The potential availability of discovery is one of the many issues to consider when determining whether to include a mandatory arbitration provision in a contract for an international transaction. A recent decision by a federal court in California, which held that third-party discovery is not available for private arbitration, is a good reminder of the importance of addressing the availability of discovery when drafting arbitration provisions.
In the case
, Dubey, a Taiwanese company with a California-based affiliate, instituted an arbitration proceeding before the American Arbitration Association’s International Centre for Dispute Resolution to enforce an indemnification provision against several individuals. One of the individuals sought an order compelling the Taiwanese company to produce various documents for use in the arbitration. Specifically, the individual sought an order under a statute that gives federal courts discretion to order discovery for use in a “foreign or international tribunal.”
The court denied the order, holding that private arbitration does not constitute a “foreign or international tribunal” and noting that permitting discovery in private arbitration would defeat the timeliness and cost-effectiveness of arbitration.
The availability of discovery is one item that should be addressed when entering into an agreement with a foreign entity that mandates resolving disputes by arbitration. As discussed in Dubey
, there is a split of authority as to whether third-party discovery is available in the context of private arbitration. The Sixth Circuit Court of Appeals has not directly addressed the issue in Dubey
In any event, addressing discovery issues at the outset can be an effective means of increasing the likelihood that arbitration is timely and cost-effective without limiting the availability of meaningful discovery.
If you have questions about cross-border disputes, please contact Jeffrey Dornbos, (firstname.lastname@example.org
or 616.396.3260), International Dispute Resolution Practice Group Chair Brian Lang (email@example.com
or 231.727.2612) or another member of the International Dispute Resolution Practice Group at Warner Norcross & Judd.