As globalization continues to reduce barriers to the movement of goods, capital and ideas, today's businesses routinely operate, invest, and sell their products in numerous jurisdictions around the world. As cross-border business transactions become the norm, rather than the exception, it is unsurprising that incidents of cross-border litigation are also on the rise. These disputes frequently involve parallel proceedings—both litigations and arbitrations—in jurisdictions governed by diverse legal systems. Lawyers representing clients in these complicated games of “three-dimensional chess” are therefore required to understand substantive and procedural nuances of each forum in order to obtain the best results for their clients. Scott Flaherty, “What It Takes to Dominate in the Elite Game of International Litigation,” American Lawyer, Sept. 28, 2017. In the United States, one tool of which every cross-border litigant should be mindful is §1782 discovery.

Originally passed in 1855 as a means to respond to direct requests for assistance from foreign courts, the scope of discovery permitted by §1782 has grown rapidly since the U.S. Supreme Court's seminal decision in Intel v. Advanced Micro Devices, 542 U.S. 241, 246-47 (2004). Since Intel, lower courts have become increasingly willing to grant §1782 discovery and lawyers in foreign jurisdictions have increasingly become aware of the opportunities afforded by §1782. Not surprisingly, the number of §1782 applications has increased substantially resulting in an ever broader reading of the section. This article looks at three recent developments in the use of §1782 discovery: its use in aid of private commercial arbitration, its use in accessing evidence for use in jurisdictions with restrictive discovery regimes, and the recent trend of serving subpoenas on U.S.-based counsel to obtain documents belonging to their non-U.S. clients.

28 U.S.C. §1782: The Basics

Section 1782 permits an interested party to seek discovery in the United States for use in a judicial proceeding pending abroad. The statute requires that a §1782 application meet three statutory requirements: (1) that the party from whom discovery is sought resides in or can be found in the district in which the application is pending; (2) that the discovery be for use in a proceeding in a foreign tribunal; and (3) that the application be made by an interested person in the foreign proceeding. See Intel, 542 U.S. at 246-47. If those statutory requirements are met, courts have the discretion to order discovery, but are not required to do so. In considering whether discovery should be permitted, courts typically look at the so-called Intel factors: (1) whether the respondent is a party to the foreign proceeding; (2) the nature of the foreign tribunal and its receptivity to U.S. judicial assistance; (3) whether the application seeks to circumvent foreign proof-gathering restrictions; and (4) whether the requested discovery is “unduly intrusive or burdensome.” 542 U.S. at 264-65.

§1782 Discovery in Aid of International Arbitration

Prior to the Supreme Court's seminal 2004 decision in Intel, the answer to the question of whether a litigant could obtain 1782 discovery in aid of a commercial arbitration was a resounding 'no'. In quick succession, two circuit courts expressly forbade the use of §1782 discovery in aid of commercial arbitrations, reasoning that because arbitration was a creature of contract it was not a “proceeding” as that term was understood by the drafters of §1782. See Republic of Kazakhstan v. Biedermann Intern., 168 F.3d 880, 882-83 (5th Cir. 1999); Nat'l Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184, 190-91 (2d Cir. 1999). Other courts followed suit.

