Fund for the Protection of Investors’ Rights in Foreign States v. Lithuania

At a glance

Parties

The Fund for Protection of Investors' Rights in Foreign States (Russia) v. Republic of Lithuania; US court proceedings: AlixPartners, LLP and others v. the Fund

Case no.

UNCITRAL ad hoc arbitration; US Supreme Court No. 21–518 (consolidated with No. 21–401, ZF Automotive US, Inc. v. Luxshare, Ltd.)

Forum and rules

Ad hoc arbitration under the UNCITRAL Arbitration Rules; discovery application under 28 U.S.C. §1782

Treaty

Russia–Lithuania BIT, Article 10

Court

Supreme Court of the United States; opinion of the Court delivered by Justice Barrett

Sector

Banking (AB bankas SNORAS)

Outcome

On 13 June 2022 the Supreme Court held that the ad hoc UNCITRAL panel is not a "foreign or international tribunal" under §1782, and reversed the Second Circuit's judgment that had allowed discovery.

The dispute

The Fund for Protection of Investors' Rights in Foreign States is a Russian corporation and the assignee of a Russian investor in AB bankas SNORAS (Snoras), a Lithuanian bank that failed. Lithuania's central bank nationalised Snoras and appointed Simon Freakley, now CEO of AlixPartners, LLP, as temporary administrator. After his report, Lithuanian authorities opened bankruptcy proceedings and declared Snoras insolvent. The Fund claims that Lithuania expropriated investments along the way, and it began an ad hoc UNCITRAL arbitration under the Russia–Lithuania BIT. Before the arbitrators were chosen, the Fund applied under 28 U.S.C. §1782 to the Southern District of New York for discovery from Freakley and AlixPartners. AlixPartners argued that the ad hoc panel was a private body and so not a "foreign or international tribunal" under the statute.

Key holdings

1. Section 1782 covers only governmental or intergovernmental adjudicative bodies. A "foreign tribunal" exercises governmental authority conferred by one nation. An "international tribunal" exercises governmental authority conferred by two or more nations. Private adjudicatory bodies fall outside §1782. p. 11
2. The Court reads the statute's history and its comity purpose, and compares it with the Federal Arbitration Act. On that basis, the 1964 amendment widened the range of public bodies covered; it did not extend the statute to private ones. pp. 9–11
3. Neither Lithuania's presence as a party nor the existence of the treaty decides the question. What matters is whether Russia and Lithuania intended to give the ad hoc panel governmental authority. pp. 12–13
4. The ad hoc UNCITRAL panel under Article 10 of the BIT is not intergovernmental. The treaty does not create the panel. The panel works independently of both States, its members have no official affiliation, it receives no government funding, and its proceedings are confidential. Its authority comes from the consent of Lithuania and the Fund, as in commercial arbitration. By contrast, Article 11 provides for state-to-state tribunals with much greater government involvement. pp. 13–15 and n. 4
5. The Fund compared the panel to the I'm Alone commission and the United States–Germany Mixed Claims Commission. The Court found these comparisons unpersuasive, because those treaties involved each sovereign in forming the body, and in one case also fixed its funding and its seat. pp. 15–16
6. The judgment of the Second Circuit in No. 21–518 is reversed. p. 17

Procedural history

1. 4 May 2012Notice of Dispute served on Lithuania.
2. 12 July 2012Lithuania acknowledges receipt of the Notice of Dispute.
3. 29 April 2019Notice of Arbitration filed under the UNCITRAL Rules.
4. 18 December 2019Order on the Respondent's request concerning the Claimant's §1782 application.
5. 8 July 2020The US District Court for the Southern District of New York grants the Fund's discovery application.
6. 25 August 2020Further order of the District Court on the discovery application.
7. 2021The Second Circuit affirms, holding the ad hoc panel to be a "foreign or international" tribunal (5 F. 4th 216).
8. 13 June 2022The US Supreme Court reverses: the ad hoc panel is not a §1782 tribunal.

Keywords

• 28 U.S.C. §1782
• discovery in aid of arbitration
• foreign or international tribunal
• Russia–Lithuania BIT
• Snoras
• AlixPartners
• ZF Automotive v. Luxshare
• UNCITRAL ad hoc arbitration
• investor-state arbitration
• bank nationalisation
• expropriation
• comity
• Federal Arbitration Act
• Second Circuit
• US Supreme Court
• temporary administrator

Summary generated with AI from the published documents — refer to the award for the authoritative text.