What has happened
The Supreme Court heard two hours of oral argument on March 23, 2022 in consolidated cases ZF Automotive US v. Luxshare and AlixPartners LLP v. Fund for Protection of Investor Rights in Foreign States. At issue is whether international arbitrations, including private commercial arbitration and investor-state arbitration, qualify as “foreign or international tribunal[s]” under 28 U.S.C. § 1782, the federal statute enabling U.S. federal district courts to order discovery assistance for litigants before such tribunals. The U.S. Courts of Appeals for the Second, Fifth, and Seventh Circuits have held that private commercial arbitration does not qualify for discovery assistance under § 1782, while the Fourth and Sixth Circuits have extended the statute to private arbitration. But the Courts of Appeals agree that investment treaty arbitrations are eligible for § 1782 discovery, so the Supreme Court’s decision to review AlixPartners came as somewhat of a surprise.
Section 1782 does not define the phrase “foreign or international tribunal.” In their briefing, the petitioners (ZF Automotive and AlixPartners) said the phrase refers to tribunals created by foreign governments that exercise governmental authority. Private commercial and investor‑state arbitrations do not fit that definition, so petitioners say they may not obtain discovery under § 1782. The respondents (Luxshare and the Fund) urged the Court to read the text broadly to encompass private arbitrations. The Biden Administration, which submitted an amicus brief and argued in support of ZF Automotive and AlixPartners, urged the Court to adopt a bright line rule excluding any kind of arbitration from § 1782 discovery.
Key points from oral argument
Oral argument began by focusing on the statutory text. Chief Justice Roberts and Justice Kagan were skeptical that the language “foreign tribunal” naturally requires government affiliation, suggesting that it could also include tribunals established under the law of another country. The petitioners responded that the Court should read “foreign tribunal” as a whole rather than chopping the phrase into individual words. The petitioners explained that the statute’s focus on governmental adjudicators was evident from its purpose of enhancing cooperation with foreign countries, including quasi-judicial agencies. Deputy Solicitor General Edwin Kneedler, arguing for the government, agreed that the statute was meant to facilitate cooperation with foreign governments and is most naturally read as referring to courts or bodies exercising official governmental authority.
The Justices also highlighted the difference between the two types of arbitration at issue: private commercial arbitration and treaty-based investor-state arbitration. Chief Justice Roberts noted that investor-state arbitration seemed “quite different,” because the arbitral panel was created by the government. Kneedler explained that the government saw the two as “functionally the same,” because a foreign state is like a private actor when it agrees to private arbitration and private tribunals lack sovereign power. Justice Sotomayor asked whether an arbitral panel selected by an international body like the World Trade Organization, which has a dispute settlement plan between states, would qualify as a governmental tribunal where states submit to its jurisdiction. AlixPartners conceded that such an entity would qualify as governmental. Kneedler likewise acknowledged that § 1782 might apply where foreign states establish a formal standing body with arbitrators selected by the governments but said that situation was not at issue here.
The argument also focused heavily on the issue of comity. The litigants disagreed as to whether discovery access in arbitrations would promote reciprocal access for U.S. litigants before foreign tribunals. The respondents argued that comity is not purely transactional and is also about respect for foreign tribunals. In any event, they pointed out that reciprocating countries like the U.K. are major locations for international arbitrations. Kneedler disagreed, arguing that U.S. involvement in foreign arbitrations risked undermining international comity by creating the potential for friction and controversy on issues that did not involve the United States.
Several Justices questioned how investor-state arbitration undermines comity, given that foreign states agree to such arbitration by treaty. Justice Sotomayor and Justice Kavanaugh repeatedly pressed that issue, and Justice Barrett questioned whether countries’ expectations are relevant in determining the status of an arbitral body. Kneedler argued that foreign governments adopt treaty-based arbitration to simplify and depoliticize dispute resolution by removing issues from one state’s court system. He said U.S. intrusion into private disputes undermines these goals. The respondents disagreed and asserted a broader view of comity, one they said the Supreme Court had previously recognized as advanced by international arbitration.
The advocates and Justices also focused on potential asymmetry in discovery for domestic and international arbitration. In petitioners’ view, granting broad discovery access in international arbitration was incongruous with the rules limiting discovery in domestic arbitration, undermining comity and encouraging foreign litigants to seek U.S.-based discovery. In response to concerns that a broad reading would encourage abuse of § 1782, Justice Breyer asked whether discovery could be limited to requests by the foreign arbitrator. The respondents agreed that was one way to prevent abuse; they also argued that parties and tribunals could limit or prohibit discovery by agreement or arbitration rules. The petitioners disagreed, arguing that § 1782 allows applicants to request discovery before proceedings begin, meaning that courts would be left to guess the preferences of hypothetical arbiter panels.
What this means
It is difficult to forecast what the Court will decide, although the Court seemed most likely to hold that private commercial arbitration is not eligible for § 1782 discovery. On the issue of investor-state arbitration, several Justices were candid about the difficulties presented, and most of the argument was devoted to that issue. Justice Breyer was concerned about the prospect of subsequent litigation asking the Court to determine whether particular arbitrations qualify as governmental and thus eligible for § 1782 discovery, should the Court adopt petitioners’ view of the statute. Justice Gorsuch asked whether the Court should err in the direction of allowing the political branches to first decide if § 1782 extended to arbitration. Justice Kagan said that “of all the parties,” the government is “the expert in international comity,” and the Court is likely to afford significant weight to the government’s view that investor-state arbitration falls outside the scope of § 1782. Justice Alito asked no questions, and Justice Thomas was absent from argument while recovering from an illness.
The Supreme Court is likely to rule on this matter by June 2022.
Authored by Ollie Armas, Sam Zimmerman, Mike Jacobson, David Michaeli, Katherine Wellington, and Dana Raphael.