Article of the Day: Beale, Lugar, and Schwarz on the Judicial Assistance Statute and Arbitration
Posted on June 29, 2011
Kenneth Beale, Justin Lugar, and Franz Schwarz, all lawyers with WilmerHale, have a new article on the applicability of the judicial assistance statute, 28 U.S.C. § 1782, to international arbitration: Solving the § 1782 Puzzle: Bringing Certainty to the Debate Over 28 U.S.C. § 1782’s Application to International Arbitration, 47 Stan. J. Int’l L. 51 (2011).
The authors would adopt something like the “functional” approach outlined in Gustavo Lamelas’s recent article, which I reviewed here. That is, they would take the question on a case-by-case basis rather than adopting a categorical rule that private arbitral tribunals are or are not “tribunals” within the meaning of the judicial assistance statute. Their emphasis on the need or at least the desirability of prior approval of the tribunal is welcome, and it addresses one of the main concerns about the use of US judicial assistance in international arbitration, namely, opening the floodgates of discovery when one of the reasons the parties chose to agree to arbitrate was precisely to keep the floodgates closed, or mostly closed. I made this point in my post on Gary Born’s take on In re Caratube.
However, I continue to think that the best answer to the question is a categorical “no”: private arbitral tribunals are not tribunals within the scope of the statute. I have two principal reasons for taking this view. First, granted that the focus on approval of the tribunal takes some of the sting out of the point, I think it would be highly anomalous to give litigants in international arbitrations access to US discovery mechanisms when there is an absolute rule barring litigants in domestic arbitrations from accessing the courts for discovery purposes unless the arbitrator first issues a subpoena. I don’t understand the authors to be saying that approval of the tribunal is an absolute prerequisite. Rather, they describe tribunal approval (p. 106) as a factor that weighs in favor of granting discovery.
Second, and with less certainty: while Professor Smit, the primary drafter of the statute, has written that the statute applies to arbitral tribunals, I think the best reading of the legislative history is to the contrary. As Marc Goldstein wrote when commenting on the Second Circuit’s decision in NBC v. Bear, Stearns & Co., 165 F.3d 184 (2d Cir. 1999):
Considering first the ordinary meaning of the statute’s text, Judge Jose Cabranes writing for unanimous Second Circuit panel, concluded that the word “tribunal” did not unambiguously include, or exclude, international arbitration panels. Then, proceeding to examine the legislative history, the court found clear evidence of a congressional purpose to extend discovery assistance to non-conventional foreign adjudicative bodies, such as administrative tribunals, but was unable to find any expression of congressional intent to extend assistance to tribunals that were not either units of a foreign government or creatures of intergovernmental agreements. Finally, the court observed that the conclusions mandated by the statutory text and legislative history were fully supported by the policies underlying the FAA, which treats arbitration as a creature of the contract between the parties that ordinarily should not impose obligations on non-parties except as specified in the FAA itself.
The Second Circuit’s decision appears likely to gain wide acceptance in view of its careful scrutiny of the legislative history. The Second Circuit’s task was complicated by the fact that the drafter of the bill that included § 1782 was Professor Hans Smit, at that time a director of a project at Columbia University Law School that furnished assistance to the Commission on International Rules of Judicial Procedure. In a recent article, Professor Smit has asserted that § 1782 was intended by the drafter to cover private arbitrations, and should be so construed. The Second Circuit, however, noted that the Senate Report on § 1782 relied on a 1962 article by Professor Smit, which expressed the view that an international tribunal owes both its existence and its powers to an international agreement. As the Second Circuit’s decision notes, Professor Smit’s 1962 article, and the 1964 House and Senate reports on >§ 1782, can be searched in vain for affirmative evidence of an intention to include private, contractual, arbitral tribunals within the scope of the statute.
Marc J. Goldstein, International Commercial Arbitration, 33 Int’l Law. 389, 396-97 (1999).
Despite my views on this, which differ from the authors, I recommend this article as a worthwhile and well-written approach to the problem.