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Seventh Circuit Prohibits Discovery Under § 1782 for Foreign Private Arbitrations

The discovery powers conveyed by Section 1782 (28 U.S.C. § 1782) have been a vital tool for parties in international proceedings.  Section 1782 allows parties to obtain discovery, such as deposition testimony or documents, “for use in a proceeding in a foreign or international tribunal”.

Section 1782 discovery powers were especially useful to parties in commercial arbitrations outside the U.S. because arbitral tribunals outside the U.S. do not typically have the power to compel third parties to provide evidence or to issue subpoenas. Moreover, discovery in standard ICC or LCIA arbitrations is usually more limited in scope than discovery available under U.S. rules.  Parties to international arbitrations therefore often relied on the discovery powers conveyed by Section 1782.

Over the years, federal courts disagreed regarding whether Section 1782 could be used by parties to a foreign private international arbitration, such as a standard commercial ICC or LCIA arbitration. Recently, the Second Circuit re-affirmed its view that Section 1782 cannot be used by parties to foreign private arbitrations because private arbitral bodies do not qualify as a “foreign or international tribunal.”  See In re Application and Petition of Hanwei Guo, No. 19-781 (2d Cir. 2020).  

This view has now been endorsed by the Seventh Circuit, which has confirmed its view that parties may not pursue discovery under Section 1782 for use in private commercial arbitrations.  See Servotronics, Inc. v. Rolls-Royce PLC, No. 19-1847, 2020 WL 5640466 (7th Cir. Sept. 22, 2020). 

As things now stand, the Second, Fifth, and Seventh Circuit Courts of Appeal reject the use of Section 1782 to obtain discovery in aid of private commercial arbitrations seated outside the United States, while both the Fourth and Sixth Circuit Courts of Appeal permit such applications.  Cases raising this issue are currently pending before the Third and Ninth Circuit Courts of Appeal.

The widening circuit split on this issue increases the likelihood that the Supreme Court will be asked to provide a final view on this issue.

 


Article written by: Yisrael Hiller and Chavah Apfelbaum