An Unprecedented Victory

By+Wang+Jun

‘Sany wins the case against U.S. President Obama in the U.S Court of Appeals！”Xiang Wenbo， President of Sany Heavy Industry Co. Ltd.， exclaimed on his Weibo account， Chinas answer to Twitter， on the morning of July 16.

At the media briefing held by Sany in Beijing on July 19， Xiang said that if the Obama administration now gives up on the appeals process， Sany will enjoy the last laugh.

“From the moment that the federal appeal court made the ruling， President Obamas ban on the project became invalid， which means Sany has achieved a consummate victory，” Tim Tingkang Xia， an attorney for Sany said at the media briefing.

On July 15， the U.S. Court of Appeals for the District of Columbia Circuit ruled that the U.S. Government violated the rights of Ralls Corp.， which is owned by machinery giant Sany， when it reviewed the companys purchase of several wind farm projects near a naval weapons training facility in Oregon. This will hopefully see an end to a case which has lasted almost two years.

In September 2012， U.S. President Barack Obama issued a presidential order to prevent Ralls Corp. from buying the wind farms in Oregon， citing national security risks. Obamas presidential order followed a recommendation from the Committee on Foreign Investment in the United States （CFIUS）， an inter-agency committee headed by the U.S. Treasury Secretary that reviews attempts by foreign companies to purchase U.S. businesses. It was the first time a U.S. president had exercised the right to nullify a foreign acquisition for security reasons in the past two decades.

Xiang said there are three possibilities following the ruling： If CFIUS and Obama decide not to appeal， Sany will win the case； if CFIUS and Obama appeal， Sany will also continue their pursuit； and it cannot be ruled out that lawyers from both sides will strike a deal and end the logjam.

Sany may continue with the Oregon wind farm purchase， transfer their ownership to another party， or purchase wind farms in different locations， said Xiang， adding that a final decision has yet to be made.

A point of attack

Ralls Corp. immediately sued Obama in October 2012 for blocking the deal， claiming that the order exceeded the Presidents constitutional rights and that the administration had failed to disclose detailed evidence.

“When making investment in the United States， Sany has completely complied with U.S. laws， and we did not and will never do anything detrimental to the national security of the United States，” said Xiang.endprint

In October 2013， the district court had dismissed most of Ralls claims， deeming that presidential orders are not subject to judicial review. Ralls then took the case to the U.S. Court of Appeals for the District of Columbia Circuit in the same month. During the appeal， Xia said that Sany did not provide new evidence， but found a better point of legal attack： Although presidential orders are not subject to judicial review， it doesnt mean the procedure for presidential orders is not subject to judicial review. This contention was supported and upheld by the U.S. court.

The U.S. Court of Appeals for the District of Columbia Circuit ruled that the presidential order had deprived Ralls of significant property interests without due process of law. Sany， it declared， had never had access to the information the White House used to make its decision and therefore was unable to address its concerns.“This lack of due process constitutes a clear constitutional violation，”a unanimous ruling by the three-judge panel said.

According to the ruling， Ralls Corp. should have been given access to any unclassified evidence the president relied on to make his decision， and the company should have had the chance to respond to that evidence.

“Ralls never had the opportunity to tailor its submission to the [governments] concerns or rebut the factual premises underlying the presidents action，” the appeals court said in its opinion.

Sany welcomed the ruling， defining the victory as a historically significant one. “Sany and Ralls believe that their legitimate interests will eventually be protected by fairness and justice，” the group said in a statement.

“What is important to Sany is not the loss of a single project or the ruling by the U.S. court， but that it has made clear its position when unfairly treated for making investment abroad，” said Shi yiqing， head of Sany Groups brand and public relations department.

An example to others

Xia said that Sany is the first foreign investor to have challenged the CFIUS and the U.S. presidents decision， and that the latest ruling represents a breakthrough.

Mei Xinyu， a researcher with the Chinese Academy of International Trade and Economic Cooperation， said Sanys victory provides a model for Chinese companies to follow when protecting their legitimate rights and interests in foreign countries. “As China-U.S. trade relations develop， there will be more frictions，” he said.endprint

When interviewed by Securities Daily， Zhong Lanan， a partner of Beijing-based CN-KnowHow Law Firm， said that Chinese companies should learn from Sanys case， which provides a salutary lesson for such enterprises when making investment abroad.

“Actually in the legal environment of the United States， it would be abhorred if a company were to do something that could not be on the table for government relations. But when making investment in foreign countries， Chinese companies find themselves hardpressed to avoid various forms of trade barriers，”said Zhong. “Under these conditions， using the law to protect their own interests may be the best solution.”

When filing for the lawsuit in October 2012， Xiang claimed that Sany was forced to file a lawsuit against the CFIUS and Obama， who issued the executive order， because theyve caused the company to incur losses and had discriminated against it. However， the company had confidence in the U.S. justice system.

Hao Junbo， founder of Beijing-based Hao Junbo Law Firm， said at the July 19 briefing that Sanys victory will give hope to all foreign investors which have been forced to give up projects in the U.S. market， as the ruling sets a precedent for similar lawsuits in the future.

Sanys victory will push the CFIUS to reform and become more transparent in making decisions and protecting other foreign investorsinterests in the U.S. market， Xiang said.

China and the United States are now accelerating negotiations regarding bilateral investment treaties， and China has demanded a more transparent review mechanism in the United States for foreign investment. At the sixth round of the China-U.S. Strategic and Economic Dialogue held in Beijing in July， the two countries resolved to continue to discuss and clarify concepts concerning the U.S. foreign investment review process.endprint