- Generally speaking, a district court is authorized under the FAA to compel compliance with subpoenas issued by an arbitral panel that is sitting in the court’s district. See 9 U.S.C. § 7. Since the New York Convention as enacted incorporates chapter one of the FAA (to the extent there is no conflict between the two), this same authority applies to international arbitrations under the New York Convention that take place within the U.S. See 9 U.S.C. § 208.
- Pursuant to the terms of Section 7 of the FAA (9 U.S.C. § 7), an arbitral panel has the authority to summon parties and non-parties to appear at a hearing before the panel in order to testify and to bring documents. Courts will also often uphold an arbitral panel’s decision to order pre-hearing discovery from the parties to the arbitration – either depositions or pre-hearing production of documents – on the ground that the parties have usually agreed to arbitrate under a set of rules that allow for pre-hearing discovery. See, e.g., Integrity Ins. Co. v. Am. Centennial Ins. Co., 885 F. Supp. 69, 71 (S.D.N.Y. 1995) (“[a]n arbitrator's power over the parties derives from both the arbitration agreement and the FAA.”).
- However, courts are split on the extent to which arbitrators may order pre-hearing discovery from non-parties. The 8th and 6th Circuits, in addition to some district courts, have held that arbitrators are authorized to subpoena documents from non-parties for production prior to a hearing. See In re Sec. Life Ins. Co. of Am., 228 F.3d 865, 870-71 (8th Cir. 2000) (arbitral panel has authority to subpoena relevant documents from a non-party for production during pre-hearing discovery, where the non-party is integrally related to the underlying arbitration); Am. Fed'n of TV & Radio Artists v. WJBK-TV, 164 F.3d 1004, 1009 (6th Cir. 1999) (agreeing with cases holding that 9 U.S.C. § 7 implicitly includes the authority to compel the production of documents from non-parties for discovery purposes); Brazell v. American Color Graphics, 2000 U.S. Dist. LEXIS 4482, at *9-10 (S.D.N.Y. Apr. 6, 2000). Even if arbitrators may order pre-hearing document production from non-parties, courts have ruled that arbitrators do not have the authority to order pre-hearing depositions of non-parties. Integrity Ins. Co. v. American Centennial Ins. Co., 885 F. Supp. 69, 73 (S.D.N.Y. 1995); P&G v. Allianz Ins. Co., 2003 U.S. Dist. LEXIS 26025, at *7 (S.D.N.Y. 2003).
- Other courts of appeal have ruled that arbitrators do not have authority to order any discovery from non-parties, whether it be pre-hearing production of documents or pre-hearing depositions. See Hay Group, Inc. v. E.B.S. Acquisition Corp., 360 F.3d 406 (3d Cir. 2004) (rejecting arbitrator’s ability to force pre-hearing depositions from non-parties in part because “[a]n arbitrator's authority over parties that are not contractually bound by the arbitration agreement is strictly limited to that granted by the [FAA].”). Nevertheless, if the panel has no power to order pre-hearing discovery, it may still order non-parties to testify and produce documents at a preliminary evidentiary hearing, prior to any merits-related hearing. See Stolt-Nielsen Transp. Group, Inc. v. Celanese AG, 430 F.3d 567 (2d Cir. 2005) (noting that while the Second Circuit has not ruled on whether non-party discovery may be ordered by an arbitral panel, non-parties can be compelled to appear at hearings, even if the hearing is a preliminary one).
- Taking yet another view, the Fourth Circuit has held that pre-hearing discovery from non-parties in aid of arbitration may be permissible “under unusual circumstances” and “upon a showing of special need or hardship.” COMSAT Corp. v. NSF, 190 F.3d at 269, 276 (4th Cir. 1999).
