Highlighted Victory of Sany against Obama

“ Since the moment the U.S. court announced the judg- ment on July 15， the decree of President Obama is no longer effective.”

Soon after the lawyer spoke the aforementioned words， Xiang Wenbo， a board director of Sany Heavy Industry Group （Sany） said responded loudly： “Have you heard that？ It is not long effective！”

As of 2012， Sany’s wind power projects were sabotaged successively by the Commission of Foreign Investment in the U.S. （CFIUS） and the presidential decree of Obama. On July 15， the federal appellate court of D.C. made the judicial decision that the presidential decree “violated the procedural injustice and deprived the involved enterprise of the property right under the protection of the Constitution”.

“This is the first victory Chinese companies have ever made in the cases of safeguarding their legal rights against the administrative measures of Western leaders，” Xia Tingkang， lawyer of Sany in this case， in a press conference in Beijing on July 19.

How Sany Defeated Obama？

In March 2012， Sany’s affiliated company Ralls Corporation acquired a wind power project in Oregon， the U.S. and got all the approvals from the administrative bodies. However， the CFIUS put a stop to this project in August with the reason of “probably threatening the U.S. national security”. On September 12， Ralls Corporation filed a lawsuit against the CFIUS.

16 days later， the U.S. president Obama issued a decree to support the decision of CFIUS about stopping this project. The decree required Ralls Corporation to “move away all assets and devices in two weeks and take back all investment in 90 days”.

In the press conference， Wu Jialiang， vice general manager of Sanyi and CEO of Ralls Corporation， said： “On March 24， 2013， the U.S. judge turned down most of our lawsuit appeals. The experts forecasted that we almost had no possibility to win this case.”

“In the past 50 years， no enterprises， whether they are from Europe， Canada or Middle East， dared to challenge the CFIUS，” says the lawyer Xia Tingkang. The foreign companies all faced a strange trap： the CFIUS stopped foreign enterprises from investing in the U.S. with the reason of “national security”， but gave out no specific reasons. When some enterprises tried to sue against the CFIUS， the ban would be replaced with the presidential decree. “The presidential decree is beyond the judicial examination. That means any investors that encounter the CFIUS will have no one to file a lawsuit against.”

Then， how did Sany defeat Obama？

Xia Tingkang says： “The U.S. law stipulates that the president’s decision and actions are not subject to the U.S. judicial system， but this does not meant that the procedures before making decisions or taking actions are beyond the judicial review.”

“Therefore， we filed this lawsuit with the point that President Obama did not follow procedural justice according to the Constitution or other laws， which violated our legal rights and interests. Once the procedures are illegal， the decision made through the process could not be established.”

Three Highlights of Obama’s Failure

The written judgment issued by the Federal Appellate Court of D.C. for this case has 47 pages in total. The experts analyze that the judgment has three highlights.

First： the collegiate bench affirmed that Ralls Corporation“owned the property rights protected by the procedural justice under the Constitution” in the wind power project. This rejected the two viewpoints of the U.S. government，” Xia Tingkang says. “The U.S. government previously said that the foreign investors could not enjoy the property right given by the Constitution without the approval of CFIUS even if you have finished the investment， but the judgment of the court pointed out that the property protection under the Constitution was stitched to you the moment the project delivery was finished.”

“The second viewpoint is that the U.S. government previously thought that Ralls Corporation which did not report to the CFIUS before the investment gave up the property rights under the U.S. Constitution. The judgment told us that there was no such thing， because reporting to the CFIUS is a voluntary act instead of a mandatory one. In addition， The Act of National Defense Production allows the project owner to report to the CFIUS after the project. Therefore， Ralls Corporation’s choosing to report to CFIUS after the project is completely legal and the U.S. government should do as the laws require.”

The second highlight of judgment is that “the U.S. government needs to provide Ralls Corporation with responsive procedural justice， including the non-confidential information the decisions of CFIUS and president were based on. It also needs to give Ralls Corporation time to answer to the information，” says Xia Tingkang. “This greatly unnerved the U.S. government and CFIUS.”

Wu Jialiang says that every time they go to the CFIUS to know about the reasons， they would most likely hear the answer that “we can tell you nothing since it is related to security”.

