High Court’s Upcoming Decision May Have Major Impact on Foreign Arbitrations

April 21, 2021

On March 22, 2021, the U.S. Supreme Court granted a petition for writ of certiorari in Servotronics, Inc. v. Rolls-Royce PLC, a decision that will likely resolve a circuit split over the power of an arbitrator to issue third-party discovery subpoenas to obtain document discovery in foreign arbitrations.

The issue involves Title 28, Section 1782(a) of the United States Code, which governs a district court’s authority to provide discovery assistance in litigation in “foreign and international tribunals.” The interpretation of “tribunal” has caused confusion among courts.

The Circuit Split

The 2nd, 3rd, 9th and now 7th Circuits hold that the Federal Arbitration Act (FAA) does not grant an arbitrator subpoena power to order prehearing discovery from third parties — limiting the definition of “tribunal” to state-sponsored foreign and international tribunals. Life Receivables v. Syndicate, 459 F.3d 210 (2d Cir. 2008); Hay Group v. E.B.S., 360 F.3d 404 (3d Cir. 2004); CVS Health v. Vividus, 878 F.3d 703 (9th Cir. 2017). The courts explain that “a broad grant of federal-court authority to compel discovery in private foreign arbitrations would stand in stark contrast to the extremely limited judicial role in domestic arbitrations.” Servotronics, Inc. v. Rolls-Royce PLC, 975 F.3d at 692-693.

The 8th Circuit is the only court that disagrees directly with the above circuits, while the 4th and 6th Circuits have limited their rulings on this topic. In holding that a “party” may issue the subpoena after a showing of “special need,” the 4th Circuit never held that the FAA empowered “arbitrators” to issue the subpoena. COMSAT v. Nat’l Sci. Found., 190 F.3d 269 (4th Cir. 1999). The 6th Circuit permitted this only in labor arbitrations. Am. Fed’n of Tel. & Radio Artists v. WJBK-TV, 164 F.3d 1004, 1009 (6th Cir. 1999). The 8th Circuit, however, disagreed directly, reasoning that this power furthers the goal of facilitating the efficient resolution of disputes. In re Security Life Insurance Co. of America, 228 F.3d 865, 870-71 (8th Cir. 2000).

Procedural History of Servotronics

After a prior settlement, Rolls-Royce PLC sought indemnification from Servotronics, the manufacturer of an engine valve used by Rolls-Royce in its products. Id. The parties’ contract dictated arbitration, and both sides agreed to begin arbitration in London. Id. Servotronics filed an ex parte application in the U.S. District Court for the Northern District of Illinois, asking the court to issue a subpoena compelling a third party to produce documents for use in the London arbitration.

Focusing on the statutory context of the term “foreign or international tribunal,” the court ruled arbitrators are not permitted to issue third-party discovery subpoenas to obtain document discovery in domestic arbitrations. Id. In 1964, Section 1782’s language was proposed by the Commission on International Rules of Judicial Procedure. Although this group was charged with various tasks, it was not charged with improving judicial assistance to private foreign arbitration. Id. Six years later, Congress adopted this language along with a complete revision to two other statutes — Sections 1781 (letters rogatory) and 1696 (service of process assistance in foreign litigation). Id. Read in conjunction, the court determined that both sections “are matters of comity between governments,” which suggests that the phrase “foreign or international tribunal” means “state-sponsored tribunals,” not “private arbitration panels.” Id. The word “tribunal,” therefore, means a governmental, administration or quasi-governmental tribunal operating pursuant to the foreign country’s “practice and procedure.” Id. Thus, private foreign arbitrations are not included. Id.

Grant of Certiorari

The Supreme Court granted certiorari to Servotronic’s 7th Circuit challenge and will decide whether the discretion granted to district courts under 28 U.S.C. Section 1782(a) includes rendering assistance in a private, foreign commercial arbitration.

This decision is likely to have a major impact on foreign arbitration. This ruling could create a flood of arbitrators issuing third-party subpoenas to U.S. district courts in private, foreign commercial arbitrations.

Subscribe
Back to top