Fourth Circuit Weighs In on Whether International Commercial Arbitration Panels Are Tribunals

An important question in international commercial arbitrations—whether parties have a statutory means to take discovery in the United States—has been addressed by another U.S. Court of Appeals, paving the way for the Supreme Court deciding the ultimate point. In the meanwhile, exponents of taking U.S. discovery in their international arbitration have new legal support.

In its March 30 opinion in Servotronics, Inc. v. Boeing Company, the Fourth Circuit joined the Sixth Circuit Court of Appeals, and numerous district courts, in holding that a federal statute, 28 U.S.C. Section 1782, includes international arbitral panels in its definition of foreign or international “tribunals.”¹ The ruling is important because these panels’ classification as tribunals permits parties before them to apply to U.S. courts under Section 1782 for permission to take discovery here, including through deposition and document subpoenas. These parties might otherwise have no access to evidence found in the United States.

Section 1782 is a statute intended by Congress to assist international litigants and thereby promote international judicial cooperation, chiefly by extending to any interested person  the right to apply to a district court to obtain testimony or documents from persons found in the United States for use in proceedings in “foreign or international tribunals.” It has been clear from the beginning that the statute covers proceedings in foreign courts; the question that has been circulating for a number of years is what other kinds of bodies constitute such a tribunal, and in particular, whether a private commercial arbitration would be covered.

Two circuits, the Second and the Fifth, both issued opinions in 1999 that a private arbitration proceeding does not quality under Section 1782 as a tribunal.²  The primary basis for those decisions was the courts’ view that a tribunal must be some form of entity operating through the authority of government, whereas, in their view, commercial arbitration are privately constituted. However, after the 2004 Supreme Court in Intel Corp. v. Advanced Micro Devices, Inc. examined the meaning of “tribunal” in a way that undermines the earlier decisions’ reasoning, district courts in the Second Circuit have questioned the validity of that circuit’s pre-Intel holding.³

In Intel, the Supreme Court determined that a non-judicial body, the Directorate General of the European Union, was a foreign tribunal for purposes of Section 1782, permitting one of the parties to an EU competition proceeding to gather evidence in the United States.⁴  Analyzing the text of the statute, the Court noted it had been amended to remove prior language referring to “judicial” bodies, and to substitute the broader “foreign or international tribunal” phrasing. The Court also analyzed the function of the Directorate General, which was to act as a first-instance decision-making body, performing adjudication or quasi-adjudicative functions.⁵   Thus, the Court indicated its willingness to accept a functional definition of a tribunal rather than limit it to an official judicial organ.

The Sixth Circuit considered the question last year, the first Court of Appeals to do so after Intel; it applied the Supreme Court’s analysis, determining that private commercial arbitrations qualify as tribunals under the statute’s terms. Similarly, many district courts including those in the Second Circuit, considering Intel, have agreed that its reasoning applies to private international arbitration. The Fifth Circuit, however, where district courts faithfully followed that appellate court’s holding, remains the sole outlier.

That brings us to Servotronics, in which the underlying arbitration in the United Kingdom was between a valve manufacturer, Servotronics, and Rolls-Royce, which claimed a Servotronics’ valve had caused a malfunction and the resulting fire in an engine sold to Boeing. After Boeing sought compensation from Rolls-Royce, the company settled and then filed arbitration against Servotronics. As part of its defense, Servotronics needed testimony from Boeing, and sought permission under Section 1782 to issue deposition subpoenas to three Boeing employees in South Carolina.  Denying the application, the federal district court determining that Intel did not apply to private arbitrations and that the UK arbitral panel was thus not a “tribunal” under Section 1782. The Fourth Circuit reversed.

In doing so, the court looked to the history of the statute, including the language change from “judicial bodies” to “tribunals,” and discussed the Second and Fifth Circuit decisions pre-dating Intel. Notably, the Fourth Circuit found that because of the statutory regime that governs arbitrations in countries like the UK (which has a statute similar to our Federal Arbitration Act), that the UK arbitration was indeed conducted with the authority of the state. This reasoning would apply to many international arbitral regimes, which are set up by statute and whose enforcement depends on the judicial system.

The clear circuit split that exists means that this issue will most likely reach the Supreme Court for resolution sometime soon.⁶   For now, if you are involved in an arbitration and there are documents or witnesses obtainable in the Fourth or Sixth Circuits, it is clear that an application under Section 1782 is appropriate. In either the Fifth or Second Circuits, the discussion in Servotronics provides strong support to argue that their respective Circuits’ pre-Intel decisions are no longer good law. And in all other circuits, both the Servotronics opinion and the Sixth Circuit’s will provide useful support for litigants involved in international arbitration who wish to obtain pre-trial discovery or evidence for use in their proceedings.

[1] Servotronics, Inc. v. Boeing Company, 954 F.3d 209 (4th Cir. 2020).

[2] National Broadcasting Company, Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir. 1999), and Republic of Kazakhstan v. Biedermann International, 168 F.3d 880 (5th Cir. 1999).

[3] See e.g. In re Children’s Inv. Fund Found. (UK), 363 F. Supp. 3d 361 (S.D.N.Y. 2019), appeal withdrawn sub nom. In re Application of Children’s Inv. Fund Found. (UK), 19-397, 2019 WL 2152699 (2d Cir. Mar. 19, 2019).

[4] In re Application to Obtain Discovery for Use in Foreign Proceedings, 939 F.3d 710, 731 (6^th Cir. 2019) (“We hold that the DIFC-LCIA Arbitration panel is a “foreign or international tribunal,” and the district court may order…discovery for use in the proceeding before that panel.”).

[5] Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 258, 124 S.Ct. 2466, 2479 (2004) (“We have no warrant to exclude the European Commission, to the extent that it acts as a first-instance decisionmaker, from § 1782(a)’s ambit.”)

[6] In fact, Rolls-Royce has already stated to the Fourth Circuit that it intends to file a petition for a writ of certiorari to the Supreme Court.