Sany Group faces barriers in wind farm case: US lawyers

If Chinese machinery manufacturer Sany Group takes further action against the US government over a controversial wind farm purchase, US lawyers say there are barriers which could make the case difficult for the company.

A US federal appeals court sided with the Chinese firm and ruled on July 15 that the US government had violated the rights of Ralls Corp when it rejected the company's bid to purchase four wind farms in Oregon. The court said that Ralls was not provided with the right of due process. Ralls is owned by two executives of Sany Group. Ralls Corp had already installed wind turbines on the wind farms, but had not submitted a review to the Committee on Foreign Investment in the United States (CFIUS). The inter-agency committee headed by the US Treasury secretary, reviews attempts to bring US businesses under foreign ownership.

Obama issued a presidential order in September 2012 to prevent Ralls from buying the wind farms, citing national security risks, possibly because the wind turbine installations are near a naval weapons systems training facility. The presidential order followed a recommendation from CFIUS.

In 2012, when the deal was first blocked Ralls immediately sued Obama, claiming the order had exceeded the president's constitutional rights and failed to provide detailed evidence. The last and first transaction blocked on CFIUS grounds was by then-president George H.W. Bush in 1990.

According to Xinhua, Xiang Wenbo, a board member of Sany, presented three possible scenarios at a July 19 press conference in Beijing: If CFIUS and Obama decide not to appeal, then 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.

Stephen McHale, a partner at Squire Patton Boggs, in Washington, told China Daily that there are two ways in which the Ralls case could be further delayed or make it tough for them to win the case. It could go to the full court of appeals or the government could take it to the US Supreme Court for review.

Christian H. Davis, a counsel at Akin Gump Strauss Hauer & Feld LLP based in Washington, said: "I think if they can proceed with the case it may be difficult for them to change the determination with those properties (wind farms)."

"They can proceed with the legal case, however it is unlikely they will change the national security determination related to these particular wind farms." said Davis

Davis said the appeals court ruling is "narrow". "Due process rights only apply prior to a presidential order, which is very rare. However, the implementation of the ruling and the further legal proceedings in this case could result in greater transparency within the CFIUS process," he said.

"This ruling explicitly does not impact the president's power to make national security determinations regarding foreign investment; however, it does provide foreign parties with limited due process rights in advance of the presidential order (president's decision)," said Davis. "This includes providing the affected parties with the unclassified information that formed the basis of this determination and the opportunity to respond to this information." "Very rarely do companies go through review with CFIUS." said McHale "Usually it has to do with some issue of national security."

"This is one of a number of CFIUS cases involving China," said McHale. "Many have been blocked. Normally the committee and the foreign party involved try to reach an agreement before a deal is blocked." said McHale. "If at the end of the day CFIUS and company can't come to an agreement, CFIUS recommends the president to block the request," said McHale. "If this decision stands, there will be a better opportunity for transparency; the curtain between which CFIUS operates will be pulled back a bit."