Section 1782 May Be An Empowering Tool To Brazilian Parties Who Wish To Access Evidence In The United States

1. Introduction.

It would not be surprising if Brazilian practitioners and arbitrators deal with alternative means of evidence production for the first time in the context of an international commercial arbitration. While the word “discovery” may sound daunting at first, Brazilian parties may gain considerable advantage by using this broad means of evidence production from parties seated or domiciled in the United States. So, the first step is to know that the possibility is out there and then know how to make best use of it.

2. Discovery in the United States.

Discovery refers generally to the tools of evidence production and development available in court litigation in the United States. The standard instruments are deposition, requests for production of evidence, written interrogatories and requests for admission of facts. Through their use, a party may gather a wide-range of valuable information. This is so as the Federal Rules of Civil Procedure establish the broad concept that discovery should be "reasonably calculated to lead to admissible evidence." [3] In other words, discovery may contemplate the exploration of evidence that “might be relevant”, rather than evidence that “is indeed relevant” to the case. [4] Discovery is usually performed by the parties themselves, with little judicial oversight. However, when a party refuses to comply, the other party may seek for the help of the court to compel the production of the evidence.

3. Discovery in international arbitration

Most arbitration rules do not specify the means and procedures for the development and production of evidence. For instance, the ICC, the ICDR, CCBC, and FIESP/CIESP Rules do not even mention discovery. [5] Without further instruction from the parties, the tribunal is reasonably free to tailor the procedure within the context of the arbitration. Even the IBA Rules on Taking of Evidence (“IBA Rules”), which may be incorporated by the parties through the terms of reference or otherwise, are not as broad in scope as the rules applied by courts in the United States. Under such rules, a request for discovery must contain a description of all targeted documents or category of documents, and a demonstration of their relevance to the case. Based on this assessment, the tribunal will have full discretion to allow or to deny the production of any evidence.

4. How can Brazilian parties to an international arbitration make use of Section 1782 discovery?

If the dispute involves evidence that may be located in the United States, a party to the arbitration may have another way of obtaining evidence that is external to the arbitral proceedings. Section 1782 allows United States federal courts of first instance to order discovery if the petitioner meets the following statutory requirements: (1) the order must be issued by “[t]he district court . . . of the district in which [respondent] resides or is found”; (2) the discovery must be “for use in a proceeding in a foreign or international tribunal”; (3) the application is made by a foreign or international tribunal or an “interested person [emphasis added].” [6] The procedure can be initiated by any “interested person,” and commences with an application to the court for the district in which the evidence is located.

The original position of United States courts was to unanimously deny the application of Section 1782 to international arbitral tribunals. [7] However, this changed with the issuance by the United States Supreme Court of the Intel decision in 2004. [8] In that case, the Supreme Court adopted a more expansive concept of the term “international tribunal.” Although the case did not deal with arbitration, the court reasoned that arbitral tribunals could be within the concept of an “international tribunal.” In dicta, Justice Ginsburg adopted the idea that the term “tribunal” in fact included arbitral tribunals. [9]

However, Intel was not able to resolve the controversy on the scope of Section 1782. Most Circuit Court of Appeals have not yet decided this issue, or reached a clear decision. [10] Among those that have, we may see three different approaches:

1) Some courts have held that only “public tribunals” could benefit from Section 1782, and that those would be limited to the adjudicatory organs that are connected to a government. The Fifth Circuit (Louisiana, Mississippi and Texas) follows this approach. [11]

2) Others considered that only “public tribunals” were within the scope of Section 1782, and found that an arbitral tribunal in an investor-state dispute was a “public tribunal,” but not an international commercial arbitration tribunal. This was the holding of two federal courts of first instance located in the Third [12] and Seventh Circuits. [13]

3) The third group, which represents the majority of the current Section 1782 decisions, considered that the term “international tribunal” refers to arbitral tribunals based on the statute’s legislative history and on the common meaning of that term. Federal courts of first instance in Georgia (Eleventh Circuit), [14] Minnesota (Eighth Circuit), [15] Colorado (Tenth Circuit), [16] Massachusetts First Circuit), [17] and New York (Second Circuit), [18] and the Court of Appeals of the Third Circuit (Delaware, New Jersey and Pennsylvania) [19] share this understanding. [20]

