The Use and Abuse of Section 1782 Litigation in England
May 25, 2023
This post considers the use and misuse in England of the U.S. district court’s power under 28 U.S.C. § 1782 to order a person to give evidence or produce documents for use in a proceeding in a foreign tribunal. It is based upon a paper written for a conference honouring Professor Linda Silberman, a close and faithful friend over many years and a brilliant scholar and teacher. This paper, and others from the conference, are to be published in the NYU Journal of International Law and Politics.
I shall look here at the operation of § 1782 from the standpoint of the proposed end-user of the material obtained, or sought to be obtained, under § 1782. In the cases considered, a party to English litigation had obtained, or was seeking to obtain, documents or oral evidence in the United States for use in the English proceedings. In some of the English cases, the use of § 1782 was entirely uncontroversial. In several cases, however, one of the parties not only objected to its use but sought an injunction (a variant on an anti-suit injunction) to restrain the other party from continuing with its § 1782 application. In all of the cases a party was making direct recourse to the United States court, and not asking the English court to address letters rogatory under the Hague Evidence Convention: that was probably because the United Kingdom does not allow the Hague Convention to be used for discovery (material which may lead to evidence), as opposed to evidence in the strict sense.
In theory at least, there should be few occasions in which the English court should object to the use of § 1782 in support of its proceedings. That is because the United States Supreme Court in Intel Corp v. Advanced Micro Devices, Inc. not only recognised that comity concerns may be important as touchstones for a district court’s exercise of discretion, it specifically listed one of the factors to be taken into account in deciding whether to apply § 1782 was the “receptivity of the foreign … court … abroad to U.S. federal-court judicial assistance.”
Uncontroversial Use of § 1782 Material in England
The emphasis on § 1782 in discussion of the English cases has tended to be on its potential abuse, but the evidence of published judgments is that often the use of § 1782 for the purposes of English litigation is entirely uncontroversial. For example, in the ultimately unsuccessful Yukos claim for conspiracy to rig the auction of Yukos shares in Russia, the judge, recognising that, in assessing events of many years ago, it must be the documentary evidence which is ordinarily of most assistance, relied on documents which had been obtained in the United States under § 1782. In another uncontroversial case, a witness gave evidence in an English trial by video-link pursuant to a § 1782 order.
When the Federal Republic of Nigeria was granted an extension of time to challenge an arbitration award made several years before on grounds that a gas processing contract had been procured by fraud, the judge relied on evidence obtained in New York pursuant to § 1782 over the objection of the defendants, where the documents obtained had proved bribes had been paid to Nigerian officials.
So also in another case, Nokia claimed that the operation of chips inside phones manufactured by the defendants infringed its patents. The chips were made by Qualcomm, and Nokia sought to prove infringement by doing experiments and by obtaining disclosure from Qualcomm in the United States under § 1782. Because of the highly confidential nature of the § 1782 materials from Qualcomm, the court sat in private nearly all the time when discussing infringement. In deciding what to include in the judgment, Meade, J. said that he “would have been willing to take into account that third party disclosure procedures such as those under 1782 are a useful and necessary tool …”
Injunctions to Restrain the Use of § 1782
In South Carolina Insurance Co. v. Assurantie Maatschappij “de Zeven Provincien” NV v. Al Ahlia Insurance Co., the defendants to a reinsurance claim resisted summary judgment on the basis (inter alia) that the plaintiffs, South Carolina, had misrepresented the retention on the reinsurance, and had not disclosed a “previous atrocious” loss record on the business in question. The defendants applied in the federal court in Seattle under § 1782 for discovery of documents in the possession of the underwriting agents and the loss adjusters and for deposition of their officers.
In England, South Carolina applied for an injunction to restrain the defendants from proceeding further with their § 1782 application and for a declaration that it was an abuse of the process of he English court. An injunction was granted by Hobhouse, J. and by the Court of Appeal on the basis that, once parties had submitted to the jurisdiction of the English court, it was a fundamental principle that the procedural rules to be applied were those of the English court, and it was for that court to control the proceedings and ensure that litigation was conducted in accordance with its procedure.
