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U.S. Supreme Court Takes Up Case: Is Section 1782 Discovery Available for Foreign Commercial Arbitrations?

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Last week, the U.S. Supreme Court agreed to take up the issue of whether litigants in foreign commercial arbitrations can seek discovery in the United States under 28 U.S.C. § 1782. This case will determine the ongoing viability of a discovery tool that has seen ever-increasing use in international disputes. Section 1782 provides that the “district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal.” The precise meaning of the phrase “foreign or international tribunal” has been hotly contested, with the Fourth and Sixth Circuits holding that Section 1782 includes foreign commercial arbitrations and the Second, Fifth, and Seventh Circuits reaching the opposite conclusion. Now, the Supreme Court has agreed to step in and potentially resolve the circuit split.

In Servotronics Inc. v. Rolls Royce PLC, the parties’ discovery dispute arose out of a January 2016 incident in which a Boeing airplane caught fire as employees tried to dislodge a piece of metal from an engine valve. The engine was manufactured by Rolls Royce and the valve in question was supplied by Servotronics. To settle Boeing’s claims, Rolls Royce agreed to pay Boeing $12 million in damages. Rolls Royce then sought indemnity from Servotronics by commencing arbitration under the auspices of the London-based Chartered Institute of Arbitrators.

Servotronics applied for discovery under Section 1782 in the Northern District of Illinois, asking the court to issue a subpoena requiring Boeing to produce certain documents for use in the London arbitration. The district court initially granted the application for discovery, but later reversed course after Boeing and Rolls Royce objected that Section 1782 does to extend to foreign commercial arbitrations.

On appeal, the Seventh Circuit affirmed the district court’s decision to quash Servotronic’s Section 1782 subpoena.[1] The Court largely based its decision on “statutory context”, relying on both legislative history suggesting that the intent of Section 1782 was to render “assistance to foreign courts and quasi-judicial agencies” and similar language in other federal statutes that implied the phrase “foreign or international tribunal” in Section 1782 was limited to “state-sponsored tribunals.” The Seventh Circuit also distinguished the U.S. Supreme Court’s prior Intel decision—which held that a proceeding before the Directorate General for Competition of the Commission of the European Communities fell within the meaning of “foreign or international tribunal” as used in Section 1782—on the basis that the Commission was a “a public agency with quasi-judicial authority.”[2]

The Supreme Court will now take up the Servotronics case and will be asked to resolve the circuit split by deciding whether Section 1782 can be used in foreign commercial arbitrations to obtain court-supervised discovery in the United States. The Supreme Court’s ruling could have significant ramifications for international arbitration.

The existing circuit split has essentially made Section 1782’s availability for foreign arbitrations wholly dependent on where the entities or individuals from which information is sought are located. This result is highlighted by the Servotronics case itself. In addition to the Section 1782 application filed in Illinois, Servotronics also filed a Section 1782 application in federal court in South Carolina. This application made its way before the Fourth Circuit and, in March 2020, that appellate court concluded that the Chartered Institute of Arbitrators was a foreign tribunal within the meaning of Section 1782.[3] So, Servotronics was able to obtain testimony from witnesses located in South Carolina but was prevented from obtaining documents located in Illinois.

By accepting review of the Seventh Circuit’s decision in Servotronics, the Supreme Court could resolve the circuit split and establish a uniform rule across the United States on the availability of Section 1782 discovery in foreign-seated commercial arbitrations. If the Supreme Court rules that Section 1782 permits discovery in aid of foreign arbitrations, we can almost certainly expect a rise in Section 1782 discovery. If the Supreme Court comes to the opposite conclusion, litigants in foreign commercial arbitrations will no longer be able to avail themselves of U.S. discovery under this provision. Because U.S. discovery is often more expansive than the discovery afforded through arbitration or in other domestic jurisdictions, the outcome could have an impact on the costs of arbitration, the volume of information exchange and, where only one party to a foreign arbitration has information in the United States, the respective parties’ relative access to information.

[1] Servotronics Inc. v. Rolls Royce PLC, 975 F.3d 689 (7th Cir. 2020).

[2] In November 2016, the U.S. District Court for the Southern District of New York used the Supreme Court’s Intel decision to justify granting Section 1782 discovery in aid of a foreign commercial arbitration, despite the Second Circuit having reached, prior to Intel, the opposite conclusion.  Baker Botts’s analysis of that decision can be found here (beginning on pg. 27).

[3] Servotronics, Inc. v. Boeing Co., 954 F.3d 209 (4th Cir. 2020).

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