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The IBA’s response to the war in Ukraine
Joshua B Simmons
Wiley Rein, Washington DC
On 22 March 2021, the United States Supreme Court granted certiorari in Servotronics Inc v Rolls-Royce PLC and The Boeing Company, a case that the international legal community has followed closely. The question presented in Servotronics was whether a statute known as ‘Section 1782’ (28 USC s 1782) permits US district courts to allow discovery for use in a ‘foreign or international tribunal’ when the tribunal has been constituted for private commercial arbitration. A few weeks ago, the Court removed the case from its docket following a party’s request for dismissal. This is an important lost opportunity. Servotronics shows well the need to clarify the meaning of Section 1782, and why any companies doing business abroad – and with a presence in the US – should continue tracking this law.
The Servotronics case started with an engine fire. Boeing, which had been testing the engine, sought compensation from the manufacturer, Rolls-Royce. They settled their dispute and Rolls-Royce sought indemnification from Servotronics, the manufacturer of an engine component. The dispute went to arbitration in England. Servotronics filed multiple ex parte applications in US district courts under Section 1782, seeking documents and witness testimony from Boeing. The Seventh Circuit – like the Second and Fifth Circuits – held that Section 1782 ‘does not authorise the district court to compel discovery for use in a private foreign arbitration', but the Fourth and Sixth Circuits had held the opposite. It was particularly striking that, in connection with the same parties in the same English arbitration, the Fourth and Seventh Circuits came to clashing conclusions.
The Supreme Court granted certiorari following the Seventh Circuit’s decision. The Court last took up a Section 1782 appeal in 2004, when it issued the decision in Intel Corp v Advanced Micro Devices Inc, 542 US 241 (2004). Intel set forth factors to guide courts in granting Section 1782 requests but left open the question presented in Servotronics: whether the phrase ‘foreign or international tribunal’ in Section 1782 applies to private commercial arbitral tribunals. In deciding this question, the Court could have resolved the existing circuit split and prevented further inconsistencies. Instead, parties may now continue to ‘forum shop’ based on where evidence happens to be located in the US.
Servotronics argued before the Court that the text of Section 1782 clearly encompasses a tribunal in international commercial arbitration. The respondents contested this interpretation based primarily on the statutory history and practical consequences. As Boeing argued, recent assessments of international commercial arbitration show a total of more than 9,000 cases, and ‘Servotronic’s proposed interpretation […] would provide any and all parties involved in these private, contract-based arbitrations with potential access to discovery through US courts.’ Boeing added that US companies doing business abroad could be particularly exposed to ‘public, intrusive, and unequal discovery requests from foreign entities’ in international arbitration. Yet, as Servotronics noted, under the Court’s precedent in Intel, courts have shown wide discretion in applying several factors to limit discovery, such as when it would be ‘unduly intrusive or burdensome’, (Intel, 542 US at 264–65).
The respondents also argued that the case was moot because the arbitration hearing ended in May 2021. Servotronics countered that the arbitral tribunal has not yet issued its final award and that the case fit within the exception for claims that are ‘capable of repetition yet evading review’. The recent dismissal could likely support the same argument in a future case. Moreover, the Court’s grant of certiorari suggests an interest in resolving the lingering uncertainty over Section 1782’s application, rather than punting on grounds of mootness.
The international community took notice of the case’s significance. Eleven amicus briefs were filed. The majority opposed an expansive interpretation of Section 1782, including amicus briefs of the US Chamber of Commerce, Halliburton and the US Government. The US argued in favour of narrow discovery under the Federal Arbitration Act and it raised concerns that Section 1782 should not extend to investor-state arbitration. Although the State Department’s legal adviser did not co-submit the brief, it is not surprising that the Executive Branch – responsible for defending the US in investor-state arbitration – opposed ‘injecting broad discovery’ into such disputes. By contrast, the amicus briefs of prominent arbitrators and arbitration counsel, such as Professor George Bermann, argued that the plain meaning of Section 1782 ‘compels the conclusion that the statute applies to proceedings before international commercial arbitral tribunals.’
Both sides in Servotronics had thorough and reasonable arguments, as the circuit split shows. Now, with the recent dismissal, future litigants are left to continue the debate over Section 1782 – until another case winds its way to the Supreme Court. The international community should be watching and waiting for this chapter of the ‘Americanization’ of discovery now turns an uncertain new page.