The decision was reversed by the House of Lords, which took these matters into account: (1) South Carolina’s lawyers had sought to prevent the underwriting agents and the loss adjusters from providing documents to the plaintiffs; (2) the underwriting agents and the loss adjusters were not agents of South Carolina and therefore discovery of documents by South Carolina in England would not extend to relevant documents held by them; (3) if the defendant re-re-insurers were to achieve their legitimate object of inspecting relevant documents held by the underwriting agents and the loss adjusters, some other means had to be found to enable them to do so; (4) there was no way in which a party to an action in the High Court in England could compel pre-trial discovery as against a person which was not a party to such action, either by way of the disclosure and inspection of documents in its possession or power, or by way of giving oral or written testimony; (5) it was not possible to decide in advance how the United States district court would see fit to exercise the discretion conferred on it by § 1782 in the circumstances of this case; (6) the defendants’ conduct was not an interference with the English court’s control of its own process, because under the civil procedure of the English court, the court did not, in general, exercise any control over the manner in which a party obtained the evidence which it needed to support its case; (7) even though the defendants might be said to have accepted the jurisdiction of the English court, the defendants had not in any way departed from, or interfered with, the procedure of the English court, and all that they had done was what any party preparing its case in England was entitled to do, namely to try to obtain in a foreign country, by means lawful in that country, documentary evidence which they believed that they needed in order to prepare and present their case; (8) to the extent that South Carolina’s costs had increased, that was self-imposed because it had refused access to the material held by the underwriting agents and the loss adjusters.
The effect of the decision in the South Carolina case was for most practical purposes to remove obstacles in England to the use of § 1782 for English proceedings. Following the decision, applications for injunctions to restrain the use of § 1782 have failed in several cases. Thus in Nokia Corp. v Interdigital Technology Corp., an injunction in English patent revocation proceedings to restrain Nokia from pursuing § 1782 applications in Texas for documents and other evidence from Ericsson and Sony-Ericsson Mobile was refused.
It was unlikely, but possible, that the evidence obtained would be useful in the English proceedings. After detailed consideration of the principles set out in Intel, the court noted that the § 1782 jurisdiction would be exercised having regard to the attitude that the foreign court will take to the material produced by the § 1782 request. The English court should not seek to circumscribe the discretion possessed by the US district court by imposing its own view as to the appropriateness of the classes of documents sought by reference to the issues in proceedings as they stand. It was legitimate for the requesting party to use the request to ascertain facts and obtain documents of which the requesting party is unaware, but which may be in the future deployed in the English proceedings, if necessary, after appropriate amendment.
Subsequently, a federal court in North Carolina refused to make a § 1782 order in favour of Nokia. The court said that, although the English court has stated that it would not enjoin Nokia from seeking relief under § 1782 and that it would review any relevant evidence obtained by Nokia in a § 1782 proceeding, the English court was not asking for this information, and had questioned its relevance; Nokia’s request concealed an attempt to circumvent foreign proof-gathering restrictions; and the requested discovery sought highly confidential material and was overbroad and unduly burdensome.
Most recently, in Soriano v. Forensic News LLC, the claimant was an Israeli citizen who was suing US entities in London for allegedly defamatory statements. The defendants applied in New York for a § 1782 order requiring HSBC Bank USA NA (HSBC USA) to produce very broad categories of banking documents relating to Mr. Soriano’s companies. An injunction to restrain the § 1782 proceedings was refused by the Court of Appeal: (1) the apparently undesirable breadth of the order sought in New York was a matter for the New York federal court applying its own principles, although it would realise from the judgment of the Court of Appeal that such a broad order would be unlikely to be granted in England; (2) in Intel, Justice Ginsburg said specifically that the district court could consider whether the § 1782 request concealed an attempt to circumvent foreign proof-gathering restrictions, that unduly intrusive or burdensome requests may be rejected or trimmed, and that the district court might consider appropriate measures, if needed, to protect the confidentiality of materials; (3) no reasons had been advanced as to why the New York court was unable to apply these principles appropriately; (4) there was nothing inherently objectionable from a domestic perspective about seeking evidence in an appropriate case from a party’s bankers or from the bankers to the corporate entities in which the party has an interest; (5) the general rule was that the defences of truth and honest opinion form part of the framework by which free speech was protected, and it was important that no unnecessary barriers to the use of these defences were erected.
