Identifying Tensions in §. 1782 Discovery Aid in International Commercial Arbitration.
Keywords: Arbitral Tribunals; Discovery Aid; Functional Analysis; International Commercial Arbitration, Judicial Review, Textual Analysis.
As the circuit split regarding the applicability of §1782Discovery Aid to private arbitral tribunals increases, the Supreme Court recently granted certiorari to decide on the matter.[1] If the Court finds such tribunals to be within the ambit of § 1782(a), as encouraged by the draft Third Restatement,[2] three tensions ought to be addressed for a comprehensive resolution of the conundrum: the extent to which a textual analysis is sufficient, the reviewability criterion in the functional test developed by the seminal Intel decision, namely, whether an arbitral decision are judicially reviewable, and the potential emergence of a contradiction with § 7 of the Federal Arbitration Act.[3]
1. The Pertinence of Textual Analysis and the Meaning of ‘Tribunal’
Appellate courts on both sides of the debate referred to definitions of the statutory term ‘tribunal’ in their decisions.[4] For those expanding the applicability of § 1782(a) to private arbitral tribunals, emphasis was given to dictionary definitions, common usage of the term, and legal writing.[5] Establishing that the statutory text does not require a reading beyond such a plain meaning, the Sixth Circuit concluded in ALJ that arbitral panels are included within the reach of § 1782.[6] The bench also referred to Intel mentioning that arbitral tribunals can be considered within the ambit of the statute.[7]
On the other hand, the Second, Fifth, and Seventh in NBC and Guo, Biederman, La Comision, and Servotronics all started by perceiving the definition of the term ‘tribunal’ as ambiguous and thus turned to the statute’s legislative history, concluding that arbitral tribunals are outside the ambit of discovery aid under s. 1782.[8] Three out of five rulings were issued after Intel.[9] Thus, even when relying on Intel, the circuit courts diverged in their respective opinion.
The Supreme Court in Intel listed arbitral panels as tribunals that can be considered within the ambit of such discovery aid, only in obiter dicta.[10] The issue it was tackling concerned a different type of adjudicative body, more precisely an independent quasi-judicial European law regulator.[11] Furthermore, ‘arbitral tribunals’ was only mentioned in a parenthetical, quoting an article from Prof. Hans Smit in which he lists types of international tribunals.[12] This very point was not lost on the Fifth Circuit in La Comision. The bench rejected the applicability of § 1782 to a private international tribunal, stating that ‘the only mention of arbitration in the Intel opinion is in a quote in parentheticals from a law review article by Hans Smit […] Nothing in the context of the quote suggests that the [Supreme] Court was adopting Smit’s definition of “tribunal” in whole’ specially in light of the fact that the court in Intel was not deciding on whether a privately constituted tribunal was a tribunal under § 1782.’[13]
Moreover, in NBC and Operadora, the courts referred to a senate report pertaining to § 1782 and itself referring to another work of Prof. Hans Smit, to conclude against the expansion of § 1782 discovery aid to arbitral tribunals as their decision-making authority derives from private contracts rather than international agreements.[14] In Operadora, the court directly quoted the work stating that ‘an international tribunal owes both its existence and its powers to an international agreement’ thus deducing that Congress’s intent was not to include discovery aid to private arbitration.[15] This permitted the court to qualify the weight of Prof. Smit’s quote in Intel to conclude that the discovery aid in question is not available in the context of private arbitral tribunals.[16]
Hence, any decision settling the question of whether to allow § 1782 discovery aid to private arbitration would do well to address the extent to which the term ‘tribunal’ is ambiguous, by, inter alia, examining the extent to which Prof. Hans Smit’s quote in Intel’s be afforded significance considering that it was in obiter, and, relatedly, whether his quasi-contrary statement in a law review article would infer that international tribunals do not include private arbitral panels considering that the source of their decision-making authority is contractual.
