Commercial Litigation and Arbitration

Foreign Arbitration Subject to Limited Appellate Review (FAA-Like) Is a “Proceeding” within 28 U.S.C. § 1782 — As This Is the First Post-Intel Circuit-Level Decision, Is There More Than a Nominal Circuit Split?

Application of Consorcio Ecuatoriano de Telecomunicaciones S.A., Pursuant to 28 USC 1782, 2012 U.S. App. LEXIS 12949 (11th Cir. June 25, 2012) (NOTE: THIS OPINION WAS WITHDRAWN SUA SPONTE ON 1/10/14 -- see Application of Consorcio Ecuatoriano de Telecoms. S.A., 2014 U.S. App. LEXIS 531 (11th Cir. Jan. 10, 2014):

Although an issue of first impression in this Circuit, the determination of whether a foreign arbitration falls within the scope of section 1782 is guided in substantial measure by the Supreme Court's seminal decision in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004). Most significantly for our purposes, the Court in Intel emphasized the breadth of the statutory term "tribunal." In discussing the legislative history of section 1782, Justice Ginsburg, writing for the Court, observed that Congress in 1964 introduced the word "tribunal" into the statute to replace the previous version's term "judicial proceeding," quoting with approval from a Senate Report "explain[ing] that Congress introduced the word 'tribunal' to ensure that 'assistance is not confined to proceedings before conventional courts,' but extends also to 'administrative and quasi-judicial proceedings.'" Id. at 248-49 (quoting S. Rep. No. 88-1580, at 7 (1964), reprinted in 1964 U.S.C.C.A.N. 3782, 3788). And then, in determining whether the Directorate-General for Competition of the European Commission was a "tribunal" under the statute, the Supreme Court reiterated that the legislative change from the phrase "any judicial proceeding" to the current phrase -- "a proceeding in a foreign or international tribunal" -- was intended to "provide the possibility of U.S. judicial assistance in connection with administrative and quasi-judicial proceedings abroad." Id. at 258 (alterations and internal quotation marks omitted). As the Supreme Court noted, "[w]hen Congress acts to amend a statute, we presume it intends its amendment to have real and substantial effect." Id. at 258-59 (quoting Stone v. INS, 514 U.S. 386, 397 (1995)).

Moreover, the Court quoted with approval the following broad definition of "tribunal" set forth by a leading scholar on international procedure: "[t]he term 'tribunal' . . . includes investigating magistrates, administrative and arbitral tribunals, and quasi-judicial agencies, as well as conventional civil, commercial, criminal, and administrative courts." Id. at 258 (alterations in original) (emphasis added) (quoting Hans Smit, International Litigation Under the United States Code, 65 Colum. L. Rev. 1015, 1026 n.71 (1965)).

Footnote 4. Professor Smit, whose articles are repeatedly cited by the Supreme Court in Intel, is more than a leading scholar in the field. Indeed, one of the reasons offered for citing his views as persuasive authority on the interpretation of section 1782 is that, as then-Judge Ginsburg explained in an earlier D.C. Circuit opinion, Professor Smit is "the dominant drafter of, and commentator on, the 1964 revision of 28 U.S.C. § 1782." In re Letter of Request from the Crown Prosecution Serv. of the U.K., 870 F.2d 686, 689 (D.C. Cir. 1989).

Applying this broad definition to the case, the Supreme Court concluded that because the European Commission acted as a "proof-taking" body and a "first-instance decisionmaker," the Court had "no warrant to exclude the European Commission . . . from § 1782(a)'s ambit." Id. at 257-58; accord id. at 246-247 ("[T]he Commission is a § 1782(a) 'tribunal' when it acts as a first-instance decisionmaker . . . ."); id. at 255 & n.9 (noting that a European Commission proceeding "leads to a dispositive ruling, i.e., a final administrative action both responsive to the complaint and reviewable in court," and observing that the European Commission has the "authority to determine liability and impose penalties, dispositions that will remain final unless overturned by the European courts").

