Winston & Strawn LLP
On June 14, 2018, in a unanimous opinion reversing the Second Circuit, the United States Supreme Court held that U.S. courts are not required to give conclusive effect to a foreign government’s proffered statement of its own law. Animal Sci. Prod., Inc. v. Hebei Welcome Pharm. Co., 138 S. Ct. 1865, 1869 (2018).The opinion resolved a circuit split on the import of views offered by a foreign government on the meaning of its law that emerged after the adoption in 1966 of Federal Rule of Civil Procedure 44.1, which made the meaning of foreign law a legal question on which courts could “consider any relevant material or source.” While the opinion prescribes “respectful consideration” of a foreign government’s statement, the Supreme Court ultimately held that U.S. district courts are not bound to give conclusive weight to a foreign government entity’s interpretation of its law.
In the underlying multidistrict litigation in the Eastern District of New York, U.S.-based purchasers of vitamin C brought claims against Chinese manufacturers and exporters for fixing the price and quantity of exports of the vitamin in violation of the Sherman and Clayton Acts.Id. at 1870.Defendant manufacturers twice sought and were denied dismissal, first with a motion to dismiss, and again at summary judgment, arguing principles of international comity, including the act of state and foreign sovereign compulsion doctrines, shielded their conduct because Chinese law mandated the challenged pricing regime.See 584 F.Supp.2d 546 (denying Defendants’motion to dismiss); 810 F.Supp.2d 522 (denying Defendants’ motion for summary judgment).
In support of Defendants’ argument that they acted pursuant to Chinese regulations governing vitamin C export pricing, the Ministry of Commerce of the People’s Republic of China submitted a brief as amicus curiae, asserting that the Ministry is the highest administrative authority regulating foreign trade in China, and that the Chinese law did, in fact, require Defendants to fix the vitamin C prices at issue.138 S. Ct. at 1870.The Chinese manufacturers also presented expert testimony to further bolster their position that the Ministry’s “interpretation of its own regulations and policies carries decisive weight under Chinese law.”Id.
However, the District Court declined to give the Ministry’s statement conclusive effect, and credited evidence Plaintiffs offered in response, including expert testimony and a Chinese statement to the World Trade Organization in 2002 that it no longer engaged in “export administration of vitamin C,” to deny summary judgment and hold that Chinese law did not require Defendants to fix the price or quantity of vitamin C exports. 810 F.Supp.2d at 525, 532.At trial, the jury found Defendants liable, and Plaintiffs were awarded approximately $147 million in damages and an injunction against further anticompetitive behavior.138 S. Ct. at 1871.
The Second Circuit reversed on appeal, holding that the district court improperly denied Defendants’ motion to dismiss.In re Vitamin C Antitrust Litigation, 837 F.3d 175, 195 (2d. Cir. 2016).The Court of Appeals explained that “because the Chinese Government filed a formal statement in the district court,” that statement was “conclusive” as to the meaning of Chinese law and “principles of international comity required the district court to abstain from exercising jurisdiction.” Id. at 179.In support of its holding, the Second Circuit relied on the “seminal” Supreme Court case, United States v. Pink, 315 U.S. 203, decided in 1942, which held that U.S. courts are “bound to defer to” a foreign government’s statement of its law.Id. at 188.While acknowledging a Circuit split on this question and differing views on the enduring validity of Pink following the 1966 enactment of Federal Rule of Civil Procedure 44.1, which allows a U.S. district court to “consider any relevant material or source” in determining foreign law, the Second Circuit “found no support” for the argument that Rule 44.1 undermined the mandate of Pink.Id. at 187; See e.g., United States v. McNab, 331 F.3d 1228, 1239-42 (11th Cir. 2003) (noting Honduran government’s shift in interpretation of its law and accepting its previous position as the proper interpretation); McKesson HBOC Inc. v. Islamic Republic of Iran, 271 F.3d 1101, 1108-09 (D.C. Cir. 2001), vacated in part on other grounds, 320 F.2d 280 (D.C. Cir. 2003) (declining to adopt meaning of Iranian law advanced by Iranian government because of conflicting expert affidavits).
The Supreme Court Decision
The Supreme Court granted certiorari to address the Circuit split and reversed, in a unanimous opinion, holding that the Second Circuit’s “unyielding” rule requiring complete deference to any “facially reasonable” foreign government submission was inconsistent with Federal Rule of Civil Procedure 44.1’s directive to “consider any relevant material.” Animal Sci. Prod., Inc. at 1874.The Court observed that Rule 44.1 was intended to “make the process of determining alien law identical with the method of ascertaining domestic law to the extent” possible, and analogized the potential different sources for interpretations of foreign law to different sources of state law interpretation, contrasting the “binding” impact of a decision by the highest court of a state, with the “respectful consideration” given to the views of a state’s attorney general. Id at 1873-74.The Ministry’s submission was akin to the latter, not the former.
Further, while noting that Pink was decided before Rule 44.1 existed, the Court distinguished that case on its facts, describing the Pinkcircumstances as “unusual.”Id. at 1874. In keeping with its concern about the source of the foreign government statement, the Court emphasized that in Pink, the United States obtained the Soviet Government Commissariat for Justice’s official declaration through “diplomatic channels,” and that the Commissariat for Justice was determined to “have the power to interpret existing Russian law.”Id. at 1874 (citing Pink at 220). Those distinctions justified giving conclusive weight to the declaration in Pink, but such deference was not warranted in this case.
Due to the “many and diverse legal systems” and “range of circumstances in which a foreign government’s views may be presented,” the Court held “no single formula or rule will fit all cases.”Id. at 1873.The Court enumerated five factors that judges should consider when determining how much weight to accord a foreign government’s statement:
(1) the statement’s clarity, thoroughness, and support,
(2) context and purpose,
(3) transparency of the foreign legal system,
(4) role and authority of the entity or official offering the statement, and
(5) the statement’s consistency with the foreign government’s past positions.
Id. at 1873-1874.Taking no position on the correct interpretation of Chinese law, but deeming the materials considered by the district court “relevant,” the Court vacated the Second Circuit’s opinion and remanded for renewed consideration.Id. at 1875.
Although this opinion resolves the Circuit split on this matter, the five-factor test the Court adopted gives district court judges a considerable amount of discretion in interpreting foreign law, even in the face of a foreign government’s representation in a U.S. court of its laws meaning, and might create more uncertainty than it settles. In particular, the Court’s decision leaves district court judges with little guidance on the potentially subjective questions of the transparency of a foreign legal system (factor three), and the role and authority of the entity or official offering a legal interpretation (factor four). This places district courts in a position to parse the positions and credibility of foreign authorities, which could make foreign entities more reluctant to weigh in on disputes.
One likely result of the Supreme Court’s decision is increased reliance on foreign-law experts, including in opposition to or to bolster a foreign government entity’s legal statement, or to opine on the factors of transparency and the authority of foreign government entities. Litigants will need to develop a comprehensive and convincing position on the meaning of foreign law, including through expert testimony, which can withstand the adversarial process.