While it did not happen often, there have been occasions where insurance and reinsurance disputes outside the US looked to the US federal court to assist in discovery of documents or depositions in the US to aide the non-US arbitration. While the federal circuits were split, several circuits permitted the district courts to aide in the non-US arbitration.
In June 2022, the US Supreme Court addressed the issue of whether a non-US arbitration was a proceeding in a foreign or international tribunal so that the district court could aide in that proceeding under 28 U. S. C. §1782(a). Many articles and blog posts have been written about this case and I do not intend to get into the technical details of 1782(a) or the various arguments presented. I do, however, discuss below the ramifications for insurance and reinsurance arbitrations.
In ZF Automotive US, Inc., v. Luxshare, Ltd., Nos. 21-401, 21-518 (Jun. 13, 2022), the US Supreme Court held unanimously that only a governmental or intergovernmental adjudicative body constitutes a “foreign or international tribunal” under 28 U. S. C. §1782, and that the arbitral bodies in these cases did not qualify. Thus, requests to aide in discovery in the federal courts were denied (the Court reversed orders allowing for discovery).
Justice Barrett got right to the point in the first paragraph of the opinion:
Congress has long allowed federal courts to assist foreign or international adjudicative bodies in evidence gathering. The current statute, 28 U. S. C. §1782, permits district courts to order testimony or the production of evidence “for use in a proceeding in a foreign or international tribunal.” These consolidated cases require us to decide whether private adjudicatory bodies count as “foreign or international tribunals.” They do not. The statute reaches only governmental or intergovernmental adjudicative bodies, and neither of the arbitral panels involved in these cases fits that bill.
Notably, the Court used the Federal Arbitration Act (“FAA”) to bolster its argument for why a private arbitration tribunal is not a “foreign or international” tribunal. The Court stated that:
Extending §1782 to include private bodies would also be in significant tension with the FAA, which governs domestic arbitration, because §1782 permits much broader discovery than the FAA allows. Among other differences, the FAA permits only the arbitration panel to request discovery, see 9 U. S. C. §7, while district courts can entertain §1782 requests from foreign or international tribunals or any “interested person,” 28 U. S. C. §1782(a). In addition, prearbitration discovery is off the table under the FAA but broadly available under §1782 (citation omitted). Interpreting §1782 to reach private arbitration would therefore create a notable mismatch between foreign and domestic arbitration.
Without consent from the other side to provide discovery, parties to non-US insurance and reinsurance arbitrations have now lost (if they ever had it) a way to obtain documents or depositions from US-based entities relevant to their dispute. There may be ways to obtain discovery under certain international treaties, but those mechanisms will be slow and may not provide the breadth of discovery previously allowed in some circuits.
While there are lots bigger fish to fry in Congress, it is possible that at some point amendments to the FAA may address this issue depending on whether enough of a pro-arbitration population in Congress thinks this is an issue worthy of attention.
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