[00:00:07] Speaker 03:
Good afternoon to you, Your Honor, and may it please the Court, Robert Feldman, for the defendants.

[00:00:13] Speaker 03:
If possible, I'd prefer to reserve five minutes for my rebuttal.

[00:00:16] Speaker 03:
Can you speak up a little bit more?

[00:00:18] Speaker 04:
Sure.

[00:00:18] Speaker 04:
Okay.

[00:00:19] Speaker 03:
If possible, I'd like to reserve five minutes for my rebuttal.

[00:00:25] Speaker 03:
And I have a few preliminary observations, which may be of assistance, and of course I'd be delighted to answer any questions that the Court has.

[00:00:33] Speaker 03:
If absolute immunity is not observed, either because of a request for deference, or because instrumentalities are not eligible, or because of a commercial activity exception, we would go from a regime where there have been no federal prosecutions, no state prosecutions, and no prosecutions worldwide, that is in other countries.

[00:01:03] Speaker 03:
to a regime where really there are no rules, because there would be a request for deference, or instrumentalities would not be eligible, or there would be the commercial activity exception, and for all we know, other exceptions.

[00:01:17] Speaker 03:
That's number one.

[00:01:19] Speaker 03:
Number two, with respect to the subject of whether instrumentalities are potentially immune, I would urge the court's attention to the legislative history, which is before the court,

[00:01:34] Speaker 03:
including the letter from Secretary of State Rogers and Attorney General Kleindienst in 1973, which said in no uncertain terms that instrumentalities had always been entitled to the same immunity as governments.

[00:01:54] Speaker 03:
Number three, with respect to the subject of deference, I would urge that the deference that should be shown

[00:02:02] Speaker 03:
is to the two generations of trial lawyers who will have to try this case for the government, both of whom conceded, in effect, that my clients were instrumentalities because they know what they will have to prove under the Economic Espionage Act, or at least try.

[00:02:22] Speaker 03:
And I would say with further respect to the subject of deference, there is a study

[00:02:30] Speaker 03:
that the court may be familiar with, it is cited at note 18 of the Samantar decision.

[00:02:40] Speaker 03:
It's a study by and for the State Department shortly after the passage of the Foreign Sovereign Immunities Act, in which the State Department's lawyers surveyed all of the cases

[00:02:53] Speaker 03:
between 1952, which was the adoption, as you know, of the Tate letter, and 1976, which, as you know, was the adoption of the Foreign Servant Immunity Act.

[00:03:04] Speaker 03:
And the purpose was to, in effect, create a history of what had happened with respect to immunity requests to the State Department.

[00:03:13] Speaker 03:
There are several notable things about that.

[00:03:16] Speaker 03:
I'm a trial lawyer, not an appellate lawyer, and I regard that study as, in effect, the evidence of what the state of immunity requests with respect to the State Department were.

[00:03:29] Speaker 03:
I would say this.

[00:03:31] Speaker 01:
Is there a relevant period in time of time where you think the decisional law is most relevant to what we're doing here?

[00:03:38] Speaker 01:
Because we have essentially 100 or 200 years, depending on how you count it, of law or the absence of law.

[00:03:45] Speaker 01:
And within that, there's been some developments over time.

[00:03:48] Speaker 01:
You mentioned the Tate letter, the FSIA is another.

[00:03:50] Speaker 01:
Are you asking us to focus on any particular period of time as the most relevant here?

[00:03:56] Speaker 03:
We haven't previously asked you to do that, and if I may, if I'm allowed to say this, that's a good question.

[00:04:02] Speaker 03:
And I would say that the period of time that is of most relevance is 1952 to 1976, and then the period subsequent to 1976.

[00:04:12] Speaker 01:
Okay, why do you say that?

[00:04:14] Speaker 01:
What, I mean?

[00:04:16] Speaker 03:
Because, I'll tell you why, because in the, I believe,

[00:04:20] Speaker 03:
in Justice Gorsuch's opinion in the Halkbank case, he said that the deference doctrine, if you will, began to develop in the 20th century.

[00:04:32] Speaker 03:
And I think it's worth looking at that, in particular after the Tate letter, to see what actually was going on.

[00:04:43] Speaker 04:
Can I ask you about, I mean, one of the things you've pointed to, and it makes some sense, is to look at the second restatement, because that's done in the late 60s, right before the codification of some of the common law and the modification of some of it in the Foreign Sovereign Immunities Act in 1976.

