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From Antitrust Law Daily, March 7, 2018

U.S. argues courts faced with foreign law question not bound by foreign government’s views

By Jeffrey May, J.D.

When antitrust litigants raise issues, such as the act of state doctrine, the foreign sovereign compulsion doctrine, and principles of international comity, courts are not bound by the submissions of the relevant foreign government on these positions, according to the Department of Justice. Instead, courts should respectfully consider the foreign government’s views and afford them substantial weight where appropriate. The courts, however, are not "bound to adopt the foreign government’s characterization nor barred from considering other materials that support a different interpretation," the Justice Department explained in a brief filed with the U.S. Supreme Court. The government offered its views as the Court considers the appropriate level of review owed an appearing foreign sovereign’s interpretation of its domestic law (Animal Science Products, Inc. v. Hebei Welcome Pharmaceutical Co. Ltd.Dkt. 16-1220).

The High Court is reviewing a decision of the U.S. Court of Appeals in New York City. In the context of a price fixing action against Chinese manufacturers and exporters of vitamin C, 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.

According to the Justice Department, the Second Circuit's holding that, when a foreign government "directly participates in U.S. court proceedings" and offers an interpretation that is "reasonable under the circumstances," "a U.S. court is bound to defer" was rigid and unsound. The U.S. Solicitor General had asked the Court to take up the case because it had a substantial interest in the question raised in the petition, which affects both the enforcement of federal statutes and foreign relations.

The government explained that the precise weight that should be afforded a foreign government’s views will depend on the circumstances of the case. Rejecting a formula or rule, the government said: "the relevant considerations include the interpretation’s clarity, thoroughness, and support; its context and purpose; the nature and transparency of the foreign legal system; the role and authority of the entity or official offering the interpretation; its consistency with the foreign government’s past positions; and any other corroborating or contradictory materials."

Further, the government contended that the appellate court in this case erred when it treated an amicus brief submitted by the Ministry of Commerce of the People’s Republic of China supporting dismissal of the price fixing claims as binding and by disregarding other relevant materials. The Court was urged to vacate the appellate court's decision and remand the case to determine the proper weight to be afforded the foreign government's submission and to consider the question of whether Chinese law required the defending manufacturers’ conduct.

Other support for petitioners. The American Antitrust Institute (AAI) and the U.S. Chamber of Commerce also filed briefs, supporting the petitioners. AAI warned of "serious adverse implications for antitrust enforcement and U.S. consumers if the Court follows the Second Circuit’s rule of affording conclusive deference to a foreign government’s statement that its laws compelled price fixing of exports to the United States." The U.S. Chamber of Commerce, referencing "federal agencies’ capacious interpretations of purportedly ambiguous statutory text," expressed its view that "free enterprise does not benefit from an uncritical and reflexive deference by the courts to a sovereign regulator’s interpretation of its own laws."

The case is set for argument on April 24.

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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