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Case Note:
International Arbitration... Meet U.S. Discovery

by ~ Ann F. Ketchen (Email) (Web Site)

Suppose you're involved in a reinsurance arbitration in another country, can you use the courts in the United States to seek discovery from a third-party? If the third-party is in Massachusetts, the answer may be, "yes."

In Borsig AG v. Babcock Power, 583 F. Supp. 2d 233 (D. Mass. 2008), the federal district court in Massachusetts indicated a willingness to order third-party discovery for use in an international arbitration under 28 USC  1782. That statute permits federal district courts to order parties within their jurisdiction to provide documents or testimony for use in proceedings before international "tribunals," raising the question, is a private arbitration a "tribunal"?

Contemplated ICC Arbitration in Germany

In Borsig, the issue was not reinsurance, but the principles would apply, nonetheless. The Borsig dispute arose out of an arbitration clause in a corporate asset sale transaction. A German company, Babcock Borsig AG (Borsig) sold certain assets to BPI, an American company, and others to Hitachi, a Japanese company. During later litigation between Borsig and BPI, Borsig discovered what it believed to be material misrepresentations made by Hitachi in connection with the asset sale.

Borsig contemplated arbitration of these material misrepresentation claims against Hitachi, but it did not commence arbitration. Instead, Borsig filed an application for discovery under 28 USC 1782 from BPI for use in a future arbitration before the International Chamber of Commerce (ICC) in Germany.

Objection to U.S. Discovery

BPI and Hitachi objected on various grounds, including that the private ICC arbitration is not a "tribunal" within the meaning of section 1782, and thus, the court did not have the statutory authority to order BPI to produce documents for use in a proceeding before the ICC. BPI and Hitachi also argued that even if the requirements of  1782 were met, the Court should exercise its discretion to deny discovery.

The ICC Is a "Foreign Tribunal"

The Court focused principally on whether the ICC is a foreign "tribunal." Holding that such a private arbitration does meet the requirements for  1782 discovery, the court relied on the Supreme Court's 2004 decision, Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 247. Although Intel does not directly address whether private arbitral bodies like the ICC qualify as "tribunals" under section 1782(a), its "reasoning and dicta strongly indicate" an understanding that Congress intended such a private foreign arbitral authority to be a quasi-judicial "tribunal" within the scope of the statute. The Massachusetts court also looked to recent federal district court decisions in Georgia and Minnesota for support. Both cases were decided after Intel, and both reach the same conclusion as the Borsig court. The Massachusetts court distinguished earlier contrary case law on the grounds that it pre-dated Intel. In contrast, a federal court in Illinois last month denied a motion to take a deposition for use in a private reinsurance arbitration in London. In re an Arbitration in London, England, No. 09-C-3092, 2009 WL 1664936, at *1 (N.D. Ill. June, 15, 2009).

Discretion to Deny Discovery

The court in Borsig also concluded that the fact that arbitration had not yet been commenced did not preclude discovery under the statute if the arbitration was within "reasonable contemplation." Nevertheless, the court exercised its discretion under section 1782 and denied Borsig's discovery request because the ICC had not indicated whether it would be receptive to the materials. The court also emphasized the facts that Borsig had already litigated against BPI without obtaining this discovery and had delayed two years without actually commencing the arbitration.

All the same, the court noted that it was "ready and willing to reconsider this ruling" if "the ICC indicates its receptivity to some or all" of the requested materials.We use the very best in technology to make these elegant hermes kelly bag,iwc replica,replica longines watches and bell & ross replica watches.

Ann Ketchen may be reached at afketchen@rkmc.com.

 2009 Robins, Kaplan, Miller & Ciresi L.L.P. All Rights Reserved.

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