Samuel Estreicher

U.S. lower courts are increasingly getting involved in international arbitration cases via the authority of 28 U.S.C. §1782. Under §1782, enacted in 1964, a U.S district court "'may order' a person residing or found in the district to give testimony or produce documents 'for use in a proceeding in a foreign or international tribunal … upon the application of any interested person.'" Decisions in the lower federal court are expanding the reach of §1782 to include discovery in aid of private commercial international arbitration. Although both as a linguistic and historical matter, it may be difficult to view a private international arbitration panel as a "foreign or international tribunal" for purposes of §1782, that was the holding of the courts in Abdul Latif Jameel Transp. Co. v. FedEx Corpo. (In re Application to Obtain Discovery for Use in Foreign Proceedings), 939 F.3d 710, 723 (6th Cir. 2019; Servotronics v. Boeing Co., 2020 WL 1501954 (4th Cir. March 30, 2020). (In Servotronics, the Fourth Circuit relied on an additional ground—that under the UK Arbitration Act of 1996, the English arbitration panel in that case was acting with "government-conferred authority" and hence should be treated the same as any other foreign legal proceeding.) Jameel and Servotronics are the first appellate rulings to apply §1782 to international arbitral panels.

Jameel and Servotronics derive some support from the Supreme Court's recognition in Intel v. Advanced Micro Devices, 542 U.S. 241 (2004), that "Congress introduced the word 'tribunal' to ensure that "assistance is not confined to proceedings before conventional courts," but extends also to 'administrative and quasi-judicial proceedings.'" S. Rep. No. 1580, 88th Cong., 2d Sess., p. 7 (1964); see H. R. Rep. No. 1052, 88th Cong., 1st Sess., p. 9 (1963). Needless to say, Intel did not deal with the question whether an international arbitration panel is a "foreign or international tribunal" for purposes of §1782.

In October 2019, the U.S. Court of Appeals for the Second Circuit in In re: Application of Antonio del Valle Ruiz, 939 F.3d 520 (2019), further expanded the reach of §1782. Del Valle Ruiz establishes that a federal court under §1782 can order the production of documents located outside of the United States.

In the In re del Valle Ruiz case, Banco Popular Español, S.A. (BPE) was Spain's sixth largest bank, but had struggled financially with toxic and nonperforming assets dating to the 2008 financial crisis. Santander, another Spanish bank, retained New York-based UBS and Citibank to advise on a contemplated bid to purchase BPE. In the interim, the Spanish government learned from EU authorities that BPE was likely to fail and invited several banks to submit bids to purchase BPE; Santander submitted the only bid and successfully purchased BPE for one euro. A group of BPE's investors from Mexico investors (BPE investors) sued to challenge the sale before the Court of Justice of the European Union. In the United States, the investors sought an order from a U.S. district court providing for discovery from Santander, as well as Santander Investment Securities (SIS), a New York affiliate of Santander, relating to the essentially forced sale of BPE. Santander argued that it was not "found" in New York within the meaning of §1782 and that §1782 does not apply to documents or witnesses located overseas.

The Second Circuit's held, first, that §1782's reference to "resides in or is found" applies to the full extent of constitutional due process under the Fifth Amendment. Since the BPE investors were seeking discovery from a non-party, the court adopted a special jurisdictional standard for purposes of §1782: "where the discovery material sought proximately resulted from the respondent's forum contacts, that would be sufficient to establish specific jurisdiction for ordering discovery … . [W]here the respondent's contacts are broader and more significant, a petitioner need demonstrate only that the evidence sought would not be available but for the respondent's forum contacts." Del Valle Ruiz, 939 F.3d 520, 530 (2d Cir. 2019).

Here, the BPE investors sought discovery regarding the essentially forced sale of BPE, but the only U.S. forum contacts by Santander predating this sale had been for purposes of due diligence of a prior bid. In the appeals court's view, because the BPE investors' claims arose from the government-forced sale, the materials sought did not proximately arise from Santander's contacts with UBS and Citibank investigating a potential earlier purchase of BPE. The Second Circuit ruled that it lacked jurisdiction over Santander and refused to order documents from that company.

The Second Circuit next considered whether discovery could be had from SIS—Santander's U.S. subsidiary—over which the court plainly had general, dispute-blind jurisdiction (as the district was its place of incorporation), Santander argued that SIS should not be ordered to produce discovery located outside of the United States because §1782 does not apply extraterritorially.

The Second Circuit disagreed, following a 2016 Eleventh Circuit ruling (Sergeeva v. Tripleton Int'l Ltd., 834 F.3d 1194 (11th Cir. 2016)), which held that because §1782 authorizes discovery pursuant to the Federal Rules of Civil Procedure, which in turn authorize extraterritorial discovery of any documents within the subpoenaed party's possession, custody, or control, §1782 by its plain language allows for extraterritorial discovery.

The combined effect of these decisions suggests we are likely to witness resort to discovery through the federal courts in a great many international arbitrations where the individual or entity from which documents or other information is sought has sufficient contacts with the Unites States to satisfy §1782's jurisdictional standards. Whereas traditionally a party to an arbitration seeking such discovery would be limited to a request to the arbitration panel, §1782 would now be available to circumvent the panel, a development which possibly may change the nature of international commercial arbitration.

Samuel Estreicher is Dwight D. Opperman Professor of Law, director of the Center for Labor and Employment, and codirector of the Institute of Judicial Administration, NYU School of Law.