Originally published April 7, 2010
Keywords: discovery, foreign bank, secrecy laws, foreign criminal law, blocking statute
In a pair of recent decisions, the US District Courts for the Southern and Eastern Districts of New York have compelled the disclosure of overseas documents even though such production may violate foreign criminal laws. These decisions demonstrate the challenges associated with reconciling US discovery rules with foreign privacy laws and "blocking statutes" (i.e., statutes designed to protect non-US citizens from US discovery), and suggest several key factors that should be considered by litigants facing such issues.
Official Objections by Affected Foreign Governments May Help in Resisting Discovery that Violates Foreign Law
In Gucci America, Inc. v. Curveal Fashion, 2010 WL 808639 (S.D.N.Y. Mar. 8, 2010), the Eastern District of New York ordered a non-party Malaysian bank, United Overseas Bank's New York Agency (UOB), to produce information about the defendant's Malaysian bank accounts. UOB objected to the subpoena on the ground that Malaysian banking secrecy laws explicitly forbade disclosure of the information. UOB introduced substantial evidence that disclosing the information violated Malaysian criminal law. Despite this evidence, the court concluded that disclosure was justified and ordered UOB to produce documents in two weeks.
In reaching this conclusion, the district court engaged in a detailed multi-factor analysis under the framework established by the Supreme Court in Societe Nationale Industrielle Aerospatiale v. U.S. Dist. Ct. for the S. Dist. Of Iowa, 482 U.S. 522 (1987). Two factors in particular appear to have driven this court's decision not to defer to Malaysian law. First, the court found it significant that UOB had submitted no authority establishing the likelihood that it would actually be prosecuted and punished for violation of the Malaysian statute if it disclosed the information in question pursuant to a US court order. Second, the court emphasized the fact that the Malaysian government itself had not voiced any objections to disclosure in this case.
Based on these observations, the court reasoned that "the competing interests of the United States and Malaysia"—an Aerospatiale factor "of the greatest importance in determining whether to defer to the foreign jurisdiction"—weighed in favor of applying US discovery rules despite the foreign law. The court noted that UOB's failure to show likelihood of prosecution also worked against it with respect to another relevant factor—whether compliance would pose a "hardship" on UOB.
Risk of French Blocking Statute Prosecution Considered Only a "Discounted" Hardship
The likelihood of actual prosecution under foreign law also played a prominent role in In re Air Cargo Shipping Services Antitrust Litigation, Case No. 1:06-md-1775-JG (VVP) (E.D.N.Y. Mar. 29, 2010). In that decision, Air France, a party in an ongoing multidistrict antitrust action, was ordered to produce five boxes of documents, unambiguously subject to the French blocking statute, French Penal Code Law No. 80-538. The French blocking statute imposes criminal penalties on any French national or corporation that produces or seeks evidence located in France for use in foreign legal or administrative proceedings without using the procedures of the Hague Evidence Convention or other international treaties or agreements.
The fives boxes of documents at issue in Air Cargo had already been produced to the US Department of Justice pursuant to a request under the US-France treaty regarding Mutual Legal Assistance in Criminal Matters (MLAT). When plaintiffs in Air Cargo sought the five boxes in discovery, Air France objected that they should make a Hague Convention request so that Air France could produce the documents without violating the blocking statute.
Plaintiffs moved to compel, and the district court ordered Air France to produce the documents. The court relied prominently on its determinations that Air France faced no real threat of prosecution if it produced the documents, and that the US interest in enforcement of US antitrust law governing price-fixing—conduct that is also illegal in France—outweighed France's interest in controlling access to information within its borders.
In "discount[ing] significantly the hardship posed by the prospect of criminal sanctions," the court acknowledged that in a recent case known as In re Advocat Christopher X, a French attorney had been fined €10,000 for violating the blocking statute. But the court distinguished Christopher X on the ground that the French attorney had been convicted for attempting to secure testimony in France under false pretenses, not for responding to discovery served in a foreign action. The district court also found that, by providing the five boxes to the Department of Justice under the MLAT, France had, "at least implicitly . . . already made the judgment that its interest in combating anticompetitive behavior outweighs its desire to limit access to information about its citizens."
The Gucci America and Air Cargo decisions suggest that, in resisting discovery on the basis of a conflict with a foreign privacy law or blocking statute, it may be important for the resisting party (i) to present specific evidence that there is an actual risk of prosecution for a violation of the foreign law even where the violation occurs as a result of compliance with a US court order; and (ii) to seek the foreign government's direct involvement in articulating its national interest in nondisclosure and its seriousness concerning enforcement.
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