Thus, while the Supreme Court in Intel was not tasked with specifically deciding whether a private arbitral tribunal falls under the statute, its broad functional construction of the term "tribunal" provides us with substantial guidance. Consistent with this functional approach, we examine the characteristics of the arbitral body at issue, in particular whether the arbitral panel acts as a first-instance adjudicative decisionmaker, whether it permits the gathering and submission of evidence, whether it has the authority to determine liability and impose penalties, and whether its decision is subject to judicial review. See id. at 255 & n.9, 257-58; see also In re Winning (HK) Shipping Co., 2010 WL 1796579, *7 (S.D. Fla. April 30, 2010) ("Intel suggests that courts should examine the nature of the arbitral body at issue to determine whether it functions as a 'foreign tribunal' for purposes of section 1782."); In re Roz Trading Ltd., 469 F. Supp. 2d 1221, 1228 (N.D. Ga. 2006) ("Where a body makes adjudicative decisions responsive to a complaint and reviewable in court, it falls within the widely accepted definition of 'tribunal,' the reasoning of Intel, and the scope of § 1782(a). . . .").

The pending arbitration between JASE and CONECEL meets the functional criteria articulated in Intel. In connection with its section 1782 application, CONECEL submitted declarations from its Ecuadorian counsel explaining that the arbitral panel has the "authority to receive evidence, resolve the dispute, and award a binding decision." The declaration further states that after the conclusion of the arbitration proceedings,

the parties will be able to appeal the decision before an ordinary court of the Ecuadorian state for causes related to procedural defects during the proceedings, for example, for the lack of service of the complaint to the defendant or lack of notification relating to some relevant decision that prevented one of the parties to exercise its defense rights, or a violation of the rules regarding designation of arbitrators or the selection of the tribunal, etc. The nullification action is resolved by the Provincial Court in the jurisdiction in which the arbitral award is rendered. Against the decision of the Provincial Court, an appeal can be made before the National Court of Justice.

The declaration also opined that "another possible option is to attack an arbitral award through an extraordinary action of protection provided for in the new Constitution of 2008." This kind of constitutional attack on the arbitral award is "made before the Constitutional Court," and the action would be viable if "a guaranteed right under the Constitution has been violated, whether by act or omission."

Notably, JASE does not contest that the arbitral tribunal at issue is a first-instance decisionmaking body that can receive evidence and bind the parties with its ruling; it only contests whether the arbitral tribunal's decision is subject to judicial review. JASE submitted in the district court its own declaration from Ecuadorian counsel stating only that "[t]he sum and substance of [arbitrators'] rulings, including determinations of fact and law are not reviewable by appeal."

The parties' declarations are in no way inconsistent. JASE's declaration does not dispute that the award of the arbitral panel is subject to nullification based on procedural defects in the arbitration proceeding and to constitutional attack if the constitutional rights of one of the parties has been violated. The opposing declarations read together demonstrate that judicial review of arbitration awards in Ecuador, much like a federal court's review of an arbitration award, is focused primarily on addressing defects in the arbitration proceeding, not on providing a second bite at the substantive apple that would defeat the purpose of electing to pursue arbitration in the first instance. Cf. 9 U.S.C. § 10(a) (providing that a district court may vacate an arbitration award where the award was procured by corruption or fraud, where the arbitrators were partial or corrupt, where misbehavior by the arbitrators prejudiced the rights of any party, or where the arbitrators exceeded their powers); Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 578 (2008) (holding that "the statutory grounds" for judicial review in the Federal Arbitration Act "are exclusive," and may not be supplemented by contract); White Springs Agric. Chems., Inc. v. Glawson Invs. Corp., 660 F.3d 1277, 1280 (11th Cir. 2011) ("Because these Sections [9 U.S.C. §§ 10-11] are the exclusive means for upsetting an arbitration award, a panel's incorrect legal conclusion is not grounds for vacating or modifying the award.").

One could not seriously argue that, because domestic arbitration awards are only reviewable in court for limited reasons (notably excluding a second look at the substance of the arbitral determination), this amounts to no judicial review at all. As the Supreme Court has expressly recognized, the Federal Arbitration Act provides the exclusive statutory grounds for "expedited judicial review." Hall St., 552 U.S. at 578 (emphasis added). Yet JASE urges us, for section 1782 purposes, to conclude that the functional requirement of being subject to judicial review is only satisfied when the sum and substance of the arbitral body's decision is subject to full judicial reconsideration on the merits. This definition is far too stringent, and we can discern no sound reason to depart from the common sense understanding that an arbitral award is subject to judicial review when a court can enforce the award or can upset it on the basis of defects in the arbitration proceeding or in other limited circumstances. Based on the undisputed record before this Court, the arbitral panel in Ecuador, after receiving evidence from the parties, will render a first-instance binding decision on the merits that is subject to judicial review. This arbitral panel is, in the words of the Supreme Court, "a first-instance decisionmaker" whose judgment is subject to judicial review, and we therefore "have no warrant to exclude [it] . . . from § 1782(a)'s ambit." Intel, 542 U.S. at 258. In short, CONECEL's application satisfied the prima facie requirements of 28 U.S.C. § 1782(a).