5. What factors should be considered under a Section 1782 request?

Once a United States federal court determines that it has the power to proceed with discovery under Section 1782, it has to determine whether it will grant the request, and then tailor the scope of the discovery. [21]

The Supreme Court in Intel set several guidelines in this regard. First, the court should give special attention to the requests presented by non-parties to the foreign proceedings. As the international tribunal lacks jurisdiction over third-parties, the only way they may obtain any evidence would be through Section 1782. [22] Second, “the nature of the foreign tribunal, the character of the proceedings and the reciprocity of the foreign government” should be taken into consideration. [23] It is not whether the same request would or could be granted by the international tribunal that should matter, but whether the international tribunal would be receptive to the discovery. [24] So, the American court should consider whether the Section 1782 discovery will be useful in the context of the main proceedings by assessing the likelihood that the international tribunal will rely on the evidence that it would order a party to produce. Third, the court should “consider whether the §1782(a) request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States.” [25] In other words, the district court should not grant discovery when the arbitrators have made it clear that they will not accept the evidence collected through a Section 1782 application.

Fourth, the request under Section 1782 may be made by any “interested party,” rather than exclusively the parties to the arbitration. As was noted in Intel, the term “interested party” “plainly reaches beyond the universe of persons designated ‘litigant.’” [26] The party against whom the request is made does not even have to be communicated of it in advance. [27] The request may be made directly to the district court (ex parte), which may later require notice to the party against whom discovery is sought in order to commence the procedure. [28] This may be an important “surprise factor” in favor of a Brazilian party requesting Section 1782 discovery. Nevertheless, the scope of discovery should not be broad, but trimmed to avoid “unduly intrusive or burdensome requests”. [29] This closer scrutiny assessment is of great importance to avoid excesses and ensure adequate assistance to international tribunals.

6. Final Observations.

In conclusion, Section 1782 may allow Brazilian parties to take advantage of discovery proceedings in international arbitrations against parties seated or domiciled in the United States. However, as the scope of Section 1782 has not yet been settled by American courts, one should carefully consider the views of each court before filing a discovery request. Moreover, Brazilian parties should consider whether this will in fact be cost-beneficial. Discovery may be a very expensive and time consuming exercise. Nonetheless, this may provide Brazilian parties with access to evidence that otherwise would be unavailable through in the arbitration, without exposing it to the risks of a typical, two-sided discovery procedure. [30]

[1] Member of the Brazilian Bar Association (Paraná Section), LL.M. in International Law with Specialization in International Arbitration at University of Miami School of Law, Bachelor of Law at Federal University of Paraná. The author deeply thanks Daniel Aun (White & Case) for his kind assistance in the editing of this paper.

[2] “Section 1782” refers to 28 U.S.C. § 1782. Title 28 of the United States Code contains statutes that relate to civil procedure, whereas most state courts follow similar rules.

[3] Rule 26, Title V, Federal Rules of Civil Procedure.

[4] Some information such as that considered as privileged (e.g., attorney-client privilege) is generally beyond the reach of discovery.

[5] International Chamber of Commerce’s Rules of Arbitration (“ICC Rules”), Rules for the International Center for Dispute Resolution (“ICDR Rules”), Chamber of Commerce Brazil-Canada’s Rules (“CCBC Rules”), and São Paulo Chamber for Mediation and Arbitration’s Rules (“FIESP/CIESP Rules”).

[6] 28 U.S.C. § 1782 (a); see also Schmitz v. Bernstein Liebhard & Lifshitz, LLP, 376 F.3d 79, 83 (2d Cir.2004) (listing these three statutory requirements); see also In re Clerici, 481 F.3d 1324, 1331–32 (11th Cir.2007) (including a fourth statutory requirement, that the request must seek evidence, “whether it be the ‘testimony or statement’ of a person or the production of ‘a document or other thing.’”)

[7] National Broadcasting v. Bear Stearns and Republic of Kazakhstan v. Biederman are the two most influential decisions against the applicability of Section 1782 to arbitral tribunals. These cases established that the term “international tribunal” in Section 1782 only referred to governmental bodies, not to arbitral panels.

