US District Court Reaffirms that Private Commercial Arbitrations Are Not Eligible for Section 1782 Discovery

By Diego Luis Alonso Massa, 16 January 2023

In line with 13 June 2022 US Supreme Court’s decision in ZF Automotive US, Inc. v. Luxshare Ltd,  the United District Court for the Southern District of New York held, in a Memorandum Opinion issued on 19 December 2022, that, as the parties did not intend to imbue the ICSID Arbitral Tribunal with governmental authority, such Tribunal does not constitute a “foreign or international tribunal” within the meaning of 28 U.S. Code § 1782.

Therefore, the District Court granted Webuild’s motions to vacate a 19 May 2022 Order and quashed subpoenas for documents and testimony from a non-party located in New York served on the Republic of Panama for use in ICSID Arbitration proceeding Webuild S.p.A. (formerly Salini Impregilo S.p.A.) v. Republic of Panama (ICSID Case No. ARB/20/10).

Section 1782 of 28 U.S. Code authorises federal district courts to order discovery “for use in a proceeding in a foreign or international tribunal.” In ZF Automotive, the Supreme Court held that this language authorises assistance to “governmental or intergovernmental adjudicative bodies” only and that the private arbitral panels there at issue did not qualify under the statute.

In the Supreme Court’s view, an interpretation of § 1782 that included parties to private international arbitrations “would open district court doors to any interested person seeking assistance for proceedings before any private adjudicative body—a category broad enough to include everything from a commercial arbitration panel to a university’s student disciplinary tribunal.”

Also, according to the Supreme Court, “the intent of the relevant nations to imbue the body in question with governmental authority” mattered more than the mere fact that one or more of the parties appearing before an adjudicative body were sovereigns.

Ultimately, the Supreme Court decided that an ad hoc investor-state arbitration panel, convened pursuant to a bilateral investment treaty (“BIT”) between Lithuania and Russia and in accordance with the United Nations Commission on International Trade Law Arbitration Rules (“UNCITRAL Rules”), was not “exercising governmental authority” and therefore was outside the ambit of Section 1782. [TAO’s detailed report on the US Supreme Court’s decision is available here.]

In the present case, following the same line of arguments, District Judge Lewis A. Kaplan held that the ICSID Tribunal at issue is not a “foreign or international tribunal” within the meaning of Section 1782, because:

  • The ICSID Panel is “not a pre-existing body, but one formed for the purpose of adjudicating investor-state disputes”;
  • the Panama-Italy BIT did not “itself create the [ICSID Panel]”;
  • the ICSID Tribunal “functions independently of and is not affiliated with either” of the relevant BIT nations;
  • the ICSID Tribunal does not receive any “government funding”;
  • the confidentiality of the ICSID Panel is more akin to private commercial arbitration than adjudication by a governmental body; and
  • the ICSID Tribunal “derives its authority from the parties’ consent to arbitrate.

In the District Court’s opinion, that authority exists because Webuild and Panama consented to the arbitration, not because Italy and Panama (parties to the Panama-Italy BIT) clothed the panel with governmental authority.

This Opinion has as its immediate precedent the decision of the Magistrate Judge for the Eastern District of New York Robert M. Levy, on 27 October 2022, when granting an order to quash his prior decision to authorise subpoenas for documents and testimony in aid of ICSID arbitration proceedings Alpene Ltd v. Republic of Malta (ICSID Case No. ARB/21/36). [TAO’s detailed report on that decision is available here.]

In the past, federal courts held that investor-state arbitrations were eligible for § 1782 discovery and even twenty years earlier the US Supreme Court had indicated in Intel Corp. v. Advanced Micro Devices, Inc that § 1782 could be used to obtain evidence in aid of foreign commercial arbitrations.

Nevertheless, in its 13 June 2022 Opinion in the ZF Automotive case (consolidated with AlixPartners, LLP v. The Fund for Protection of Investors’ Rights in Foreign States), the US Supreme Court opted for an apparent about-face – departing from its remarks in Intel and instead signalling “a desire to limit the availability of discovery in U.S. courts for international commercial arbitrations.”

While in doing so, the US Supreme Court laid out the general principles that it considered to be relevant to the determination of whether an adjudicative body is the kind of “foreign or international tribunal” covered by § 1782, it did not address ICSID investor-state arbitrations specifically.

In any event, however, “the relevant question” according to the US Supreme Court was always “whether the nations intended that the [arbitral] panel exercise governmental authority.”

Therefore, where the intention to imbue foreign proceedings with governmental authority is clear, it seems that US courts will not hesitate to grant a request for §1782 discovery – as the US District Court for the Southern District of New York did on 14 September and 12 December 2022 in support of Nigeria’s efforts to set aside the recognition and enforcement of the USD 6.6 billion arbitral award on fraud allegations [TAO’s detailed reports on those decisions are available here and here].