Arbitration bodies should be considered tribunals under s. 1782.

• Author: Boesel, Scott R.
• Position: 28 U.S. Code section 1782 - Case Note

1. INTRODUCTION

   The purpose of this Note is to analyze the Second Circuit's decision in NBC v. Bear Stearns & Co.(1) and its interpretation of Title 28, [sections] 1782 of United States Code. The statute governs the obtaining of evidence in the United States for use in judicial proceedings abroad.(2) The relevant language of the statute for purposes of this Note is the phrase "foreign and international tribunals." The court in NBC concluded that an International Chamber of Commerce [I.C.C.] arbitration proceeding was not considered a tribunal within the scope of the statute.(3) This Note will argue that arbitration tribunals were intended to be included within the scope of [sections] 1782 and the Second Circuit should not have used the tribunal distinction as the basis for its decision.

   Prior to NBC, there existed a difference of opinion regarding the "foreign and international tribunal" language of [sections] 1782.(4) The Southern District of New York concluded in In re Technostroyexport(5) that an arbitral body was intended to be included in the language of [sections] 1782, but the court would not bypass the arbitrator's authority and allow discovery.(6) Because the Technostroyexport court did not cite to any authority for its determination that arbitration tribunals were to be included in the language of the statute, a subsequent Southern District ruling ignored the Technostroy holding; the court in In re Medway Power Ltd.(7) ruled that arbitration was not intended by Congress to be included within the scope of [sections] 1782.(8) In the NBC case, the judges attempted to resolve the split between the two prior cases involving this issue.(9)

   Part II of this Note will discuss the In re Technostroyexport, Medway and NBC decisions and distinguish the different situations in each case.(10) It is the position of this Note that the decision by the Technostroy court to include arbitral tribunals within the language of [sections] 1782 should have been followed in Medway and NBC. The statute should be read to encompass arbitration by a private international tribunal such as the International Chamber of Commerce International Court of Arbitration (I.C.C. Court).

   Part III of the Note will document the increased use of arbitration in recent years as well as the history and organization of the I.C.C. Court in relation to this increase.(11) Part IV will examine the legislative history and the secondary authority behind the creation of [sections] 1782.(12) Part V will combine Parts II, III and IV to analyze why the decision in the NBC case was flawed.(13) The sixth and final part of this Note suggests that district courts should not deny discovery requests by arbitrarily interpreting Congress' intent when enacting the statute, but should use the broad discretion granted by [sections] 1782 to make their decision.(14)

2. THE CASE HISTORY

   1. NBC Case

      In January of 1998, the District Court for the Southern District of New York was asked to decide `whether to enforce subpoenas served by NBC upon parties with whom it was involved in arbitration proceedings.(15) The district court held that private commercial arbitration is not included in the language of [sections] 1782.(16) The Court of Appeals for the Second Circuit affirmed this decision.(17) The arbitration proceeding was to take place through the I.C.C. Court based in Paris, France.(18) The dispute involved NBC and TV Azteca (Azteca), a Mexican television broadcasting company, and five of Azteca's financial advisors (Azteca parties).(19)

      The background of the case is necessary to introduce the underlying issue. In 1994, Azteca and NBC entered into an agreement in which NBC was to supply services and programs to Azteca in exchange for a compensation warrant from Azteca.(20) A dispute about the compensation warrant arose in 1997.(21) Azteca claimed the compensation included the right of NBC to purchase 10% of Azteca's then privately held stock and the right to participate in 10% of any future securities offerings in which Azteca might be involved.(22) According to NBC, it was given the right to purchase 10% of Azteca's shares at an initial price of $120 million(23) on May 6, 1994, when the parties entered the agreement, up to a final price of $160 million(24) on May 6, 1997, when the compensation warrant expired.(25) NBC also claimed that the warrant gave it the right to "put" (to sell or require Azteca to pay NBC for the unexercised portion) the warrant to Azteca for $25 million, in whole or in part, depending on the proportion of the right NBC exercised by purchasing shares of Azteca.(26)

      On April 3, 1997, NBC informed Azteca that it intended to purchase 1% of Azteca's shares and put the remaining portion of the compensation warrant to Azteca for $22.5 million.(27) On April 28, 1997, Azteca made a request for arbitration pursuant to the contract, alleging NBC failed to perform under the 1994 agreement.(28) As a result of these events, the parties became involved in arbitration.

