On September 6, 2011, the United States District Court for the Eastern District of New York denied summary judgment for vitamin C manufacturers in In re Vitamin C Antitrust Litig., MDL No. 1738 (Decision (Vit C)). The Court rejected defendants’ act of state defense under which defendants claimed immunity contending that Chinese law required them to fix prices.
The Chinese government provided support for defendants, by providing a statement that the scheme was required by the Chinese legal system (the Chamber also filed an amicus brief). The Court disagreed – what at first glance appears surprising is explained by the fact that the Chinese government did not explain many aspects of the law and was vague on other aspects.
The Court acknowledged that trying to apply some foreign legal systems to U.S. law is akin to fitting a round peg in a square hole. For example, experts explained to the Court that “law” in China is not based so much on the written law, but rather a mix of law (as we understand it) and voluntary behavior.
After analyzing these cultural differences, the Court found that the Chinese legal and regulatory system was not sufficiently concrete to justify a finding that the otherwise illegal (within the U.S. Court’s jurisdiction) behavior was required by the Chinese law. Thus, while the behavior was legal under the Chinese system, it was not required. The lack of a requirement to comply with a law was, inter alia, fatal to the defendants. The Court was unconvinced of compulsion because the statement of Chinese law read like a litigation position and the Chinese government had made contrary representations to the WTO.
There are a number of other noteworthy issues. The Court refused to defer to the Chinese government’s evidence on the Chinese law. The Court did not need to set a standard of deference; so it did not so. The jurisprudence is still uncertain on the level of deference to be afforded a foreign government’s statements of foreign law. The Court took notice of a WTO Panel decision (July 5, 2011, not yet (and, may not be) appealed to the Appellate Body), which neither of the parties had made reference. The Court also did not examine the level of deference to a WTO Member’s statements that the WTO affords – both during accession negotiations and at a Panel hearing. The Court appeared to take the findings of the WTO Panel at face value, and not subject it to a factual analysis. This is particularly interesting because at the WTO the U.S.’s position is that Panel and Appellate Body decisions are not “law.”
As an aside, the U.S. recognized China’s market economy status in 2010.
This post was co-authored by Adrian Render.