Every commercial litigator is familiar with the burdens at the discovery phase of litigation, whether it is a dispute over production, privilege, or just the sheer volume and cost (both time and money) associated. Be that as it may, discovery also serves a critical and necessary purpose in commercial litigation. Determining what to ask for and how to get it is an art, and a skilled litigator’s strategy for doing so can shape the conduct of litigation. 

Commercial litigators often are faced with interstate discovery. When so confronted, litigators will dust off each adopting state’s version of the Uniform Interstate Depositions and Discovery Act and employ the simple procedures applicable to those interstate courts to have deposition and discovery subpoenas issued to the out-of-state non-party.  

But what happens when the discovery sought is outside the territorial jurisdiction of the United States? The Commercial Division, as provided in South32 Chile Copper Holdings Pty Ltd. v Sumitomo Metal Mining Co., Ltd., et al., presided over by the Honorable Robert R. Reed of the New York State Supreme Court, New York County, Commercial Division have those instances covered via the Hauge Convention of 1970 on the Taking of Evidence Abroad in Civil Matters (the “Convention”).

The Dispute and Litigation

Plaintiff, South32 Chile Copper Holdings Pty Ltd. (“Plaintiff”), initiated an action against defendants, Sumitomo Metal Mining Co., Ltd. and Sumitomo Corp. (collectively “Defendants”), seeking to hold Defendants responsible for Dutch tax liabilities for Chilean gold mine operations that Plaintiff acquired as part of a transaction with Defendants.   

During the discovery phase of the litigation, Plaintiff moved the Court to obtain documents from the US affiliates of certain non-party entities in the Netherlands and the United Kingdom, each of which are alleged to have: (1) given tax advice regarding the Dutch tax liability; and (2) having relevant information surrounding the parties’ sale and purchase agreements that are purported to confer the Dutch
tax liability. Defendants also moved to obtain documents from a Netherlands entity which is alleged to have provided advice regarding the filing and preparation of the tax returns at issue, which led to the Dutch tax liability. Plaintiff’s discovery motions went uncontested. 

What Is the Hague Evidence Convention?

The Convention is a multilateral treaty signed by over 60 countries, which was designed to aid parties in seeking discovery from international non-parties via a system of signatory central authorities. In sum, a litigant in the New York Commercial Division seeking pre-trial discovery from a non-party in a foreign jurisdiction that is a member of the Convention can apply to the New York Court for issuance of a “Letter of Request for Judicial Assistance” (“Letter”) finding the discovery requests at issue to be sufficient for issuance of the Letter. The Letter is then submitted to a Central Authority of the signatory state where the evidence is located and, if in compliance with the Convention and the laws of the signatory state, will be executed by an authority within that signatory state. The executing authority will notify the parties subject to the discovery request and provide the opportunity to be heard.

What Must Be Considered by the New York Court? 

In South32 Chile Copper Holdings Pty Ltd., the parties sought tax documents and information from tax consultants that provided advice related to the Dutch tax liability.  Upon the requests of both parties, Justice Reed analyzed three different elements necessary to issue a Letter including: 

  1. That the “documents sought are both material and necessary to the legal claims in the matter” [citing Allen v Crowell-Collier Pub. Co., 235 NY2d 403 [1968]).
  2. “That ‘the method of discovery sought will result in the disclosure of relevant evidence or is reasonably calculated to lead to the discovery of information bearing on the claims’” [quoting Abrams v Pecile, 83 AD3d 527, 528 [1st Dept 2011] [internal quotation omitted]); and     
  3. “That the information sought is ‘crucial to the resolution of a key issue in this case’” [quoting Kahn v Leo Schacter Diamonds, LLC, 139 AD3d 635 [1st Dept 2016]). 

In analyzing these elements, Justice Reed found that the tax documents sought, or the advice procured by the non-parties, was central to the tax liability at issue. The Court held that the information sought by Plaintiff and Defendants was “crucial to the resolution of a key issue in the case” and therefore granted each of the motions issuing a Letter to each of the non-parties. 

The Takeaway

Though seemingly daunting, commercial litigators must keep in mind that discovery from outside the territorial jurisdiction of the United States is available, and that there is a tried-and-true process under the Convention for obtaining it. Parties need not forego obtaining crucial international discovery, and the Commercial Division can assist by issuing a Letter upon the requisite showing.