International arbitration

Discovery in international arbitrations can be controversial for a lot of reasons. The District Court for the District of South Carolina recently added another one to the list in In re Servotronics, Inc., No. 2:18-MC-00364-DCN, 2018 WL 5810109 (D.S.C. Nov. 6, 2018). The case addresses a very practical question: does 28 U.S.C. § 1782, which allows a district court to order a person who resides in the court’s district to provide testimony or documents to be used in a proceeding in a foreign tribunal, apply to a private international arbitration? According to the court, the answer is “no.”

The dispute arose from an arbitration related to a fire at a Boeing facility in Charleston, South Carolina. Boeing was testing a plane when the plane’s engine caught fire. The fire caused several million dollars of damage to the plane and the test facility. Boeing sought compensation from the engine’s manufacturer, Rolls-Royce. Rolls-Royce, in turn, demanded indemnity from Servotronics, who had manufactured a valve in the engine. Servotronics refused the demand, and Rolls-Royce initiated an arbitration in London.

During the course of the proceeding, Servotronics sought the deposition of three Boeing employees residing in Charleston. Boeing would not voluntarily produce them, so Servotronics filed an action in the US District Court in South Carolina seeking to compel discovery for use in a foreign proceeding under §1782.

In denying Servotronics’ request, the court concluded that a private arbitral body does not qualify as a foreign or international “tribunal” for purposes of §1782. As the court noted, this conclusion squares with decisions of the Second and Fifth Circuits. See Nat’l Broad. Co. v. Bear Sterns & Co., Inc., 165 F.3d 184 (2d Cir. 1998); Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880 (5th Cir. 1999).

The Second and Fifth Circuit decisions, however, were cast into some question by SCOTUS’s subsequent interpretation of §1782 in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004). Specifically, in dicta, SCOTUS said that Congress had amended §1782, expanding its application from “any judicial proceeding” to “a proceeding in a foreign or international tribunal.” Id. at 257–58. The Court noted that “Congress understood that change to ‘provide the possibility of U.S. judicial assistance in connection with administrative and quasi-judicial proceedings abroad.’” Id. (citations omitted). The Court went on to deploy a definition of “tribunal” from a law professor (Yay!) to include “ investigating magistrates, administrative and arbitral tribunals, and quasi-judicial agencies, as well as conventional civil, commercial, criminal, and administrative courts.” Id. at 258 (citations omitted).

In the wake of Intel, lower courts have divided over the question of whether §1782 applies to international arbitration bodies. Compare, e.g., In re Operadora DB Mexico, S.A. de C.V., 2009 WL 2423138, at *6 (M.D. Fla. Aug. 4, 2009) (“The Intel Court was not faced with—and did not address—the question of whether a private arbitral tribunal is a foreign or international tribunal under § 1782.”) with In re Roz Trading Ltd., 469 F. Supp. 2d 1221, 1224 (N.D. Ga. 2006) (“Although the Supreme Court in Intel did not address the precise issue of whether private arbitral panels are ‘tribunals’ within the meaning of the statute, it provided sufficient guidance for this Court to determine that arbitral panels convened by the [private arbitral institution] are ‘tribunals’ within the statute’s scope.”).

Joining the negative side of the ledger, the District Court for the District of South Carolina held that the Intel decision did nothing to alter the Second and Fifth Circuit precedent, noting that

[s]tretching the language of Intel to apply to private arbitration is simply too far of a reach absent more explicit language from Congress or the Supreme Court.

Given just how important the question is, I go on record now to predict that we’re going to see more Circuits weigh in on the issue in the very near future. If I were a betting person, I’d say that SCOTUS would come down in favor of broad support for international commercial arbitration and read §1782 as applying to arbitral bodies.