Using U.S. Discovery for International Arbitrations Abroad: What are the Limits? Insights from the Caratube Case.

For businesses engaged in international arbitration, particularly those seated outside the United States, accessing evidence located within the U.S. can be a critical challenge. One unique statutory tool, 28 U.S.C. § 1782, has long been a subject of debate and strategic consideration. This provision allows U.S. federal district courts to order U.S.-based persons or entities to provide discovery—testimony or documents—for use in proceedings before a "foreign or international tribunal." For years, a key question was whether private international commercial arbitration panels qualified as such "tribunals." While a 2022 U.S. Supreme Court decision largely answered this for private arbitrations, the statute's application to investor-state arbitrations and the discretionary factors guiding U.S. courts remain highly relevant. The 2010 decision of the U.S. District Court for the District of Columbia in In re Application of Caratube International Oil Company LLP (730 F. Supp. 2d 101 (D.D.C. 2010)) offers valuable insights into how courts weigh these factors, particularly when an arbitration is already well underway.

I. Understanding 28 U.S.C. § 1782: A U.S. Gateway for International Evidence

Section 1782(a) broadly provides that a U.S. district court in the district where a person "resides or is found" may order that person to give testimony or produce documents or other things "for use in a proceeding in a foreign or international tribunal." Such an order can be made upon the application of the foreign or international tribunal itself or by "any interested person." The discovery is generally to be conducted in accordance with the Federal Rules of Civil Procedure, unless the court orders otherwise.

The statute aims to provide efficient assistance to participants in international legal proceedings and to encourage foreign countries to offer reciprocal assistance to U.S. courts.

II. The Scope of "Foreign or International Tribunal": The Supreme Court's Clarification in ZF Automotive

For many years, U.S. federal circuit courts were split on whether § 1782 could be used to obtain discovery in aid of private international commercial arbitrations. Some, like the Second Circuit in National Broadcasting Co. v. Bear Stearns & Co. (1999) and the Fifth Circuit in Republic of Kazakhstan v. Biedermann International (1999), held that private arbitral bodies did not qualify as "tribunals" under the statute, viewing them as products of private contracts rather than governmental or quasi-governmental entities.

The landscape was significantly influenced by the U.S. Supreme Court's 2004 decision in Intel Corp. v. Advanced Micro Devices, Inc. (542 U.S. 241). While Intel did not directly address private commercial arbitration, it held that the Directorate-General for Competition of the European Commission, when acting as a first-instance adjudicative body, was a "tribunal" for § 1782 purposes. The Intel Court's expansive language and citation to academic commentary (including Professor Hans Smit's view that "tribunal" included arbitral panels) led many lower courts and practitioners to believe that § 1782 might indeed be available for private international arbitrations.

However, the Supreme Court definitively resolved this question in June 2022 with its consolidated decision in ZF Automotive US, Inc. v. Luxshare, Ltd. and AlixPartners, LLP v. The Fund for Protection of Investors' Rights in Foreign States. The Court unanimously held that 28 U.S.C. § 1782 reaches only governmental or intergovernmental adjudicative bodies, and does not cover private commercial arbitral tribunals or ad hoc investor-state arbitration panels established solely by private agreement between an investor and a state to resolve a commercial dispute. The Court reasoned that the term "foreign or international tribunal" in § 1782 is best understood to refer to bodies that exercise governmental authority conferred by one or more nations, not to adjudicators chosen by private parties to resolve their private disputes.

III. Investor-State Arbitration Post-ZF Automotive: Do ICSID Tribunals Still Qualify?

The ZF Automotive decision specifically carved out a distinction. While it excluded private commercial arbitration panels and ad hoc investor-state panels that derive their authority solely from party agreement, the Court's reasoning implies that investor-state arbitration tribunals constituted under treaties and operating under the auspices of international organizations established by multiple nations (like the International Centre for Settlement of Investment Disputes, ICSID) would likely still qualify as "foreign or international tribunals" because they are imbued with governmental or intergovernmental authority. ICSID, for example, was established by an international convention (the ICSID Convention) entered into by numerous sovereign states. This distinction is crucial for understanding the ongoing relevance of cases like Caratube, which involved an ICSID arbitration.

Thus, while § 1782 is now largely unavailable for discovery in aid of private international commercial arbitrations, it remains a potentially viable tool for certain types of investor-state arbitrations.

