International Arbitration Procedures: Evidence Gathering in the USA

Background

The discovery process is a key instrument in U.S. procedural law for preparing a trial.

It allows each party to systematically obtain evidence and information from the other party to strengthen their own argument or uncover weaknesses in the opposing party's argument. This is done through depositions, requests for document production, requests for admissions, and witness testimonies. Subpoenas can also be used to obtain evidence from non-parties.

On 13 June 2022, the US Supreme Court decided in the case ZF Automotive US, Inc., et al. v. Luxshare, Ltd. that the parties in an arbitration proceeding cannot request discovery assistance under 28 U.S. Code § 1782(a) from U.S. federal courts if the arbitration location is outside the USA.

28 U.S. Code § 1782(a) states:
"The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation."

In the proceeding, the claimant Luxshare, from Hong Kong, asserted post-M&A claims against ZF Automotive, an automotive supplier based in Michigan and a subsidiary of a German company. The business purchase agreement stipulated that all disputes were to be resolved under the arbitration rules of the German Institution of Arbitration (DIS). To prepare for a DIS arbitration against ZF, Luxshare filed an application under 28 U.S. Code § 1782(a) with the competent U.S. federal court, seeking information from ZF and its officers.

The court based its decision primarily on a text-based interpretation of 28 U.S. Code § 1782(a):

"Foreign tribunal" more naturally refers to a tribunal belonging to a foreign nation than to a tribunal that is simply located in a foreign nation. And for a tribunal to belong to a foreign nation, the tribunal must possess sovereign authority conferred by that nation.

Conclusion

If the arbitration location is abroad, the path of obtaining evidence in the USA for international arbitration proceedings over 28 U.S. Code § 1782(a) will be closed in the future.