Case of the Day: In re Kleimar N.V.
Posted on December 7, 2016
The case of the day is In re Application of Kleimar N.V. (S.D.N.Y. 2016). Kleimar was engaged in an arbitration against Dalian Dongzhan Group Co. before the London Maritime Arbitration Association. Kleimer brought a § 1782 application seeking leave to take discovery from Vale S.A., a non-party, for use in the arbitration. The issue was whether the LMAA tribunal, a private arbitral tribunal, is a “tribunal” for purposes of § 1782.
I have written about this issue several times, most recently (and perhaps curtly) in April 2016, and earlier here, here and here. Second Circuit precedent has held that private arbitral tribunals are not tribunals for purposes of § 1782, but the judge was persuaded in light of dicta in Intel that the Supreme Court might consider overruling precedents such as the Second Circuit precedent, and he held, without much discussion of the rationale, that the LMAA was indeed a tribunal for purposes of the statute. It is interesting to me to see a district court judge stick his neck out like this. I’m not sure I understand the reason. I don’t think anything in Intel is likely to persuade the Second Circuit to reverse itself, if this decision is appealed.
It seems to me that many of the cases, and my own posts, have been pretty conclusory on this question, one way or the other. The closest looks I’ve taken are here and here. It’s true that some legislative history supports the idea that a private arbitral tribunal should count as a “tribunal” for purposes of the statute. One of the leading drafters, Hans Smit, took the view that they should, and the amended statute refers to “a proceeding in a foreign or international tribunal” instead of a “judicial proceeding,” as did the prior statute. On the other hand, I think there are sound policy reasons to go the other way. It makes little sense for litigants in foreign arbitrations to have greater access to US discovery procedures than do litigants in domestic arbitrations (where courts will enforce subpoenas issued by arbitrators but will not allow the parties to apply for judicial assistance without an arbitrator’s order). Granted, as Gary Born and others have pointed out, the foreign arbitrator can forbid recourse to § 1782, which would bring the non-circumvention factor in Intel into play. Moreover, in practice, parties that agree to arbitration are often motivated by a desire to avoid US-style discovery, and it seems sound (though this is not really a matter contemplated in Intel) to say that allowing § 1782 to be used in such cases is contrary to the spirit at least of the parties’ agreement. A pithier but less useful way to put this is that you shouldn’t be able to have your cake and eat it, too.