[00:05:01] Speaker 04:
And in addressing the question of what entities qualify as at the threshold for getting any form of foreign sovereign immunity,

[00:05:11] Speaker 04:
They refer to a corporation created under its laws and exercising functions comparable to those of an agency of the state.

[00:05:21] Speaker 04:
How is it that your clients exercise functions comparable to an agency of the state?

[00:05:29] Speaker 04:
They look like corporations that do commercial business.

[00:05:33] Speaker 03:
Yes.

[00:05:35] Speaker 03:
I must say that I had the same question when I read that language.

[00:05:38] Speaker 03:
And the answer is in the cases that were decided both before and after the adoption of the FSIA.

[00:05:48] Speaker 04:
Well, the FSIA clearly adopts a broader definition of what corporations qualify for some form of immunity because it clearly extends beyond those exercising functions comparable to an agency.

[00:06:03] Speaker 04:
You could have an ordinary corporation, and if it's directly owned by the government as a majority of its shares, it counts for the FSIA, but that does not appear to be true under this

[00:06:14] Speaker 04:
at least the ALI's description of the common law in the restatement in the 60s.

[00:06:20] Speaker 03:
So the first case that I would point, thank you, the first case that I would point, Your Honor, to would be the World's Arrangement case in which the, it was a district court opinion in which the company was one third owned by the British government and the court said, served the purpose of ensuring an adequate oil supply for the British Navy.

[00:06:44] Speaker 04:
They put a lot of weight on the fact Britain's an island nation.

[00:06:48] Speaker 04:
Its Navy was the centerpiece of its empire, and that having an adequate supply of maritime fuel was essential to its national security.

[00:07:00] Speaker 04:
But they distinguished the Deutsches case

[00:07:05] Speaker 04:
involving a French corporation saying that the French government was involved in a commercial venture entirely divorced from any governmental function.

[00:07:14] Speaker 04:
And that's from the World Arrangements case.

[00:07:17] Speaker 04:
So why aren't you on the wrong side of the World Arrangements line?

[00:07:20] Speaker 03:
Because if you look at the cases that have addressed that subject under the Foreign Sovereign Immunity Act, which is widely regarded as having codified

[00:07:32] Speaker 03:
the common law, you will see what kinds of purposes, which is the test, one of the tests.

[00:07:38] Speaker 04:
Well, two things.

[00:07:40] Speaker 04:
First, the Foreign Sovereign Immunities Act, with respect to what entities and what corporate entities qualify for sovereign immunity, does not codify the common law, at least as stated in the restatement.

[00:07:52] Speaker 04:
It changes it.

[00:07:53] Speaker 04:
It expands it.

[00:07:54] Speaker 04:
But second, it also rejects a purpose test and looks at the outward form of the activities.

[00:08:02] Speaker 03:
not for purposes of determining what the instrumentality was.

[00:08:07] Speaker 00:
Well, if I may, since you're arguing NRA world arrangements, what about this case do you contend brings it factually within the NRA world arrangements world?

[00:08:23] Speaker 03:
The first thing is a comparison of the purpose recited in the NRA world's case.

[00:08:30] Speaker 03:
And the second thing is the degree of control and lack of separation that the record establishes in this case and the comparison by comparison to the world's arrangement case.

[00:08:50] Speaker 00:
So, but what is it about China's priorities or

[00:08:56] Speaker 00:
goals that are essential to its existence that you are carrying out on its behalf.

[00:09:04] Speaker 00:
Your client, sorry.

[00:09:06] Speaker 03:
That is set forth, Your Honor, in the very first paragraph of the indictment and in the Simoji Declaration, which makes clear that the development of this process was a national priority of the People's Republic of China.

[00:09:21] Speaker 00:
Right, but what suggests that

[00:09:24] Speaker 00:
pangang group was charged with carrying out that or fulfilling that national priority.

[00:09:30] Speaker 03:
I beg your pardon, Your Honor?

[00:09:32] Speaker 00:
It suggests that your client was charged by China to carry out or fulfill that priority.

[00:09:41] Speaker 03:
That's what's alleged, I think, in the first paragraph of the indictment and is set forth in detail in the Sumoji Declaration.