2. Judicial Reviewability – Functional Analysis
Intel also provided the functional test criteria when considering whether an adjudicative body is an international or foreign tribunal for the purposes of § 1782(a).[18] Is the body in question a first-instance decision-maker, a gatherer of evidence or capable of issuing dispositive decisions subject to review?[19] If the answer is in affirmative to all the above questions, Intel would tell us that this would be a tribunal for purposes of § 1782.[20]
The Sixth Circuit in ALJ referred to Intel’s functional analysis only to confirm that it does not contradict its result reached by semantic analysis.[21] It relies on the legislative history discussed in Intel noting that according to ‘the Supreme Court’s reasoning the word “tribunal” applies to non-judicial proceedings’, referring to the aforementioned reference to arbitral tribunal in parentheses in the Intel decision. The Sixth Circuit also relied on the “first-instance decision-maker” factor of the functional analysis created by Intel.[22]
The tension arises regarding the extent to which an arbitral award can be said to be subject to judicial review. It was held in Consorcio that, so long as a court “can enforce [an arbitral] award or can upset it”, it amounts to judicial review rendering the arbitral panel a tribunal even if the said review does not pertain to a “full judicial reconsideration” of the merits of the dispute.[23]
Contrastingly, the court in Operadora found that an ICC Court review of an arbitral panel decision does not amount to judicial review as it may only modify the form of the Award without affecting the panel’s liberty of decision in relation to the merits of the case.[24]
The question of reviewability is at the core of international arbitration’s ethos as practitioners in this field habitually point out to the finality and binding characteristics of arbitral awards.[25] This is also true from the perspective of the Supreme Court. As such, it did not allow the judicial review of awards rendered by contractual arbitral tribunals. Indeed, it reasoned that the FAA’s provisions of allowing limited review a policy matter “needed to maintain arbitration’s essential virtue of resolving disputes straightaway.”[26] Similarly, In Re London, the bench relied on a raison d’être pertaining to efficiency in arbitration, stating that “private arbitrations are generally considered alternatives to, rather than precursors to, formal litigation” in supporting its position.[27] This echoes the holding in NBC, where the Second Circuit considered arbitration’s efficiency and cost-effectiveness of arbitration “at odds with full-scale litigation” and thus denied the applicability of §1782.[28]
Thus, the tension arising out of the functionality test concerns the extent to which an award rendered by a privately constituted tribunal can be judicially reviewed. Attention to the meaning of judicial review as well as the policy inclined considerations of the purposes of arbitral dispute settlement could shed some light in this regard.
3. Contradictions Emanating from § 7 of the FAA and § 1782(a)
One other source of tension pertains to the contradiction which emanates from § 7 of the FAA and § 1782 in case a court finds that discovery aid is permissible for private arbitral panels under the latter provision. The NBC court juxtaposed both provisions: the FAA confers the authority to subpoena documents or witnesses solely to arbitrators; the materials which can be expressly subpoenaed is testimony before arbitrators and material physical evidence; and, the authority to enforce is conferred only upon the “district court for the district in which such arbitrators, or a majority of them, are sitting”.[29] In contrast, § 1782 allows all ‘interested persons’ – not just arbitrators and parties – to request discovery aid. Additionally, the material which may be subject to discovery is seemingly less limited under § 1782 than § 7.[30]
One may be led to conclude that since nominally § 7 relates to domestic arbitration and § 1782 concerns international or foreign tribunals, any further inquiry is unnecessary. However, within the realm of international arbitration, such a distinction is not straightforward. As private arbitral panels are inherently flexible adjudicative institutions, other than a strictly U.S. domestic arbitration where the applicable law is American law, the procedural rules emanate from an American institution or law, and the parties are Americans, there can be new challenges regarding other arbitral panels where their international or domestic character is not clear. In NBC, the court warned that “a new category of disputes concerning the appointment of arbitrators and the characterization of arbitral panels as domestic, foreign, or internationa[l]” could arise.[31] For instance, would an ICC-administered private arbitration seated in Texas, involving two non-U.S. parties be considered domestic or international? How would the answer change, if the seat would not be in the U.S. but the disputing parties were American?
In ALJ, the court addressed a similar yet less developed argument submitted by the Respondent where it argued that “[i]t would be incongruous […] to permit foreign parties in arbitration overseas border discovery than United States parties in arbitration here.”[32] It rejected the argument based on the finding in Intel that § 1782 does not have foreign discoverability rule.[33] While the court’s answer may prove to be convincing, it presupposes a straightforward method of determining whether an arbitral tribunal is foreign or domestic.
