Special Mechanisms for Obtaining Evidence

Introduction

Every seasoned arbitration practitioner will have been in a situation where a particularly useful class of documents was in the possession of a third party or the client was unable to secure evidence from a potentially helpful witness of fact. Given the consensual nature of arbitration, arbitrators’ hands are tied and orders can be made only against parties to the arbitration and in respect of evidence that is in their possession or control. An arbitration also needs to have been initiated before a party can make any requests for evidence. Arbitrators also lack the coercive powers of a state court to enforce a document production order or to compel a witness to give evidence, albeit they can draw adverse inferences or make adverse cost orders.

There are a number of avenues to consider to overcome these limitations. There may be a contractual or statutory right to request the evidence in question (or that it be procured) or the applicable legal framework may bestow the competent court with the power to compel production of evidence in aid of arbitration. The focus of this chapter is on Section 1782 of Title 28 of the US Code (Section 1782), which offers arguably the most potent route to obtaining evidence when the relevant party is incorporated in the United States or present in the jurisdiction, albeit its application in particular to commercial arbitrations continues to evolve. Other routes to evidence briefly considered here, and which have been used in practice to varying degrees, are freedom of information access requests, data subject access requests pursuant to EU rules on data protection and evidence obtained in parallel criminal proceedings.^[2]

Section 1782 application

Introduction

Although many jurisdictions offer judicial assistance in obtaining evidence in aid of arbitration (as already noted), the seat of the arbitration ‘has usually been chosen for its neutrality, and so the relevant third party is unlikely to be within its jurisdiction’.^[3] Courts in some jurisdictions also extend their judicial assistance in aid of foreign arbitrations,^[4] with the US courts ostensibly taking the most liberal approach.

Section 1782 allows a foreign or international tribunal or ‘any interested person’ to file an application in a US district court in the jurisdiction where the respondent resides or can be ‘found’ within the district. The application may seek to compel deposition testimony or the production of documents ‘for use in a proceeding in a foreign or international tribunal’ where there would otherwise be no other mechanism to achieve this.^[5] The US Congress enacted Section 1782 to further the ‘twin aims’: (1) to provide efficient discovery procedures in US courts for the benefit of participants or tribunals in foreign proceedings; and (2) (perhaps somewhat overzealously) to encourage other countries, by a ‘generous example’, to provide similar means of assistance to US litigants.^[6]

As is explored in more detail below, Section 1782 can thus be deployed when one of the parties is incorporated in the United States or when the individual in question is located in the United States, even temporarily.^[7] Although Section 1782 has been invoked frequently in respect of investment treaty arbitrations, the question of whether commercial tribunals qualify as foreign or international tribunal within the meaning of Section 1782 is currently pending before the Supreme Court.^[8] Courts retain discretion to reject the application, including in particular in circumstances where the evidence sought can be ordered by the arbitral tribunal in the usual course.^[9] A Section 1782 application is thus most useful when third parties – such as corporate affiliates, subsidiaries, and parent entities – over which the tribunal has no jurisdiction, are in the possession of important evidence or (possibly) before the tribunal is constituted.^[10]

In the subsections that follow, we first set out the statutory requirements for making a Section 1782 application, then explain the factors that courts consider in deciding whether to exercise their discretion to grant the application, followed by procedural aspects and considerations of the respondent in responding to the application.

Statutory requirements

A Section 1782 applicant must satisfy three statutory requirements before a court can order discovery.

