Shearman & Sterling LLP | Antitrust Blog | United States Supreme Court Rules That Foreign Government Submissions As To Disputed Issues Of Foreign Law, While Entitled To Deference, Are Not Binding On U.S. Courts
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  • United States Supreme Court Rules That Foreign Government Submissions As To Disputed Issues Of Foreign Law, While Entitled To Deference, Are Not Binding On U.S. Courts
    06/19/2018
    On June 14, 2018, Justice Ginsburg, writing for a unanimous Supreme Court, revived Sherman Act claims against Chinese vitamin manufacturers, reversing a 2016 opinion by the Second Circuit in In re Vitamin C Antitrust Litigation, 837 F.3d 175 (2d Cir. 2016), and holding that a foreign government’s interpretation of its own law is not binding on U.S. courts. Animal Science Prods., Inc. v. Hebei Welcome Pharm. Co., No. 16-1220 (June 14, 2018).

    The case, In re Vitamin C Antitrust Litigation, dates back to 2005 and 2006, when U.S. vitamin C purchasers filed complaints against Chinese manufacturers alleging that the manufacturers had agreed to fix the price and supply of vitamin C exported to the United States, in violation of Section 1 of the Sherman Act. Defendants, aided by submissions from the Chinese government, moved to dismiss on the ground that Chinese law required them to fix the price and quantity of vitamin C exports, thus shielding the Chinese manufacturers from liability under U.S. antitrust law. Plaintiffs in turn presented evidence refuting that Chinese law compelled defendants to engage in price fixing.

    Finding the Chinese government’s statements regarding Chinese law inconclusive, the United States District Court for the Eastern District of New York denied defendants’ motion to dismiss and the case ultimately went to trial. In March 2013, a federal jury found the Chinese manufacturers liable for violating Section 1 and awarded plaintiffs $147 million in treble damages.

    In September 2016, the Court of Appeals for the Second Circuit held that the District Court erred in denying defendants’ motion to dismiss and vacated the lower court’s judgment, stating that it was “bound to defer” to the Chinese government’s interpretation of its domestic law.

    The Supreme Court reversed the Second Circuit and remanded the case. Writing on behalf of the unanimous Court, Justice Ginsburg held that Federal Rule of Civil Procedure 44.1 requires that a determination by a federal court of foreign law “‘must be treated as a ruling on a question of law,’ rather than as a finding of fact,” and thus the court “may consider any relevant material or source … whether or not submitted by a party.” Therefore, Justice Ginsburg explained, a “federal court should accord respectful consideration to a foreign government’s submission, but it is not bound to accord conclusive effect to the foreign government’s statements.” Relevant considerations include, but are not limited to, the foreign statute itself; the clarity, thoroughness and support of the government’s characterization of its law; the foreign government’s prior interpretations of the law; the transparency of the foreign legal system; and expert testimony regarding the application of the law in the foreign country.

    As a practical matter, the Supreme Court’s decision means that litigants cannot rely solely on a foreign government’s interpretation of its own law to avoid liability under U.S. antitrust laws (or under other U.S. laws that could expose them to criminal or civil liability), and must be prepared to present evidence, including potentially expert testimony, on how any disputed law is understood and applied.

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