Is a court bound to defer to a foreign government’s interpretation of its domestic law when appearing before the court?
This case will decide whether American courts are bound to accept a foreign government’s interpretation of its own laws. Animal Science Products Inc. (“Animal Science Products”) argues that a “binding deference standard”, which requires courts to accept an appearing foreign government’s description of its laws, inhibits a court’s ability to independently reach an accurate determination of foreign law. Furthermore, Animal Science contends, the lower court’s decision to uphold binding deference misapplied the Supreme Court’s holding in United States v. Pink. Hebei Welcome Pharmaceuticals (“Hebei”) counters that requiring courts to accept an appearing foreign government’s reasonable statement of its laws appropriately balances judicial independence and international comity concerns. Moreover, Hebei asserts that the court below was correct in finding United States v. Pink to support binding deference. This issue affects how federal courts interpret foreign law in international litigation. Accordingly, this case will impact international litigation strategy and entities with operations that are regulated outside of the U.S.
Questions as Framed for the Court by the Parties
Whether a court may exercise independent review of an appearing foreign sovereign’s interpretation of its domestic law (as held by the Fifth, Sixth, Seventh, Eleventh, and D.C. Circuits), or whether a court is “bound to defer” to a foreign government’s legal statement, as a matter of international comity, whenever the foreign government appears before the court (as held by the opinion below in accord with the Ninth Circuit).
In 2005, Animal Science Products, Inc. and various Vitamin C producers in the United States (“Animal Science Products”) filed suit in the Eastern District of New York against Hebei Welcome Pharmaceuticals Co. (“Hebei”), a Chinese pharmaceutical company and its holding company, alleging that Hebei was a co-conspirator who established an illegal cartel for price-fixing purposes.
Instead of denying the claims, Hebei moved to dismiss the complaint on the basis that the companies were following Chinese laws and regulations set forth by the Ministry of Commerce of the People’s Republic of China (“the Ministry”). These laws, Hebei asserted, required that the companies coordinate prices and establish a supply shortage. Hebei argued that the court should dismiss the complaint on the basis of the act of state doctrine, the doctrine of foreign sovereign compulsion, and principles of international comity.
Furthermore, the Ministry filed an amicus curiae brief in support of Hebei’s motion to dismiss. Notably, this was the first time that an entity of the Chinese government had appeared as amicus curiae before an American court. . Within the brief, the Ministry established its position within the Chinese government as the highest authority on foreign trade and corroborated that Hebei was following Chinese law and regulation which, at the time, required that companies comply with a government-mandated export price and volume.
The District Court denied Hebei’s motion for dismiss for further discovery on whether the companies’ actions were mandated by the Chinese government. Ultimately, the District Court decided not to extend deference to the Ministry’s interpretation of Chinese law and regulation on the grounds that it had substantial discretion to consider different types of evidence pursuant to Federal Rule of Civil Procedure 44.1 beyond the Ministry’s statements.
The case ultimately went to trial, and a jury found Hebei liable for violations of the Sherman Act. The District Court awarded Animal Science Products approximately $147 million in damages and a permanent injunction barring Defendants from further violating the Sherman Act. Hebei appealed to the Second Circuit, arguing that the District Court erred in denying Defendants’ motion to dismiss.
The Second Circuit reversed the District Court’s decision, holding that the District indeed erred in denying Hebei’s motion to dismiss. In holding such, the Second Circuit found that Rule 44.1 did not “soften” the level of deference owed by American courts to statements of appearing foreign governments. The Second Circuit also found that, based on prior precedent from the Supreme Court case of United States v. Pink and from previous Second Circuit cases, American courts ware bound to defer to reasonable interpretations of foreign law when such interpretations come from an appearing foreign government.
DOES RULE 44.1 AFFECT THE LEVEL OF DEFERENCE GIVEN TO STATEMENTS OF FOREIGN GOVERNMENTS?
Animal Science Products claims that the court below erred in requiring courts to defer to a foreign government’s description of its own laws, known as the “binding deference” standard.Animal Science Products argues that a binding deference standard is contrary to Rule 44.1 of the Federal Rules of Civil Procedure and contends that Rule 44.1 gives courts substantial discretion to independently determine the correct interpretation of foreign law. In support of this contention, Animal Science Products points to the text of Rule 44.1, which provides that courts “may consider any relevant material or source” when determining foreign law.Animal Science Products asserts that a binding deference standard would require courts to disregard material that contradicts foreign government statements on their own law, which would inhibit a court’s ability to reach an accurate determination of foreign law.
