Discovery under the FSIA: An Examination of the Solicitor General’s Brief in NML Capital

On December 4, 2013, the United States Solicitor General filed an amicus curiae brief in the Supreme Court in Republic of Argentina v. NML Capital, Ltd., No. 12-842.  I have several observations regarding the Solicitor General’s submission and related issues:

•       On balance, the Solicitor General makes a persuasive case that the Court should grant certiorari.  The Second Circuit’s decision in EM Ltd. v. Republic of Argentina, 695 F.3d 201 (2d Cir. 2012), is in conflict with Rubin v. Islamic Republic of Iran, 637 F.3d 783 (7th Cir. 2011), on an issue of considerable importance – namely the scope of discovery permissible in post-judgment proceedings under the FSIA.  Moreover, for reasons cogently set forth by the Seventh Circuit in Rubin, there is no doubt that – contrary to the Second Circuit’s view – a general asset discovery order violates the FSIA.  See Rubin, 637 F.3d at 794-99.

•       The Solicitor General’s brief recognizes several important principles implicated by discovery against foreign sovereigns, including:

•           “The presumptive immunity in the FSIA protects foreign sovereigns not only from liability or seizure of their property, but also from the costs, in time and expense, and other disruptions attendant to litigation.”  Brief for the United States as Amicus Curiae (“Amicus Brf.”) at 10.

•           “To permit burdensome and intrusive discovery . . . would be inconsistent with both the FSIA’s protections and the comity principles the statute implements.”  Id.

•           Discovery “should be conducted in a manner that respects the comity and reciprocity principles that the FSIA was enacted to implement and safeguard.”  Id. at 11.

•           If allowed, discovery should only “be ordered circumspectly and only to verify allegations of specific facts crucial to an immunity determination.”  Id. at 12.

•       The Solicitor General’s brief cites the Supreme Court’s decision in Société Nationale Industrielle Aérospatiale v. United States Dist. Ct. for the S.D. of Iowa, 482 U.S. 522 (1987).  The principles relating to foreign discovery enunciated in Société Nationale are generally not, in my view, sufficiently relied upon by attorneys defending foreign sovereigns in U.S. litigation.  In Société Nationale, the Supreme Court stated:

American courts, in supervising pretrial proceedings, should exercise special vigilance to protect foreign litigants from the danger that unnecessary, or unduly burdensome, discovery may place them in a disadvantageous position. Judicial supervision of discovery should always seek to minimize its costs and inconvenience and to prevent improper uses of discovery requests.  When it is necessary to seek evidence abroad, . . . the district court must supervise pretrial proceedings particularly closely to prevent discovery abuses. . . . Objections to “abusive” discovery that foreign litigants advance should therefore receive the most careful consideration.  In addition, we have long recognized the demands of comity in suits involving foreign states, either as parties or as sovereigns with a coordinate interest in the litigation.  American courts should therefore take care to demonstrate due respect for any special problem confronted by the foreign litigant on account of its nationality or the location of its operations, and for any sovereign interest expressed by a foreign state.

Société Nationale, 482 U.S. at 546.  Since Société Nationale addressed any case involving “foreign litigants,” its cautionary language should apply with particular force with respect to foreign sovereigns.  In other words, Société Nationale should be considered the floor, and not the ceiling, of discovery protections afforded foreign states under the FSIA – and it is therefore a powerful tool to use on behalf of foreign sovereigns in discovery proceedings.

•       The Solicitor General recognizes that “discovery requests directed at third parties may burden the foreign state itself, as it may have to participate in litigation over the scope and manner of discovery.”  Amicus Brf. at 17.  If accepted by the Supreme Court, this view could have a significant practical impact in FSIA cases involving attempts at discovery against third parties to obtain jurisdiction against foreign states.

•       Although not mentioned in the Solicitor General’s brief, the circuit split created by EM Ltd. was long in the making.  The Second Circuit has always been the circuit that is the least sensitive to the concerns of foreign sovereigns relating to discovery under the FSIA.  See, e.g., Reiss v. Société Centrale Du Groupe Des Assurances Nationales, 235 F.3d 738, 748 (2d Cir. 2000).  Given the importance of uniformity under the FSIA, NML Capital provides the opportunity to resolve significant differences in circuit law with respect to discovery involving foreign states.

•       The Supreme Court has never before spoken to the issue of discovery under the FSIA.  If certiorari is granted in NML Capital, the resulting decision could be the most important Supreme Court FSIA precedent since Nelson – particularly with respect to the practical aspects of litigation against foreign states in federal court.

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