ZF AUTOMOTIVE US, INC., ET AL. v. LUXSHARE, LTD.
Nos. 21-401 and 21-518
SUPREME COURT OF THE UNITED STATES
June 13, 2022
596 U.S. ___ (2022)
JUSTICE BARRETT delivered the opinion of the Court.
Together with No. 21-518, AlixPartners, LLP, et al. v. Fund for Protection of Investors’ Rights in Foreign States, on certiorari to the United States Court of Appeals for the Second Circuit.
(Slip Opinion)
OCTOBER TERM, 2021
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
ZF AUTOMOTIVE US, INC., ET AL. v. LUXSHARE, LTD.
CERTIORARI BEFORE JUDGMENT TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
No. 21-401. Argued March 23, 2022-Decided June 13, 2022*
The second case involves AB bankas SNORAS (Snoras), a failed Lithuanian bank declared insolvent and nationalized by Lithuanian authorities. The Fund for Protection of Investors’ Rights in Foreign States—a Russian corporation assigned the rights of a Russian investor in Snoras—initiated a proceeding against Lithuania under a bilateral investment treaty between Lithuania and Russia, claiming that Lithuania expropriated investments. Relevant here, the treaty establishes a procedure for resolving “any dispute between one Contracting Party and [an] investor of the other Contracting Party concerning” investments in the first Contracting Party‘s territory, and offers parties four options for dispute resolution. App. to Pet. for Cert. in No. 21-518, pp. 64a-65a. The Fund chose an ad hoc arbitration in accordance with Arbitration Rules of the United Nations Commission on International Trade Law, with each party selecting one arbitrator and those two choosing a third. After initiating arbitration, the Fund filed a
Held: Only a governmental or intergovernmental adjudicative body constitutes a “foreign or international tribunal” under
(a)
“Foreign tribunal” more naturally refers to a tribunal belonging to a foreign nation than to a tribunal that is simply located in a foreign nation. And for a tribunal to belong to a foreign nation, the tribunal must possess sovereign authority conferred by that nation. This reading of “foreign tribunal” is reinforced by the statutory defaults for discovery procedure under
Similarly, an “international tribunal” is best understood as one that involves or is of two or more nations, meaning that those nations have imbued the tribunal with official power to adjudicate disputes. So understood, a “foreign tribunal” is a tribunal imbued with governmental authority by one nation, and an “international tribunal” is a tribunal imbued with governmental authority by multiple nations. Pp. 5-9.
(b)
Extending
(c) The adjudicative bodies in these cases are not governmental or intergovernmental tribunals that fall within
The ad hoc arbitration panel at issue in the Fund‘s dispute with Lithuania presents a harder question. A sovereign is on one side of the dispute, and the option to arbitrate is contained in an international treaty rather than a private contract. Yet neither Lithuania‘s presence nor the treaty‘s existence is dispositive, because Russia and Lithuania are free to structure investor-state dispute resolution as they see fit. What matters is whether the two nations intended to confer governmental authority on an ad hoc panel formed pursuant to the treaty. See BG Group plc v. Republic of Argentina, 572 U. S. 25, 37. The treaty offers a choice of four forums to resolve disputes. The
No. 21-401, reversed; No. 21-518, 5 F. 4th 216, reversed.
BARRETT, J., delivered the opinion for a unanimous Court.
* Together with No. 21-518, AlixPartners, LLP, et al. v. Fund for Protection of Investors’ Rights in Foreign States, on certiorari to the United States Court of Appeals for the Second Circuit.
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
Nos. 21-401 and 21-518
ZF AUTOMOTIVE US, INC., ET AL., PETITIONERS
21-401 v. LUXSHARE, LTD.
ON WRIT OF CERTIORARI BEFORE JUDGMENT TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
ALIXPARTNERS, LLP, ET AL., PETITIONERS
21-518 v. THE FUND FOR PROTECTION OF INVESTORS’ RIGHTS IN FOREIGN STATES
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
[June 13, 2022]
JUSTICE BARRETT delivered the opinion of the Court.
Congress has long allowed federal courts to assist foreign or international adjudicative bodies in evidence gathering. The current statute,
I
Both cases before us involve a party seeking discovery in the United States for use in arbitration proceedings abroad. In both, the party seeking discovery invoked
A
The first case involves an allegation of fraud in a business deal gone sour. ZF Automotive US, Inc., a Michigan-based automotive parts manufacturer and subsidiary of a German corporation, sold two business units to Luxshare, Ltd., a Hong Kong-based company, for almost a billion dollars. Luxshare claims that after the deal was done, it discovered that ZF had concealed information about the business units. As a result, Luxshare says, it overpaid by hundreds of millions of dollars.
