Antitrust News: Supreme Court Says that Federal Courts, Not Foreign Governments, Decide Foreign Law

Author: Jarod Bona

In an antitrust case deciding a non-antitrust-specific issue, the US Supreme Court held in Animal Science Products, Inc. v. Hebei Welcome Pharmaceutical Co. (the Vitamin C Antitrust Litigation) that to determine foreign law in federal courts, judges are not strictly bound by that foreign government’s statements.

The judge should “accord respectful consideration to a foreign government’s submission,” but it is his or her call in making the ultimate decision.

The Supreme Court in this case is interpreting Federal Rule of Civil Procedure 44.1, which states that when deciding foreign law—sometimes that is necessary in federal court—a judge may “consider any relevant material or source . . . whether or not submitted by a party.”

This decision arose out of the Vitamin C Antitrust Litigation, which is an antitrust class-action lawsuit against four Chinese corporations that manufacturer and export, you guessed it, Vitamin C. Purchasers of the vitamin sued Chinese vitamin C sellers, alleging that they agreed to fix the price and quantity of Vitamin C exported to the United States from China. Price fixing, of course, is a per se antitrust violation.

(Read here if you want to learn more about defending an antitrust class action case.)

The Chinese vitamin C sellers argued that they are shielded from US antitrust law liability by the act-of-state doctrine.

But what is the act-of-state doctrine?

Good question.

US courts under the act-of-state doctrine should not judge the validity of an official act of a foreign government committed within that foreign government’s borders. This is a doctrine that extends beyond antitrust law.

In Animal Science Products, the defendants argued that China law required them to fix prices as part of a “regulatory pricing regime.”

The parties, however, disputed whether China law actually mandated the fixed prices. To help resolve that question, the Ministry of Commerce of the People’s Republic of China filed an amicus curiae brief supporting the Chinese vitamin C sellers’ argument that China law required defendants to fix prices.

(You can read our article here on the many reasons to file amicus briefs).

So the trial court had to figure out whether China law mandated price fixing. And to assist it, China’s Ministry of Commerce weighed in via amicus brief.

What would you do?

Would you just agree with whatever China says about its own law? Or would you do an independent examination and decide?

In this case, the district court acknowledged that the Ministry’s amicus brief was entitled to substantial deference, but did not regard their arguments as conclusive. The court ultimately held—against the Ministry’s urging—that Chinese law did not require price fixing in this case. The case went to a jury, which found for the plaintiff.

The Court of Appeals for the Second Circuit, however, reversed because it believed that the Ministry’s position should be given conclusive deference if it was reasonable and, according to the Second Circuit, it was.

This set up the US Supreme Court to determine the following question:

Is a federal court determining foreign law under Rule 44.1 required to treat as conclusive a submission from the foreign government describing its own law?

Let’s skip to the end. The answer is no.

The Supreme Court acknowledged that Federal Rule of Civil Procedure 44.1 “does not address the weight a federal court determining foreign law should give to the views presented by the foreign government.”

Principles of comity require federal courts to carefully consider a foreign state’s views about the meaning of its own laws, but “the appropriate weight in each case will depend upon the circumstances.”

The Court suggested caution specifically in situations in which foreign governments may make conflicting statements or where their statement arrives in the context of litigation itself.

The Supreme Court also pointed out that when judging state law, federal courts aren’t bound by statements of a particular State’s attorney general, which are due respectful consideration, but nothing more.

Ultimately, the Court offered little guidance beyond, “it depends,” but did provide some “relevant considerations” for district courts, which will, of course, now dictate briefing on the issue in future cases (i.e. this is important):

“Relevant considerations include the statement’s clarify, thoroughness, and support; its context and purpose; the transparency of the foreign legal system; the role and authority of the entity or official offering the statement; and the statement’s consistency with the foreign government’s past positions.”

Because the Second Circuit held that the Chinese Ministry’s statement is conclusive because it is reasonable, the Supreme Court reversed and remanded for “renewed consideration consistent with this opinion.”

This won’t be the most widely influential Supreme Court antitrust case out there, but it could become increasingly important as US Courts continue to grapple with antitrust cases involving conduct in foreign countries, particularly Asia the last several years.

To the extent challenged foreign business conduct is consistent with foreign law, federal courts may have to decide foreign legal issues. This case offers some clarify on how they should do so.

More broadly, as companies and markets become increasingly global, it will be interesting to see how specific governments handle enforcement when conduct spans multiple jurisdictions.

photo credit: árticotropical Tangerine via photopin (license)