Moreover, Animal Science Products contends that, as the binding deference standard looks to the identity of the party offering the interpretation—in this case, the foreign government by amicus brief—and not the content, the standard is contrary to Rule 44.1’s mandate to conduct a legal, rather than a factual inquiry. According to Animal Science Products, disregarding the actual persuasiveness or accuracy of the foreign government’s interpretation merely because they appear before the court undermines the court’s discretion to determine the correct foreign law to apply.
In opposition, Hebei argues that requiring courts to defer to foreign government statements of law that are reasonable under the circumstances does not interfere with the courts’ discretion to reach an accurate determination of foreign law. Hebei posits that the binding deference standard only requires that a court defer to an appearing foreign government’s statement if the foreign government submits a reasonable interpretation or statement of its own law. Hebei contends that this standard merely focuses the court’s discretion, which is not inconsistent with Rule 44.1’s mandate. Furthermore, Hebei elaborates, the binding deference standard provides a clear rule about how a specific type of source should be treated by courts, which is consistent with the legal inquiry Rule 44.1 requires, especially in comparison to a factual inquiry that involves assessing credibility and weighing evidence. Finally, Hebei asserts, the binding deference standard avoids creating practical difficulties that could potentially arise from inconsistent obligations generated by federal courts second-guessing the interpretations of foreign regulators.
HOW SHOULD COURTS READ UNITED STATES V. PINK?
Animal Science Products argues that the court below misread United States v. Pink to support a “conclusive” binding deference standard. Animal Science Products asserts that the Supreme Court has never decided that a foreign government’s interpretation of foreign law was conclusive. Rather, Animal Science Products contends, the Pink Court’s acceptance of the Russian Commissariat’s interpretation of Russian law was based on specific facts from the Pink case’s context, including the Court’s determination that the Commissariat had power to interpret Russian law; the fact that the Commissariat’s interpretation was submitted upon invitation from the executive branch; and additional evidence in the record confirming the interpretation. Animal Science Products contends that these factors are absent in this case. Animal Science Products also highlights that the U.S. government has asked the Court to deny conclusive deference to foreign government legal statements.
Hebei disagrees with Animal Science Products’ interpretation of United States v. Pink and responds that Pink clearly established that, if a foreign entity with the power to interpret its domestic law gives an official statement of law, it is “conclusive.” Further, Hebei asserts that the Ministry has similar “authenticity and authority” to that of the Commissariat in Pink, and notes that additional evidence was not a significant factor in the Pink Court’s determination. Finally, Hebei maintains that there is no case law rejecting a foreign government’s explanation of its own law and contends that all case law, in fact, treats foreign government descriptions as presumptively true.
WHAT DOES INTERNATIONAL COMITY REQUIRE?
Animal Science Products claims that international comity does not require, or even support, upholding a binding deference standard. Instead, Animal Science Products contends, a standard that seeks “accuracy, reliability, and judicial independence” better satisfies international comity principles of goodwill. In support of this argument, Animal Science Products points to how no other foreign courts use a binding deference standard and contends that reciprocity is not implicated. Additionally, Animal Science Products notes that no prominent treaties or international agreements support a conclusive deference standard. Rather, Animal Science Products contends, a large number of nations have signed treaties formalizing systems for requesting legal opinions from foreign countries that explicitly provide that those opinions are non-binding.
In response, Hebei states that international comity requires far more than what Animal Science Products claims, and asserts that international comity mandates “respect for the knowledge that foreign sovereigns have about their own laws.” Hebei elaborates that as international comity requires substantial deference in other contexts—such as when foreign governments assert sovereign immunity—treating foreign governments’ explanations of their own laws differently would be inconsistent. Additionally, Hebei contends that not deferring to a foreign government’s reasonable explanation of its own law is effectively legal imperialism.
Hebei also counters that the United States is not a signatory to the treaties relied on by Animal Science Products, and asserts that treaties commonly establish baselines that do not displace signatory rules. Moreover, Hebei notes, the cited treaties should be treated differently than an official statement of law, as such treaties are bilateral agreements between sovereigns where each sovereign cedes a degree of sovereignty, whereas “lawmaking is an exercise of sovereignty” and thus a higher degree of deference should be afforded to a sovereign’s explanation of its own law. Finally, Hebei argues that deference is apt because the political branches are better suited to resolving the conflict between the two economic and trade regimes at issue.