• The applicant must be a foreign or international tribunal or an interested person. Being a litigant in a foreign proceeding more than satisfies the latter requirement. Indeed, in the landmark case Intel,^[11] the US Supreme Court acknowledged that the text of Section 1782(a) ‘reaches beyond the universe of persons designated “litigant,” and encompasses those with a reasonable interest in obtaining the assistance’. However, there is an ongoing debate as to whether the phrase ‘foreign or international tribunal’ encompasses commercial arbitrations. That investment treaty tribunals qualify as foreign or international tribunals is reasonably settled.^[12] Applying a functional analysis,^[13] the courts have generally found that international investment tribunals, such as those constituted under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention), the North American Free Trade Agreement (NAFTA) or bilateral investment treaties, qualify as foreign tribunals under Section 1782.^[14] Investment treaty tribunals and parties to investment treaty arbitrations can thus avail themselves of the Section 1782 mechanism provided the other factors are met. Whether the same applies to tribunals in and parties to commercial arbitration is subject to debate. Some circuit courts, such as the Fourth and Sixth Circuits, have found that ‘a foreign tribunal’ includes private, commercial arbitrations. On the other hand, for the time being, the Second, Fifth and Seventh Circuits have prohibited a Section 1782 application in aid of international commercial arbitration proceedings. To resolve the circuit split and provide guidance to lower courts, the US Supreme Court is scheduled to hear arguments on this issue in Servotronics,^[15] with a decision expected in 2022.
• The respondent must reside or ‘be found’ in the district of the court to which the application is made. For individuals, courts have held that the mere presence of an individual within the jurisdiction, even temporary, is sufficient to satisfy the ‘reside’ or ‘be found’ requirement. For entities, a Section 1782 application must be filed in the district in which the entity is incorporated or where it is headquartered. If an entity’s headquarters are in a district other than the district where it is incorporated, the applicant can file the application where it is more advantageous to do so.
• The application must be to obtain evidence for use in a foreign or international proceeding; a requirement that has been interpreted broadly. To satisfy the ‘for use’ requirement, the applicant must show that (1) the requested discovery will be used at some stage of a foreign proceeding; and (2) the proceeding qualifies as a ‘foreign or international tribunal’. With respect to the first requirement, Section 1782 applications are filed while the proceedings are pending but this is not required. In Intel, the Supreme Court held that a proceeding may be within ‘reasonable contemplation’ and rejected the requirement that the proceedings be ‘imminent’. The Intel court clarified that the evidence requested need only be ‘eventually . . . used in such a proceeding’. To meet this lower bar of reasonable contemplation, applicants have attested to their intent to file proceedings, retained legal counsel, sent demand letters and provided other ‘objective indici[a]’.^[16]

Discretionary Intel factors

Even if the statutory requirements of Section 1782(a) are satisfied, the district court retains its discretion to decide whether to order discovery. In deciding whether to exercise the discretion, courts consider the following factors set forth in the Intel decision: (1) whether the discovery sought is within the foreign tribunal’s jurisdictional reach and thus obtainable absent Section 1782 aid; (2) the nature of the foreign tribunal and its receptivity to evidence obtained under Section 1782; (3) whether the application conceals an attempt to circumvent foreign proof-gathering restrictions; and (4) whether the subpoena contains unduly intrusive or burdensome requests.^[17] These factors must be assessed in light of Section 1782’s twin aims of ‘providing efficient means of assistance to participants in international litigation in [US] federal courts and encouraging foreign countries by example to provide similar means of assistance to [US] courts’.^[18] Each of these factors is elaborated on below.

First Intel factor

This factor relates to efficiency.^[19] If the foreign tribunal is in a position to order the discovery sought, then it is not efficient to burden a US court with such a request. Conversely, the aim of efficiency is furthered if the respondent is outside the tribunal’s reach and located in the United States. However, discovery can be obtained also against parties to arbitration proceedings provided the applicant demonstrates that the foreign law applicable to the arbitration does not afford any mechanism to compel the production of the requested documents if they are not produced pursuant to the tribunal’s order.^[20]

Second Intel factor

The issue considered here is whether the foreign tribunal might regard as inadmissible the evidence obtained pursuant to Section 1782, in which case granting the application will be of no identifiable use and thus inefficient.^[21] It would also not encourage the foreign jurisdiction where the tribunal is seated to grant reciprocal discovery for US applicants.

In considering this second factor, district courts generally presume that the foreign tribunal will be receptive to the evidence absent clear, ‘authoritative proof that the foreign tribunal would reject the evidence sought’.^[22] Authoritative proof of unreceptivity is ‘embodied in a foreign country’s judicial, executive, or legislative declarations that specifically address the use of evidence gathered under foreign procedures’.^[23] In practice, this requires either a statement from the foreign tribunal disavowing the requested Section 1782 discovery, or statutory provisions or judgments having precedential value from the foreign jurisdiction prohibiting its use.

