicial proceedings.'” (emphasis supplied). Fourth, the Intel Court, citing the amicus brief filed by the European Commission, made a precise record of the DG-Competition’s status as a creature of inter-governmental sovereignty under the European Union treaty. The Court then undertook, in order “to place this case in context,” to trace the role of the DG-Competition in enforcing EU competition law and regulations. Fifth, the holding in Intel is that “[t]he statute authorizes…a federal district court to provide assistance to a complainant in a European Commission proceeding that leads to a dispositive ruling, i.e. a final administrative action both responsive to the complaint and reviewable in court.” (emphasis supplied). Sixth, the Intel Court notes that among the discretionary factors a district court may consider is “the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assistance.” (emphasis supplied). Seventh, in its analysis of whether a Section 1782 applicant must show that the matter would be discoverable in the foreign tribunal, the Court “question[ed] whether foreign governments would in fact be offended by a domestic prescription permitting, but not requiring, judicial assistance.”  (emphasis supplied). Eighth, the Intel decision includes no reference to the pre-Intel Second and Fifth Circuit decisions holding that a private arbitral tribunal is not within Section 1782. Ninth, the Intel court quoted Professor Smit’s International Litigation treatise, which included a reference to “arbitral tribunals” amidst a litany of clearly sovereign-related adjudicative bodies, and the Court quoted the Smit treatise not for the purpose of suggesting that 1782 reaches non-sovereign arbitral tribunals, but only to show that 1782 clearly covered the EU courts that would hear EU antitrust claims based on the investigative record made before the EU’s DG-Competition.

There is a case to be made, therefore, that Intel was not pronouncing a “strictly functional” approach to what is a “foreign or international tribunal,” but instead that, having no need to deal with the private versus sovereign dichotomy, the Court adopted a functional approach to the question whether the “for use in” requirement of Section 1782 was met when (i) the only forum to which the US-gathered evidence could be directly submitted, the DG-Competition, was investigative not adjudicatory, but (ii) the applicant for the 1782 discovery might eventually use the DG-Competition record to pursue its claims before the EU Court of First Instance and then on appeal to the European Court of Justice.

A final word about the decision from the Eleventh Circuit. Only two of the three members of the panel accepted the position that a private arbitral tribunal is covered by Section 1782. And one of those, the non-author of the opinion, was a district court judge in Florida sitting by designation. The other regular Eleventh Circuit appellate judge on the panel concurred specially, to state that he would have affirmed the decision of the district court to allow 1782 discovery only because the arbitral claimant in Ecuador was in addition contemplating civil and private criminal suits in Ecuador courts, courts that are indisputably “foreign tribunals” within the ambit of Section 1782. Such division of opinion within the appellate panel might lead to en banc review by the full Eleventh Circuit, and arbitration law watchers will be watching for that in the coming weeks.

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