June 13, 2022
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Decided on June 13, 2022
ZF Automotive US, Inc. v. Luxshare, Ltd., No. 21-401; and AlixPartners, LLP c. The Foreign States Investor Rights Protection Fund, No. 21-518
Today, the Supreme Court ruled 9-0 that parties to foreign private arbitrations cannot seek assistance from federal courts to gather evidence for use in those arbitrations.
Background: Congress has authorized district courts to order certain findings “for use in a proceeding in a foreign or international court.” 28 USC § 1782(a). Luxshare, Ltd. sought discovery under Section 1782 from ZF Automotive US, Inc. for use in an arbitration scheduled under the rules of a German private association. The District Court granted the claim, finding that a foreign private commercial arbitration body qualifies as a “foreign or international court” under Section 1782. The Supreme Court granted certiorari before judgement.
In a separate case, a Russian entity initiated arbitration against Lithuania under a bilateral investment treaty between Russia and Lithuania. The Russian entity requested under Section 1782 for the discovery of third parties based in the United States. The district court granted the request. The Second Circuit asserted, holding that the arbitral panel was a “foreign or international court” largely because it derived its jurisdictional power from the treaty.
Publish: Whether a private arbitration body is a “foreign or international court” under 28 USC § 1782(a).
Only a governmental or intergovernmental adjudicative body constitutes a “foreign or international court” under 28 USC § 1782(a). These bodies are those which exercise the governmental authority conferred by a nation or several nations. Thus, private commercial arbitration abroad is inadmissible, nor is an arbitration panel formed under an international treaty, unless the parties to that treaty have conferred governmental authority on the panel. arbitrator.
“The statute only reaches governmental or intergovernmental adjudicative bodies, and none of the arbitration panels involved in these cases fit this bill.”
Judge Barrett, writing for the Court
What this means:
- The court’s decision limits the ability of parties to foreign and international private arbitration proceedings to seek discovery under United States discovery rules, which are relatively liberal compared to rules in other nations. This could hamper the parties’ ability to develop evidence in private arbitration proceedings abroad, but it could also streamline those proceedings. Parties to these arbitrations, however, may still be able to use remedies under state law for discovery assistance.
- This decision ensures that private foreign arbitrations do not have broader access to federal court discovery assistance than private domestic arbitrations. Under the Federal Arbitration Act, parties to private domestic arbitrations cannot apply directly to a federal court for discovery assistance, but must instead seek discovery through the arbitrator.
- The court ruling rules out the use of Article 1782 in arbitrations conducted under bilateral investment treaties, where the treaty does not confer governmental authority on the arbitral body. It remains to be seen whether this ruling will prevent the use of Section 1782 in bilateral investment treaty arbitrations conducted through the International Center for Settlement of Investment Disputes.
- Foreign and international arbitration proceedings are often confidential. The Court’s decision helps preserve that confidentiality by preventing the parties from bringing public lawsuits in federal courts under Section 1782.
The opinion of the Court is available here.
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