As a final note on this factor, responding parties seeking to oppose Section 1782 requests should not confuse receptivity with scope of discovery authorised in the arbitration proceedings. As Judge Poser observed, the scope of discovery is nearly always less in non-US proceedings than as authorised under the US Federal Rules of Civil Procedure (the FRCP).^[24] Simply because a foreign tribunal’s rules do not facilitate such discovery does not mean that the tribunal will not consider and receive the evidence.

Third Intel factor

The circumvention factor considers ‘whether the foreign court would be affronted by the applicant’s resort to US discovery’.^[25] This might be the case if the use of material obtained in a certain manner is affirmatively prohibited. As the Second Circuit explained, ‘proof gathering restrictions are best understood as rules akin to privileges that prohibit the acquisition or use of certain material’. Meanwhile, rules that merely ‘fail to facilitate the investigation of claims by empowering parties to require their adversarial and non-party witnesses to provide information’ are not regarded as evidence of circumvention.^[26] Positive prohibition of the use of materials obtained via a Section 1782 application would be rare in international arbitration and most likely be found in the arbitration agreement. It is therefore unlikely that foreign tribunals would be considered to be affronted. Nevertheless, it is advisable to explain adequately in a Section 1782 application that the discovery being sought will not violate any prohibitions imposed by the rules of procedures applicable to the foreign proceeding or arbitration.

Fourth Intel factor

Unduly intrusive or burdensome requests under Section 1782 may be rejected or trimmed by the district court, which has considerable discretion in this regard. District courts evaluate Section 1782 requests using the scope of discovery as authorised under the FRCP and not based on the scope of discovery available in the foreign tribunal.^[27] Accordingly, requests should be tailored to the specific facts of the application and avoid requesting irrelevant material. Otherwise, just like in arbitration proceedings, respondents may characterise the requests as an impermissible ‘fishing expedition’.

Procedural aspects

In terms of procedure, as noted above, a Section 1782 application has to be filed with the US district court where the respondent resides or can be found. The application should consist of a notice of motion or application, memorandum of law and points of authority, supporting declaration and a proposed order attaching the proposed subpoenas. The content of these documents, in brief, is follows:

• The application or notice of motion should inform the court of the filings to be submitted and briefly explain the requested relief.
• The memorandum of law and points of authority should set forth the facts of the underlying dispute and the nature of the non-US proceedings. It should further explain why the statutory requirements are satisfied and the discretionary factors weigh in favour of granting the application.
• All declarations should detail the necessary facts giving rise to the dispute and the rules applicable to the foreign tribunal.^[28]
• A proposed order attaching the proposed subpoenas should follow the form of the local rules and the proposed subpoenas should detail the discovery requests in conformity with the FRCP. As discussed above, the requests should be tailored to the dispute and the facts necessary to establish that connection must be set forth in the application.

A Section 1782 application is commonly filed ex parte. If an ex parte application is granted by the court, the applicant must serve the application and subpoenas on the respondent pursuant to Rule 5 of the FRCP, which is the applicable rule governing the service of new actions.

Responding to a Section 1782 application

The manner of responding to a Section 1782 application depends on whether the application is ex parte. If it is not, a respondent will need to consider whether to file an opposition to the application. To the extent that an opposition is to be filed, the court’s local and individual rules ought to be reviewed carefully to determine the opposition deadline and a briefing schedule ought to be requested.

If the application is granted ex parte and the respondent is served with a subpoena from the ex parte order, three types of responses are available: (1) comply; (2) object; or (3) move to quash the subpoena.

Compliance is advisable if the application is on solid footing with narrowly tailored requests. Objecting to the subpoena (in the manner prescribed in the FRCP)^[29] is advisable if the application, although on a solid footing, is overly broad in its scope. Well-lodged objections will cause the parties to seek to reach a compromise, failing which the onus will be on the applicant to move to compel compliance with the subpoena.

If, on the other hand, the respondent believes that the Section 1782 application was granted improperly, then it should file a motion to quash the subpoena. The motion to quash should articulate the reasons why the application fails to meet any of the statutory requirements or why the discretionary factors weigh towards denying the request. A motion to quash should also be accompanied by a declaration if there is a factual or foreign legal reason to deny the application. As a final note, if a respondent moves to quash and also believes the scope is improper, it should object under the FRCP to preserve the objections.

