United States: Second Circuit Holds Section 1782 Discovery Off Limits In Private International Arbitrations

Interpreting a key statutory provision for cross-border discovery, on July 8, 2020, the Second Circuit held that parties to a private international arbitration cannot obtain discovery in the United States in aid of that arbitration under 28 U.S.C. § 1782. In Re: Application and Petition of Hanwei Guo for an Order to take Discovery for Use in a Foreign Proceeding Pursuant to 28 U.S.C. 1782 (2d Cir. July 8, 2020).

Section 1782 authorizes federal courts to compel the production of materials "for use in a proceeding in a foreign or international tribunal" upon "the application of any interested person." Petitioner Guo initiated an arbitration against music streaming service Tencent Music and other parties under the rules of the China International Economic and Trade Arbitration Commission ("CIETAC"), asserting fraud-based claims related to a prior investment he had made. Guo then sought Section 1782 discovery in the United States from multiple investment banks related to their underwriting work in the Tencent Music IPO.

The Second Circuit found no reason to diverge from its prior holding in NBC v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999), which held that Section 1782 does not apply to "arbitral bod[ies] established by private parties." Id. at 191. It determined that the Supreme Court's intervening Section 1782 decision in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), did not mandate a different result, as the issue of Section 1782's applicability to private international arbitrations was not before the Intel Court. Finding that the CIETAC arbitration was a private international arbitration outside Section 1782's scope, the Second Circuit affirmed the district court's denial of Guo's petition.

As the contours of Section 1782 continue to be determined by the courts, parties to agreements mandating private arbitrations outside the U.S. should continue to monitor Section 1782 case law closely. Parties to international arbitrations should consider whether the U.S. discovery they seek can be obtained through alternative means, such as through party discovery, and whether the arbitral body hearing their dispute is sufficiently government-sponsored to qualify as a "foreign or international tribunal" within the scope of Section 1782.

Originally published by Jones Day, July 2020

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.