      This matter came before the district court after the Part I judge granted NBC's ex parte application pursuant to [sections] 1782.(29) The section provides, in relevant part:

      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. The order may be made pursuant to a letter rogatory issued, or request made, by a foreign or international tribunal or upon the application of any interested person.... The order may prescribe the practice and procedure, which may be in whole or part the practice and procedure of the foreign country or the international tribunal, for taking the testimony or statement or producing the document or other thing.(30) The district court was asked to decide whether the private international arbitration taking place between NBC and Azteca through the I.C.C. was a tribunal within the "foreign and international tribunal" language found in [sections] 1782.(31) Though the statute was enacted in 1964, the Second Circuit had little guidance regarding this aspect of [sections] 1782.(32) After the district court quashed the subpoenas, an appeal went to the Second Circuit where they were asked to decide the same question.(33) Only two other cases involving this issue had been brought before the Second Circuit and their decisions were at odds.(34) The Second Circuit sought to resolve the discrepancy with their decision in the NBC case. The court found that the arbitration was not included in the "foreign and international tribunal" language.(35)

   2. In re Technostroyexport

      Technostroyexport was the first case to come before the Second Circuit involving an arbitration proceeding and a [sections] 1782 discovery request.(36) The court ruled that an arbitration panel was a "tribunal" under the statute, but that it would be improper to allow the discovery request without authority from the arbitration panel.(37) Technostroyexport (Technostroy) was a Russian economic association that initiated arbitration against International Development and Trade Services (I.D.T.S.), a New York corporation.(38) I.D.T.S. countered with its own arbitration proceeding.(39) Technostroy filed for arbitration in Moscow while the I.D.T.S. arbitration was to commence in Stockholm.(40) Technostroy petitioned the judge for an ex parte order to obtain documents and testimony from certain I.D.T.S. officers.(41) I.D.T.S. sought to have the subpoenas quashed, claiming that the district court could not enforce the statute without a ruling from either arbitral tribunal.(42) The district court agreed that the arbitrators in Russia and Sweden should decide what discovery was to be obtained.(43)

      This case can be distinguished from the NBC case. In Technostroyexport, the arbitration was taking place in Russia and Sweden, and not under the I.C.C. Court.(44) More importantly, the arbitration was occurring at the time Technostroy made its discovery request to the district court.(45) NBC's request was made prior to selection and appointment of the arbitrators and was made pursuant to I.C.C. Rule 8(5),(46) which allows a party to seek conservatory measures without affecting the arbitration.(47) The Second Circuit was correct in interpreting [sections] 1782 to include arbitration tribunals in Technostroyexport. Furthermore, since the arbitration was already in progress at the time Technostroy made the request, the court was correct in denying the request and leaving the discovery determinations to the arbitrators.

      The district court, in the NBC case, should have taken into consideration the conclusion by the Technostroyexport court that arbitration tribunals were to be included within [sections] 1782, along with I.C.C. Rule 8(5), which provided NBC with the authority to seek conservatory measures. Once the court determined NBC did not violate the arbitration agreement or the arbitral tribunal's rules, the court could have used the broad discretion granted by [sections] 1782 to enforce or quash the subpoenas.(48)

   3. In re Medway Power Ltd.

      In the second case, In re Medway,(49) the court ruled that private arbitration was not a tribunal under [sections] 1782.(50) Medway was involved in arbitration pending in England and made a motion under [sections] 1782 for General Electric Company to produce documents.(51) General Electric was not a party to the arbitration but its records were deemed "relevant and necessary" by Medway.(52) Here, the district court ruled that the legislative history of [sections] 1782 did not evidence an intention to include private arbitration.(53) The Medway court did not feel obligated to follow the previous ruling in Technostroyexport because the Technostroyexport court did not cite to any authority in its decision.(54) The Medway court commented, however, that "what adjudicatory bodies fall within the term `tribunal' may appear to be an...