Understanding Federal Subpoena Power Over Foreign Companies

Understanding Federal Subpoena Power Over Foreign Companies

In investigations and litigation in the U.S., federal agencies often seek information from foreign companies through subpoenas. However, the reach of federal subpoena power overseas is complex and uncertain. This article examines key issues foreign companies face when dealing with federal subpoenas.

What is a Subpoena?

A subpoena is a writ ordering a person or company to produce documents, provide testimony, or both, relevant to an investigation or legal proceeding. In U.S. federal cases, subpoenas are issued under authority granted by statutes, regulations, or court rules.

Subpoenas can be issued in criminal investigations, civil litigation, administrative proceedings, congressional investigations, and grand jury proceedings. They are an essential tool for gathering evidence.

Subpoena Power Over Foreign Companies

U.S. federal agencies and courts can issue subpoenas to foreign companies under certain circumstances. Key principles include:

• Personal jurisdiction – The company must have sufficient business contacts or activities involving the U.S. to be subject to personal jurisdiction.
• Relevance – The information sought must be reasonably relevant to an authorized investigation or proceeding.
• Undue burden – Compliance cannot impose an undue burden on the company.

Foreign companies that do business in the U.S. or with U.S. entities are generally subject to federal subpoena power. However, the analysis is fact-specific.

Challenging Subpoenas

Foreign companies can challenge subpoenas on several grounds, such as lack of personal jurisdiction, relevance, undue burden, or privileges like attorney-client privilege or bank secrecy laws. Common arguments include:

• The subpoena seeks information located outside the U.S.
• Compliance would violate foreign data privacy or blocking statutes.
• The requests are overbroad or seek irrelevant information.
• Responding would be unduly costly and burdensome.

Motions to quash or modify a subpoena are decided by the issuing court. Success often depends on showing compliance would be unreasonable or create significant hardship.

Consequences of Noncompliance

If a foreign company refuses to comply with a subpoena, potential consequences include:

• Civil contempt sanctions like fines or arrest if representatives enter the U.S.
• Preclusion from accessing U.S. capital markets.
• Reputational harm and negative publicity.
• Adverse inferences in litigation.

However, contempt sanctions generally cannot be enforced if the recipient remains outside the U.S. Practically speaking, a company with no U.S. assets or need to access U.S. markets may be able to ignore a subpoena without significant repercussions.

Navigating Cross-Border Discovery

Cross-border discovery disputes involving foreign companies often become complex, protracted legal battles. Strategies for navigating cross-border discovery include:

• Seeking to narrow subpoena scope through negotiation.
• Using alternative discovery methods like voluntary interviews.
• Leveraging mutual legal assistance treaties (MLATs).
• Pursuing diplomatic channels if necessary.

Taking a cooperative approach and demonstrating good faith efforts to produce relevant information can help mitigate conflicts over federal subpoenas.

DOJ Policy on Foreign Data Requests

In recent years, DOJ has issued policies cautioning prosecutors against overly broad requests for foreign-stored data. Key guidelines include:

• Considering alternative means for obtaining data like MLATs.
• Weighing the importance of data against burdens on foreign states.
• Carefully tailoring requests to needed information.

While these policies are not binding, they signal DOJ’s recognition of sovereignty concerns. Companies can reference these guidelines when negotiating subpoena scope.

Using Mutual Legal Assistance Treaties

MLATs are agreements between countries to obtain and exchange foreign evidence for use in judicial proceedings. The U.S. has MLATs with over 60 countries. Key advantages of MLATs include:

• Requests go through designated Central Authorities, avoiding direct conflicts.
• Countries agree in advance to produce evidence requested.
• Procedures satisfy data privacy and blocking statutes.

However, the MLAT process can be slow and cumbersome. Agencies often prefer issuing direct subpoenas when possible.

Data Privacy and Blocking Statutes

Foreign data privacy laws like the EU GDPR create compliance challenges for responding to U.S. discovery. Companies can face hefty fines for transferring data without authorization. Strategies include:

• Anonymizing or redacting personal information.
• Obtaining consents from data subjects.
• Using MLAT procedures.
• Challenging overbroad requests.

Foreign blocking statutes also prohibit producing certain types of evidence located overseas. Companies must balance compliance with U.S. discovery orders against violating local laws.

Takeaways for Foreign Companies

Key takeaways for foreign companies dealing with federal subpoenas include:

• • Seek qualified U.S. counsel for navigating discovery disputes.
  • Act in good faith and demonstrate willingness to cooperate.
  • Explore negotiation, alternative discovery methods, and MLATs.
  • Make narrow, specific objections to overbroad requests.
  • Proactively engage with agencies to understand the scope of investigations and identify ways to efficiently provide relevant information.

When facing federal subpoenas, foreign companies should strive to act in good faith and avoid being perceived as obstructionist. Demonstrating a sincere willingness to cooperate, even if challenging aspects of requests, can help build credibility.

Companies should also explore negotiation, alternative discovery methods like voluntary interviews, and mutual legal assistance treaties (MLATs) as potential mechanisms for resolving disputes. Negotiation can narrow subpoena scope, while MLATs allow information exchange through approved channels.

Making narrow, specific objections to overbroad or unduly burdensome requests is preferable to outright rejecting subpoenas. Blanket non-compliance invites sanctions and reputational damage. Targeted challenges to relevance or scope are more likely to succeed.

Finally, proactively engaging with investigating agencies, understanding the focus of inquiries, and identifying efficient ways to provide relevant information demonstrates cooperation. Finding mutually agreeable solutions reduces conflicts.

While federal subpoena power over foreign companies is expansive, cooperative engagement, negotiation, and narrow objections can help balance investigative needs with sovereignty and compliance concerns.