Fifth Circuit Rules on Section 1782 Discovery Motion for International Arbitration Case

In an unpublished opinion, the United States Court of Appeals for the Fifth Circuit held that section 1782 does not apply for a discovery motion for use in a private international arbitration.

In El Paso Corporation v. La Comision Ejecutiva, (No. 08-20771) (5th Cir. Aug. 6, 2009), La Comision Ejecutiva Hidroelectrica Del Rio Lempa (“CEL”) is a state-owned utility company in El Salvador and Nejapa Power Company (“NPC”) is a utility company related to El Paso Corporation (“El Paso”), an energy corporation based in Houston, Texas.

Currently, CEL and NPC are arbitrating a contract dispute in Geneva, Switzerland, under the arbitration rules of the United Nations Commission on International Trade Law (“UNCITRAL”), El Salvadoran substantive law, and Swiss procedural law. CEL sued to obtain discovery from El Paso, to use it in its international private arbitration proceeding with NPC, pursuant to 28 U.S.C. § 1782 (Assistance to Foreign and International Tribunals and to Litigants Before such Tribunals).

The Texas District Court denied CEL’s request for discovery and held that § 1782 did not apply to discovery for use in a private international arbitration. The court also held that, even if it did have the authority under § 1782, “it would not [grant the application], out of respect for the efficient administration of the Swiss arbitration.” The court granted the Rule 60(b) motion for relief from a judgment or order, vacated its ex parte order, and quashed the outstanding discovery requests. CEL now appeals.

The Fifth Circuit first considered El Paso’s argument that CEL’s appeal was moot. Because the evidentiary hearing for the arbitration has concluded and the panel has closed the evidence, El Paso argues that “there is no longer a live case or controversy.” The court noted that under UNCITRAL arbitration rules, an arbitral tribunal may reopen the hearings at any time before the award is made. So, if CEL discovered new evidence with a § 1782 application, the court reasoned, that evidence could still be considered if the tribunal reopen the evidentiary hearing. The court concluded that a live controversy still exists and proceeded to address the merits of the appeal.

Next, the Fifth Circuit reviewed the granting of the Rule 60(b) motion. The court stated that “[s]uch a motion can be granted for a number of reasons, including mistake, inadvertence, surprise, or excusable neglect” and “any other reason that justifies relief. The law of this circuit permits a trial judge, in his discretion, to reopen a judgment on the basis of an error of law.”

The court noted that in Republic of Kazakhstan v. Biedermann International, 168 F.3d 880 (5th Cir. 1999), the court held that “a ‘tribunal’ within the meaning of § 1782 did not include a private international arbitral tribunal, and thus § 1782 did not apply to discovery sought for use in such a tribunal.” CEL argued that Biedermann is no longer controlling in light of the Supreme Court’s decision in Intel Corp. v. Advanced Micro Devices, Inc, 542 U.S. 241, 258 (2004). However, the Fifth Circuit was not persuaded by CEL’s argument. The court concluded that the issue of whether a private international arbitration tribunal qualifies as a “tribunal” under § 1782 was not before the U.S. Supreme Court in Intel.

In addition, the court, citing Republic of Kazakhstan, explained that “empowering parties in international arbitrations to seek ancillary discovery through federal courts could destroy arbitration’s principal advantage as a speedy, economical, and effective means of dispute resolution if the parties succumb to fighting over burdensome discovery requests far from the place of arbitration.”

Accordingly, the court denied El Paso’s motion to dismiss the appeal as moot and affirmed the district court’s grant of the Rule 60(b) motion.

Technorati Tags:

arbitration, ADR, law, Fifth Circuit, international arbitration, discovery