Marc J. Goldstein Arbitrator & Mediator NYC
May 02, 2015

Miami Vice

Just when you thought America’s international arbitration lawyers had finally moved on from the exhausted (but not quite conclusive) debate over whether the federal international judicial assistance statute codified at 28 USC §1782 (“1782”) applies to private international commercial arbitrations, along come two decisions from two federal district courts, involving essentially one coordinated quest for discovery in the same arbitration.  Each federal district court decision reaches the same result: thumbs down on the proposed use of 1782 for non-party discovery in private arbitration because a private, contract-based Arbitral Tribunal is not the type of “tribunal” Congress had in mind when, in 1964 (as the elected members headed home to watch the Beatles on the Ed Sullivan Show), it tweaked the language of 1782 to substitute “foreign or international tribunal” in place of “foreign judicial proceedings.” In re Application of Grupo Unidos Por El Canal, S.A., 2015 WL 1815251 (N.D. Cal. April 21, 2015); In re Application of Grupo Unidos Por El Canal, S.A., 2015 WL 1810135 (D. Colo. April 17, 2015).

The primary rationale of each decision is not surprising: that the reference to “arbitral tribunals” in a 1964 law review article by Professor Hans Smit (who had been the Rapporteur of the International Rules Commission that urged Congress to update 1782 with the 1964 amendment), despite the reference having been favorably quoted in a footnote by the US Supreme Court in its 2004 Intel decision, demonstrates only that a 1782 “tribunal” is a sovereign or multi-sovereign adjudicative body — one that is established by, or pursuant to an international agreement among, one or more nation-states.

But wait readers. Patientez. Do not head for the cocktail hour quite yet. There is more nourishment here.

Understand first that this is no “ordinary” international commercial arbitration but a dispute over cost overruns on (according to one of the opinions) one of the largest ongoing infrastructure projects in the world: the installation of new locks on Panama Canal. Add to the mix that this is an ICC arbitration before three eminent arbitrators of English, Spanish and Belgian nationality, sitting in Miami, Florida, United States of America. (One can imagine much good wine being consumed at dinners for the visiting dignitaries hosted by an arbitration professor at the local university). Not yet impressed? Then consider that the arbitration clause in the contract and the Terms of Reference in the arbitration each provides that, in addition to the ICC Rules, the proceedings will be “governed by” the IBA Rules of Evidence. And — just as an indication of how well connected this Tribunal must be in the corridors of the ICC — the Terms of Reference dated in June 2014 provide that “discovery” will begin — BEGIN — on May 29, 2015.  Even ICC Rules are made to be broken.

This scenario invites us to consider the relationship between the arbitral subpoena power under Section 7 of the Federal Arbitration Act (FAA) (which applies to international arbitrations at a U.S. place of arbitration even when the arbitration agreement does not provide, as this one did, that the FAA applies), and the potential use of 1782 in an international arbitration at a U.S. seat.

According to one of the opinions in these cases, no application had been made to the Arbitral Tribunal for permission to undertake the discovery contemplated by these 1782 petitions. (According to the other opinion, the 1782 applicant, to the Court’s displeasure, had sought in its application to obscure the fact that this was a Miami arbitration). This observation was made not in relation to the possibility of an arbitral subpoena as a viable way of obtaining the same non-party evidence — it does not seem to have occurred to the judges here that this was possible —  but in regard to Article 3, Section 9 of the IBA Rules of Evidence. That section states in pertinent part that permission of the Tribunal should be sought before a party seeks evidence from a third party by compulsory process … something that many understand FAA Section 7 also to require .

We are left to wonder why the issuance of subpoenas by the Arbitral Tribunal was not a more viable option for this party as compared with 1782 petitions that faced serious obstacles even if the courts petitioned were to adopt the minority view that a private contractual Arbitral Tribunal is a 1782 “tribunal.” (Among the other obstacles to using 1782: whether a Miami-seated Tribunal is “foreign or international” for purposes of 1782; whether the documents sought were located in the US; and whether the parties’ agreement to elevate the IBA Evidence Rules to the status of “hard” procedural law for their case was a discretionary factor weighing against the 1782 application given that the Tribunal’s permission had not been sought).

We might suppose that the volume of responsive documents and their locations were considerations factored in by the applicant. Evidently the universe of documents requested from one of the witnesses was about 165,000,000 printed pages if the documents were to be printed. What fraction of them is in electronic storage and arguably “cyber-located” (the Colorado court’s terminology) in the US is unclear. The applicant might also have been reluctant to begin educating foreign arbitrators on the vagaries of US arbitral subpoenas and their judicial enforcement under FAA Section 7. (A note to foreign arbitrators: Here in New York the organized arbitration bar has just completed a major written project on this topic, and it will be presented by this commentator, the rapporteur of the project, at, among other places and dates, a venue reasonably close to Wembley Stadium, in November. Tickets are still available but the pre-sale has kept pace with the US football booked into Wembley for October).

Under the prevailing US view of US arbitral subpoenas, a documents-only discovery subpoena probably would not be judicially enforced, and if this prognosis for enforcement were impressed upon non-US arbitrators they might be quite reluctant even to issue such a summons. And under the prevailing US view the arbitral subpoena may only require the witness to testify at a hearing in the presence of the arbitrator and to bring with her documents to be received as evidence at such hearing. But the exercise the applicant in the Panama Canal arbitration had in mind here probably was to secure delivery of vast troves of documents for use by experts in composing reports on damages. The text of FAA Section 7 (a relic of the Roaring ’20s) seems to envision a more homespun witness event, consisting mainly of oral testimony aided by a few items of correspondence brought along in a satchel tossed on the jump seat of the Model T for the ten-mile ride on a dusty dirt road to the arbitrator’s storefront office across the way from the county courthouse.

Query whether  FAA Section 7 is necessarily so hemmed in by its language, so cryogenically frozen into a century-old paradigm of US domestic arbitration? Perhaps not. The arbitrators  in this Panama Canal case ought to be amenable to the view that all Section 7 requires is that the subpoena provide for the physical appearance of the witness to testify before one or more of them and bring along the documents. If that occurs, or if the mere prospect of such an event prompts an agreed tender of documents without a hearing, Section 7 is not offended. And if the arbitrators opt to schedule this event nine weeks (or more) ahead of the merits hearing, in recognition of the work needed to make intelligent use of the documents in the arbitration,  the Tribunal should not be seen as violating the FAA, but  instead as applying a 1925 statute pragmatically to the needs of 2015 arbitration. Section 7 does not in terms prohibit the use of evidence in a way that looks like discovery; it only specifies the manner in which the evidence shall be obtained if compulsory process is ultimately the only way to obtain it.

Arbitration Commentaries invites the skilled advocates in its audience to a contest: to compose the most persuasive statement of contrition in support of a (hypothetical) application to this Panama Canal arbitral tribunal to issue an FAA arbitral subpoena notwithstanding two failed attempts to use 1782. The winning contestant will receive a dinner in Miami, but not necessarily with the Tribunal or the local arbitration professor.


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