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§ 1782 Discovery In Aid Of International Arbitral Proceedings

Fall 2007
International Disputes Quarterly

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On April 2, 2007, the US District Court for the District of New Jersey granted discovery under 28 USC. § 1782 in aid of an international arbitration. Other circuit courts have held that § 1782 does not apply to private arbitrations. The New Jersey court interpreted prior rulings narrowly, and permitted a party to a foreign investor-state arbitration to obtain testimony and documents from a non-party.1 Taken with other recent developments, § 1782 may increasingly permit parties to import US-style discovery into international arbitral proceedings.

Discovery Under 28 USC. § 1782

§ 1782 gives federal courts discretion2 to grant discovery "for use in a proceeding in a foreign or international tribunal" if, among other requirements, the target of discovery "resides or is found" in the US district in which the application for discovery is made and the request for discovery is made by the foreign or international tribunal or "any interested person."

Historically, § 1782 was not often invoked in aid of international arbitration. The Second and Fifth Circuits have ruled that a private international commercial arbitral tribunal is not a "tribunal" under § 1782.3 In its 2004 Intel Corp. decision, the US Supreme Court's broad interpretation of "tribunal" laid the groundwork for change.4 The Court found that the European Commission is a "tribunal" under § 1782 because the EC Director General for Competition acts as a first-instance decision maker and resembles an adjudicatory administrative agency.

Discovery for Use in Public International Arbitration

The dispute in Oxus5 arose between Oxus Gold, PLC, an international mining group based in the UK and the Kyrgyz Republic. The Kyrgyz government had granted a license for the development of a gold deposit in Kyrgyzstan to a joint venture company created by affiliates of Oxus Gold and the Kyrgyz state. Upon cancellation of the license, Oxus Gold initiated an arbitration against Kyrgyzstan for unlawful and discriminatory conduct in violation of the UK-Kyrgyz BIT. Oxus Gold also filed an ex parte application with the New Jersey district court, seeking documents and testimony from Mr. Jack A. Barbanel, a non-party to the arbitration who likely possessed important evidence and who was "found" in New Jersey within the meaning of § 1782.6

The New Jersey district court upheld an order permitting Oxus Gold to obtain discovery from Mr. Barbanel. The court did not specifically invoke Intel Corp.'s reasoning, based on first-instance decision making and resemblance to an adjudicatory administrative agency. Instead, the court distinguished Oxus, involving a public international arbitration, from Second and Fifth Circuit jurisprudence, which addressed private arbitrations.7 The Oxus arbitration was administered by a tribunal constituted under UNCITRAL rules and conducted pursuant to the UK-Kyrgyz BIT. This BIT "specifically mandates that disputes between nationals of the two countries would be resolved by arbitration governed by international law … [and the arbitration] is thus being conducted within a framework defined by two nations."8 In this context, and given the Supreme Court's broad interpretation of "tribunal" in Intel Corp., the court found that the UNCITRAL tribunal in Oxus was a "tribunal" under § 1782.

The court did not address whether § 1782 applies to private arbitrations. The question remains open in the Third Circuit.

Discovery for Use in Private International Commercial Arbitration

The Eleventh Circuit is poised to review Roz Trading,9 in which a Georgia district court upheld an order granting discovery for use in a private international commercial arbitration. Roz Trading followed the Intel Corp. and Oxus approach of interpreting "tribunal" broadly, but went even further than Oxus. The court interpreted Intel Corp. to invalidate prior Second and Fifth Circuit jurisprudence and to mandate a broad interpretation of § 1782.10

If other US circuits follow Oxus and Roz Trading, assuming the latter is affirmed on appeal, parties to foreign international arbitrations may have access to broad US-style discovery. Such access raises concerns of party autonomy, especially where US discovery is imported into arbitrations that have no connection to US law. Restraint in the use of § 1782 in international arbitral proceedings will ultimately depend on US courts. Even in the Third and Eleventh circuits, Oxus and Roz Trading will not guarantee discovery in all instances, since the application of § 1782 is discretionary.11 However, in the face of uncertainty, it is likely that §1782 applications will increase, as will forum shopping for arbitration-friendly venues.

1 In re Oxus Gold plc, MISC No. 06-82-GEB, 2007 WL 1037387 (D.N.J. Apr. 2, 2007).

2 Intel Corp. v. Advanced Micro Devices Inc., 124 S.Ct. 2466, 2483 (2004) (emphasizing that application of § 1782 is discretionary and listing four factors to be considered in exercising this discretion).

3 See Nat'l Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999) (legislative history of § 1782 did not contemplate that it would apply to private international arbitral tribunals); Republic of Kazakhstan v. Biedermann Int'l, 168 F.3d 880 (5th Cir. 1999) (§ 1782 was not intended to apply to private international arbitral tribunals).

4 Intel Corp., 124 S.Ct. at 2479 (the Court cited an article by Hans Smit stating that “the term tribunal … includes … administrative and arbitral tribunals …") (emphasis added) (citations omitted).

5 In re Oxus Gold plc, 2007 WL 1037387, at *1.

6 Id. at *4 (Barbanel resides in Moscow but leases an apartment in New Jersey and travels there regularly).

7 See supra note 3.

8 In re Oxus Gold plc, 2007 WL 1037387, at *5.

9 In re Roz Trading Ltd., 469 F.Supp.2d 1221 (N.D.Ga. Dec 19, 2006).

10 Id. at *1 n.1 (the court explicitly rejects any interpretation of Oxus that might preserve a distinction between public and private arbitral tribunals, a distinction which is not found in the text of § 1782).

11 E.g., courts may consider factors such as whether the movant sought permission first from the arbitral tribunal.

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