In Intel, the Supreme Court was called upon to determine whether proceedings before the European Commission—Europe's antitrust authority—qualified as a “foreign proceeding.” In answering this question, the Supreme Court explained that the term “foreign proceeding” was sufficiently broad to encapsulate proceedings before “investigating magistrates, administrative and arbitral tribunals, and quasi-judicial agencies … .” 542 U.S. at 258. Since then, a growing number of district courts around the country have found §1782 to be available in the context of private commercial arbitration. For example, a recent Southern District of New York decision refused to follow Second Circuit precedent that pre-dated Intel, finding instead that §1782 relief is available in the context of an international commercial arbitration. See In re Kleimar, 220 F. Supp. 3d 517, 521 (S.D.N.Y. 2016). The Southern District's position is consistent with numerous courts around the country that have in recent years authorized the use of §1782 in aid of international arbitrations. See, e.g., Kleimar, N.V. v. Benxi Iron and Steel America, No. 17-cv-01287, 2017 WL 3386115, at *6 (N.D. Ill., Aug. 7, 2017); In re Pinchuk, No. 13-22857, 2013 WL 5574342, at *2 (S.D. Fla. Sept. 20, 2013); In re Application of Mesa Power Group, 878 F. Supp. 2d 1296, 1302 (S.D. Fla. 2012); In re Owl Shipping, No. 14-5655, 2014 WL 5320192, at *2 (D.N.J. Oct. 17, 2014); In re Hallmark Capital, 534 F.Supp.2d 951, 954 (D. Minn. 2007); In re Application of Roz Trading Ltd., 469 F. Supp. 2d 1221, 1227-28 (N.D. Ga. 2006); In re Application of Hallmark Capital, 534 F.Supp.2d 951, 954-55 (D. Minn. 2007).

While most courts have now held that §1782 applies in the context of international commercial arbitrations, the minority of U.S. courts have steadfastly refused to authorize §1782 discovery in aid of international arbitration. For example, while questioning its prior decision prohibiting the use of 1782 in aid of international arbitration, the Fifth Circuit ultimately refused to overrule its own precedent absent a clear instruction from the Supreme Court. See El Paso Corp. v. La Comision Ejecutiva Hidroelectrica Del Rio Lempa, 341 Fed. Appx. 31, 33-34 (5th Cir. 2009). Meanwhile, a number of recent district court decisions have also resisted expanding the scope of §1782 to permit discovery in aid of arbitration. See, e.g., In re Dubey, 949 F.Supp.2d 990, 993 (C.D. Cal. 2013); In re Arbitration in London, Eng.¸626 F. Supp. 2d 882, 886 (N.D. Ill. 2009); In re Operadora DB Mex., S.A. de C.V., No. 09-383, 2009 WL 2423138, at *12 (M.D. Fla. 2009).

Still, the trend is unmistakable and provides parties and counsel in international arbitrations with a new opportunities and challenges when representing parties in international arbitrations.

Obtaining Otherwise Unobtainable Evidence

Perhaps the most powerful aspect of §1782 discovery is the increasing willingness of U.S. courts to authorize §1782 discovery to order discovery that would be unavailable in the country where the main proceeding is being litigated. In Intel, the Supreme Court stated that there is no “foreign discoverability requirement” but also instructed courts to consider whether a §1782 application demonstrates an intent to circumvent foreign proof-gathering restrictions. 542 U.S. at 264-65. A review of post-Intel precedent, however, shows that courts will generally grant 1782 applications unless the target of discovery can establish that not only is the §1782 application seeking discovery unavailable in the forum where the main proceeding is pending, but that the foreign tribunal would affirmatively reject the fruits of discovery—a hard showing to make in most circumstances. See, e.g., Siemens AG v. Western Digital Corp., No. 13-1407, 2013 WL 5947973, at *5 (C.D. Cal. Nov. 4, 2013); In re: Ex Parte Application Varian Medical Systems International AG, No. 16-80048, 2016 WL 1161568, at *5 (N.D. Cal. March 24, 2016); Cryolife, Inc. v. Tenaxis Medical, No. 08-05124, 2009 WL 88348, at *3 (N.D. Cal. Jan. 13, 2009).

