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Risk of U.S. discovery against non-U.S. banks potentially reduces

ANZ Bank v APR Energy Holding Ltd: International litigants increasingly seek broad, U.S. style discovery against non U.S. banks under 28 U.S.C. § 1782. Given the costs of complying with U.S.-style discovery, international banks with a presence in the U.S. will be interested in judicial determinations regarding the limits of when the statute can be properly invoked. A recent decision in the Southern District of New York may signal a trend toward reducing exposure of non-U.S. banks to this type of discovery.

A foreign court or tribunal may request assistance from a U.S. court to obtain witness testimony or document, for use in foreign proceedings (known as a section 1782 application). A district court may assist if the target of the request 'resides or is found' in that district. A non-U.S. entity with a presence in a U.S. district can therefore become the subject of a discovery order from that district court, even if the foreign proceeding has no other link to the U.S. Courts have been divided on how the 'resides or is found' test should be applied, and what degree of jurisdictional connection between the non-U.S. entity and the U.S. is required.

Although the statute has existed in its current form since 1964, over 60% of the available decisions related to Section 1782 are from 2010 or later and many involve non-U.S. banks.1 Indeed, non U.S. banks may not only be subject to 1782 applications, but also document subpoenas and other requests for discovery in connection with U.S. litigation, where jurisdictional defences have also been successfully used. For example, in 2014, a New York federal court considering a subpoena for documents on non-party Bank of China held that having a bank branch in the U.S. is not sufficient to establish general jurisdiction over the bank's foreign operations, though discovery was permissible where specific personal jurisdiction could be established, such as from the NY branch itself or where the transaction at issue involved the NY branch.2

On September 1, 2017, a New York federal court took a step that may reduce exposure for non-U.S. banks to section 1782 discovery by ruling that a section 1782 application was only permissible when the subject of the application – a bank – has contacts with the state that are so continuous and systematic as to render it essentially "at home". Because a bank is usually only considered "at home" in the place of its incorporation and the place of its principal place of business, and ANZ bank had neither in New York, the application was denied for lack of general jurisdiction.3 

This development may limit any non-U.S. bank's exposure to broad U.S.-style discovery for use in foreign proceedings, and provide them with an additional defence to resist such requests. Although this result is not binding on other courts, the decision was appealed to the U.S. Court of Appeals for the Second Circuit on October 3, 2017, which could result in a binding precedent on all New York federal courts on this issue. We will need to continue to monitor the development to see if other courts share the same analysis and establish this as a more binding precedent.

Footnotes

1. See, eg, In re Asia Maritime Pacific Ltd., No. 15-CV-2760 (VEC), 2015 WL 5037129 (S.D.N.Y. Aug. 26, 2015) (application against 16 banks including ABN Amro Bank, BNP Paribas, and HSBC); In re Application of Hornbeam Corp., 2014 WL 8775453, at *1 (S.D.N.Y. Dec. 24, 2014) (application against 12 banks including RBS, Standard Chartered Bank, and UBS AG); In re Fuhr, 13 Civ. 6753, 2014 WL 11460502 (S.D.N.Y. Aug. 6, 2014) (application against Deutsche Bank AG); In re Kreke Immobilien KG, No. 13 MISC. 110 NRB, 2013 WL 5966916, at *1 (S.D.N.Y. Nov. 8, 2013) (application against Deutsche Bank AG).
2. Gucci Am., Inc. v. Weixing Li, 135 F. Supp. 3d 87 (S.D.N.Y. 2015)
3. Australia and New Zealand Banking Group Ltd v APR Energy Holding Ltd, 2017 WL 384187, at *1 (S.D.N.Y. Sept. 1, 2017).

Further information

This case summary is part of the Allen & Overy Legal & Regulatory Risk Note, a quarterly publication.  For more information please contact Karen Birch – karen.birch@allenovery.com, or tel +44 20 3088 3710.

Legal and Regulatory Risk Note
United States