In conclusion, in circumstances where important evidence (be it documentary or witness) can be found on US soil, parties or prospective parties to an arbitration are advised to consider carefully whether to make a Section 1782 application, particularly if the evidence is needed to start the proceedings or if there are third parties involved who are beyond the arbitral tribunal’s reach. A Supreme Court ruling clarifying whether foreign commercial arbitrations fall within the ambit of Section 1782 would provide a welcome end to the circuit split. At the same time, as is apparent from the above discussion, there are sufficient checks and balances embedded in the consideration of the application to ensure that the mechanism is not abused.

Freedom of information requests

If the desired documents are held by public authorities, another route to obtaining them might be through a freedom of information request. The right to access information held by public bodies is now generally recognised, both domestically and in international law.

As regards domestic law, the constitutions in many jurisdictions contain a stand-alone right to information.^[30] In addition, states have enacted legislation guaranteeing their citizens’ right of access to government information. Whereas in 1990 only 13 countries had adopted such statutes,^[31] today 119 countries have freedom of information acts^[32] although they are by no means uniform and ‘vary in strength’.^[33] Information legislation ordinarily encompasses the right to request (and receive) information from public bodies but also the state’s obligation to publish information proactively.^[34]

From the public international law standpoint, ‘international human rights bodies such as the UN Human Rights Committee, the European Court of Human Rights, the Inter-American Court of Human Rights and the European Committee on Social Rights have today accepted the existence of a right to information in certain circumstances’.^[35] Thus, by failing to comply with a freedom of information request, a state also risks breaching the applicant’s human rights, as is apparent from a summary of the European Court of Human Rights’ landmark judgment in Társaság a Szabadság v. Hungary^[36] on access to information:

The applicant, a civil liberties NGO, employed domestic freedom of information (FOI) legislation in a bid to obtain access to the text of an application for constitutional review of laws relating to drug offences submitted to the Constitutional Court by a member of parliament. The decision of the Constitutional Court to refuse to grant access to the requested material had been upheld by the domestic courts on the basis that the application for review contained personal data of the member of parliament which could not be accessed without the author’s approval. The European Court of Human Rights decided that the refusal of access amounted to a violation of the applicant’s rights under Article 10 [of the European Convention on Human Rights].^[37]

Another significant development is the entry into force of the Council of Europe Convention on Access to Official Documents on 1 December 2020 (the Convention on Access). The Convention is ‘the first binding international legal instrument to recognise a general right of access to official documents held by public authorities’.^[38] To date, 18 countries have either signed or ratified the Convention on Access, including Belgium, Iceland and Lithuania, which historically have weaker freedom of information laws.^[39] Each party is obliged give effect to the Convention on Access in its domestic law.^[40] Under the Convention, anyone (whether a citizen or not) may request access to official documents held by public authorities without specifying reasons for the request, subject to customary limitations such as protection of national security and privacy.^[41] This further supports the trend towards broad availability of documents held by governments.

Although, in general, a freedom of information request does not need to be tied to any proceedings, it is no surprise that it has been used successfully by claimants in investment treaty arbitrations where the state counterparty was bound by the relevant freedom of information legislation.^[42] Making a freedom of information request may be particularly useful before commencing arbitration proceedings, including, for example, if one needs access to travaux préparatoires in respect of the applicable treaty from the prospective state counterparty or, indeed, some other documents. One should also note that the applicable freedom of information legislation may cover not only states and state entities but also private parties performing public functions or operating with public funds.^[43]

The key advantages of making an information request in aid of arbitration can be summarised as follows:

• The request can be made before commencement of the proceedings, which may assist in assessing the prospects of the claim, developing new legal theories and substantiating claims with evidence, before making a final decision to proceed with the arbitration.
• The request need not be made by the (prospective) party to the proceedings and neither does there need to be an identity of the parties on the state side – a state related entity not party to the arbitration might be captured by the freedom of information legislation or, indeed, if the state related entity is party to the arbitration, documents might be obtained from the state that is not a party via this route.
• The scope of a freedom of information request can be broader than a document production request since the former is not limited to the scope of the dispute.
• Respondent states may be more motivated to produce documents at the document production phase, when the request for documents is coupled with a freedom of information request under the state’s own legislation, which can attract more public scrutiny and the potential threat of a human rights violation, as noted above.
• Making a broad freedom of information request may place an additional administrative burden on the responding party.
• More a neutral factor than an advantage is that the cost of making a freedom of information request is nominal, unless the request itself is litigated (in which case the costs of any such litigation are likely to be modest).

