The foreign-owned company fighting a grand jury subpoena tied to the special counsel’s Russia investigation is warning the U.S. Supreme Court that a decision subjecting it to the U.S. criminal process would create a “foreign policy nightmare” and invite reciprocal treatment from other countries.
The Supreme Court in January unsealed a partially redacted petition from the company’s defense lawyers that shed light on a few new details but otherwise maintained the secrecy that has surrounded the case for months. The foreign-owned company, which has not been identified, is pushing to overturn a decision from a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit, which ruled in December that the company could not invoke sovereign immunity to dodge the grand jury subpoena. A trial judge in Washington held the company in contempt.
The company’s petition cautioned that the D.C. Circuit panel’s ruling could have a global ripple effect. The government was expected to respond to the petition on Feb. 21. There is no certainty the Supreme Court would take the case, and any decision on that front could be weeks away.
“If left to stand, the ruling would wreak havoc on American foreign policy—possibly alienating U.S. allies, undermining diplomatic efforts, and inviting reciprocal treatment abroad for American agencies and instrumentalities,” the company’s lawyers at Alston & Bird argued. The D.C. Circuit decision was the “first appellate court in American history to exercise criminal jurisdiction over a foreign state,” the defense lawyers said in their petition.
Alston & Bird appellate partner Brian Boone, who is based in the firm’s Washington, D.C., and Charlotte, North Carolina, offices, is lead counsel in the Supreme Court, according to a CNN report. Boone and partner Edward Kang, co-leader of the firm’s white-collar and government investigations team, were identified as the company’s lawyers on a filing in the D.C. Circuit.
A team from Gibson, Dunn & Crutcher, including partner Theodore Boutrous Jr., have moved the Supreme Court and D.C. Circuit to release redacted court papers. The firm represents the media and transparency advocate Reporters Committee for Freedom of the Press.
“That this appeal arises out of contempt proceedings does not eradicate the First Amendment right,” the Gibson Dunn lawyers wrote. “In the event the Court grants certiorari, RCFP respectfully requests that the Court direct the filing of publicly redacted versions of all merits briefs, that any oral argument be held publicly, and that a redacted oral argument transcript and recording be publicly filed.”
A spokesman for special counsel Robert Mueller III, leading the investigation into Russia’s interference of the 2016 presidential election, has declined to comment on the litigation. Two prosecutors working with Mueller—Scott Meisler and Zainab Ahmad—participated in the case in the trial court, records show.
Expanding a Prosecutorial Tool
The challenged D.C. Circuit decision provided fresh precedent on the subject of immunity for state-owned companies—an area of the law that has long been considered murky. The D.C. Circuit ruling caught some attention from the white-collar bar, as lawyers who are not involved in the fight parsed any potential wider impact of the ruling.
“I think, prior to this opinion, many lawyers probably assumed that the evidence held outside the U.S. by the [state-owned] entity would be largely—not entirely, but largely—immune from the reach of a U.S. grand jury. This opinion is a roadmap for ways of getting around that and making them accessible,” said Debevoise & Plimpton partner Bruce Yannett, a former federal prosecutor who leads the firm’s white-collar and regulatory defense practice.
The D.C. Circuit took remarkable measures to conceal the identity of the lawyers in the case and the identity of the state-owned company, closing an entire courthouse floor in downtown Washington for oral arguments in December. Circuit judges Thomas Griffith, David Tatel and Stephen Williams heard the case. For more than an hour, a U.S. marshal declined to let reporters pass through the hall.
In a redacted opinion that referred to the company’s owner only as “Country A,” the D.C. Circuit rejected arguments that the corporation could not be forced to comply with a subpoena under the Foreign Sovereign Immunities Act, a law that shields foreign governments and state-owned companies from lawsuits under certain circumstances.
The panel, upholding a ruling by Chief Judge Beryl Howell of the U.S. District Court for the District of Columbia found that, even if the immunities law applies to criminal proceedings—a point the government disputed—the corporation would still be required to comply with the subpoena because it falls under an exception for commercial activities. Howell is presiding over Mueller-related subpoena fights.
The D.C. Circuit described the issue of criminal immunities for state-owned corporations as “unsettled,” noting the “paucity” of cases on the subject. “From that paucity,” the panel said, “the corporation would have us infer that such corporations are universally understood to possess absolute immunity, but that notion strikes us as highly speculative. An equally likely explanation for the absence of cases is that most companies served with subpoenas simply comply without objection.”
The company is being fined $50,000 daily for noncompliance with the subpoena. Prosecutors had asked Howell to impose a $10,000 daily fine. The U.S. Supreme Court last month restored the compliance order, rejecting a push from the company’s lawyers to keep a freeze on the subpoena.
The D.C. Circuit’s decision could come into play, particularly in investigations into money laundering and sanctions violations. In the area of sanctions enforcement, Dechert counsel Sean Kane said there have long been questions about whether foreign entities can be forced to comply even with administrative subpoenas issued by the Treasury Department’s Office of Foreign Assets Control.
Kane, a former assistant director for policy at OFAC, said the D.C. Circuit ruling “removes one argument from the quiver, if you’re a state-owned enterprise.”
Joon Kim, a Cleary Gottlieb Steen & Hamilton partner and former acting U.S. attorney for the Southern District of New York, said the decision could give prosecutors more leverage when they subpoena state-owned foreign corporations.
“There are regions in the world with many partially or fully state-owned companies engaged in commercial business,” Kim said. “To the extent these state-owned enterprises in these countries thought there was a question or uncertainty about whether or not they could be subject to the criminal process in the U.S., this decision, at least, says they are.”
Kim said prosecutors in the past might not have been inclined to litigate a foreign, state-owned company’s claims to immunity to a grand jury subpoena. “Now, prosecutors would be more likely to press, since they have a circuit court decision that they can point at to compel compliance or use in any litigation over the issue,” he said.