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UNLOCKING FINANCIAL INFORMATION IN THE UNITED STATES: OBTAINING DISCOVERY FOR USE IN FOREIGN PROCEEDINGS

by | Oct 30, 2020 | 1782 Blog | 0 comments

The US offers a very powerful litigation tool to parties to foreign legal proceedings to obtain bank records, other documents and witness testimony from sources within the US, even if such evidence is unobtainable through the foreign forum’s own discovery procedures.   This process can be relatively quick, inexpensive, and efficient for obtaining crucial information to win a case

I. What is 28 U.S.C. §1782?  

Section 1782 is an American law designed to allow participants in pending or future foreign proceedings to ask a US federal court to authorize discovery of documents and testimony from sources located in the US, for use in those foreign proceedings.  The applicant is not required to obtain Letters Rogatory or pursue discovery through the Hague Evidence Convention.

II. What Can Be Obtained?

 The types of documentary and testimonial evidence that can be obtained include:

  • International Wire Transaction Records (US Dollar wires typically transit the US)
  • Emails, Correspondence, Phone and Travel Records
  • Banking, Credit Card and Business Transaction Records
  • Corporate Documents including Shareholder and Board Meeting Records
  • Accounting, Employment and Intellectual Property Records
  • Property and Real Estate Transaction Records
  • Attorney Records (not subject to attorney-client privilege)
  • Medical and Educational Records
  • Depositions of individuals and corporate representatives

New York banks are frequently targeted for production of information related to wire transactions.  The information produced typically includes the dates and amounts of the wires, originating, intermediary and recipient banks, as well as the beneficiaries and related parties to the wire transaction. If the discovery target is a corporation, in addition to being required to produce documents, it may be required to designate someone to testify on its behalf.  This may or may not be a corporate officer, but the person must be knowledgeable about the topic at hand.  For example, in one matter, the CEO of The Bank of New York was ordered to produce documents and appear for a deposition for use in Russian litigation. 

Section 1782 discovery has significant implications for foreign banks with registered branches in the US or that execute trades on US exchanges.  In one recent case, the US court authorized discovery of Deutsche Bank, DZ Bank AG and the Commodity Exchange Inc. which executed trades in New York, regarding silver and silver derivatives transactions for use in a case pending in Germany.  The requested discovery was allowed even though Deutsche Bank’s traders worked in London and Singapore, not in New York.

In permitting discovery for use in foreign proceedings, US courts have found no per se bar to the extraterritorial reach of §1782.  What this means is that a person or company located in the US can be compelled to produce documents located abroad if that person or company has sufficient control over the documents.  In one matter, the US court authorized §1782 discovery from New York based Santander Investment Securities, Inc. for use in proceedings before the General Court of the Court of Justice of the European Union and in Spanish criminal proceedings, and rejected the argument that discovery should not be allowed because the information requested was located abroad.  In another matter, the US court concluded that information being located in Switzerland is irrelevant to the §1782 analysis and allowed pre-litigation discovery for use in anticipated Swiss litigation against Credit Suisse based upon its failure to prevent and detect a fraudulent scheme perpetrated by its former Russia Desk manager.  In general, whether the US discovery target must produce documents located overseas is dependent on the nature of its possession or ability to control those documents.

III. What A US Court Will Consider

In considering whether to grant a §1782 application, a US court will first look to see if the threshold statutory requirements are satisfied.  These are (1) the person from whom discovery is sought must reside or be found in the district of the federal court to which the discovery request is made; (2) the information sought must be for use in a proceeding in a foreign or international tribunal; and (3) the application must be made by a foreign or international tribunal or an “interested person” with participation rights in a pending or contemplated proceeding.  If these statutory requirements are satisfied, the US court will weigh the additional “discretionary factors.”

The first discretionary factor examines whether the discovery target is a participant in a foreign proceeding or subject to the jurisdiction of the foreign tribunal.  This factor weighs in favor of granting discovery when the discovery target is not a party to the foreign proceeding and the foreign tribunal has no jurisdiction over that party.  In one matter, the court granted discovery because the target, the Chairman of The Bank of New York, was outside the reach of the Russian court’s jurisdiction, and discovery from him would be unobtainable without the assistance of §1782.  The second factor examines the foreign tribunal’s receptivity to US judicial assistance.  Typically, courts do not delve into a foreign tribunal’s rules and legal traditions and instead look for affirmative “authoritative proof” that the foreign tribunal would reject the evidence.  The discovery need not be admissible in the foreign action.  Next, the court will consider whether the request seeks to circumvent foreign proof gathering restrictions or other policies of a foreign country or the US.  That the foreign forum might limit discovery within its domain does not necessarily weigh against permitting discovery.  Finally, a court will consider whether the requests are unduly intrusive or burdensome, protecting against abusive or harassing discovery requests and protecting confidential information.  Courts have rejected arguments that requested discovery is burdensome if documents merely require translation or are located abroad.

IV. Conclusion

Section 1782 is an increasingly important mechanism for obtaining evidence to prove or defend against foreign lawsuits, and, with continued globalization, its importance and utility will only grow.

Thomas C. Sullivan is an attorney in the Philadelphia office of Marks & Sokolov LLC. Mr. Sullivan represents Western, Russian and Ukrainian clients in complex commercial disputes including civil RICO, securities fraud, Foreign Corrupt Practices Act, Convention on the International Sale of Goods and ICC Arbitration matters.  He has litigated numerous Section 1782 discovery matters throughout the United States and was recently published in Obtaining U.S. Discovery For Use In Non-U.S. Tribunals Pursuant To 28 U.S.C. § 1782 (Chapter 7), Juris Publishing, LLC, 2020.

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