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16 June 2022

Supreme Court Decides ZF Automotive US, Inc. v. Luxshare, Ltd.

In its 13 June 2022 decision in the matter ZF Automotive v Luxshare (Docket No. 21-401), the U.S. Supreme Court unanimously held that 28 U.S.C. § 1782 is not available as a basis for federal courts to assist the gathering of evidence in aid of private adjudicatory bodies, including arbitral tribunals. This long-awaited decision has resolved a split between federal courts some of which had allowed section 1782 discovery for use in private arbitrations while others had not. This decision puts an abrupt end to U.S.-style discovery in aid of arbitration proceedings.

Under section 1782, "[t]he district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal […]." The Supreme Court has now decided, mainly based on a textual analysis of the statute, that arbitral tribunals do not fall under the definition "foreign or international tribunals" exercising governmental authority conferred by one or more states.

The Supreme Court was also mindful of the fact that, by admitting section 1782 discovery in aid of foreign arbitration, it would have privileged arbitration abroad over domestic arbitration based on the Federal Arbitration Act (FAA).

The same reasoning also applies in investment arbitration cases, even though the Supreme Court found this a "harder question" in the case AlixPartners, LLC, et al. v The Fund for Protection of Investor Rights in Foreign States (Docket No. 21-518) that it decided along with the ZF Automotive matter. While such cases almost invariably encompass governmental bodies, these are involved in a capacity as parties, not creating or prescribing the procedures. It still remains to be seen whether investment arbitration cases under the ICSID Convention and before the EU Multilateral Investment Court (MIC) will be treated likewise.

The full decision can be accessed here.

Authors: Thomas Weibel, Christian Oetiker

Category: Litigation and Arbitration