U.S. Discovery For Use in Foreign Tribunals
Corporate & Finance Alert
December 30, 2008
United States-based businesses engaging in cross-border commercial activity periodically become entangled in foreign legal proceedings. Many foreign countries’ laws do not provide for discovery of confidential or proprietary information in the way American discovery rules do, even if that information is relevant to the dispute. Unknown to many U.S. businesses involved in foreign legal proceedings, a federal law allows foreign litigants to engage in U.S.-style discovery to acquire materials for use in the non-U.S. proceedings.
That statute, 28 U.S.C. §1782(a), reads, in part, as follows:
“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, including criminal investigations conducted before formal accusation. The order may be made … upon the application of any interested person and may direct that the testimony or statement be given, or the document or other thing be produced, before a person appointed by the court.”
In 2004, the United States Supreme Court in Intel Corp. v. Advanced Micro Devices, Inc., 124 S.Ct. 2466 (2004), clarified that Section 1782(a) authorized the institution of legal proceedings before U.S. courts for the sole purpose of allowing discovery for use in aid of proceedings outside of the United States.
The statute sets out three factors that have to be fulfilled in order for it to be applicable: The application must be made towards (1) a person residing or to be found in the court’s district; (2) for use in a proceeding in a foreign or international tribunal; and the application must be (3) made [for the purpose identified here] by any person interested in the proceeding.
The Supreme Court in Intel ruled that even if all three factors were met (thus giving a U.S. court the power to grant the application), U.S. courts would still have discretion as to whether to grant or deny the requested discovery. The Supreme Court held that this discretion should be exercised based upon the following questions:
- Is the person from whom discovery is sought a participant in the foreign proceeding?
- What is the nature of the foreign tribunal and the character of the proceeding underway abroad, and is the foreign government or the court or agency abroad receptive to U.S. federal court assistance?
- Is the sole purpose of the Section 1782(a) request to attempt to circumvent foreign proof-gathering restrictions or policies?
- Is the request unduly intrusive or burdensome?
Intel has received substantial scrutiny by the lower courts in the four years since it was issued. Subsequent case law across the United States has addressed the law governing each of the three factors and four questions mentioned above. Intel has channeled the discussion on the applicability of Section 1782(a), including the finding that the Supreme Court’s specifications in Intel are not exclusive and may therefore be amended by further factors. Thus, there remains ample room for creative lawyers to further shape and define the reach of Section 1782(a) and the ability of U.S. courts to allow discovery in aid of non-U.S. proceedings.
Examples of the post-Intel case law include:
- In In re Application of Grupo Qumma, 2005 U.S. Dist. LEXIS 6898, where the disputing parties (litigants to a proceeding pending in Mexico) gave contradicting evidence as to whether the Mexican Court would admit the evidence sought through discovery, the U.S. District Court for the Southern District of New York held that it was not up to the judges to try to glean the accepted practices and attitudes of other nations from what are likely to be conflicting and, perhaps, biased interpretations of foreign law. Accordingly, the court granted the Section 1782(a) application and stated that it should be for the Mexican Court to decide whether the additional evidence is admissible, since it would be in a better position to do so.
- In In re Application of Gemeinshcaftspraxis D. Med. Schottdorf, 2006 U.S. Dist. LEXIS 94161, the U.S. District Court for the Southern District of New York granted a Section 1782(a) application to serve a subpoena upon a U.S. company headquartered in New York and required it to produce documents within its control that were physically located in Germany for use in a German court proceeding. The U.S. court rejected the suggestion that Section 1782(a) assistance cannot extend to the production of documents located abroad stating there “is no such express restriction in the statute, and the Court is unwilling to engraft one onto it.”
- In In re Oxus Gold PLC, 2007 U.S. Dist. LEXIS 24061, Oxus Gold had initiated an arbitration against Kyrgyzstan for unlawful and discriminatory conduct in violation of a bilateral investment treaty between the United Kingdom and Kyrgyzstan. Oxus Gold also filed an ex parte application with the U.S. District Court for the District of New Jersey, seeking documents and testimony from an individual, a non-party to the arbitration, who likely possessed important evidence and who was “found” in New Jersey within the meaning of Section 1782(a). The New Jersey district court upheld an order permitting Oxus Gold to obtain discovery from such individual arguing that the private international tribunal (constituted under UNCITRAL rules) would satisfy the “tribunal” requirement of Section 1782(a).
U.S. businesses should, therefore, not assume that documents located in the U.S. can not be obtained by parties to foreign legal proceedings. Furthermore, companies should contact their counsel with respect to record retention issues.