The Washington Post: Obama Administration Denies Chinese Firm Due process, Appeals Court Rules
Type : Events
Date of Release : 2014-07-18


Source: Washington Post


An appeals court ruled Tuesday that the Obama administration failed to give constitutional due process to a Chinese-owned company barred for national security reasons from investing in wind farms in northwest Oregon.

The Committee on Foreign Investment in the United States (CFIUS), which reviewed the investment by Ralls Corp., must share all non-classified information on which it relied and give Ralls the opportunity to rebut arguments against the project, the U.S. Court of Appeals for the District of Columbia ruled.

The ruling could alter long-established procedures and timelines at CFIUS, which in 2012 reviewed 114 transactions. The only one rejected was the wind-farm investment proposed by Ralls, which is owned by two Chinese executives of SANY, a Chinese construction-equipment firm that manufactures wind turbines.

“I think it’s a pretty big deal,” said Timothy Keeler, a partner at Mayer Brown who spent a dozen years in a variety of government trade-related positions. “This is the first time there has been any serious CFIUS litigation and the first time the government has ever lost.”
Ralls was represented by high-profile constitutional lawyers, former solicitor general Paul Clement and Viet D. Dinh, a former senior Justice Department official. Both served under President George W. Bush.

“Ralls is heartened that the court today upheld Ralls’ arguments in every respect and ordered the government to disclose the reasons why it deprived Ralls’ property,” Tim Tingkang Xia, counsel for Ralls, said in a statement. “We look forward to further vindicating Ralls’ right to be treated fairly and equally under the law.”

Ralls was created in order to invest in wind farms and give SANY the chance to demonstrate the reliability of the wind turbines it manufactures. Named for the Texas town near its first wind-farm investment, Ralls spent about $6 million in March 2012 to buy four tracts in Oregon to install turbines.

But President Obama, after the CFIUS review, ordered Ralls in September 2012 to divest itself of all four of the wind farms because they fall within or near restricted airspace of the Naval Weapons Systems Training Facility in Boardman, Ore. Ralls says that other wind farms are operating in the same area. SANY has shipped about 20 turbines that are in a warehouse in the port of Seattle.

The company did not challenge Obama’s decision but rather the lack of due process under the Fifth Amendment. The appeals court ruling does not take away the president’s ultimate authority to block foreign investments on the basis of national security, and Keeler said Ralls might still lose its investment bid after a more extensive review process. The court ruling could, however, alter investment strategies that companies pursue.

CFIUS, an interagency committee established in 1950 and chaired by the Treasury secretary, usually conducts a 30-day review of foreign investments deemed sensitive to national security and can extend that for an investigative period lasting an additional 45 days. After that, the president has up to 15 days to issue a decision.

Keeler said sharing information and allowing further arguments by investors at CFIUS “strikes me as something that could gum up the works.” He said that the court ruling might help some large investors with major national security issues because they can wait for further review. But Keeler said some smaller companies might have trouble keeping a deal on hold.

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