Thus, an expansion of § 1782 discovery aid to private ‘foreign or international’ arbitral tribunals would do well to address which characteristics of the arbitration defines whether it is domestic or international
4. Concluding Remarks
It has been reasoned that examining three questions could prove helpful to decide whether § 1782 discovery aid should be extended to private arbitral tribunals. This entails looking at the extent to which the term ‘tribunal’ is ambiguous and reviewing the statements of Prof. Hans Smit, scrutinizing the functionality test arising out of Intel, with a specific consideration of what it means for an award to be judicially reviewable against the backdrop of the arbitral ethos of efficiency, and lastly, addressing the possibility of classifying an arbitration as international or domestic to be able to determine which arbitral discovery aid could an arbitral proceeding avail itself of.
Endnotes
[1] See Servotronics, Inc. v. Rolls-Royce Plc, et al., 592 US, No. 20-794, 2021 (order granting certoriari); see also Servotronics,Inc. v. Rolls-Royce PLC, 975 F.3d 689 (7th Cir. 2020) (holding that such arbitral panels are not “foreign or international tribunals” under s.1782) and Servotronics,Inc. v. Rolls-Royce PLC, 954 F.3d 209 (4th Cir. 2020) (holding that the same arbitration falls within the ambit of s. 1782); 28 U.S.C. § 1782 .
[2] See Restatement (Third, Proposed Final Draft) of the Law the U.S. Law of International Commercial and Investor-State Arbitration § 2.1 cmt b (2019).
[3] 9 U.S.C. § 7.
[4] Servotronics (4th Cir.), 954 F.3d at 214; Servotroncis (7th Cir.), 975 F.3d at 692–694; ALJ Transport Co. Ltd v FedEx Corp,. 939 F.3d 710 (6th Cir. 2019) at 717–722; NBC v. Bear Sterans & Co. et. al.,165 F.3d (2nd Cir 1999) 184 at 188–189; Rep. of Kazakhstan v. Biedermann Int’l, 169 F.3d 880 at 882.
[5] See ALJ, F.3d 710 (6th Cir. 2019) at 717–722; Servotronics (4th Cir.), 954 F.3d at 214; see also In Roz Trading, 469 F.Supp.2d 1221 (N.D. Georgia 2006) at 1225–1226.
[6] See ALJ, F.3d 710, at 724-726.
[7] Id.
[8] Servotronics (7th Cir.), 975 F.3d at 693El Paso Corp. v. La Comision EHR, 341 Fed.Appx. 31 (5th Cir.2009), NBC 165 F.3d, Biederman, 169 F.3d 880.
[9] Servotronics (7th Cir.), 975 F.3d; . La Comision, 341 Fed.Appx. at 31.
[10] Intel Corp. v. AMD, 542 U.S. 241, 256 (2004).
[11] Id. at 242,
[12] Id. at 256.
[13] La Comision, 341 Fed.Appx at 34.
[14] NBC 165 F.3d at 189; In re Application of Operadora DB Mexico, S.A., No. 6:09-cv-383-Orl-22GJK, 2009 WL 2423138 (MD. Florida Aug. 4, 2009)at 9.
[15] Operadora, at 9.
[16] Id.
[18] Intel 542 U.S., at 241, 258.
[19] Id. at 241–243.
[20] Id.
[21] ALJ, F.3d 710, at 723–726.
[22] ALJ, F.3d 710, at 723–724.
[23] Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding, Inc. et al., 954 F.3d at 996–997
[24] Operadora at 10
[25] N. Blackaby et al, Redfern and Hunter on International Arbitration § 9.03(6th ed. 2015).
[26] Id.
[27] In re Arbitration in London 626 F.Supp. 2d 882(N.D. Illinois, 2009) at 886.;
[28] NBC 165 F.3d at 190–191.
[29] NBC 165 F.3d at 187 (quoting to § 7 of the FAA).
[30] NBC 165 F.3d at 187–188 (contrasting both provisions’ effects).
[31] NBC 165 F.3d at 191; see also Biederman, 169 F.3d 882–883 (echoing the NBC concerns).
[32] ALJ, at 728
[33] Id.
Ramsey S. Nassar is an attorney admitted to practice in New York and currently works in international litigation and dispute resolution at a New York international law firm. He has previously worked in international arbitration and litigation in Western Asia. He holds an LL.B. in Laws and Economics from The University of Edinburgh and an LL.M. from the Georgetown University Law Center.
The views and opinions expressed in the article are those of the Author(s) solely having been gathered from her experience as a practitioner. They do not reflect the official position of the institution(s) with which the Author(s) is /are affiliated. Further, the statements of the Author(s) produced herein should not be construed as legal advice.
