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From Antitrust Law Daily, January 12, 2018

High Court to consider deference owed to a foreign government’s characterizations of its own laws

By Jeffrey May, J.D.

Following a call from the U.S. Solicitor General to take up the case, the U.S. Supreme Court today granted a petition for certiorari, asking "whether a court may exercise independent review of an appearing foreign sovereign’s interpretation of its domestic law" or must defer to the foreign government’s legal statement. At issue is a decision of the Second Circuit that vacated a district court judgment against Chinese vitamin C manufacturers for fixing prices (Animal Science Products, Inc. v. Hebei Welcome Pharmaceutical Co. Ltd., Dkt. 16-1220).

Animal Science Products and other U.S. purchasers of vitamin C alleged that Hebei Welcome Pharmaceutical and other Chinese manufacturers and exporters of vitamin C conspired to fix the price and supply of vitamin C sold to U.S. companies on the international market in violation of the Sherman Act. The federal district court in New York rejected the defendants’ motion for judgment as a matter of law, ruling that that the doctrines of act of state and international comity did not bar plaintiffs’ suit. After a jury trial, the court entered judgment, awarding the plaintiffs approximately $147 million in damages and enjoining the defendants from engaging in future anticompetitive behavior.

In September 2016, the U.S. Court of Appeals in New York City vacated the judgment and reversed the order denying the manufacturers’ motion to dismiss. It said that the case presented the question of what laws and standards control when U.S. antitrust laws are violated by foreign companies that claim to be acting at the express direction or mandate of a foreign government. The appellate court addressed how a federal court should respond when a foreign government, through its official agencies, appears before that court and represents that it has compelled an action that resulted in the violation of U.S. antitrust laws.

The Second Circuit concluded, that because the Chinese government had filed a formal statement in the district court asserting that Chinese law required the defendants to set prices and reduce quantities of vitamin C sold abroad and because the manufacturers could not simultaneously comply with Chinese law and U.S. antitrust laws, the principles of international comity required the district court to abstain from exercising jurisdiction in this case.

Animal Science petitioned the Supreme Court for review, arguing that the Chinese government had mischaracterized its own law in asserting that the Chinese companies' anti-competitive behavior was required by Chinese law. The petitioners pointed to statements that the manufacturers' anti-competitive agreement was self-regulated and voluntarily adopted without government intervention.

The petition presented three questions for the Supreme Court: (1) whether the Second Circuit, in conflict with decisions of three courts of appeals, erred in exercising jurisdiction under 28 U.S.C. §1291 over a pre-trial order denying a motion to dismiss following a full trial on the merits; (2) whether a court may exercise independent review of an appearing foreign sovereign’s interpretation of its domestic law (as held by the Fifth, Sixth, Seventh, Eleventh, and D.C. Circuits), or whether a court is "bound to defer" to a foreign government’s legal statement, as a matter of international comity, whenever the foreign government appears before the court (as held by the opinion below in accord with the Ninth Circuit); and (3) whether a court may abstain from exercising jurisdiction on a case-by-case basis, as a matter of discretionary international comity, over an otherwise valid Sherman Antitrust Act claim involving purely domestic injury.

Today, the Court said that it would consider the second question presented. The U.S. Solicitor General filed an amicus brief in November 2017, arguing that the Court should grant the petition solely on the question of whether a federal court determining foreign law under Fed. R. Civ. P. 44.1 is required to treat as conclusive a submission from the foreign government characterizing its own law. The Solicitor General argued that a foreign government's characterization of its own law is entitled to substantial weight, but was not conclusive. The government said that the case raised an important and recurring issue.

Attorneys: Michael Julian Gottlieb (Boies Schiller Flexner LLP) for Animal Science Products, Inc. Noel J. Francisco, U.S. Department of Justice, for the United States. Jonathan M. Jacobson (Wilson Sonsini Goodrich & Rosati, PC) for Hebei Welcome Pharmaceutical Co. Ltd.

Companies: Animal Science Products, Inc.; Hebei Welcome Pharmaceutical Co. Ltd.

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