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United States: Appellate Court Rules Federal Law Allows Discovery in Foreign Criminal Investigations

(Dec. 31, 2014) The U.S. Court of Appeals for the Second Circuit has ruled that federal law permits a U.S. district court to compel document discovery for use in a criminal investigation by a foreign magistrate. (In Re Application for an Order Pursuant to 28 U.S.C. § 1782 to Conduct Discovery for Use in Foreign Proceedings, No. 14-2807-cv (2d Cir. 2014), FINDLAW.)

Background

Franck Berlamont, the appellee, is the president and chief executive officer of an investment firm in Switzerland named Geneva Partners. (Id. at 5.) Geneva Partners had invested in a fund managed by Optimal Investment Services, S.A. (Optimal), a subsidiary of Banco Santander, S.A. (Id.) Optimal had invested in the Bernard Madoff ponzi scheme, and in 2009 Berlamont began a criminal proceeding in Switzerland against Optimal and its former director general, alleging misrepresentations of Optimal’s Madoff investments. (Id.)

Berlamont sought production of a transcript of an examination in London of Rajiv Jaitly, a former chief risk officer for Optimal, and related exhibits. (Id. at 6-7.) The documents had been produced in discovery in a case brought in the Southern District of New York involving claims similar to those of Berlamont. (Id. at 6.) The court in that case (Rembaum v. Banco Santander, S.A., No. 10 Civ. 4095 (S.D.N.Y.)), however, saw Switzerland as a more appropriate forum and dismissed the case for forum non conveniens. (In Re Application for an Order at 7.)

Berlamont filed an ex parte application in the Southern District of New York seeking the Jaitly documents under 28 U.S.C. § 1782 (id. at 7), which permits a district court to order production of documents “for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation.” (28 U.S.C. § 1782 (2012), U.S. House of Representatives Law Revision Council website.) The court authorized Berlamont to subpoena the Jaitly documents from Optimal’s U.S. counsel, Hunton & Williams LLP, and Optimal and its counsel moved to vacate the court’s order and quash Berlamont’s subpoena. (In Re Application for an Order at 7.) The court denied Optimal’s motion, and Optimal and its counsel appealed to the Second Circuit. (Id. at 7-8.)

Second Circuit Ruling

The appellants argued that (1) the Swiss investigating magistrate did not constitute a “foreign or international tribunal” under § 1782, and (2) Berlamont’s application for the Jaitly documents should have been denied by the district court under “the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, July 27, 1970 [date of U.S. signature], 23 U.S.T. 2555, 847 U.N.T.S. 231 (referred to in the District Court’s memorandum order as the ‘Hague Convention’), international comity, and Swiss attorney-client privilege.” (Id. at 8; Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (Mar. 18, 1970; in force on Oct. 7, 1972, Hague Conference on Private International Law website.)

The Second Circuit applied Schmitz v. Bernstein Liebhard & Lifschitz LLP, 376 F.3d 79, 83 (2d Cir. 2004), which held that a request for discovery under § 1782 may be granted when “(1) the person from whom discovery is sought resides (or is found) in the district of the district court to which the application is made, (2) the discovery is for use in a proceeding before a foreign or international tribunal, and (3) the application is made by a foreign or international tribunal or any interested person.” (In Re Application for an Order at 9.) Only the second prong of this test was at issue in the appeal. (Id.)

Relying on the language of the statute and legislative history, the Second Circuit held that the Swiss magistrate’s investigation did constitute a “foreign or international tribunal” under § 1782. (Id. at 13.) The court stated that an investigative proceeding by such a magistrate, who in the Swiss criminal justice system acts as an impartial investigator and must weigh exculpatory as well as incriminating evidence, was precisely the sort of “criminal investigation conducted before formal accusation” to which the statute was designed to apply. (Id. at 12-13.)

The Second Circuit rejected the appellants’ remaining arguments for denial of the discovery order under the Hague Convention, international comity, and Swiss attorney-client privilege, affirming the district court’s reasoning without further discussion. (Id. at 13.) The district court had held that article 1 of the Hague Convention, which prohibits requesting that evidence be obtained by a foreign court when the evidence is not intended for existing or contemplated judicial proceedings, did not apply, because the treaty does not restrict later use of properly-obtained evidence. (In Re Application of Franck Berlamont for an Order Pursuant to 28 U.S.C. § 1782 to Conduct Discovery for Use in Foreign Proceedings, 2014 U.S. Dist. LEXIS 111594 6 (S.D.N.Y. Aug. 4, 2014).)

The district court had further held that comity did not restrict access to the Jaitly documents, because the British court order that caused them to be created for Rembaum did not limit their use to that case. (Id. at 6-7.) Finally, Swiss attorney-client privilege was, according to the district court, inapplicable because the Jaitly documents lacked sufficient connections with Switzerland. (Id. at 6.)