International Arbitration Update: Supreme Court to Resolve Circuit Split Over Discovery in Aid of Foreign-Seated Private Commercial Arbitrations

On March 22, 2021, the United States Supreme Court granted certiorari in Servotronics Inc. v. Rolls-Royce PLC, No. 20-794, to determine whether the discretion granted to district courts under 28 U.S.C. § 1782 (“Section 1782”) to render assistance in gathering evidence for use in a “foreign or international tribunal” includes seeking evidence in aid of private commercial arbitrations (in contrast to treaty-based arbitrations).

Importantly, Section 1782 does not define what qualifies as a “foreign or international tribunal.” Federal courts are increasingly divided on whether the definition includes foreign-seated private commercial arbitral tribunals. The U.S. Courts of Appeals for the Fourth and Sixth Circuits have held that a “foreign or international tribunal” includes private commercial arbitral tribunals, whereas the U.S. Courts of Appeals for the Second, Fifth, and Seventh Circuit have decided that the language does not extend to such tribunals.

With the clear and important circuit split on this issue, it seemed only a matter of time before the Supreme Court would weigh in to resolve the question of what qualifies as a “foreign or international tribunal.” Thus, the Supreme Court’s grant of certiorari here comes as no surprise. As discussed below, Servotronics had found itself in an absurd situation, with different U.S. Courts of Appeals reaching polar opposite conclusions with respect to discovery in the same arbitral proceeding. 

Section 1782 Discovery

Section 1782 empowers federal district courts to grant applicants the authority to issue subpoenas in the United States to obtain documents and/or testimony in aid of foreign proceedings. Specifically, an applicant pursuing Section 1782 discovery must establish that:

a) The discovery is for use in an actual or contemplated proceeding before a “foreign or international tribunal”;

b) The applicant is an “interested person” in that proceeding; and

c) The person from whom the discovery is sought resides or is otherwise found in the district of the court where the application is filed.[1]

If the applicant satisfies all of these statutory requirements, a district court has the discretion to grant or deny the application after considering the following factors established by the U.S. Supreme Court in Intel Corp. v. Advanced Micro Devices, Inc.:

• Whether the discovery sought is within the foreign tribunal’s jurisdictional reach and, thus, accessible without resorting to Section 1782;
• The nature of the foreign tribunal, the character of the proceedings abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal court judicial assistance;
• Whether the applicant’s request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States; and
• Whether the request is unduly intrusive or burdensome.[2]

The relevant issue for parties to a foreign-seated arbitration proceeding seeking U.S. discovery is whether a private commercial arbitration outside the United States qualifies as a “foreign or international tribunal” within the meaning of Section 1782.[3] The statute’s failure to define those terms and disagreement regarding the correct interpretation is the source of the current 3–2 circuit split and the Supreme Court’s decision to weigh in.

Growing Circuit Split and Servotronics’ Petition for Writ of Certiorari

Long before Servotronics found itself in the middle of the circuit split, the Second and Fifth Circuits had rejected the use of Section 1782 to obtain discovery in aid of private commercial arbitration seated outside the United States.[4] For almost 20 years, no U.S. Court of Appeals had ever found that Section 1782 discovery could be sought in aid of foreign-seated private commercial arbitration. In 2019, the Sixth Circuit was the first appellate court to permit this use of Section 1782.[5]

In March 2020, the 2-1 circuit split became a 2-2 tie when the Fourth Circuit in Servotronics, Inc. v. Boeing Co. joined the Sixth Circuit to permit Section 1782 discovery in aid of a foreign-seated private commercial arbitration.[6] The Fourth Circuit considered whether a party to a private commercial arbitration in the United Kingdom could obtain testimony from residents of South Carolina for use in the arbitration.[7]

The tie did not last long. Just six months later in September 2020, the Seventh Circuit had to decide whether Servotronics could seek discovery in aid of the same arbitral proceeding at issue in the Fourth Circuit case.[8] The Seventh Circuit held that Section 1782 discovery in aid of private commercial arbitration is impermissible.