Thus, pointing to Intel's instruction that evidence sought by §1782 application need not be discoverable in the forum where the litigation is pending, courts generally refuse to deny §1782 relief merely because the requested discovery is not available under the foreign procedural rules where the action is pending. For example, many courts have recognized that while the rules of discovery in European civil procedure are far more limited than those of the United States, this is no reason not to grant U.S.-style discovery. In re Ex Parte Application of Porsche Automobil Holding SE, No. 15-417, 2016 WL 702327, at *9 (S.D.N.Y. Feb. 18, 2016) (same); In re Application of Auto-Guadeloupe Investissement S.A., No. 12-221, 2012 WL 4841945, at *7 (S.D.N.Y. Oct. 10, 2012) (same for a French proceeding); In re Judicial Assistance Pursuant to U.S.C. Sec. 1782 ex re. Macquarie Bank Ltd., No. 14-0797, 2014 WL 7706908, at *4 (D.Nev. June 4, 2013) (same for a Dutch proceeding). The Third Circuit in Kulzer v. Esschem offers a handy example. In Kulzer, the Third Circuit looked to the fact that German discovery rules allow neither pre-trial discovery nor document requests that lack precise specificity as a reason to grant a §1782 application. As the Third Circuit observed, “given courts' consistently liberal interpretation of [§1782] and its objective 'to assist foreign tribunals in obtaining relevant information but, for reasons having no bearing on international comity, they cannot obtain under their own laws'” (390 Fed. App'x 88, 92 (3d Cir. 2010)), it is appropriate to grant discovery even if it would be unavailable in the forum of the main proceeding. Other courts have considered the fact that evidence would be unobtainable under foreign procedural rules as an affirmative reason to allow discovery in the United States to “set an example to encourage foreign countries to enlarge discovery rights within their own systems.” 633 F.3d 591, 594 (7th Cir. 2011); see also In re Application of Carsten Rehder Und Reederei Gmbh & Co., No. 08-0108, 2008 WL 4642378, at *2 (M.D. Fla. Oct. 17, 2008) (“China's rules of procedure relating to discovery are not comparable to our own and … obtaining the information without this Court's assistance is by no means assured.”).

Finding a Proxy Respondent Via a U.S.-Based Law Firm

A third emerging trend of which U.S. counsel should be mindful is the recent targeting of U.S. law firms by §1782 applications seeking documents belonging to the firms' non-U.S. clients that would otherwise not be available through §1782 discovery. In the past two years, several law firms, including Baker Botts and Cravath, Swaine & Moore, have been on the receiving end of such applications.

For example, in In re Petition of Esther Kiobel, applicant Esther Kiobel sought to serve a subpoena on Cravath seeking documents belonging to Royal Dutch Shell plc for use in litigation pending in the Netherlands. No. 16-7992, 2017 WL 354183, (S.D.N.Y. Jan. 24, 2017). Cravath moved to quash the subpoena, arguing, inter alia, that the true respondent was the firm's client, not the firm itself, and that therefore the ultimate target was not located within the district in which the application was made, a statutory requirement of §1782. Id. at **2-3, 5. The court rejected Cravath's argument, finding that the entity in possession of the documents—Cravath—was the proper respondent, even if the documents ultimately belonged to Shell. Id. at *5. The court enforced the subpoenas, which sought documents already produced in a prior action but subject to a confidentiality agreement as well as deposition transcripts from the same prior action. Id. at *7. Cravath's appeal of the order is sub judice.

While §1782 applications targeting a litigant's U.S. counsel have become more common, some courts have questioned whether seeking discovery from U.S. counsel is appropriate—arguing that the burden of reviewing documents for privilege may outweigh their relevance in a foreign proceeding. In re an Order Pursuant to 28 U.S.C. §1782 v. Baker Botts, No. 17-1466, 2017 WL 3708028, **4-5 (D.D.C. Aug. 18, 2017). Still, U.S. counsel are on notice that client files in their possession are vulnerable to §1782 applications and should plan accordingly.

Conclusion

Recent trends in §1782 litigation offer new opportunities for foreign litigants seeking discovery, and challenges for U.S. litigants seeking to oppose such discovery. However, the ever-increasing scope of §1782 suggest that U.S. counsel of foreign clients should be mindful of the risk of receiving a §1782 subpoena seeking the production of their clients documents and should take appropriate document retention measures upon the conclusion of an engagement.

Tim Harkness is a partner at Freshfields Bruckhaus Deringer. Linda H. Martin is a partner at the firm and co-head of its global financial institutions disputes group. David Y. Livshiz is a senior associate and Allie Wilson is an associate at the firm.

