Can International Comity Considerations Stop a US Antitrust Prosecution?

Posted by The New York Law Journal

Can International Comity Considerations Stop a US Antitrust Prosecution?

By Philip C. Patterson and Vera M. Kachnowski

As with other types of cross-border investigations, antitrust issues attract the interest of regulators around the globe, and US authorities are active in matters involving foreign players. Last January, the Federal Trade Commission and the Department of Justice jointly issued revised guidelines discussing their tools for collaborating with foreign authorities and the application of US antitrust law to conduct involving foreign commerce. See Antitrust Guidelines for International Enforcement and Cooperation (Jan. 13, 2017) (guidelines). Among other factors, the guidelines note that these agencies consider international comity when enforcing federal antitrust laws. But how far does that comity consideration actually go for an individual subject to global antitrust scrutiny?

In United States v. Usher, 17-CR-00019 (RMB) (Usher), three criminal antitrust defendants recently broached this question in connection with their prosecution in the Southern District of New York for allegedly coordinating trading in the Euro/US Dollar currency exchange market. The defendants, all former foreign currency traders, were citizens and residents of the United Kingdom, who worked at London banks, with customers in Europe. Before being charged in the United States, the Serious Fraud Office (SFO) in the UK conducted an 18-month investigation of the same conduct and decided not to prosecute any these defendants. In moving to dismiss their indictment here, the defendants noted this determination, and argued that they could not have foreseen being hailed into a US court for conduct that “took place entirely in the United Kingdom, was central to their job responsibilities, and had no perceptible effect in the United States.” The defendants argued, inter alia, that the court should decline to exercise jurisdiction on international comity grounds.

International comity is “the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation,” see Hilton v. Guyot, 159 US 113, 163-64 (1895). Comity can come into play in a number of ways, including imparting res judicata effect to judgments of foreign tribunals and through “comity of the courts,” whereby judges “decline to exercise jurisdiction over matters more appropriately adjudged elsewhere.” See Hartford Fire Insurance v. California, 509 US 764, 817 (1993) (Scalia, J., dissenting); see also Royal & Sun Alliance Insurance Co. of Canada v. Century International Arms, 466 F.3d 88, 92-94 (2d Cir. 2006) (outlining considerations related to US court discretion to abstain in deference to litigation pending in a foreign court). In addition, courts can abstain from exercising jurisdiction based on “prescriptive comity,” that is, “the respect sovereign nations afford each other by limiting the reach of their laws.”

The Usher defendants’ motion argued, inter alia, that the indictment alleged conduct outside of the Sherman Act’s extraterritorial scope and that the prosecution violated due process because the defendants’ conduct did not have a sufficient nexus to the United States. The Usher defendants further argued, citing a 10-factor test outlined by the US Court of Appeals for the Second Circuit, that international comity grounds militate against the United States exercising criminal jurisdiction over foreign defendants engaging in entirely foreign conduct, see Usher (Dkt. 63) (citing In re Vitamin C Antitrust Litigation, 837 F.3d 175, 184-86 (2d Cir. 2016) (Vitamin C)).

Those factors are:

Degree of conflict with foreign law or policy; nationality of the parties, locations or principal places of business of corporations; relative importance of the alleged violation of conduct here as compared with conduct abroad; the extent to which enforcement by either state can be expected to achieve compliance, the availability of a remedy abroad and the pendency of litigation there; Existence of intent to harm or affect American commerce and its foreseeability; possible effect upon foreign relations if the court exercises jurisdiction and grants relief; If relief is granted, whether a party will be placed in the position of being forced to perform an act illegal in either country or be under conflicting requirements by both countries; whether the court can make its order effective; whether an order for relief would be acceptable in this country if made by the foreign nation under similar circumstances; and whether a treaty with the affected nations has addressed the issue.

The Second Circuit noted that the Supreme Court has relied solely upon the first factor—the degree of conflict between US and foreign law—to decide that abstention was inappropriate. Although the Second Circuit’s decision in Vitamin C also turned on a Factor 1 conflict-of-law analysis, it read Hartford Fire narrowly and determined that the other factors are still relevant to an abstention analysis. (As an aside, the Supreme Court recently reversed the Vitamin C panel’s decision on the distinct issue that it deferred too heavily to one official statement from China in determining that a true conflict of law existed. See Animal Science Products v. Hebei Welcome Pharmaceutical, 585 US __ (June 14, 2018)).

Here, the Usher defendants argued that several of the factors pointed in favor of abstention on comity grounds—namely that they are UK citizens and residents (Factor 2), that the alleged conduct “took place entirely in the United Kingdom, on a British trading platform, in a decentralized global market,” and there are no allegations of a specific effect on, or intent to target, the United States (Factors 3 and 5). They also pointed to Factor 4 and noted that the UK has a robust enforcement regime for antitrust matters and the SFO conducted a long and thorough investigation of the same conduct and declined to prosecute. They thus argued that the very jurisdiction in which the conspiracy allegedly occurred determined that charges were not warranted.

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