In the contract governing the sale, the parties had agreed that all disputes would be “exclusively and finally settled by three (3) arbitrators in accordance with the Arbitration Rules of the German Institution of Arbitration e. V. (DIS).” App. in No. 21–401, p. 93. DIS is a private dispute-resolution organization based in Berlin. The agreement, which is governed by German law, provides that arbitration take place in Munich and that the arbitration panel be formed by Luxshare and ZF each choosing one arbitrator and those two arbitrators choosing a third.
With an eye toward initiating a DIS arbitration against ZF, Luxshare filed an ex parte application under
ZF moved to quash the subpoenas, arguing (among other things) that the DIS panel was not a “foreign or international tribunal” under
We granted a stay and certiorari before judgment to resolve a split among the Courts of Appeals over whether the phrase “foreign or international tribunal” in
B
The second case began with a dispute between Lithuania and a disappointed Russian investor in AB bankas SNORAS (Snoras), a failed Lithuanian bank. After finding Snoras unable to meet its obligations, Lithuania‘s central bank nationalized it and appointed Simon Freakley, currently the CEO of a New York-based consulting firm called AlixPartners, LLP, as a temporary administrator. After Freakley issued a report on Snoras’ financial status, Lithuanian authorities commenced bankruptcy proceedings and declared Snoras insolvent. The Fund for Protection of Investors’ Rights in Foreign States—a Russian corporation and the assignee of the Russian investor—claims that Lithuania expropriated certain investments from Snoras along the way.
The Fund initiated a proceeding against Lithuania under a bilateral investment
Relevant here, the treaty addresses the procedure for resolving “any dispute between one Contracting Party and [an] investor of the other Contracting Party concerning” investments in the first Contracting Party‘s territory. Id., at 64a. It provides that if the parties cannot resolve their dispute within six months, “the dispute, at the request of either party and at the choice of an investor, shall be submitted to” one of four specified forums. Id., at 64a-65a. The Fund chose “an ad hoc arbitration in accordance with Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL),” with each party selecting one arbitrator and those two choosing a third. Id., at 65a; App. in No. 21–518, p. 159a. Under the treaty, “[t]he arbitral decision shall be final and binding on both parties of the dispute.” App. to Pet. for Cert. in No. 21–518, at 65a.
After initiating arbitration, but before the selection of arbitrators, the Fund filed a
The Second Circuit affirmed. Unlike the Sixth Circuit, the Second Circuit had previously held that a private arbitration panel does not constitute a “foreign or international tribunal” under
We granted certiorari and consolidated the two cases. 595 U. S. ___ (2021).
II
We begin with the question whether the phrase “foreign or international tribunal” in
A
“The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation.”
Standing alone, the word “tribunal” casts little light on the question. It can be used as a synonym for “court,” in which case it carries a distinctively governmental flavor. See, e.g., Black‘s Law Dictionary 1677 (4th ed. rev. 1968) (“[t]he seat of a judge” or “a judicial court; the jurisdiction which the judges exercise“). But it can also be used more broadly to refer to any adjudicatory body. See, e.g., American Heritage Dictionary 1369 (1969) (“[a]nything having the power of determining or judging“). Here, statutory history indicates that Congress used “tribunal” in the broader sense. A prior version of
This is where context comes in. “Tribunal” does not stand alone—it belongs to the phrase “foreign or international tribunal.” And attached to these modifiers, “tribunal” is best understood as an adjudicative body that exercises governmental authority.2 Cf. FCC v. AT&T Inc., 562 U. S. 397, 406 (2011) (“[T]wo words together may assume a more particular meaning than those words in isolation“).
Take “foreign tribunal” first. Congress could have used “foreign” in one of two ways here. It could mean something like “[b]elonging to another nation or country,” which would support reading “foreign tribunal” as a governmental body. Black‘s Law Dictionary, at 775. Or it could more generally mean “from” another country, which would sweep in private adjudicative bodies too. See, e.g., Random House Dictionary of the English Language 555 (1966) (“derived from another country or nation; not native“). The first meaning is the better fit.
The word “foreign” takes on its more governmental meaning when modifying a word with potential governmental or sovereign connotations. That is why “foreign” suggests something different in the phrase “foreign leader” than it does in “foreign films.” Brief for Petitioners in No. 21–401, pp. 20-21; Brief for Respondent in No. 21–401, pp. 7–8. The phrase “foreign leader” brings to mind “an official of a foreign
nation. See id., at 14–15 (a governmental adjudicator is “one whose role in deciding the dispute rests on” a “nation‘s sovereign authority“).