As globalization continues to reduce barriers to the movement of goods, capital and ideas, today's businesses routinely operate, invest, and sell their products in numerous jurisdictions around the world. As cross-border business transactions become the norm, rather than the exception, it is unsurprising that incidents of cross-border litigation are also on the rise. These disputes frequently involve parallel proceedings—both litigations and arbitrations—in jurisdictions governed by diverse legal systems. Lawyers representing clients in these complicated games of “three-dimensional chess” are therefore required to understand substantive and procedural nuances of each forum in order to obtain the best results for their clients. Scott Flaherty, “What It Takes to Dominate in the Elite Game of International Litigation,” American Lawyer, Sept. 28, 2017. In the United States, one tool of which every cross-border litigant should be mindful is §1782 discovery.

Originally passed in 1855 as a means to respond to direct requests for assistance from foreign courts, the scope of discovery permitted by §1782 has grown rapidly since the U.S. Supreme Court's seminal decision in Intel v. Advanced Micro Devices , 542 U.S. 241, 246-47 (2004). Since Intel, lower courts have become increasingly willing to grant §1782 discovery and lawyers in foreign jurisdictions have increasingly become aware of the opportunities afforded by §1782. Not surprisingly, the number of §1782 applications has increased substantially resulting in an ever broader reading of the section. This article looks at three recent developments in the use of §1782 discovery: its use in aid of private commercial arbitration, its use in accessing evidence for use in jurisdictions with restrictive discovery regimes, and the recent trend of serving subpoenas on U.S.-based counsel to obtain documents belonging to their non-U.S. clients.

28 U.S.C. §1782: The Basics

Section 1782 permits an interested party to seek discovery in the United States for use in a judicial proceeding pending abroad. The statute requires that a §1782 application meet three statutory requirements: (1) that the party from whom discovery is sought resides in or can be found in the district in which the application is pending; (2) that the discovery be for use in a proceeding in a foreign tribunal; and (3) that the application be made by an interested person in the foreign proceeding. See Intel, 542 U.S. at 246-47. If those statutory requirements are met, courts have the discretion to order discovery, but are not required to do so. In considering whether discovery should be permitted, courts typically look at the so-called Intel factors: (1) whether the respondent is a party to the foreign proceeding; (2) the nature of the foreign tribunal and its receptivity to U.S. judicial assistance; (3) whether the application seeks to circumvent foreign proof-gathering restrictions; and (4) whether the requested discovery is “unduly intrusive or burdensome.” 542 U.S. at 264-65.

§1782 Discovery in Aid of International Arbitration

Prior to the Supreme Court's seminal 2004 decision in Intel, the answer to the question of whether a litigant could obtain 1782 discovery in aid of a commercial arbitration was a resounding 'no'. In quick succession, two circuit courts expressly forbade the use of §1782 discovery in aid of commercial arbitrations, reasoning that because arbitration was a creature of contract it was not a “proceeding” as that term was understood by the drafters of §1782. See Republic of Kazakhstan v. Biedermann Intern. , 168 F.3d 880, 882-83 (5th Cir. 1999); Nat'l Broadcasting Co. v. Bear Stearns & Co. , 165 F.3d 184, 190-91 (2d Cir. 1999). Other courts followed suit.

