International Discovery: Navigating Uncharted Waters

Article excerpt

The extraterritorial application of national laws frequently subjects companies to conflicting or overlapping legal requirements, fosters unpredictability, increases the risks involved in commercial activities, exposes companies to overly burdensome litigation in foreign jurisdictions, and inflates legal and other transaction costs. (1)

Litigants in the United States are accustomed to expansive discovery. The Federal Rules of Civil Procedure allow discovery into "any matter, not privileged, that is relevant to the claim or defense of any party"; relevant information need not be admissible at trial if the discovery appears "reasonably calculated to lead to the discovery of admissible evidence." (2) Discovery of such sweeping scope is literally foreign to other civil justice systems. Indeed, engaging in such broad discovery may conflict with legal obligations imposed in those countries. This can leave companies in an impossible quandary where compliance with one country's laws constitutes a violation of another's. (3)

In cases involving non-U.S. litigants or U.S.-based litigants with operations overseas, tensions between the expectations of U.S. courts and foreign laws increasingly arise in the context of foreign data protection statutes and blocking statutes. With the advent of technologies allowing the rapid creation and transmittal of information, and of recent e-discovery amendments to the Federal Rules of Civil Procedure, these tensions will likely increase.

This article discusses the approach U.S. courts have taken to cross-border discovery and suggests possible strategies for companies facing such discovery.

A. Data Protection

Data protection measures outside the United States can be substantial and may conflict with U.S. discovery demands. For instance, European Union Directive 95/46/EC requires Member States to "protect the fundamental rights and freedoms of natural persons, and in particular their right to privacy with respect to the processing of personal data." (4) Where the Commission finds that a third country (like the United States) does not ensure an adequate level of protection, Member States are required to take the measures necessary to prevent any transfer of data of the same type to the third country in question. (5)

B. Blocking Statutes

Some countries have enacted "blocking statutes" to prevent the application of another country's laws from having extraterritorial effect. For example, the French Blocking Statute provides:

   Art. I bis--Subject to international [agreements] or accords and
   laws and regulations in effect, any individual is prohibited from
   requesting, seeking or disclosing, in writing, orally, or in any
   other form, documents or information of an economic, commercial,
   industrial, financial or technical nature directed toward
   establishing evidence in view of legal or administrative
   proceedings abroad or in relation thereto.

   ...

   Art. 3--Without prejudice to heavier penalties set out by law,
   any violation to [sic] the provisions of articles 1 and 1 bis of
   this law shall be punishable by imprisonment of two to six months
   and a fine of FRF 10,000 to FRF 120,000 or by either one of these
   two penalties. (6)

C. Balancing the Competing Interests: Theory vs. Reality

The Restatement (Third) of Foreign Relations Law sets out several factors courts should consider in evaluating the reasonableness of an international litigant's conduct in the face of conflicting legal requirements:

1. The importance to the litigation of the documents or information requested;

2. The degree of specificity of the request;

3. Whether the information originated in the United States;

4. The availability of alternative means of securing the information; and

5. The extent to which noncompliance with the request would undermine important interests of the U. …