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UPDATED: August 5, 2015 NO. 31 JULY 31, 2014
An Unprecedented Victory
After going toe-to-toe with the Obama administration, Sany claimed a win for all Chinese businesses overseas
By Wang Jun
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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 doesn't 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 [government's] concerns or rebut the factual premises underlying the president's 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 Group's 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. president's decision, and that the latest ruling represents a breakthrough.

Mei Xinyu, a researcher with the Chinese Academy of International Trade and Economic Cooperation, said Sany's 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.

When interviewed by Securities Daily, Zhong Lan'an, a partner of Beijing-based CN-KnowHow Law Firm, said that Chinese companies should learn from Sany's 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 hard-pressed 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 they've 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 Sany's 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.

Sany's victory will push the CFIUS to reform and become more transparent in making decisions and protecting other foreign investors' interests 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.

Email us at: wangjun@bjreview.com

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