IV. The Intel Discretionary Factors and the Caratube Decision

Even where the statutory requirements of § 1782 are met (i.e., for a qualifying "tribunal"), the Intel Supreme Court decision clarified that district courts are not required to grant such applications. Instead, they must exercise their discretion, guided by several factors aimed at balancing the U.S. policy of providing judicial assistance with concerns of comity, procedural fairness, and efficiency. These Intel factors are:

1. Whether the person from whom discovery is sought is a participant in the foreign proceeding. If so, the foreign tribunal itself likely has jurisdiction over that person, making U.S. court assistance less necessary.
2. The nature of the foreign tribunal, the character of the proceedings abroad, and the receptivity of the foreign government, court, or agency to U.S. federal-court judicial assistance. Courts will consider if the foreign tribunal is willing to accept and use evidence obtained via § 1782.
3. Whether the § 1782(a) request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States. The statute should not be used to bypass limitations on discovery imposed by the foreign tribunal or the applicable procedural rules.
4. Whether the request is otherwise unduly intrusive or burdensome. Requests must be appropriately tailored and not overly broad.

The In re Application of Caratube International Oil Company LLP case provides a useful illustration of how these discretionary factors are applied in the context of an investor-state arbitration (ICSID).

A. Factual Background of Caratube

Caratube, an oil company, had initiated an ICSID arbitration against the Republic of Kazakhstan, alleging that Kazakhstan had unlawfully terminated its petroleum exploration and production contract due to political motivations. The dispute was being arbitrated under the U.S.-Kazakhstan Bilateral Investment Treaty.

During the ICSID proceedings, the parties had agreed that the arbitration's discovery process would be guided by the IBA Rules on the Taking of Evidence in International Arbitration. An arbitral discovery schedule was in place. However, relatively late in this process—just two days after the ICSID tribunal had issued a procedural order addressing various discovery disputes between the parties, and with less than a month remaining for the completion of that discovery phase—Caratube unilaterally filed an application under § 1782 in the U.S. District Court for the District of Columbia. Caratube sought discovery from several non-party entities and an individual located in the U.S., alleging they were involved in or had information about the Kazakh government's actions.

Caratube informed the ICSID tribunal of its § 1782 application after it had been filed with the U.S. court and then requested a six-month extension of the arbitral schedule. Kazakhstan objected strongly, asking the ICSID tribunal to order Caratube to withdraw its § 1782 application. The ICSID tribunal expressed its "displeasure" with Caratube's unilateral action and lack of prior consultation but declined to order the withdrawal of the U.S. application. It also denied Caratube's request for a schedule extension and reserved its decision on the admissibility of any evidence that might be obtained through the § 1782 process.

B. The D.D.C.'s Ruling in Caratube (August 11, 2010)

Judge Rosemary M. Collyer of the D.D.C. denied Caratube's § 1782 application. While the court assumed, for the sake of argument (without definitively deciding), that an ICSID tribunal qualified as a "foreign or international tribunal" under § 1782, it exercised its discretion under the Intel factors to refuse the request.

• Factor 1 (Target as Participant): The entities from whom Caratube sought discovery were non-parties to the ICSID arbitration. The Intel Court suggested that when discovery is sought from non-participants, the need for § 1782 aid is generally greater. This factor, therefore, weighed somewhat in favor of granting Caratube's application.
• Factor 2 (Nature of Tribunal, Character of Proceedings, Receptivity): The D.D.C. found no credible evidence that the ICSID tribunal would outright reject evidence obtained via § 1782. However, several aspects weighed against granting the application under this factor:
  • Nature of the Tribunal: Caratube had chosen to submit its dispute to an ICSID tribunal, a forum where parties have significant autonomy to shape procedural rules. The court expressed reluctance to interfere with the parties' expectations arising from this choice.
  • Character of the Proceedings: The arbitration was at an advanced stage, with a detailed procedural schedule already established by the tribunal after consultation with the parties. Caratube had not previously raised the need for third-party discovery with the tribunal or sought its assistance. The timing of the application, so late in the agreed discovery process, was viewed negatively.
• Factor 3 (Circumvention of Foreign Rules/Policies): This was a decisive factor weighing heavily against granting the application. The D.D.C. found strong indications that Caratube was attempting to use § 1782 to circumvent the ICSID tribunal's control over the discovery process and the procedures the parties themselves had agreed to (the IBA Rules).
  • The IBA Rules on the Taking of Evidence (the then-current version) provided a mechanism for a party to request the arbitral tribunal to take steps to obtain documents from non-parties (Article 3.8). This rule directed a party to first seek the tribunal's assistance.
  • The D.D.C. reasoned that if Caratube had followed this agreed-upon procedure, the ICSID tribunal could have assessed the relevance and materiality of the requested documents and, if appropriate, could have itself sought judicial assistance under § 1782 or other means.
  • By unilaterally approaching the U.S. court without first utilizing the agreed arbitral procedures or seeking the tribunal's prior leave, Caratube was seen as undermining the arbitral process and the tribunal's case management authority.
• Factor 4 (Unduly Intrusive/Burdensome): The court did not need to delve deeply into this factor as the concerns under factors 2 and 3 were sufficient to deny the application.