In Intel, the Supreme Court was called upon to determine whether proceedings before the European Commission—Europe's antitrust authority—qualified as a “foreign proceeding.” In answering this question, the Supreme Court explained that the term “foreign proceeding” was sufficiently broad to encapsulate proceedings before “investigating magistrates, administrative and arbitral tribunals, and quasi-judicial agencies … .” 542 U.S. at 258. Since then, a growing number of district courts around the country have found §1782 to be available in the context of private commercial arbitration. For example, a recent Southern District of New York decision refused to follow Second Circuit precedent that pre-dated Intel, finding instead that §1782 relief is available in the context of an international commercial arbitration. See In re Kleimar, 220 F. Supp. 3d 517, 521 (S.D.N.Y. 2016). The Southern District's position is consistent with numerous courts around the country that have in recent years authorized the use of §1782 in aid of international arbitrations. See, e.g., Kleimar, N.V. v. Benxi Iron and Steel America, No. 17-cv-01287, 2017 WL 3386115, at *6 (N.D. Ill., Aug. 7, 2017); In re Pinchuk, No. 13-22857, 2013 WL 5574342, at *2 (S.D. Fla. Sept. 20, 2013); In re Application of Mesa Power Group, 878 F. Supp. 2d 1296, 1302 (S.D. Fla. 2012); In re Owl Shipping, No. 14-5655, 2014 WL 5320192, at *2 (D.N.J. Oct. 17, 2014); In re Hallmark Capital, 534 F.Supp.2d 951, 954 (D. Minn. 2007); In re Application of Roz Trading Ltd., 469 F. Supp. 2d 1221, 1227-28 (N.D. Ga. 2006); In re Application of Hallmark Capital, 534 F.Supp.2d 951, 954-55 (D. Minn. 2007).

While most courts have now held that §1782 applies in the context of international commercial arbitrations, the minority of U.S. courts have steadfastly refused to authorize §1782 discovery in aid of international arbitration. For example, while questioning its prior decision prohibiting the use of 1782 in aid of international arbitration, the Fifth Circuit ultimately refused to overrule its own precedent absent a clear instruction from the Supreme Court. See El Paso Corp. v. La Comision Ejecutiva Hidroelectrica Del Rio Lempa , 341 Fed. Appx. 31, 33-34 (5th Cir. 2009). Meanwhile, a number of recent district court decisions have also resisted expanding the scope of §1782 to permit discovery in aid of arbitration. See, e.g., In re Dubey, 949 F.Supp.2d 990, 993 (C.D. Cal. 2013); In re Arbitration in London, Eng.¸626 F. Supp. 2d 882, 886 (N.D. Ill. 2009); In re Operadora DB Mex., S.A. de C.V., No. 09-383, 2009 WL 2423138, at *12 (M.D. Fla. 2009).

Still, the trend is unmistakable and provides parties and counsel in international arbitrations with a new opportunities and challenges when representing parties in international arbitrations.

Obtaining Otherwise Unobtainable Evidence

Perhaps the most powerful aspect of §1782 discovery is the increasing willingness of U.S. courts to authorize §1782 discovery to order discovery that would be unavailable in the country where the main proceeding is being litigated. In Intel, the Supreme Court stated that there is no “foreign discoverability requirement” but also instructed courts to consider whether a §1782 application demonstrates an intent to circumvent foreign proof-gathering restrictions. 542 U.S. at 264-65. A review of post-Intel precedent, however, shows that courts will generally grant 1782 applications unless the target of discovery can establish that not only is the §1782 application seeking discovery unavailable in the forum where the main proceeding is pending, but that the foreign tribunal would affirmatively reject the fruits of discovery—a hard showing to make in most circumstances. See, e.g., Siemens AG v. Western Digital Corp., No. 13-1407, 2013 WL 5947973, at *5 (C.D. Cal. Nov. 4, 2013); In re: Ex Parte Application Varian Medical Systems International AG, No. 16-80048, 2016 WL 1161568, at *5 (N.D. Cal. March 24, 2016); Cryolife, Inc. v. Tenaxis Medical, No. 08-05124, 2009 WL 88348, at *3 (N.D. Cal. Jan. 13, 2009).