This reading of “foreign tribunal” is reinforced by the statutory defaults for discovery procedure. In addition to authorizing district courts to order testimony or the production of evidence,
Now for “international tribunal.” “International” can mean either (1) involving or of two or more “nations,” or (2) involving or of two or more “nationalities.” American Heritage Dictionary, at 685 (“[o]f, relating to, or involving two
or more nations or nationalities“); see also Random House Dictionary, at 743 (“between or among nations; involving two or more nations“; “of or pertaining to two or more nations or their citizens“). The latter definition is unlikely in this context because an adjudicative body would be “international” if it had adjudicators of different nationalities—and it would be strange for the availability of discovery to turn on the national origin of the adjudicators. So no party argues that “international” carries that meaning here. A tribunal is “international” when it involves or is of two or more nations, meaning that those nations have imbued the tribunal with official power to adjudicate disputes. See Tr. of Oral Arg. 77 (the United States arguing that “the touchstone” is whether the body is “exercising official power on behalf of the two governments“).
So understood, “foreign tribunal” and “international tribunal” complement one another; the former is a tribunal imbued with governmental authority by one nation, and the latter is a tribunal imbued with governmental authority by multiple nations.
From the start, the statute has been about respecting foreign nations and the governmental and intergovernmental bodies they create. From 1855 until 1964,
Interpreting
After all, the animating purpose of
Extending
*
*
*
In sum, we hold that
III
That leaves the question whether the adjudicative bodies in the cases before us are governmental or intergovernmental. They are not.
A
Analyzing the status of the arbitral panel involved in Luxshare‘s dispute with ZF is straightforward. Private parties agreed in a private contract that DIS, a private dispute-resolution organization, would arbitrate any disputes between them. See Stolt-Nielsen, 559 U. S., at 682 (“[A]n arbitrator derives his or her powers from the parties’ agreement to forgo the legal process and submit their disputes to private dispute resolution“). By default, DIS panels operate under DIS rules, just like panels of any other private arbitration organization operate under private arbitral rules. The panels are formed by the parties—with each party selecting one arbitrator and those two arbitrators choosing a third. No government is involved in creating the DIS panel or prescribing its procedures. This adjudicative body therefore does not qualify as a governmental body.
Luxshare weakly suggests that a commercial arbitral panel like the DIS panel qualifies as governmental so long as the law of the country in which it would sit (here, Germany) governs some aspects of arbitration and courts play a role in enforcing arbitration agreements. See Brief for Respondent in No. 21–401, at 26–27; Boeing, 954 F. 3d, at 213-214. But private entities do not become governmental because laws govern them and courts enforce their contracts—that would erase any distinction between private and governmental adjudicative bodies. Luxshare‘s implausibly broad definition of a governmental adjudicative body is nothing but an attempted end run around
B
The ad hoc arbitration panel at issue in the Fund‘s dispute with Lithuania presents a harder question. A sovereign is on one side of the dispute, and the option to arbitrate is contained in an international treaty rather than a private contract. These factors, which the Fund emphasizes, offer some support for the argument that the ad hoc panel is intergovernmental. Yet neither Lithuania‘s presence nor the treaty‘s existence is dispositive, because Russia and Lithuania are free to structure investor-state dispute resolution as they see fit. What matters is the substance of their agreement: Did these two nations intend to confer governmental authority on an ad hoc panel formed pursuant to the treaty? See BG Group plc v. Republic of Argentina, 572 U. S. 25, 37 (2014) (“As a general matter, a treaty is a contract, though between nations,” and “[i]ts interpretation normally is, like a contract‘s interpretation, a matter of determining the parties’ intent“).
“a) [a] competent court or court of arbitration of the Contracting Party in which territory the investments are made;
“b) the Arbitration Institute of the Stockholm Chamber of Commerce;
“c) the Court of Arbitration of the International Chamber of Commerce;
“d) an ad hoc arbitration in accordance with Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL).” App. to Pet. for Cert. in No. 21-518, at 64a-65a.
The options on this menu vary in form. For example, a “competent court or court of arbitration of the Contracting Party” (i.e., the state in which an investor does business) is clearly governmental; a court “of” a sovereign belongs to that sovereign. The inclusion of courts on the list reflects Russia and Lithuania‘s intent to give investors the choice of bringing their disputes before a pre-existing governmental body.