[8] See Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 242, 252 (2004).

[9] Id. at 259.

[10] Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 685 F.3d 987, 989 (11th Cir. 2012). There, the Eleventh Circuit (Georgia, Florida and Alabama) initially observed that it had the power to grant discovery related to an international commercial arbitration held in Ecuador before the Center for Arbitration and Conciliation of the Guayaquil Chamber of Commerce because the tribunal “[it] acts as a first-instance decision-maker; it permits the gathering and submission of evidence; it resolves the dispute; it issues a binding order; and its order is subject to judicial review."). But see In re Application of Consorcio Ecuatoriano de Telecomunicaciones S.A. (11th Cir. 2014), (where the court withdrew its prior decision on its own motion and made a new decision that reached the same result but that on the basis that the evidence would be used in aid to a potential judicial proceeding in Ecuador).  The first Consorcio opinion is no longer binding the Eleventh Circuit.

[11] See El Paso Corp. v. La Comision Ejecutiva Hidroelectrica Del Rio Lempa, 341 F. App'x 31, 32-33 (5th Cir. 2009) (holding that it lacked power to grant the request for a Section 1782 discovery to be used by an international arbitration court seated in Geneva because Intel had not overruled Biederman). One should note that this case is not binding as it is an unpublished decision.

[12] See Oxus Gold PLC, MISC 06-82-GEB, 2007 WL 1037387, 4-5 (D.N.J. Apr. 2, 2007) (holding that Section 1782 only applied to “public” tribunals whereas an investment arbitration tribunal applying the UNCITRAL Rules, which had been agreed upon by two nations, was considered to be a “public” tribunal). See Mesa Power Grp. LLC, CIV.A. 2:11-MC-280-E, 2012 WL 6060941, *5 (D.N.J. Nov. 20, 2012) (holding that a BIT arbitration conducted pursuant to UNCITRAL rules constitutes a foreign tribunal under Section 1782); Mesa Power Grp., LLC, 2:11-MC-270-ES, 2013 WL 1890222, 5 (D.N.J. Apr. 19, 2013) (holding that a NAFTA arbitration conducted pursuant to UNCITRAL rules constitutes a foreign tribunal under Section 1782); Chevron Corp., 3:10-CV-00686, 2010 WL 8767266 (M.D. Tenn. Aug. 17, 2010) (where the District Court of Tennessee (Sixth Circuit) also held that an investment arbitration were within the scope of Section 1782).

[13] Norfolk S. Corp. v. Gen. Sec. Ins. Co. & Ace Bermuda Ltd., 626 F. Supp. 2d 882, 886 (N.D. Ill. 2009) (holding it lacked power to grant a Section 1782 request related to an international commercial tribunal seated in London as the term “international tribunal” only included state-sponsored arbitral bodies, like the DG-Competition in Intel, but excluded purely private arbitrations such as a commercial arbitration).

[14] Roz Trading Ltd., 469 F. Supp. 2d 1221, 1230-31 (N.D. Ga. 2006) (holding that it had the power to consider the request by a Cayman Islands company for the production of documents to be used in the dispute against the Coca-Cola Company, under auspices of the International Arbitral Centre of the Austrian Federal Economic Chamber in Vienna, as the reasoning of Intel provided sufficient guidance for a court to consider a purely private arbitral tribunal to fall within the scope of Section 1782.). One should note that this decision is only binding on the corresponding Federal District Courts (Georgia, Florida and Alabama). This decision is mere persuasive authority to the other Circuit Courts of Appeals and to their corresponding district courts.

[15] See Hallmark Capital Corp., 534 F. Supp. 2d 951, 951 (D. Minn. 2007) (granting an ex parte discovery request towards a non-party, in aid to an Israeli arbitration based on Intel).

[16] Michael Wilson & Partners, Ltd., No. CIV.A. 06-CV-02575MS, 2007 WL 2221438, 2 (D. Colo. July 27, 2007) (holding that it had the power order a Section 1782 discovery where the evidence would potentially be used by one possible international commercial arbitration in England and another in Australia, as those proceedings would lead to substantive decision as was required by Intel).

