The Latest Limitation of Section 1782 Discovery
On June 13, 2022, SCOTUS unanimously decided that an arbitration tribunal presiding over a dispute between private parties or an ad hoc investor-state arbitration tribunal did not qualify as a “foreign or international tribunal” within the meaning of Section 1782. ZF Automotive US, Inc. v. Luxshare, Ltd., 596 U.S. ___ (2022). A "foreign tribunal," according to SCOTUS, "must possess sovereign authority conferred" by the foreign nation. Id.
This significantly limits the scope of discovery under 28 U.S.C. § 1782, which, as we have discussed in previous posts, permits application to a U.S. district court for assistance with obtaining a document or testimony “for use in a proceeding in a foreign or international tribunal.”
This means that parties to a private arbitration proceeding cannot avail themselves of the benefits of Section 1782's cross-border discover mechanism. In Israel, for example, one of the leading arbitration organizations is the Israeli Institute of Commercial Arbitration ("IICA") (https://eng.borerut.com/). Whether parties to an IICA proceeding are able to invoke Section 1782 will depend on whether the IICA is a "foreign tribunal" within the meaning of the Section. That question will then turn on whether the IICA possess sovereign authority conferred by the State of Israel.
The outcome of this decision should play a factor for potential litigants when considering whether to enter into private arbitration or not, especially if evidence, either in the form of documents or witnesses, is located in the U.S.
One possible way to potentially avoid this problem (although this solution has its pitfalls and obstacles) is to submit a 1782 application in the U.S. prior to formally commencing any action in Israel (or other non-U.S. country). Federal courts have allowed for pre-litigation 1782 application to proceed on condition that the litigation is within reasonable contemplation. In Certain Funds v. KPMG, LLC, 798 F.3d 113 (2d Cir. 2015) the Second Circuit expanded on this matter:
The applicant must have more than a subjective intent to undertake some legal action, and instead must provide some objective indicium that the action is being contemplated. . . . The Supreme Court’s inclusion of the word “reasonable” in the “within reasonable contemplation” formulation indicates that the proceedings cannot be merely speculative. At a minimum, a §1782 applicant must present to the district court some concrete basis from which it can determine that the contemplated proceeding is more than just a twinkle in counsel’s eye.
This would only potentially work, however, if the plaintiff has the ability to commence the underlying lawsuit in a conventional "foreign tribunal." If, for example, the plaintiff must bring the claim in a private arbitration tribunal (i.e., because there is an exclusive private arbitration clause in the contract that governs the dispute), then the opposition to the 1782 application is likely to successfully challenge the application based on the U.S. Supreme Court's ruling in ZF Automotives.