University of Pennsylvania Carey Law School Assistant Professor of Law Yanbai Andrea Wang has released the following statement on the Supreme Court’s recent decision on discovery procedures in international arbitrations:
The Supreme Court’s decision last week in ZF Automotive US, Inc. v. Luxshare, Ltd. answered a question that caused a deep circuit divide and widespread confusion in the international business community: Is U.S.-style discovery under 28 U.S.C. § 1782 available for use in international commercial arbitration and investor-state arbitration? The question stems from a statutory ambiguity in § 1782, which makes compelled discovery in the U.S. widely accessible “for use in a proceeding in a foreign or international tribunal.” In a unanimous opinion, Justice Barrett held that only “governmental or intergovernmental adjudicative bodies” come within the ambit of § 1782, and that the international arbitrations at issue don’t qualify.
While the opinion draws a bright line, it leaves open loopholes that nevertheless permit the statute to be used in international arbitration because the statute as a whole remains exceedingly broad. When the Court previously took up § 1782 in Intel v. Advanced Micro Devices in 2004, it gave the statute virtually unlimited breadth cabined only by discretionary factors that rely on judges to conduct unmanageable analyses. Under Intel, § 1782 discovery is available as soon as a proceeding is contemplated, before it is even filed, and regardless of whether the sought-after discovery is permitted under the rules of the foreign or international tribunal. Lower courts are directed to consider whether the tribunal is receptive to U.S. discovery assistance, but judges are hard-pressed to conduct that analysis. Most requests are made ex parte and seek discovery from a third party who is poorly positioned to counter with information about the foreign proceeding or the tribunal’s receptivity to U.S. discovery.
In my research, I find that the use of § 1782 has exploded since Intel, quadrupling between 2005 and 2017. Not only is U.S. discovery sought for international arbitrations, but 10% of requests are for contemplated proceedings and nearly 30% are for simultaneous use in multiple proceedings. These types of requests further complicate judges’ analyses. A foreign or international tribunal’s receptivity to U.S. discovery in a proceeding that has not yet been initiated is all but impossible to determine. And lower courts often simplify the analysis for multiple proceedings by requiring only one of them to fulfill § 1782’s requirements. In other words, a person or business need only initiate a non-arbitration proceeding abroad — or merely assert that they are contemplating doing so — to obtain § 1782 discovery, which can then be used in an arbitration. ZF Automotive opens a window even as the Supreme Court closes the door to private international arbitration.
At the Law School, she researches and teaches in the fields of civil procedure and transnational litigation, with a focus on the relationship between U.S. and Chinese courts.