[17] Babcock Borsig AG, 583 F. Supp. 2d 233, 241 (D. Mass. 2008) (holding that the court had the power to consider a Section 1782 request in aid to a potential Israeli commercial arbitration, but denying the request as the court was uncertain whether the evidence produced would actually be useful to the arbitral tribunal that had not yet been constituted). See Chevron Corp. v. Shefftz, 754 F. Supp. 2d 254, 256 (D. Mass. 2010) (holding that private international bodies operating under the UNCITRAL Rules was a “foreign tribunal” for purposes of Section 1782 – without making a distinction between a commercial arbitration and an investment arbitration - when the party requested depositions and documents in aid to an investment arbitration tribunal dealing with the supposed corruption and improper collusion involving the Republic of Ecuador in the Lago Agrio Litigation).

[18] Application of Chevron Corp., 709 F. Supp. 2d 283, 285 (S.D.N.Y. 2010) aff'd sub nom. Chevron Corp. v. Berlinger, 629 F.3d 297 (2d Cir. 2011). In Chevron, the company filled subpoenas requesting the producer of a documentary film about the environmental disaster caused by Chevron to turn over “outtakes”. Such documentary threatened a criminal prosecution in Ecuador of two of Chevron’s attorneys, and international arbitration. The court granted the Section 1782 request based on two reasons. First, the investment arbitration was not a private tribunal because it had been established by an international treaty, the BIT between the United States and Ecuador. Second, it relied on Intel’s dicta and on the cases that later applied it to state that the term “international tribunal” also refers to arbitral tribunals. [1] Like Chevron Co. v. Shefftz, this case also tried to distinguish investment arbitration tribunals from commercial arbitration tribunal, and concluded that the first were not “private international tribunals”. However, here the court gave a second and broader reason to allow discovery, which encompasses both types of tribunals. So, this case did not expressly rule that discovery under Section 1782 may only apply to investment arbitration and not to commercial arbitration.

[19] Chevron Corp., 633 F.3d 153, 161 (3d Cir. 2011). This decision did not address the scope of section 1782, and focused on court’s discretionary power to grant the remedy based on the circumstances of the case. So, this case does not offer much guidance as to the encompassment of international commercial arbitral tribunals by Section 1782.

[20] One should consider that all the cited District Court decisions are merely persuasive authority. So, one will either have to wait for a decision from each Circuit regarding this subject matter, or wait for a specific and final decision from the United States Supreme Court.

[21] Intel, 542 U.S. at 542.

[22] Id. at 245.

[23] Id.

[24] See Application of Chevron Corp., 709 F. Supp. 2d 283, 292 (S.D.N.Y. 2010) aff'd sub nom. Chevron Corp. v. Berlinger, 629 F.3d 297 (2d Cir. 2011) (holding that discovery should be granted because the international arbitral tribunal was likely to rely on the evidence collected by the American court, despite the fact that the Ecuadorian court in the parallel litigation would probably not to the same).

[25] Intel, 542 U.S. at 264-65.

[26] Id. at 258.

[27] Imanagement Servs. Ltd., No. Misc. 05-89, 2005 U.S. Dist. LEXIS 17025 (E.D.N.Y. Aug. 16, 2005).

[28] Merck & Co., 197 F.R.D. 267, 271 (M.D.N.C. 2000).

[29] Id.; See also Lopes v. Lopes, 180 F. App'x 874, 877-78 (11th Cir. 2006) (holding that in exercising its informed discretion over Section 1782, the district court should consider the scope of the evidence requested and its relation to the international proceedings).

[30] One should note that there is another split among American courts on whether the scope of Section 1782 may have extraterritorial effects. In this sense, some district courts understand that they may order the production of documents located outside of the United States under Section 1782. Accordingly, Brazilian companies that have parent or subsidiary companies seated in the United States (which would be subject to a district court’s jurisdiction) should also consider the possibility of becoming subject to discovery under Section 1782. For a complete overview on this issue, see Tyler B. Robinson, The Extraterritorial Reach of 28 U.S.C. S 1782 in Aid of Foreign and International Litigation and Arbitration, 22 Am. Rev. Int'l Arb. 135 (2011).