Those who have read my occasional fulminations about US courts ordering discovery in breach of French blocking statutes will recall that much of the argument turns on whether the French will actually enforce the statute by imposing penalties on those who export data. In an article called Cross-Border Discovery – Federal Judge makes a monkey of the cheese-eaters, I put it this way:
…it is perhaps relevant to consider the likelihood that the French will act to enforce the blocking statute. I say “perhaps relevant” because I am not entirely convinced that the “due respect to the data protection laws of any foreign sovereign” lies in the pragmatic assessment that the French will not react. One can illustrate my point this way: a combination of resource cuts and an attachment to their cosy, warm police stations means that the chances of an English policeman arresting a burglar are pretty slim – the actual statistics are the source of much debate and deliberate, self-serving obfuscation, but a career in burglary is fairly risk-free in the UK. You would not, I think, find a US judge willing to approve of UK burglary on the basis that the police are unlikely to do anything about it.
You may be interested to know that the English High Court has recently considered the same factors, concluding that discovery should be ordered. US lawyers should resist the conclusion that this means that the argument has suddenly become respectable so far as they are concerned. Blocking statutes raise the same issues as the EU-wide data protection and privacy laws, with the difference that they are expressed to be absolute. If all this was a problem before we learned about PRISM, how much worse is the position now?
The case is National Grid Electricity Transmission Plc v ABB Ltd & Ors  EWHC 822 (Ch) (11 April 2013). I am obliged to my friend Browning Marean of DLA Piper US for drawing my attention to it.
The opening sentence leaves us in no doubt as to the central issue:
These applications raise an important question as to the approach the court should take in the light of the so-called French blocking statute, French law No 68-678 of 26 July 1968
This is a complex judgment, full of quotations from earlier cases and the (divided) opinions of the (mainly French) experts whose views are reported. Extracting what seems to be important in sequence will give you a broad idea of the issues. If you want more, you may need some damp towels for your forehead.
The nature of the issues meant that “disclosure is … of great significance” (Para 7), dealt with by specific disclosure rather than standard disclosure (Para 8). The disclosure sought against the French defendants paralleled that being provided, by consent or otherwise, by the other defendants (Para 9) and the blocking statute was the only point at issue (Para 10), with the French defendants saying ‘that providing such disclosure will put them, as French companies, in breach of a prohibition under French law which attracts criminal penalties, and therefore should not be ordered”.
The EU Evidence Regulation provides for two alternative routes for the taking of evidence in another member state a) by the competent court in the foreign State or b) directly in the foreign State (Para 11). Disclosure had been delayed as against the French defendants whilst the second of these had been attempted, without success as it turned out. The French Ministry of Justice rejected the requests after “delay… under what is supposed to be a relatively quick procedure” (Para 13). This, alas, seems to fortify the US prejudice against any attempt to get discovery from France which does not involve kicking doors down and shouting a lot.
The blocking statute itself is set out in Para 18.
I will skip through the several paragraphs which recite prior cases and the various strands of evidence put before the court, leaving you to read such detail as you need for your own purposes – the references to lex fori, to the Hague Convention, to Christopher X and to “weak”, “very low”, “purely theoretical” or “nil, practically speaking” prospects of French prosecution. A central point, however, arises in Para 22 with a quotation from Morris v BAII of 2001 in which the judge said this:
the purpose of the Blocking Statute was to enable French companies to resist American discovery procedures, although the Blocking Statute as enacted is more general in scope and is not limited to requests for documents coming from the United States
and then this:
It would, I think, be highly unusual if the French criminal authorities were to prosecute a party to an action such as this in England, in circumstances where he was required to comply with an order of the court for production of documents for the purposes of that action. The enforcement of a law such as the Blocking Statute in a case such as this would not correspond with generally accepted notions of comity.
Apart from the words “in England”, this seems to support the US idea that litigation discovery is some kind of release from the blocking statute (as many of them believe to be the case in respect of privacy and data protection restrictions). That is to ignore the policy behind the blocking statute, to which the judge in Morris v BAII returns: (Para 44):
Secondly, the context of the legislation is significant. The 1980 amendment of the statute that introduced Art 1bis was made because of concern in France at what were seen as abusive discovery requests being made of French companies facing litigation in particular in the United States. That is explained by Mtre Feugère, in a part of his report that Judge Béraudo does not criticise. In this respect, the French blocking statute has a similar background to the UK Protection of Trading Interests Act 1980. Indeed, a significant number of states introduced such blocking legislation as a reaction to the perceived heavy-handed approach of the US law and procedures.
