In the United States, antitrust law strives to eliminate price fixing affecting the U.S. market. That price-fixing activity sometimes occurs outside the United States, and some defendants ensnared in antitrust inquiries have invoked a plausible defense that can be summarized as: A foreign government made me do it! Faced with this defense, U.S. courts are tasked with the complex charge of construing the law of foreign nations. In Animal Science Products v. Hebei Welcome Pharmaceutical, the Supreme Court has been asked to answer whether, in such cases, a U.S. court is required to defer to an interpretation of foreign law offered by a foreign sovereign appearing in the litigation.

An antitrust case in New York presented the issue in the context of Chinese law. In 2005, Animal Science Products Inc., a Texas-based company that uses Vitamin C in the production of livestock supplements, brought action in the U.S. District Court for the Eastern District of New York against Hebei Welcome Pharmaceutical Co. and other Chinese Vitamin C exporters, alleging that they had coordinated and fixed minimum prices for exports of Vitamin C to the United States in violation of U.S. antitrust laws. Interestingly, Hebei Welcome did not contest that it had fixed prices with other Chinese Vitamin C exporters. Instead, Hebei Welcome argued that it could not be liable for price fixing under U.S. law because Chinese law required it to fix export prices with other manufacturers. As a result, the case focused primarily on whether Chinese law in fact required Vitamin C exporters to fix export prices.

Remarkably, the Chinese government itself filed submissions with the court explaining that Hebei Welcome was correctly interpreting Chinese law. The district court, however, declined to defer to China's explanation of its own law and denied Hebei Welcome's motion to dismiss. The court allowed discovery to proceed in an effort to develop a full factual record regarding the requirements of Chinese law. At trial, the jury found that Chinese law did not require Vitamin C exporters to fix prices. Hebei Welcome requested that the district court overturn the verdict, urging that it had erred in instructing the jury to interpret Chinese law (as an issue of fact) where China itself appeared in the litigation to offer an authoritative construction of its own law.

The district court denied Hebei Welcome's request to take China at its word, citing inconsistencies in China's official statements elsewhere regarding whether Chinese law required price fixing by Vitamin C exporters. In particular, the Chamber of Commerce of Medicines and Health Products Importers and Exporters, tasked with organizing vitamin exports pursuant to Chinese regulations, had written a memorandum to the Chinese government stating that participation in price coordination facilitated by the chamber was voluntary and not required by Chinese law. The district court also relied on the Chinese government's prior statements to the World Trade Organization that Chinese law did not require Vitamin C exporters to coordinate their prices.

Hebei Welcome appealed to the U.S. Court of Appeals for the Second Circuit, arguing that it was improper for the district court to look beyond China's interpretation of its own law. The Second Circuit reversed, finding that the district court erred in developing a factual record regarding the meaning of Chinese law. Instead, the Second Circuit held that the district court should have deferred to the reasonable interpretation of Chinese law offered by the Chinese government. The Supreme Court granted Animal Science's petition for a writ of certiorari.

The parties staked out predictable positions in the Supreme Court. Animal Science argued that the Second Circuit's rule of mandatory deference to foreign sovereigns' interpretations of law was too rigid and vulnerable to manipulation. Moreover, Animal Science argued that Federal Rule of Civil Procedure 44.1's provision for federal courts to consider “any relevant material or source” to interpret foreign law permits U.S. courts to look beyond submissions of foreign sovereigns to weigh all relevant evidence. By contrast, Hebei Welcome and the Chinese government, appearing as a friend of the court, argued that U.S. courts must defer to a foreign sovereign's reasonable construction of its own law as matter of international comity.

The justices' questioning at the April 24, oral argument focused on the appropriate level of deference to afford foreign sovereigns appearing in U.S. courts. Justice Ruth Bader Ginsburg directed pointed questions at counsel for Hebei Welcome and the Chinese government, focusing on inconsistencies in official representations made by China to the WTO. Justice Neil Gorsuch questioned how the deference due to a foreign sovereign compared to the deference U.S. courts show to domestic administrative agencies.

Justice Stephen Breyer's questioning focused on how to articulate an appropriate standard of deference, stating “I mean, maybe there's a difference between 'defer to a reasonable interpretation' and 'give respectful deference to.' But what is it?” Justice Elena Kagan asked counsel for China whether Chinese courts or the courts of any other country would show the same kind of deference to the United States if it were to appear in litigation there offering an interpretation of U.S. law. Counsel admitted that it was unable to identify any other country that required this level of deference. Kagan continued the line of questioning to ask, “How can you say that the only thing that shows respect to foreign governments is to do something that we don't know that any other foreign nation does?”

While the precise contours of the final decision are uncertain, the justices' questions suggest that they are prepared to overturn the Second Circuit's rule of mandatory deference. A decision in the case is expected by late June.

Stephen A. Miller practices in the commercial litigation group at Cozen O'Connor's Philadelphia office. Prior to joining Cozen O'Connor, he clerked for Justice Antonin Scalia on the U.S. Supreme Court and served as a federal prosecutor for nine years in the Southern District of New York and the Eastern District of Pennsylvania.

Isaac A. Binkovitz also practices in the firm's commercial litigation group. He received his J.D. from University of Michigan Law School and his B.A. from McGill University. Prior to joining Cozen O'Connor, he clerked for Chief Justice Miriam Naor on the Supreme Court of Israel.