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Recent changes to the Scope of Available Discovery in International Arbitration

2022.09.05

Corporations often turn to arbitration to manage risks of being hauled into unfamiliar national courts and unpredictable laws.  An often overlooked consequence of choosing arbitration is that available discovery may be limited, as a trade-off to efficiency and cost-saving.  But in many civil law jurisdictions such as South Korea, discovery practice may be more limited than arbitral proceedings seated in common law jurisdictions or governed by their laws.  In this regard, discovery in U.S. litigation stands out unparalleled.  U.S. state and federal civil procedure rules provide access to a broad scope of information and documents for both the prosecuting and defending parties, which could be immensely costly and time-consuming.  For this reason, parties engaged in international arbitration have often turned to US courts to obtain a potential treasure trove of evidence under §1782 of Title 28 of the United States Code.  According to §1782, federal district courts may order US residents to provide discovery for use in proceedings in foreign or international tribunals.  This resulted in an anomaly where parties in international arbitrations could petition US courts and obtain pre-arbitration discovery ‒ rights which are not allowed in US domestic arbitrations under the Federal Arbitration Act (“FAA”).  However, recent U.S. Supreme Court decisions in ZF Automotive US, Inc. v. Luxshare, Ltd. and Alix Partners, LLP, et al., v. The Fund for Protection of Investors’ Rights in Foreign States 1 drastically limited the right to conduct discovery in aid of foreign arbitrations.  How this shift will impact the landscape of discovery practice in international arbitration is yet to be observed, but it seems arbitrating parties may expect less disruption to confidentiality and efficiency by §1782 requests for US discovery. 
 
 
Comparative Overview of Available Discovery 
 
United States 
 
Courts in the US generally allow a broad range of discovery with little court supervision.  Discovery is allowed for “any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case,” and the information “need not be admissible in evidence to be discoverable.” 2  Interrogatories 3, requests for admission4, requests for production of documents 5, and deposition testimony 6 may all be sought from parties and, sometimes, third parties.  Discovery is routine and useful to substantiate claims and to meet the heightened evidentiary standards to authenticate evidence in US litigation.7 
 
South Korea 
 
In South Korea, there is no requirement for pre-litigation discovery.  The limited discovery that is available is generally conducted by and under the supervision of the Court.  For instance, a party may request the Court order a party or third party to produce a document in certain circumstances, such as when the party is legally entitled to request the document, or the document was prepared for the benefit of the requesting party.8  US-style depositions are not allowed.  Although a witness may be questioned outside of the courtroom if necessary,9 parties must examine or cross-examine witnesses under the judge’s supervision.10 
 
Arbitration 
 
Discovery in arbitral proceedings generally entails elements of both common law and civil law jurisdictions.  Discovery allowed in arbitration is mostly limited to document production.  According to the IBA Rules on the Taking of Evidence (2020), within the time limits set by the arbitral tribunal, “any Party may submit…a Request to Produce” documents.11  The arbitral tribunal may limit the production of documents for compelling considerations of “procedural economy, proportionality, fairness or equality of the Parties”, among other reasons.12  For third party documents, parties may request the tribunal to “take whatever steps are legally available to obtain the requested Documents, or seek leave…to take such steps itself”.13  Still, other rules, like the “Prague Rules”, expressly discourage document production.14 
 
 
Recent US Supreme Court’s Decisions 
 
Under 28 USC §1782(a), U.S. district courts are authorized to order a witness residing in the district “to give his testimony or statement or to produce a document…for use in a proceeding in a foreign or international tribunal…”15  The Supreme Court considered what kinds of adjudicative bodies constitute a “foreign or international tribunal” and determined that only tribunals that are imbued with governmental authority qualify.  Consequently, going forward, no US discovery is allowed for use in foreign private commercial arbitrations.  For international tribunals, the Supreme Court held that the “inquiry is whether those [governmental] features and other evidence establish the intent of the relevant nations to imbue the body in question with governmental authority.”16  While much has been resolved, there are still questions regarding investor-state disputes.  The Court found that the ad-hoc arbitration in Alix Partners did not qualify under §1782, but still left open the possibility that other investor-state arbitral panels may qualify.  While certainly ad hoc arbitrations will not qualify, the status of disputes in the International Centre for Settlement of Investment Disputes (ICSID) is unclear and will likely be tested soon. 
 
 
Conclusion 
 
As such, private parties in international arbitrations can no longer resort to US litigation to obtain broad discovery typically allowed in the US.  Notably, for arbitrations in Korea, the arbitral tribunal may request Korean courts to take or assist in taking evidence17 but the scope of discovery allowed would be more or less limited.  It appears discovery practices in cross-border disputes will continue to vary by forums and jurisdictions, but the recent U.S. Supreme Court decisions may have a more converging (rather than diverging) effect on discovery practices in international arbitration. 
 
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