However, there are also (perceived) risks or drawbacks in making such a request that ought to be considered before the request is made:

• Depending on the prescribed timelines in the applicable legislation, the requested entities can take several months to respond to an information request, and the response may be unsatisfactory. Freedom of information requests should thus be considered in good time prior to starting an arbitration, or at least at the outset of the proceedings.
• A request for information may tip off the prospective counterparty about the intention to make a claim, which may not be desirable.
• The quality of information or documents that can be expected differs from jurisdiction to jurisdiction, depending on the applicable freedom of information legislation and local practices.

In sum, although the risk of tipping off the prospective counterparty has to be given serious consideration, there is little downside to making a freedom of information request. A party may gain access to a broader set of information (including from non-parties) compared to a conventional document production request, at nominal cost and even prior to initiating arbitration proceedings.

Data subject access requests pursuant to EU rules on data protection

Another tool that is often mentioned in this context is the possibility of making a data subject access request pursuant to the EU General Data Protection Regulation (GDPR),^[44] which became effective in the European Union on 25 May 2018. However, we consider that the use of this tool in international arbitration is likely to be limited to specific factual situations in which personal data that can be obtained pursuant to the GDPR may be of relevance.

The GDPR sets a high standard for personal data protection across the European Union, with severe fines for non-compliance by those handling personal data of up to 4 per cent of global gross revenue or €20 million, whichever is higher.^[45] The GDPR is broad in its scope, and applies primarily to organisations established in the European Union that process personal data although, in some circumstances, it can also extend to organisations processing personal data established exclusively outside the European Union.^[46]

As mandatory law, the GDPR applies equally to legal and natural persons falling within its ambit and handling personal data in the context of an arbitration. In an effort to consider the GDPR implications on arbitration in practice, the International Council for Commercial Arbitration (ICCA) and the International Bar Association (IBA) established a Joint Task Force on Data Protection in International Arbitration, which has produced a consultation draft of the ICCA-IBA Roadmap to Data Protection in International Arbitration (the ICCA-IBA Roadmap). Once finalised, the aim of the ICCA-IBA Roadmap is to ‘provide practical guidance on the potential impact of data protection principles, in particular [the GDPR], on international arbitration proceedings’.^[47]

One powerful tool of the GDPR of relevance for this discussion is a data subject access request (DSAR). DSARs allow individuals to obtain confirmation that their data is being processed and to access their personal data and certain other information (e.g., the purposes of processing, whether the data will be given to any other organisations and the envisaged period for which the data will be stored).^[48]

Given that the information that individuals can request is limited to personal data, the ambit of a DSAR is much narrower than document production in civil litigation or international arbitration.^[49]

Nevertheless, there are examples of cases (in the United Kingdom, for instance) in which actual and potential litigants (being natural persons) have sought to use a DSAR as a means of obtaining disclosure outside the usual disclosure process in litigation proceedings.^[50] However, these are cases in which personal data held by the defendant may be highly relevant, such as in claims for discrimination by an employer. It is therefore difficult to see how a DSAR may usefully be deployed in commercial or investment treaty disputes except for a specific instance in which personal data held by one of the parties may be of relevance in resolving any factual issue (as information not concerning personal data may be redacted).

For any such specific cases, the benefits of making a DSAR are (1) access to data held by third parties, (2) access to personal data of which the arbitral tribunal may not be authorised to order production or that may be broader in scope than what might be granted pursuant to a disclosure request, (3) enforceability in courts, and (4) nominal cost. The potential for tipping off (as in respect of freedom of information requests) and the length of the process (organisations have up to three months to respond)^[51] are two notable downsides. A DSAR should thus be made prior to or early on in an arbitration proceeding.

Finally, responding to a DSAR can be time-consuming and expensive. Making a DSAR may therefore be used as a litigation tactic to impose an administrative burden on a counter­party. However, before employing this tactic, one should consider the prospect of an equally burdensome tit-for-tat request.

