Antitrust

S H E A R M A N & S T E R L I N G L L P | 1 1 5 The Second Circuit's analysis hinged on the first factor of a multi-factor balancing test that courts use to determine whether a 'true conflict' exists between U.S. law and Chinese law. The first factor is the appropriate level of deference to afford the Chinese government's submission about its own laws. The Second Circuit explained that "[i]f deference by any measure is to mean anything, it must mean that a US court not embark on a challenge to a foreign government's official representation to the court regarding its laws or regulations, even if that representation is inconsistent with how those laws might be interpreted under the principles of our legal system." Because the Chinese government submitted a "sworn evidentiary proffer regarding the construction and effect of its laws and regulations," and such interpretation demonstrated a true conflict between U.S. and Chinese competition law, the Second Circuit held that a U.S. court is duty-bound to defer to the Chinese and abstain. The Second Circuit also held, in contrast to the District Court, that a true conflict does not require evidence of government compulsion to follow the law in question, proof that the laws in question were actually enforced, or proof that the defendants sought approval from the government for their actions. Instead, "[i]t is enough that Chinese law actually mandated such action, regardless of whether Defendants benefited from, complied with, or orchestrated the mandate." The Court further concluded that China's interests outweighed any U.S. antitrust enforcement interests. I T I S C L E A R T H A T F O R E I G N C O M PA N I E S C A N N O T O U T R I G H T R E LY O N T H E I R S O V E R E I G N ' S I N T E R P R E T A T I O N O F I T S O W N L A W T O A V O I D L I A B I L I T Y U N D E R U . S . A N T I T R U S T L A W S SUPREME COURT DECISION In evaluating the Second Circuit's ruling, the Supreme Court first addressed whether the Chinese Ministry's submission should be treated as an issue of fact or an issue of law. Writing on behalf of the Court, Justice Ginsburg held that the Federal Rules of Civil Procedure require 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." Because the Ministry's submission was but one of many relevant sources in the record, the Court concluded that the District Court was correct in ruling that it was not bound by the submission. The Court held that federal courts should "accord respectful consideration to a foreign government's submission, but [they are] not bound to accord conclusive effect to the foreign government's statements." While the Court did not set forth a bright-line rule, Justice Ginsburg's opinion listed several factors that courts should consider in determining whether to defer to a foreign government's position on its own law, including: the plain language of the foreign statute, its clarity, support for the sovereign's characterization of its law, the foreign sovereign's prior interpretations of the law, the transparency of the foreign legal system, and expert testimony about how the law is applied in the foreign country. Here, Justice Ginsburg held that the Second Circuit failed to consider the inconsistencies that the District Court identified in the Ministry's position and vacated the decision. On remand, the District Court will give "substantial but not conclusive weight" to the Ministry's submission, and may consider other evidence, which tends to undermine the Ministry's submission. IMPLICATIONS GOING FORWARD The Supreme Court's decision to grant certiorari in this case demonstrates that there was a lack of clarity for cases involving issues of international comity. While the decision still leaves some uncertainty, it is clear that foreign companies cannot outright rely on their sovereign's interpretation of its own law to avoid liability under U.S. antitrust laws. Instead, foreign defendants must be prepared to present expert evidence on how the law in question is understood and applied. In this process, courts will be on the lookout for inconsistencies or shortcomings in the government's position. The decision could also have ramifications for U.S.-China relations. Because China has never previously intervened in a U.S. lawsuit, and the Supreme Court unanimously chose not to follow the Ministry's submission, it's unlikely that China will intervene again anytime soon. The decision also came amid already strained relations with China under the Trump administration, which had imposed sweeping tariffs on Chinese imports earlier in 2018, sparking what many have deemed a trade war with China.

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