International Arbitration Procedures: Evidence Gathering in the USA

Background

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

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

On June 13, 2022, the US Supreme Court decided in the case of ZF Automotive US, Inc., et al. v. Luxshare, Ltd. that parties to arbitration cannot request discovery support under 28 U.S. Code § 1782(a) from US federal courts if the arbitration venue is outside the United States.

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 proceedings, 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 acquisition agreement provided that all disputes were to be settled 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 US federal court, seeking information from ZF and its officers.

The court primarily based its decision on a literal 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 venue is abroad, the means of obtaining evidence in the US for international arbitration under 28 U.S. Code § 1782(a) is now closed.