The U.S. District Court for the Southern District of New York issued an interesting comity decision on whether U.S. courts should defer to foreign countries’ secrecy and blocking statutes when considering motions for discovery of documents located abroad. The court’s analysis turned on how seriously the foreign governments take their own statutes, including whether the governments actually prosecute violations. Based on that analysis, the court deferred to Switzerland’s bank-secrecy regime, but not to France’s “blocking statute” or to statutes in Jordan and the United Arab Emirates (the “UAE”). Motorola Credit Corp. v. Uzan, ___ F.R.D. ___, 2014 WL 7269724 (S.D.N.Y. Dec. 22, 2014).
This episode of the Motorola saga followed a decision about which we had previously blogged. That blog post had discussed the New York Court of Appeals decision upholding the “separate entity” rule, under which a restraining order served on the New York branch of a multinational bank cannot freeze or attach assets held at a separate foreign branch of the bank. The new decision, in contrast, more narrowly addresses whether a U.S. judgment creditor can subpoena a New York bank to obtain discovery about the judgment debtor’s assets in the bank’s foreign branch.
The plaintiff judgment creditor in the Motorola case had served subpoenas on the New York branches of various international banks to try to obtain information about the defendant judgment debtors’ assets in the banks’ non-U.S. branches. The banks objected based on foreign law, contending that the laws governing the banks’ non-U.S. branches prohibit production of the subpoenaed information.
The court recognized that, “[m]ore often than not,” U.S. courts have not accorded deference to foreign secrecy and blocking statutes and have ordered discovery. However, using the framework articulated by the Supreme Court in Société Nationale Industrielle Aerospatiale v. United States District Court for the Southern District of Iowa, 482 U.S. 522 (1987), the court focused on what it considered the most important Aerospatiale factor: international comity – “the extent to which noncompliance with the [discovery] request would undermine important interests of the United States, or compliance with the request would undermine important interests of the state where the information is located.” The court reached different conclusions for each of the countries involved.
France. The court held that France’s “blocking statute,” which the banks said prohibits the production of the subpoenaed information, “is riddled with loopholes that make it substantially unenforceable. This was no accident . . . . In practice, . . . it appears that when a foreign court orders production of French documents even though the producing party has raised the ‘excuse’ of the French blocking statute, the French authorities do not, in fact, prosecute or otherwise punish the producing party.” The court therefore concluded that, under the comity analysis, France’s interests did not override the United States’ own interests in enforcing its judgments.
Switzerland. The court reached the opposite conclusion under Switzerland’s bank-secrecy regime, which, “[i]n contrast with the French situation, . . . constitutes, not just a seriously enforced national interest, but almost an element of that nation’s national identity.” The court found that violations can be and actually are prosecuted ex officio even if the injured party does not complain. The comity analysis thus weighed in favor of deferring to the Swiss bank-secrecy laws. (However, the court declined to accord similar deference to Article 271 of the Swiss Penal Code, which, according to the court, “speaks only tangentially to the production of documents” and “does not create criminal liability for a bank that adheres to a U.S. court’s order to search for bank account documents located in Swiss bank branches.”)
Jordan and UAE. The court also declined to defer to Jordan’s and the UAE’s statutes. The court concluded that the Jordanian statute “permits disclosure of bank account information if so-ordered by a ‘competent judicial authority,’ and there is no material indication that this is limited to the courts of Jordan.” The court also noted the “total paucity of published prosecutions of banks or their officers in Jordan and the UAE for complying with discovery ordered by a foreign court.”
The court directed the parties to apply the principles of its decision to subpoenas for documents located in countries other than France, Switzerland, Jordan, or the UAE.