The judge in the National Grid case goes on to look at the policy context in which the proceedings were brought (in Para 47):
I find it virtually inconceivable that where jurisdiction over a company is exercised pursuant to an EU regulation to make it a defendant to proceedings in another EU Member State, for damages alleged to result from an established and serious violation of a fundamental provision of EU law, which proceedings serve an objective of EU policy, the public authorities of one EU Member State would in the exercise of their discretion institute criminal proceedings against that company for complying with the procedural rules of the courts of the Member State where the proceedings are brought.
So, the distinguishing feature is that discovery is being ordered by the authorities of one EU member state against a party in another. Remember, incidentally, that this is not a privacy or data protection issue but the specifically French blocking statute. Pausing only to dismiss the idea that EU Evidence Regulation is an effective bar, the judge ends (Para 57) by ordering that “the French Defendants should be subject to an order for disclosure in the same way as all the other defendants”.
So, the end of this painstaking analysis is that disclosure should be ordered against a French party, notwithstanding the acceptance of the meaning and effect of the French blocking statute, and after an analysis of the same point which comes up so often in US cross-border discovery applications – the likelihood or otherwise that the French authorities will prosecute for breach of the blocking statute.
US lawyers get understandably desperate when needing documents from abroad in order to comply with US discovery requirements – “understandably” because of the extreme breadth of US discovery and because of the penalties which may (we should stress that word “may”) follow from a failure to produce foreign documents. The analysis of the prospects of prosecution tends to be rather more cursory in US proceedings than we see in the English case, which is why I stigmatise it with my burglary analogy. One also sees, at least with the eyes of an outsider, a blurring of the distinction between “the interests of the US” and “the interests of the US party in the litigation”.
US lawyers also often overlook something else. The scope of US discovery is seen as objectionable in most other jurisdictions regardless of data protection and privacy laws as well as blocking statutes. It is, to take the words used in this case, a “heavy-handed approach”. The NSA / PRISM revelations add another reason why policy and individual judgments tend against allowing the export of documents and data.
To my eye, the point which distinguishes this judgment (which I think to be right) from US ones which US lawyers may consider to be analogous, is the policy point – the blocking statute was created precisely to avoid the abuses of US discovery, whereas in this case it had no US implications and (more importantly) appears in direct conflict with an important objective of an EU regulation.
There is a temptation into which US lawyers frequently fall in this context, to take one small component of an argument or a set of facts and use it to justify something without regard to the wider context. An example is the concept of “Safe Harbor” which is seized on by US lawyers as justifying data exports without regard to the fact that Safe Harbor is but one of the factors which must be considered and that it was not intended, on its own, to provide a cloak for litigation discovery.
What is to be done when EU documents are needed in US proceedings? Have a look first at the Sedona Conference International Principles on Discovery, Disclosure and Data Protection and consider, amongst other things, whether the documents are really “needed” at all – US discovery tends to proceed on the assumptions that every document must be found, that opponents are automatically not to be trusted and that the court will punish any shortfall. The first of these is nonsense, the second a character defect which must be cured, and the third unlikely provided that the court is told very early in the proceedings what the issues are and what alternatives exist – alternative routes like the Hague Convention and alternative approaches such as in-country processing. I paraphrase, but Judge Scheindlin says “Don’t come whining ‘undue burden’ at me without being able to say what that burden is”.
Hanging over all this is the shadow of PRISM. All those jokes about restoring lost data by getting it back from the NSA are founded on a very real fear that protections previously relied upon have become meaningless. If one possible consequence is tighter restrictions (including outright bans) imposed by EU authorities, another is that companies will take greater care to avoid letting data reach the US at all – thus multiplying the volumes to fight about when litigation arises.
I realise post-publication that I have not covered one point which I usually make – that if you engage in US trade and become involved in US litigation, it is unattractive to argue that you are exempt from US rules – “If you join the game you must play according to the local rules”, as is said in one of the quotations included in this judgment. The time to prepare for that is at the beginning – it should form part of the commercial decision-making and part of the risk-assessment. There is a very real conflict here. It can often be managed by informed compromise.