- There is a further split among the federal courts regarding the geographic limits of an arbitral panel’s non-party subpoena. The Second and Third Circuits have held that, when a district court is asked to enforce a subpoena issued by an arbitral panel, the court is still bound by the geographical limits set forth in Fed. R. Civ. P. 45, and cannot enforce subpoenas issued for entities over which it does not have personal jurisdiction. Dynegy Midstream Servs. v. Trammochem, 451 F.3d 89, 96 (2d Cir. 2006) (FAA does not authorize nationwide service of process); Legion Ins. Co. v. John Hancock Mut. Life Ins. Co., 33 Fed. Appx. 26, 27 (3d Cir. 2002) (the FAA provides that arbitration subpoenas "shall be served in the same manner as subpoenas to appear and testify before the court,” which includes the limits in Rule 45). The Eighth Circuit, in contrast, has held that the territorial limits in Rule 45 do not apply to an arbitral panel’s subpoena of documents from a non-party (without deciding whether those limits would apply to a subpoena for witness testimony). In Re Sec. Life Ins. Co. of Am., 228 F.3d 865, 872 (8th Cir. 2000) ( Rule 45 does not apply to arbitral panel’s document subpoena, because “the burden of producing documents need not increase appreciably with an increase in the distance those documents must travel.”).
- Courts will generally not order discovery in aid of arbitration absent a subpoena from the arbitrators. In agreeing to arbitration, courts acknowledge that parties necessarily relinquish some rights to discovery in return for a more cost effective resolution to disputes. Burton v. Bush, 614 F.2d 389, 390 (4th Cir. 1980) (when contracting parties agree to arbitrate they relinquish certain procedural niceties associated with a formal trial, including pre-trial discovery). Courts may nevertheless entertain applications for certain discovery in aid of arbitration, absent any subpoena issued by the arbitral panel, where special need or necessity can be shown. See, e.g., Oriental Commercial & Shipping Co. v. Rosseel, N.V., 125 F.R.D. 398, 400 (S.D.N.Y. 1989) (discovery in aid of arbitration may be permitted where a movant can demonstrate “extraordinary circumstances”); Ferro Union Corp. v. SS Ionic Coast, 43 F.R.D. 11, 14 (S.D. Tex. 1967) (although dispute between the parties was subject to arbitration, court compelled production of documents from ship that was to leave port in four days); Deiulemar Compagnia di Navigazione S.P.A. v. M/V Allegra, 198 F.3d 473, 481 (4th Cir. 1999) (applying “extraordinary circumstances exception” to rule discouraging discovery in aid of arbitration).
- For arbitrations taking place outside of the U.S., parties that wish to compel discovery within the U.S. will likely need to rely upon whatever mechanisms are available in the jurisdiction in which the arbitration is taking place (for example, obtaining an order or letter rogatory from a court in the jurisdiction where the arbitral panel sits). Although 28 U.S.C. § 1782 provides for U.S. courts to order discovery in the U.S. in aid of foreign proceedings, the provision has been held by the Second and Fifth Circuits to apply only to public judicial or administrative proceedings, not private commercial arbitrations. See Nat’l Broadcasting Co.. v. Bear Stearns & Co., 165 F.3d 184, 191 (2d Cir. 1999) (noting that “because § 1782 does not apply to proceedings before private arbitrators, those [panels] who do not sit within the United States may face some difficulty in compelling evidence located here.”); Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880, 883 (5th Cir. 1999). However, at least one recent district court decision has held that the Second and Fifth Circuit decisions are no longer good law. See In re Roz Trading Ltd., 469 F. Supp. 2d 1221, 1228 (N.D. Ga. 2006). In that case, the Court ordered the U.S. parent of a subsidiary involved in a private arbitration convened under the International Arbitral Centre of the Austrian Federal Economic Chamber in Vienna to produce documents for use in the arbitration, citing to dicta in the Supreme Court’s decision in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004). For more discussion of 28 U.S.C § 1782, see Guide Chapter 14 .
- Practice Tip: Location of the arbitration will affect parties' ability to obtain discovery from non-parties. for arbitrations taking place within the U.S., courts have some authority to order discovery from U.S.-based non-parties, although the discovery may have to be presented for the first time at a hearing. For arbitrations taking place outside the U.S., there will likely be no easy way to get relevant documents or testimony from U.S.-based non-parties.
Ch. 22 Other Litigation Ancillary to International Arbitration
PETER SHERWIN, DANIELLA M. RUDY*, JEAN CLEMENTE*NOAH SISKIND GITTERMAN,
V. Compelling Testimony and Other Evidence
* Not Yet Admitted