An ad hoc arbitration panel, by contrast, is not a pre-existing body, but one formed for the purpose of adjudicating investor-state disputes. And nothing in the treaty reflects Russia and Lithuania‘s intent that an ad hoc panel exercise governmental authority. For instance, the treaty does not itself create the panel; instead, it simply references the set of rules that govern the panel‘s formation and procedure if an investor chooses that forum. In addition, the ad hoc panel “functions independently” of and is not affiliated with either Lithuania or Russia. 5 F. 4th, at 226. It consists of individuals chosen by the parties and lacking any “official affiliation with Lithuania, Russia, or any other governmental or intergovernmental entity.” Ibid. And it lacks other possible indicia of a governmental nature. See ibid. (“[T]he panel receives zero government funding,” “the proceedings . . . maintain confidentiality,” and the “‘award may be made public only with the consent of both parties“).4
Indeed, the ad hoc panel at issue in the Fund‘s dispute with Lithuania is “materially indistinguishable in form and function” from the DIS panel resolving the dispute between ZF and Luxshare. Brief for George A. Bermann et al. as Amici Curiae 19. In a private arbitration, the panel derives its authority from the parties’ consent to arbitrate. The ad hoc panel in this case derives its authority in essentially the same way. Russia and Lithuania each agreed in the treaty to submit to ad hoc arbitration if an investor chose it. The Fund took Lithuania up on that offer by initiating such an arbitration, thereby triggering the formation of an
ad hoc panel with the authority to resolve the parties’ dispute. That authority exists because Lithuania and the Fund consented to the arbitration, not because Russia and Lithuania clothed the panel with governmental authority. Cf. Granite Rock Co. v. Teamsters, 561 U. S. 287, 299 (2010) (“[T]he first principle that underscores all of our arbitration decisions” is that “[a]rbitration is strictly a matter of consent“); AT&T Technologies, Inc. v. Communications Workers, 475 U. S. 643, 648-649 (1986) (“[A]rbitrators derive their authority to resolve disputes only because the parties have agreed in advance to submit such grievances to arbitration“). So inclusion in the treaty does not, as the Fund suggests, automatically render ad hoc arbitration governmental. Instead, it reflects the countries’ choice to offer investors the potentially appealing option of bringing their disputes to a private arbitration panel that operates like commercial arbitration panels do. In a treaty designed to attract foreign investors by offering “favourable conditions for investments,” App. to Pet. for Cert. in No. 21–518, at 56a, that choice makes sense.
None of this forecloses the possibility that sovereigns might imbue an ad hoc arbitration panel with official authority. Governmental and intergovernmental bodies may take many forms, and we do not attempt to prescribe how they should be structured. The point is only that a body does not possess governmental authority just because nations agree in a treaty to submit to arbitration before it. The relevant question is whether the nations intended that the ad hoc panel exercise governmental authority. And here, all indications are that they did not.
The Fund tries to bolster its case by analogizing to past adjudicatory bodies: (1) the body at issue in the dispute over the sinking of the Canadian ship I‘m Alone, which derived from a treaty between the United States and Great Britain; and (2) the United States-Germany Mixed Claims Commission. There appears to be broad consensus that these bodies would qualify as intergovernmental. Ergo, the Fund says, the ad hoc panel must be intergovernmental too.
This does not follow. It is not dispositive whether an adjudicative body shares some features of other bodies that look governmental. Instead, the inquiry is whether those features and other evidence establish the intent of the relevant nations to imbue the body in question with governmental authority. And though we need not decide the status of the I‘m Alone and Mixed Claims commissions, it is worth noting some differences between the treaties providing for them and the treaty at issue here. For instance, those treaties specified that each sovereign would be involved in the formation of the bodies, and, with respect to the treaty creating the Mixed Claims Commission in particular, it also specified where the commission would initially meet, the method of funding, and that the commissioners could appoint other officers to assist in the proceedings. See Convention Between the United States and Great Britain for Prevention of Smuggling of Intoxicating Liquors, Art. IV, Jan. 23, 1924, 43 Stat. 1761-1762, T. S. No. 685; Agreement Between the United States and Germany for a Mixed Commission to Determine the Amount To Be Paid by Germany in Satisfaction of Germany‘s Financial Obligations Under the Treaty Concluded Between the Two Governments on August 25, 1921, Arts. II, III, IV, V, Aug. 10, 1922, 42 Stat. 2200, T. S. No. 665. So while there are some similarities between the ad hoc arbitration panel and the I‘m Alone and Mixed Claims commissions, there are distinctions too. Thus, even taking the Fund‘s argument on its own terms, its analogies are less helpful than it hopes.
*
*
*
In sum, only a governmental or intergovernmental adjudicative body constitutes
It is so ordered.