Use of documents obtained in criminal proceedings

The interplay between international arbitration and criminal law has given rise to extensive arbitration commentary.^[52] The one aspect that is relevant to this discussion is a party’s use of evidence obtained in criminal proceedings in parallel arbitration proceedings. In practice, two separate scenarios arise: (1) a state using its sovereign powers to obtain helpful evidence; and (2) a private party filing a criminal complaint and participating in the ensuing criminal proceedings as victim.

The first scenario is part of a broader theme of states using (and, indeed, sometimes abusing) the state apparatus against foreign investors. This is well documented in the practice of investment treaty tribunals.^[53] One of the consequences of a state-mandated criminal investigation concerning an investor is that the state may obtain access to the evidence collated in the investigation. For example, in Lao Holdings v. Laos, the tribunal went as far as holding that ‘the primary purpose for which the Respondent intends to use the powers of criminal investigation, at least in the first instance, is to collect evidence for use at the arbitration, which, in the result, will undermine the integrity of the arbitral process’.^[54]

Regardless of whether the investor is prosecuted in good faith, the state gains a procedural advantage and equality of arms concerns arise.^[55] Each case raises its own set of facts and different outcomes may be warranted. For example, in Libananco v. Turkey,^[56] Libananco showed that Turkey had intercepted its counsel’s email communication as part of criminal proceedings, including privileged correspondence, such as a draft of Libananco’s arbitration memorial.^[57] The tribunal ordered Turkey to obtain a statement from the public prosecutor that all intercepted emails and communications relating to the arbitration had been, or would be, destroyed.^[58]

As for the second scenario, non-confidential arbitral decisions are not readily available. However, anecdotal evidence suggests that such situations do arise. For example, imagine a situation in which the buyer commences arbitration proceedings against the seller for breach of a warranty and also makes a criminal complaint against the seller and related natural persons for fraud. Depending on the jurisdiction in question, the buyer may participate in the criminal proceedings as a victim with access to the evidence collected by the prosecutor (documents, records of property searches, transcripts of witness interviews, etc.) at minimal cost.^[59] The buyer then uses that evidence in the parallel arbitration against the seller.

This approach^[60] can obviously yield a significant procedural advantage for the claiming party, giving it indirect access to a state’s coercive powers. However, this advantage must be balanced against the complexities that parallel proceedings (criminal or otherwise) bring with them. In particular, parallel arbitrations spur arguments around procedural unfairness, bad faith, heightened standard of proof, lis pendens and suspension of the arbitration while the parallel proceedings are pending.

It is indisputable that leveraging parallel criminal proceedings, among other things, by accessing the criminal file and collecting evidence, can tip the scales of any arbitration. The foregoing discussion shows that one must wield this powerful weapon with caution as criminal proceedings have the propensity of aggravating disputes and, if shown to be unfounded, are likely to antagonise the tribunal.

Conclusion

As the discussion in this chapter shows, all is not lost when desirable evidence is in the possession of a third party over which an arbitral tribunal has no jurisdiction or is required prior to the commencement of arbitration proceedings. Outside the available court-assisted mechanisms to obtain such evidence, where a US district court’s jurisdiction can be invoked, Section 1782 is the most potent, not least because it is available in respect of foreign arbitrations and does not require the permission of an arbitral tribunal. Although its use in investment treaty arbitrations and against non-parties is reasonably settled, time will show whether its use will be accepted in respect of foreign commercial arbitrations, prior to an arbitration commencing or, indeed, against parties to an arbitration.

Among other mechanisms available, national freedom of information legislation and, more recently, the Convention on Access oblige states and, for the most part, state related entities to comply with requests for information, although the time limits for compliance may be generous and the information provided may not prove to be useful, necessitating another round of requests. The GDPR provides another route to obtaining evidence from private parties where personal data is of relevance; however, this is rarely the case in commercial or investment treaty arbitrations. Evidence that can be gleaned from parallel or related criminal proceedings should also be considered, although arbitral tribunals will take a dim view of a party’s litigation tactics if the power to initiate criminal proceedings held, in particular, by state parties is abused.

Notes