The D.D.C. concluded by emphasizing the advanced stage of the arbitration and Caratube's apparent attempt to "circumvent the Tribunal’s control of the discovery process." It therefore exercised its discretion to deny the § 1782 application.

V. Key Takeaways from Caratube for § 1782 Applications in Investor-State Arbitration

The Caratube decision, even predating ZF Automotive, provides enduring lessons for parties contemplating § 1782 applications, particularly in the context of investor-state arbitrations (like ICSID) where the statute likely remains applicable:

1. Respect for the Arbitral Process and Tribunal Authority: U.S. courts are likely to scrutinize § 1782 applications that appear to bypass or undermine the procedural framework established in the arbitration, especially if the parties have agreed to specific evidence-gathering rules (like the IBA Rules) or if the arbitral tribunal has already issued procedural orders managing discovery. Unilateral resort to § 1782 without consulting the tribunal may be viewed as an attempt to subvert the tribunal's authority.
2. Timing of the Application is Critical: Applications made late in the arbitral process, after discovery schedules are established and largely completed, may face skepticism. Courts might question why the applicant did not seek the information earlier through the arbitral process itself.
3. Utilize Tribunal-Supervised Mechanisms First: If the applicable arbitration rules or procedural orders provide avenues for seeking evidence from non-parties (e.g., by requesting the tribunal to order production or seek judicial assistance), parties should generally be prepared to demonstrate that they have exhausted or at least seriously considered these mechanisms before approaching a U.S. court directly under § 1782.
4. The Tribunal's View Matters: While an arbitral tribunal's express approval is not a statutory prerequisite for a § 1782 application by an "interested person," indications that the tribunal is unreceptive to, or surprised by, a unilateral § 1782 application can significantly influence the U.S. court's exercise of discretion. The Caratube tribunal’s expressed "displeasure" likely factored into the D.D.C.'s decision.
5. Demonstrate Genuine Need and Non-Circumvention: Applicants should be prepared to show that the discovery sought is genuinely necessary for the foreign proceeding and that the § 1782 application is not a tactic to gain an unfair advantage, harass opponents, or circumvent restrictions on discovery that are part of the agreed arbitral process or the law of the seat.

VI. Implications for U.S. Businesses Involved in International Arbitration

The evolving landscape of 28 U.S.C. § 1782 has specific implications for U.S. businesses:

• Private International Commercial Arbitration: Following ZF Automotive, U.S. businesses can no longer expect to use § 1782 to obtain discovery from U.S.-based persons or entities for use in their private international commercial arbitrations, regardless of where those arbitrations are seated. They must rely on the discovery mechanisms available under the applicable arbitration rules and the powers of the arbitral tribunal.
• Investor-State Arbitration (e.g., ICSID, treaty-based): For U.S. companies involved in investor-state disputes before tribunals that likely qualify as "governmental or intergovernmental adjudicative bodies," § 1782 probably remains a viable tool. However, as Caratube illustrates, simply meeting the statutory threshold is not enough; the application must also satisfy the court's discretion under the Intel factors.
• Strategic Use of § 1782 in ISDS: If contemplating a § 1782 application for an investor-state arbitration, it should be a carefully considered part of an overall evidence-gathering strategy. Ideally, such an application should be made transparently, and where possible, with the foreknowledge or even support of the arbitral tribunal, rather than as a unilateral, surprise maneuver.
• Defending Against § 1782 Applications: U.S. companies (or their U.S.-based affiliates), even if not parties to an arbitration, might find themselves the target of § 1782 applications (in ISDS contexts). A thorough understanding of the Intel discretionary factors and the principles from cases like Caratube (e.g., arguing circumvention of arbitral procedures) is essential for formulating an effective defense.
• Document Management: Regardless of § 1782's availability, sound document management and retention policies are crucial for all companies engaging in international business, as evidence may be sought through various means in any dispute.

Conclusion

The U.S. Supreme Court's 2022 decision in ZF Automotive has significantly narrowed the scope of 28 U.S.C. § 1782 by excluding private international commercial arbitration tribunals from its ambit. However, the statute likely remains applicable to certain types of investor-state arbitrations conducted before governmental or intergovernmental bodies like ICSID tribunals.

In these remaining contexts, the discretionary factors established by the Supreme Court in Intel v. AMD, and illustrated by the district court's analysis in Caratube, will continue to be paramount. U.S. courts will likely exercise their discretion cautiously, emphasizing respect for the integrity of the chosen arbitral process, the authority of the arbitral tribunal to manage its own proceedings (including discovery), and the procedural framework agreed upon by the parties. Parties in investor-state arbitrations should prioritize utilizing the evidence-gathering mechanisms available within their specific arbitration framework before considering a unilateral resort to § 1782, and if they do so, be prepared to demonstrate compelling reasons why U.S. judicial assistance is warranted and appropriate.