Obtaining discovery abroad: the utility of the comity analysis in determining whether to order production of documents protected by foreign blocking statutes.

I. INTRODUCTION

The global economy is now a reality. With the increasing globalization and diversification of commerce and human interaction comes a concomitant globalization and diversification of legal proceedings. In this age of growing international economic interaction, discovery driven document production often involves corporations with offices overseas. Because of resistance to American style discovery in some foreign jurisdictions, attempts to obtain information essential to litigation are sometimes frustrated by foreign blocking statutes.(1) Blocking statutes, laws of foreign countries that impose criminal penalties upon parties within their jurisdiction who disclose specified documents, are so named because of their effect upon American style discovery.(2) The tension created by these statutes has led commentators to assert that no aspect of extending the U.S. legal system abroad has given rise to more friction than discovery of materials associated with investigation and litigation in the United States.(3)

Balancing the need for production of vital information with the possibility that its discovery orders will lead to criminal liability for the producing party, a U.S. court must determine whether to grant a motion compelling production.(4) Further, if the motion to compel production is not complied with, the court must decide whether to impose sanctions through Rule 37 of the Federal Rules of Civil Procedure.(5)

Gaining compliance with a production order can mean the difference between winning or losing a multi-million dollar verdict for one's client.(6) Partly because the stakes are so high, courts have had trouble agreeing on a uniform standard.(7) In Societe Internationale, the Supreme Court affirmed a district court's power to order a party to produce documents kept in a foreign country despite the fact that such production may subject the party to criminal sanctions in the foreign country.(8) Following this decision, courts have differed in their assessment of which factors to use in arriving at the decision to compel production.(9) Because issues of national sovereignty and respect for duly enacted legislation of foreign countries arise whenever U.S. courts attempt to compel discovery in foreign jurisdictions, it behooves U.S. courts to arrive at a consistent comity analysis when determining under what circumstances to compel.(10) This Comment suggests a consistent comity analysis to be applied to the determination of whether to compel production of documents when illegality is raised as an excuse. By so doing, this analysis addresses a significant question left open ever since the Societe Internationale decision in 1958.(11)

II. FOREIGN BLOCKING STATUTES

The foundational principles upon which civil law countries have developed render them ill suited for the American style discovery assault.(12) There, the discovery process is shepherded by the judge, who alone has power to investigate facts.(13) The civil law tradition rejects the idea that such a vital function should be placed within the purview of the parties themselves.(14)

Given this predisposition in some foreign forums, it should not be surprising that American style discovery is met with a less than enthusiastic reception abroad.(15) Even where the forum shares the U.S. adversarial judicial system, the natural instinct to protect one's own interests produces antipathy in some nations toward U.S. antitrust and securities regulations.(16) This antipathy is sometimes expressed in the form of legislation aimed at thwarting the efforts of U.S. courts to pursue their jurisdictional privileges through discovery in foreign forums.(17) Accordingly, the taking of otherwise available evidence may be impossible if that evidence is subject to the reach of a foreign blocking statute.(18)

III. THE ROLE OF THE HAGUE EVIDENCE CONVENTION

A. General Provisions

Before addressing the issue of whether to order production of documents subject to a foreign blocking statute, a U.S. court must first determine whether to proceed with discovery under the Federal Rules of Civil Procedure or the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (Hague Convention).(19) The Hague Convention is a multilateral agreement that prescribes procedures by which litigants involved in civil and commercial matters may obtain evidence abroad.(20) It was initially adopted in October 1968 to provide a uniform system for the transmission and execution of requests for gathering evidence in foreign jurisdictions.(21) There are now forty signatories to the Hague Convention, including most major Western trading nations.(22) Because of widely perceived difficulties with existing methods of transnational discovery, the United States became a signatory to the Hague Convention in 1972.(23)

A primary objective of the Hague Convention was to provide an effective method for taking evidence abroad.(24) A particular concern was ensuring that the taking of evidence on foreign soil would be consistent with the laws of that country, while nevertheless providing useful results for the litigants involved.(25) Therefore, the Hague Convention's drafters were scrupulous to include local judicial or government officials in most evidence gathering functions allowed under the Convention's terms.(26) The practical result of this operational philosophy is that U.S. litigants are usually able to obtain only the discovery which litigants in the country where the documents are located would be able to obtain.(27)

The main means of evidence gathering under the Hague Convention is through the Letter of Request procedure.(28) Under article 2 of the Hague Convention, all signatory states are required to establish "Central Authorities" comprised of governmental agencies responsible for receiving incoming Letters of Request from other signatory nations and overseeing their execution.(29) Thus, the process begins when a litigant in a signatory state requests the domestic court where his action is pending to issue a Letter of Request seeking production of specified documents or the taking of testimony from a particular witness.(30) The designated Central Authority in the country where the evidence is located receives the Letter of Request and transmits it to the court in the jurisdiction where the evidence is located.(31) The foreign court then conducts an evidentiary proceeding and transmits the results directly back to the court that first issued the Letter of Request.(32)

Signatory nations are required to cooperate in executing the Letters of Request from other signatory nations.(33) However, Article 23 provides an often-utilized limitation to this requirement for countries opposed to American style discovery.(34) Member states may declare that they "will not execute Letters of Request issued for the purpose of obtaining pre-trial discovery of documents as known in Common Law countries."(35) Of the forty nations that are signatories to the Hague Convention, only the United States, Czechoslovakia, Barbados, and Israel have not limited pre-trial discovery through some type of Article 23 preclusion.(36) It is this significant limitation that has provoked much of the resistance to the Convention's use in the United States.(37)

B. The U.S. Supreme Court's Aerospatiale Decision

The Hague Convention is the subject of frequent litigation in the United States.(38) The principle issue litigants face is determining what role the Hague Convention will play when a U.S. court has jurisdiction over a foreign party and discovery is sought abroad from that party in a pending U.S. suit.(39) Before the Supreme Court's Aerospatiale decision, lower courts had reached a variety of different conclusions regarding the role of the Hague Convention.(40) One court suggested that the Convention was the exclusive means of obtaining discovery from a signatory nation.(41) Other courts adopted a rule that the Convention should be used as a first recourse before resorting to discovery under the Federal Rules of Civil Procedure if the Convention's procedures proved to be ineffective.(42) Some courts have held that the Hague Convention's procedures were not appropriate when the country producing the discovery had to transmit it to the United States rather than to foreign soil.(43)

In Aerospatiale, the Court held that the Hague Convention was not the exclusive means of discovering evidence located in a signatory state.(44) Although district courts are free to use U.S. discovery methods, the Supreme Court has observed:

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,

however, the district court must supervise pretrial proceedings

particularly closely to prevent discovery abuses. For example, the

additional cost of transportation of documents or witnesses to or from

foreign locations may increase the danger that discovery may be sought for

the improper purpose of motivating settlement, rather than finding relevant

and probative evidence. 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