As of this writing, the Third and Ninth Circuits have cases pending on this very issue.[9]

On December 7, 2020, Servotronics filed a petition for writ of certiorari asking the Supreme Court to decide whether parties may seek discovery in the United States for use in commercial arbitration proceedings seated outside the United States under Section 1782.[10]

With the Fourth and Sixth Circuits on one side, the Second, Fifth, and Seventh Circuits on the other, and with Servotronics squarely in the middle of the circuit split, the time was ripe for the Supreme Court to clarify this hotly debated question.

Now that the Supreme Court has granted certiorari, it will have the opportunity to decide once and for all if Section 1782 allows federal district courts to order discovery for use in foreign-seated private commercial arbitral proceedings.

Briefs in the case will be due during spring and summer 2021, with arguments to take place in the fall.  Notably, Justice Alito took no part in the decision to grant certiorari. Thus, the case will likely be decided by the remaining eight Justices. If the Court splits 4-4, then the Seventh Circuit decision will be affirmed by the equally divided Supreme Court, but in the absence of a majority rule, the circuit split will remain.

[1] 28 U.S.C. § 1782(a). 

[2] 542 U.S. 241, 264–65 (2004) (internal quotations and citations omitted).

[3] It is also possible for international parties to seat their arbitrations in the United States.  Some commentators have argued that such proceedings should be considered proceedings “in an international tribunal” for purposes of Section 1782.  See, e.g., Hans Smit, American Assistance to Litigation in Foreign and International Tribunals: Section 1782 of Title 28 of the U.S.C. Revisited, 25 Syracuse J. Int’l L. & Com. 1, 5 (1998) (“a tribunal is international in the sense of Section 1782 when any of the parties before it, or any of the arbitrators, is not a citizen or resident of the United States”). At least one court has considered this issue but declined to decide it after holding more generally that private arbitrations are not covered under Section 1782. See In re Dubey, 949 F. Supp. 2d 990 (C.D. Cal. 2013).

[4] Nat’l Broad. Co., Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184, 188, 190–91 (2d Cir. 1999); Guo v. Deutsche Bank Securities, Inc., 965 F.3d 96 (2d Cir. 2020); Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880, 882–83 (5th Cir. 1999). For more in-depth discussions of the cases, please see our prior client alerts which are
available at https://www.mofo.com/resources/insights/200309-ca-district-court-discovery-foreign-arbitration.html and https://www.mofo.com/resources/insights/200714-international-arbitration-update.html.

[5] Abdul Latif Jameel Transportation Co. Ltd. v. FedEx Corp., 939 F.3d 710 (6th Cir. 2019); for more in-depth discussions of the case, please see our prior client alert which is available at https://www.mofo.com/resources/insights/191002-international-commercial-arbitration.html.

[6] Servotronics, Inc. v. Boeing Co., 954 F.3d 209 (4th Cir. 2020).  For a more in-depth discussion of the case, please see our prior client alert which is available at https://www.mofo.com/resources/insights/200406-international-arbitration-update.html.

[7] Id. at 210.

[8] Servotronics, Inc. v. Rolls-Royce PLC, 975 F.3d 689, 690–91 (7th Cir. 2020).

[9] HRC-Hainan Holding Co., LLC v. Yihan Hu, No. 19-mc-80277-TSH, 2020 U.S. Dist. LEXIS 32125, at *2 (N.D. Cal. Feb. 25, 2020), appeal filed sub nom. In re: Application of HRC-Hainan Holding Co., LLC, No. 20-15371 (9th Cir. Feb. 28, 2020); In re Storag Etzel GmbH, No. CV 19-MC-209-CFC, 2020 WL 1849714 (D. Del. Apr. 13, 2020), appeal filed sub nom. In re: Application of Storag Etzel GmbH, No. 20-01833 (3d Cir. May 7, 2020); In re EWE Gasspeicher GmbH, No. CV 19-MC-109-RGA, 2020 WL 1272612 (D. Del. Mar. 17, 2020), appeal filed sub nom. In re: Application of EWE Gasspeicher GmbH, No. 20-01830 (3d Cir. May 8, 2020).

[10] For a more in-depth discussion of Servotronics, Inc.’s petition for writ of certiorari, please see our prior client alert which is available at https://www.mofo.com/resources/insights/201216-international-arbitration-update.html.