“For long， the CFIUS has been having the black-box operation because of its unique position. The prevention for many Chinese enterprises is based on unreasonable and non-existing reasons. The Chinese enterprises barely saw any progress in protecting their legal rights，” says Zhang Guoqing， assistant researcher with the U.S. Institute at the Chinese Academy of Social Sciences.

“In the past， the CFIUS gave the involved parties no proper procedural protection in spite of its name as a lawbased governmental department， but this time the judge required it to place the things from inside the black box to the top of the table. Then it needed to think of the absurdity of its “proofs” and whether they could affect the U.S. government’s credit and operation，” Xia Tingkang says.

The third highlight is that the orders CFIUS issued for the wind power project of Sany could not evade the court’s review with the presidential decree. The collegiate bench asked the court of first instance to have “substantial review”.

Good for Protecting Chinese Overseas Interests

Mei Xinyu， a researcher with the International Trade and Economic Cooperative Institute of the Ministry of Commerce， says that the Sany case is not single incident.

“Huawei， CNOOC and other Chinese enterprises also meet problems in their investment and M&A in the U.S. With the increasing trading volume between China and the U.S.， there will more similar disputes between these two countries，”he says.

Jia Xiudong， a researcher with the U.S. Institute， has witnessed many enterprises’ failure in that part which forced them to retreat when he was working as a diplomat.

“Many Chinese enterprises could find nowhere to explain themselves when they have problems in the U.S investment and export. This stopped many Chinese enterprises from having a good start and forced them to leave the U.S. market，” he says.

In Jia Xiudong’s opinion， the U.S. government could easily link everything to the national security when it comes to the review of foreign enterprises. “For example， there are several other wind power projects owned by other countries around the one of Sany， but the U.S. nave held no opposition against them. Sany， a company in China， was unreasonably placed under the spotlight. If they have proofs to prove Sany’s guilt， they could go through the legal procedures instead of using the special power of CFIUS so easily.”

Mei Xinyu also points out that “Sany wanted the equal rights instead of legal privileges”.

They and many other experts agree that the U.S. is a country that would like to follow the previous case. The Sany case let Chinese enterprises know there to show their appeals and explain themselves. This is the most important thing for the Chinese companies.

“In the future， our enterprise could quote this case when they invest in the U.S. This case greatly improved the confidence and experiences of Chinese companies’ overseas development，” Jia Xiudong says.

In Zhang Guoqing’s opinion， when the new round of China-U.S. bilateral trading negotiation was close to being started， Sany’s victory could remark an important progress for the Chinese enterprises to increase their voice internationally.

Why Obama Failed at This Time？

Zhang Guoqing believes there are several factors leading to the success of Sany in the lawsuit against Obama.

“First of all， the U.S. political disputes helped Sany a lot. Obama has a low approval rating. The judgment could be considered a warning other vested interest groups sent to Obama. The last time Obama pressed Chinese companies was just when the U.S. entered another year of election， and Obama’s action was undoubtedly to attract some votes for his second term of office.”

Secondly， the U.S. justice system， power balance and po- litical games are other good things for the Sany case. “The unfair treatment Sany suffered hit the most sensitive spot of the U.S. people the excessive expansion of the U.S. government. The difficulties the court and the capitol hill caused for the White Horse reflected the concerns and counterstrikes for the expansion of the U.S. government’s power.”

Jia Xiudong says that there used to be many pessimistic voices in China about the Sany case. They underestimated Sany’s power and overestimated Sany’s opponent， but they should know that China has already taken one third of the equipment exportation in the world with the second largest equipment exporter Germany’s exports volume less than half of China’s. Mei Xinyu calls that “Chinese enterprises should have the confidence and inspiration to protect their own rights and interests in their overseas development.”

Jia Xiudong also says the victory of Sany is not the end. The U.S. government is still setting up various barriers for the Chinese investment. For example， the U.S. Department of Commerce initiated the anti-dumping investigation into the China-made tyres on July 15.

Mei Xinyu points out the Sany case has already sent a warning to the U.S. government.“The U.S. government has already added several free trade stipulations in the agreements with other countries. These stipulations are good for the U.S.， but could damage the other countries’ legal interests. The Canadian government has already launched a dozen of lawsuits against the U.S. government for that reason.”