The March 2011 issue of the International Bar Association’s Arbitration News is out. Of particular interest in an article by Gustavo J. Lamelas of DLA Piper: The Evolving Standards for Extending US Discovery Assistance to International Arbitration. Lamelas notes that Intel Corp. v. Advanced Micro Devices has sparked “intense efforts to extend [the judicial assistance statute] to international arbitrations.” As he parses the cases, there are three basic approaches. The first simply holds that private arbitral tribunals are “tribunals” within the meaning of the statute, and thus that US courts can provide judicial assistance in aid of private international arbitrations. The second holds that only a public or quasi-public arbitration (e.g., a BIT arbitration) comes within the scope of the statute. The third adopts what he calls a nuanced “functionality” test. The core of Lamelas’s article is an examination of the functional approach. The article is helpful because it identifies what may be a trend in the case law, but Lamelas does not give a view as to the merits of the trend, which is unfortunate. I believe the trend is plainly unsound.
Lamelas cites three cases that follow the functional approach. The first, In re Operadora DB Mexico (M.D. Fla. 2009), involved an ICC arbitration in Mexico. The court held that the ICC was not a “foreign or international tribunal” within the scope of the statute. Although the tribunal had an independent arbitrator with the obligation to apply the law impartially and the authority to make a binding decision, the tribunal’s decision was not subject to judicial review (the ICC Court reviews awards before they issue, but only as to form). Moreover, the ICC’s authority derives from the agreement of the parties, not from a state. The second case, In re Winning (HK) Shipping Co. (S.D. Fla. 2010), came to the opposite conclusion in an arbitration in London under the London Maritime Arbitrators Association rules, on the grounds that the tribunal’s decision would be subject to review in the English courts. The third case, OJSC Ukrnafta v. Carpatsky Petroleum Corp. (D. Conn. 2009) (I cannot pull the decision off of PACER for some reason; the Lexis cite is 2009 US Dist LEXIS 109492), is similar to Winning: it held that a tribunal of the Arbitration Institute of the Stockholm Chamber of Commerce was within the scope of the statute on the grounds that the arbitration was governed by the UNCITRAL Rules and a challenge to the tribunal’s jurisdiction was pending in the Swedish courts.
There is some appeal to the functional approach, given the dicta in Intel rejecting a categorical approach. Lamelas does not give a critical look at the way his three cases apply it, however. It seems to me that Winning is probably wrongly decided. Under the English Arbitration Act, as under every arbitration statute of which I’m aware, an award can be vacated or set aside on various grounds. The English statute is here; for comparison, here is the relevant provision of the FAA. If Winning is right, then the “functional” test collapses into a bright-line rule that private arbitral tribunals are within the scope of the statute, which is precisely what the judge claimed she was seeking to avoid! Conversely, it would be highly unusual for a truly private international arbitration to be subject to more plenary judicial review, and thus the functional test may well collapse into a bright-line rule that private arbitral tribunals are not within the scope of the statute. The decision in OJSC Ukrnafta also seems incorrect. It is unclear why the parties’ choice of the UNCITRAL Rules to govern their arbitration should have any bearing on the question. The court seemed to confuse arbitration under the UNCITRAL Rules with arbitration under the auspices of UNCITRAL and thus to conclude, wrongly, that the arbitration it was considering was not truly private. And the mere fact that the Swedish courts have the power to set aside arbitral awards made in Sweden, or to enjoin an arbitration there, is not enough to show that the tribunal is within the statute, else essentially all international arbitrations would fall within the statute, and the functional test the court claims to be applying would collapse into a categorical rule.
At the conclusion of his piece, Lamelas draws the logical conclusion from Winning and OJSC Ukrnafta: since essentially all international arbitral awards are subject to some form of judicial review, he predicts that there will be a trend towards applying § 1782 to private arbitrations wholesale. I think we need to push back on this assertion and challenge the reasoning of the two cases. We must remember that extremely limited judicial review of awards is one of the reasons for having the international arbitration system in the first place.
My own view is that we should read the statute to categorically exclude private international arbitral tribunals, because I think it is highly anomalous to give parties to international arbitrations access to the full panoply of US pretrial discovery when we do not do so for parties in domestic arbitrations (but note that Gary Born proposes another solution to the problem).