Thus, pointing to Intel's instruction that evidence sought by §1782 application need not be discoverable in the forum where the litigation is pending, courts generally refuse to deny §1782 relief merely because the requested discovery is not available under the foreign procedural rules where the action is pending. For example, many courts have recognized that while the rules of discovery in European civil procedure are far more limited than those of the United States, this is no reason not to grant U.S.-style discovery. In re Ex Parte Application of Porsche Automobil Holding SE, No. 15-417, 2016 WL 702327, at *9 (S.D.N.Y. Feb. 18, 2016) (same); In re Application of Auto-Guadeloupe Investissement S.A., No. 12-221, 2012 WL 4841945, at *7 (S.D.N.Y. Oct. 10, 2012) (same for a French proceeding); In re Judicial Assistance Pursuant to U.S.C. Sec. 1782 ex re. Macquarie Bank Ltd., No. 14-0797, 2014 WL 7706908, at *4 (D.Nev. June 4, 2013) (same for a Dutch proceeding). The Third Circuit in Kulzer v. Esschem offers a handy example. In Kulzer, the Third Circuit looked to the fact that German discovery rules allow neither pre-trial discovery nor document requests that lack precise specificity as a reason to grant a §1782 application. As the Third Circuit observed, “given courts' consistently liberal interpretation of [§1782] and its objective 'to assist foreign tribunals in obtaining relevant information but, for reasons having no bearing on international comity, they cannot obtain under their own laws'” (390 Fed. App'x 88, 92 (3d Cir. 2010)), it is appropriate to grant discovery even if it would be unavailable in the forum of the main proceeding. Other courts have considered the fact that evidence would be unobtainable under foreign procedural rules as an affirmative reason to allow discovery in the United States to “set an example to encourage foreign countries to enlarge discovery rights within their own systems.” 633 F.3d 591, 594 (7th Cir. 2011); see also In re Application of Carsten Rehder Und Reederei Gmbh & Co., No. 08-0108, 2008 WL 4642378, at *2 (M.D. Fla. Oct. 17, 2008) (“China's rules of procedure relating to discovery are not comparable to our own and … obtaining the information without this Court's assistance is by no means assured.”).

Finding a Proxy Respondent Via a U.S.-Based Law Firm

A third emerging trend of which U.S. counsel should be mindful is the recent targeting of U.S. law firms by §1782 applications seeking documents belonging to the firms' non-U.S. clients that would otherwise not be available through §1782 discovery. In the past two years, several law firms, including Baker Botts and Cravath, Swaine & Moore, have been on the receiving end of such applications.

For example, in In re Petition of Esther Kiobel, applicant Esther Kiobel sought to serve a subpoena on Cravath seeking documents belonging to Royal Dutch Shell plc for use in litigation pending in the Netherlands. No. 16-7992, 2017 WL 354183, (S.D.N.Y. Jan. 24, 2017). Cravath moved to quash the subpoena, arguing, inter alia, that the true respondent was the firm's client, not the firm itself, and that therefore the ultimate target was not located within the district in which the application was made, a statutory requirement of §1782. Id. at **2-3, 5. The court rejected Cravath's argument, finding that the entity in possession of the documents—Cravath—was the proper respondent, even if the documents ultimately belonged to Shell. Id. at *5. The court enforced the subpoenas, which sought documents already produced in a prior action but subject to a confidentiality agreement as well as deposition transcripts from the same prior action. Id. at *7. Cravath's appeal of the order is sub judice.

While §1782 applications targeting a litigant's U.S. counsel have become more common, some courts have questioned whether seeking discovery from U.S. counsel is appropriate—arguing that the burden of reviewing documents for privilege may outweigh their relevance in a foreign proceeding. In re an Order Pursuant to 28 U.S.C. §1782 v. Baker Botts, No. 17-1466, 2017 WL 3708028, **4-5 (D.D.C. Aug. 18, 2017). Still, U.S. counsel are on notice that client files in their possession are vulnerable to §1782 applications and should plan accordingly.

Conclusion

Recent trends in §1782 litigation offer new opportunities for foreign litigants seeking discovery, and challenges for U.S. litigants seeking to oppose such discovery. However, the ever-increasing scope of §1782 suggest that U.S. counsel of foreign clients should be mindful of the risk of receiving a §1782 subpoena seeking the production of their clients documents and should take appropriate document retention measures upon the conclusion of an engagement.

Tim Harkness is a partner at Freshfields Bruckhaus Deringer. Linda H. Martin is a partner at the firm and co-head of its global financial institutions disputes group. David Y. Livshiz is a senior associate and Allie Wilson is an associate at the firm.