There are two published decisions in which injunctions were granted by the English court to restrain § 1782 proceedings. In Bankers Trust International plc v. PT Dharmala Sakti Sejahtera the plaintiffs, Bankers Trust International plc (“BTI”) claimed that the defendant owed about $65 million in relation to transactions in derivatives. BTI had acted through Bankers Trust Co (“BTCo”). The trial of the claim and counterclaim took place in July 1995 and judgment was reserved. In the next month, the defendants obtained a copy of an article published in the Washington Post relating to an action in the United States against BTCo and BTI. The defendants said that it showed that a fraudulent system had been operated by BTCo in relation other clients as well as themselves. They applied, unsuccessfully, to the trial judge for leave to amend their pleadings to include a claim of systematic fraud, and then applied, successfully, to the US district court for an ex parte order under § 1782 for disclosure directed to BTCo.
BTI and BTCo obtained from the English court an order that the defendants apply to the US district court to discontinue the proceedings there and for the setting aside of the US district court’s orders. The reasons were these: (1) the English court was better placed to assess the background, implications and propriety of the present § 1782 proceedings than is any US court; (2) whether the New York proceedings were abusive or oppressive was a matter for the English court to judge, and, if they were, intervention by the English court would avoid any future problem; (3) the applications made under § 1782 were abusive and oppressive; (4) there must be some end to litigation, and the trial in the action had taken place; (5) what was proposed by the defendants included compulsory examination of large numbers of the plaintiffs and their associate companies’ officers, in respect of a large number of other cases, which had hitherto played no significant part in the trial; (6) volumes of documents were sought, many of which, would seem to be capable of bearing only the most indirect relationship to any suggestion of any systematic conduct which the defendants might hope to establish by anyone; (7) the New York application would represent a large scale investigation of the general conduct of the plaintiffs’ derivatives business conducted on a speculative basis with a view to discovering material to enable or support allegations which, if they could properly be made at all, would doubtless be highly contentious, would require the reopening of the trial and would involve examination of other transactions entered into with other clients; (8) the new material constituted a wholly inadequate foundation for the course of conduct proposed at the then stage in these proceedings.
Another case in which an injunction was granted to restrain § 1782 proceedings was Omega Group Holdings Ltd v. Kozeny. The English litigation involved allegations of fraudulent misrepresentation in connection with an investment in the privatisation process in Azerbaijan. The claimant intended to produce witness statements from certain individuals and to call them to give oral evidence at the trial of the English proceedings. The defendant obtained orders under § 1782 in district courts in New York and Connecticut that the same individuals be deposed and produce documents. The § 1782 applications and orders were made without prior warning to the witnesses or the claimants. The claimant applied for an injunction to prevent the defendant from deposing witnesses and obtaining documents from them in the § 1782 proceedings.
The fact that a party to English litigation is able to obtain evidence by means of a right available in a foreign country significantly different from that available in the English system does not, by itself, constitute unconscionable conduct. But the injunction was granted because the witnesses would be subjected to unwarranted double cross-examination, and the trial would suffer from unnecessary duplication. There was also a risk of interference with the trial itself since the witnesses, if deposed in the United States, might be discouraged from attending the trial in England and facing further cross examination. The defendant would suffer no disadvantage since there was no issue which might be covered in the deposition proceedings which could not be dealt with by cross examination at the trial.
One question the cases do not answer is the practical utility of resort to § 1782. It has been seen that there have been cases in which evidence obtained under it has been introduced without objection. But there may be a question whether those cases in which there has been a contest over its use have justified what will inevitably in modern conditions be very substantial costs.