Footnote 7. We are aware that two of our sister circuits, prior to the Supreme Court's decision in Intel, had reached a different conclusion, holding that private arbitral tribunals fall outside of section 1782's scope because the statute was only "intended to cover governmental or intergovernmental arbitral tribunals and conventional courts and other state-sponsored adjudicatory bodies." Nat'l Broad. Co. v. Bear Stearns & Co., 165 F.3d 184, 190 (2d Cir. 1999); accord Republic of Kazakhstan v. Biedermann Int'l, 168 F.3d 880, 881 (5th Cir. 1999). Most notably for our purposes, these decisions, and the categorical distinction they drew between governmental and private tribunals, were rendered without the benefit of the Supreme Court's subsequent Intel decision, in which the Court set forth a far broader and wholly functional definition of the term "tribunal," and declined to impose "categorical limitations" on the scope of section 1782(a). Intel, 542 U.S. at 255; see also Roz Trading, 469 F. Supp. 2d at 1228. To the extent that JASE relies here on a categorical distinction between governmental and private arbitral tribunals, we are unpersuaded, because neither the text of the statute nor the Supreme Court's decision in Intel make, or even suggest, drawing any such distinction. As the Supreme Court explained, Congress in 1964 replaced the term "judicial proceeding" with the term "tribunal" precisely in order to broaden the reach of section 1782 and extend the authority of district courts to provide assistance in connection with quasi-judicial proceedings abroad. Intel, 542 U.S. at 258. And the view that the statutory term "tribunal" includes "arbitral tribunals," strongly endorsed by the Supreme Court, albeit in dicta, see id., was not qualified in any way or limited only to governmental arbitral tribunals. Indeed, we note that Professor Smit has also written that "[c]learly, private arbitral tribunals come within the term the drafters used" and that "the term 'tribunal' in Section 1782 includes an arbitral tribunal created by private agreement." Hans Smit, American Assistance to Litigation in Foreign and International Tribunals: Section 1782 of Title 28 of the U.S.C. Revisited, 25 Syracuse J. Int'l L. & Com. 1, 5-6 (1998).

Moreover, the Intel decision also made clear that a district court, in the exercise of its sound discretion, may consider a number of the concerns that animated the decisions of the Second and Fifth Circuits, such as the claim that application of section 1782 to private arbitration is at odds with the limited scope of discovery and streamlined procedures that lead parties to elect to pursue arbitration in the first place. See Kazakhstan, 168 F.3d at 883; Nat'l Broad. Co., 165 F.3d at 190-91. Thus, for example, the Fifth Circuit reasoned that "arbitration's principal advantages may be destroyed if the parties succumb to fighting over burdensome discovery requests far from the place of arbitration." Kazakhstan, 168 F.3d at 883. This concern is real, but we recognize that the district court is in the best position to weigh the section 1782 applicant's asserted need for the evidence against the nature of the foreign proceeding and concerns of undue burden or intrusiveness -- two factors that the Supreme Court expressly instructed district courts to consider in determining whether to grant a section 1782 application. Intel, 542 U.S. at 264-65; accord id. at 264 ("[T]he grounds Intel urged for categorical limitations on § 1782(a)'s scope may be relevant in determining whether a discovery order should be granted in a particular case."); In re Winning, 2010 WL 1796579, at *10 n.5 ("[The party resisting discovery] correctly asserts that the broadened definition of 'international tribunal' by the Supreme Court in Intel may result in additional discovery burdens that parties to private arbitration seek to avoid. However, because courts may modify discovery requests based upon the discretionary factors set forth in Intel, such burdens may be significantly curtailed by a court, and thus allow parties to still reap the benefits of private arbitration.").

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