The U.S. Court of Appeals for the District of Columbia cited the Restatement of the Law Fourth, The Foreign Relations Law of the United States, in holding that the U.S. District Court for the District of Columbia did not abuse its discretion in imposing sanctions on Chinese banks that failed to comply with a subpoena, even if the banks would have been penalized under Chinese law for complying with a U.S. subpoena and had acted in good faith to avoid the conflict of laws.
In re: Sealed Case, No. 19-5068 (July 30, 2019), arose from the U.S. government seeking to enforce a subpoena against three Chinese banks that allegedly provided financial services to a company acting as a “front” for the North Korean government to circumvent U.S. sanctions on North Korea’s nuclear-weapons program. The defendants argued, among other things, that they could not comply with the subpoena without violating Chinese laws, because the United States did not seek to obtain the subpoenaed information through a bilateral treaty between the United States and China. The district court ruled in favor of the United States, finding that an analysis of the international comity factors under Restatement of the Law Third, The Foreign Relations Law of the United States § 442(2) favored enforcing the subpoena. Following the defendants’ failure to comply with the subpoena, the district court imposed sanctions on the defendants.
In a unanimous decision, the U.S. Court of Appeals for the District of Columbia affirmed, holding, among other things, that “the district court reasonably found that ‘the banks [had] not demonstrated good faith in a way relevant to contempt.’” The court explained that the district court had ‘“discretion to excuse violations of law, or moderate the sanctions imposed for such violations’” under Restatement of the Law Fourth, The Foreign Relations Law of the United States § 442, and, while the defendants “[had] acted in good faith . . . to secure the Chinese government’s permission to produce the records at issue,” the district court was not required to abstain from imposing sanctions, because the defendants had nonetheless failed to comply with “a perfectly pellucid order.” The court observed that sanctions were especially justified because the defendants’ reticence caused severe harm to “an investigation into a matter of national security.”
Read the full opinion here.