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NYLJ “Tech May Be Global, But Laws Are Still Local: Limits in International Arbitration

New technologies, generally speaking, do not respect old boundaries. That can create great opportunities, but it can also raise unexpected challenges. The internet has global reach and provides on-demand access to a world of content that, a few decades ago, would have been unimaginable. At least that’s true of the internet in America, but the internet in more restrictive countries—including China—is quite different, and the content available there is far more tightly controlled. One consequence of the ready availability of this global resource in the pocket of every American is that we may tend to forget, as legal matter, that international borders still exist and that they still have very serious consequences in our technological lives. Just ask the 40 million Americans who use (and adore) TikTok, the social media app now facing a potential ban in the U.S. because of its Chinese ownership.

When providing legal advice to companies in this space, these issues can be particularly difficult to pin down. Firms entering transactions or collecting data in one jurisdiction through an app or internet presence may need to consider the laws and regulations in dozens (or hundreds) of other jurisdictions not only around the country, but around the world. The users of apps or websites should (ideally) be at least generally aware of the laws and regulations governing how their data and information can be stored and used, which varies widely across the U.S., Asia, and the European Union. As a practical matter, it is hard enough for companies to keep track of all this, and all but impossible for users to do so.

Facing such challenges, many firms attempt to codify their obligations by agreement with their business partners and their users, often selecting arbitration as a means of settling any disputes that might arise. While arbitration clauses have grown popular in most commercial contexts, they are a near necessity in agreements involving international commerce, as they avoid jurisdictional fights and allow the parties to ensure that disputes will be handled by a known entity.

But private arbitration is not a panacea. Efficiency comes with tradeoffs—particularly in discovery, which may not be as easily available (for example, from non-parties) as it would be in a judicial proceeding. That is especially so in international arbitration where non-parties may reside in a different jurisdiction than the arbitral forum. In such instances, even if parties can convince the arbitral tribunal to order discovery, it can be nearly impossible, as a practical matter, to force non-parties to comply. Although U.S. law provides some help in a limited subset of international proceedings, that law is not always applicable. A recent Second Circuit case, In re Hanwei Guo, No. 19-781 (2d Cir. 2020), provides insight into those challenges.

This article first appeared in the New York Law Journal on July 20, 2020. Stephen M. Kramarsky, a member of Dewey Pegno & Kramarsky, focuses on complex commercial and intellectual property litigation. Jack Millson, an associate at the firm, provided substantial assistance with the preparation of this article.

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