On June 14, Justice Ginsburg, writing for a unanimous U.S. Supreme Court, reversed a 2016 opinion by the Second Circuit and held that a foreign government’s interpretation of its own law is not binding on U.S. courts.
The case, In re Vitamin C Antitrust Litigation, dates back to 2005 and 2006, when U.S. vitamin C purchasers brought allegations against Chinese manufacturers claiming 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. The defendants, aided by submissions from the Chinese government, did not contest the conspiracy but instead moved to dismiss on the ground that Chinese law required the price-fixing agreement, thus shielding the Chinese manufacturers from liability under U.S. antitrust law. The plaintiffs in turn presented evidence refuting that Chinese law compelled the defendants to engage in price fixing.
Finding the Chinese government’s statements regarding Chinese law inconclusive, the U.S. District Court for the Eastern District of New York denied the 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 the plaintiffs $147 million in treble damages.
On appeal, the U.S. Court of Appeals for the Second Circuit held that the District Court erred in denying the defendants’ motion to dismiss. In September 2016, the Second Circuit 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 overturned 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.
The Supreme Court’s decision means that foreign companies cannot outright rely on a foreign country’s interpretation of its own law to avoid liability under U.S. antitrust laws, and defendants must also be prepared to present experts and other evidence on how the law in question is understood and applied. This decision will limit a tool for foreign countries to relieve their companies of antitrust liability, potentially creating conflict with other countries.