ANALOGOUS DEFERENCE DOCTRINES
Animal Science Products argues that Chevron deference to administrative agencies cannot be successfully analogized to a foreign government’s interpretation of foreign laws and posits that, even if it could, it would not support a binding deference standard. According to Animal Science Products, the deference owed to U.S. administrative agencies stems from the doctrine of the separation of powers and the Constitution, and is therefore dissimilar to the deference Hebei supports. Additionally, Animal Science Products claims, a binding deference standard gives more deference to foreign governments than what Chevron counsels U.S. agencies are owed. . Thus, Animal Science Products asserts a binding deference standard gives greater deference to foreign governments in federal court than is given to state entities.
Hebei agrees with Animal Science Products that Chevron deference is not applicable, and notes that Chevron deference is grounded in coordinating branches of the same government, in contrast to the binding deference standard, which is based on respecting independent sovereign authority. However, Hebei disputes that Chevron deference does not support a binding deference standard. Hebei claims that if deference to agencies who are delegated authority is warranted, then deference to a foreign government’s exercise of independent sovereignty is also justified. Specifically, Hebei disputes that states are given greater respect than foreign governments, and highlights that federal courts give conclusive deference to the highest state court’s interpretation of state law.
ACCURACY AND INDEPENDENCE OF FEDERAL COURTS
Animal Science Products argues that federal courts should not be bound by foreign interpretations of foreign law because it would undermine the independence of federal courts. Animal Science Products contends that giving foreign interpretations binding deference would incentivize foreign sovereigns to submit amici briefs that offer novel or unsupportable interpretations of foreign laws in cases where foreign companies face liability. Moreover, Animal Science Products asserts, binding deference would lead to the abuse of U.S. courts by foreign sovereigns and foreign companies as foreign bodies would be able to “engineer a result” by having a foreign government agency file an amicus brief in court that supports the erroneous but favorable interpretation.
The Professors of Conflicts of Law and Civil Procedure highlight that the binding-deference rule would preclude courts from considering legislative history or judicial interpretations that undermine the agency’s preferred interpretation. In a similar vein, the Chamber of Commerce, in support of Animal Science Products, maintains that a rule allowing courts to weigh and decide how much deference to afford to a foreign agency best preserves the accuracy and independence of the federal courts.
In the alternative, Hebei argues that the foreign administrative agencies have a better understanding of their own law. Moreover, Hebei emphasizes that, as long as the agency provides some support that their interpretation is reasonable, there should be little concern with respect to the accuracy of the interpretation. . Indeed, Hebei argues that particularly in situations where a legal system is dissimilar to the United States’ Western system, deference to authorities who are able to explain the laws authoritatively is particularly important.
The Chinese Law Professors, in support of Hebei, argue that deferring to the rulemaker is a foundational principle that cannot be overlooked. The Chinese Law Professors highlight that the Chinese judiciary regularly defers to the agency-at-issue’s interpretation, therefore, that agency’s interpretation is authoritative.
UNDERMINING OR PRESERVING INTERNATIONAL COMITY?
Animal Science Products argues that international comity is preserved by a non-binding deferential standard because international comity is primarily concerned with prioritizing “accuracy, reliability, and judicial independence.” . According to Animal Science Products, no foreign country routinely conclusively defers to a United States government agency on the meaning of U.S. law, and the United States here should be no different.
The Professors of Conflicts of Laws and Civil procedure highlight that comity does not require binding deference. In fact, the Professors highlight that courts would be bound to and could not review even unreliable or inaccurate statements made by foreign authorities. The Chamber of Commerce also raises a concern that the traditional balancing that courts engage in under the doctrine of deference—that is, deference to a foreign nation’s interpretation is generally balanced against competing—would be thrown into “disequilibrium.”
Hebei argues that without such high deference, the United States is disrespecting other countries’ laws and interpretations and a holding to the contrary of binding deference would increase tensions between the United States and other countries. In contrast to this rise in tensions, Hebei asserts that a binding deference rule would create harmony and help countries work together.
Hebei believes that any rule less than binding deference would otherwise render an independent sovereign’s interpretation meaningless. The Ministry of Commerce of the People’s Republic of China, in support of the Respondent, adds that deference is pivotal to comity because “deference rests on the premise that foreign sovereigns will accurately describe their law to U.S. courts.”
- Jonathan M. Barnett, SCOTUS is about to hear the easiest antitrust case ever, The Hill (March 31, 2018).
- Alison Frankel, DOJ Bucks China, urges SCOTUS to hear case against vitamin cartel, Reuters (Nov. 17, 2017).