[00:09:49] Speaker 03:
Let me just ask who?

[00:09:51] Speaker 00:
I'm asking you factually.

[00:09:52] Speaker 00:
Can you just tell me?

[00:09:55] Speaker 03:
What is it that my clients allegedly did in that connection?

[00:09:59] Speaker 00:
What factually shows that they were charged with fulfilling this national priority of China.

[00:10:09] Speaker 03:
Thank you.

[00:10:09] Speaker 03:
This emoji declaration sets that forth in great detail, and I'm happy to recite what he says.

[00:10:16] Speaker 03:
He said that the state has controls, owns and controls the companies, that it had a five-year plan,

[00:10:24] Speaker 03:
that was proposed by the Communist Party, drafted by the State Council, and approved by the People's Congress, that it gave both strategic and detailed guidance, and that it was charged with, that is to say, SASEK was charged with making sure that the Pangang companies achieved the PRC and the Communist Party's priority

[00:10:51] Speaker 03:
of improving the TIO2 production capabilities.

[00:10:58] Speaker 01:
I just want to understand the test that you think should apply here.

[00:11:01] Speaker 01:
Are you arguing that all foreign state-owned entities should have absolute immunity or are you conceding that some do not and we need to do an analysis as to which should have it and which should not?

[00:11:12] Speaker 03:
No, I think all should.

[00:11:15] Speaker 01:
So it doesn't matter what they're doing?

[00:11:18] Speaker 03:
It, no, of course, oh, I'm sorry, you said owned, of course.

[00:11:22] Speaker 03:
It definitely depends on what they're doing, absolutely.

[00:11:25] Speaker 03:
There's a four-part test, and it has to do with what purpose they serve, what the degree of separation there is, how controlled they are, and to some extent ownership.

[00:11:38] Speaker 03:
So that is a four-part test set forth in a number of cases, and if you take that four-part test

[00:11:46] Speaker 03:
And particularly, if you look at the purpose aspect of it, you'll see that our clients fall exactly within the kinds of foreign instrumentalities that should be entitled to immunity, other things.

[00:12:01] Speaker 01:
How different is this test from the test that applies under the FSIA in the civil context?

[00:12:07] Speaker 03:
It's very similar.

[00:12:09] Speaker 03:
It's very similar.

[00:12:10] Speaker 03:
And I respect what Your Honor said, but I believe that the

[00:12:15] Speaker 03:
I'll say this, first.

[00:12:17] Speaker 04:
Well, what you said in your brief is that this test from the common law is similar to the Oregon standard.

[00:12:23] Speaker 03:
Yes.

[00:12:23] Speaker 04:
It's the other part of the FSIA that extends beyond Oregon and reaches corporations that just happen to be majority owned that seems like an innovation on the common law.

[00:12:34] Speaker 03:
That's exactly right.

[00:12:36] Speaker 03:
OK.

[00:12:36] Speaker 03:
That's exactly right.

[00:12:38] Speaker 03:
That's 100% correct.

[00:12:40] Speaker 03:
I agree completely.

[00:12:41] Speaker 03:
And if you look at the purposes

[00:12:43] Speaker 03:
that have been found to be meaningful to courts.

[00:12:49] Speaker 03:
In the Gates case, decided by this court, it was to advance Alberta's interest in the marketing of hogs.

[00:12:57] Speaker 03:
In the EIE Guam case, it was to revitalize Japan's financial system.

[00:13:04] Speaker 03:
In the PowerX case,

[00:13:06] Speaker 03:
Although there was, quote, nothing inherently public about the defendant's activities, it was serving the government's purpose of creation of jobs and economic development.

[00:13:18] Speaker 03:
Here in this case, based on the indictment in the very first paragraph and the very detailed emoji declaration,

[00:13:26] Speaker 03:
the purpose of improving TiO2 production fits precisely within those.

[00:13:33] Speaker 01:
Okay.

[00:13:33] Speaker 01:
And as to the issue of whether the government gets any deference in its conclusion, its argument here that your clients don't have immunity, your answer is?

[00:13:46] Speaker 03:
Well, there are a number of levels.

[00:13:50] Speaker 03:
The first question would be

[00:13:52] Speaker 03:
What are they seeking deference with respect to?

[00:13:55] Speaker 03:
That is to say, with respect to what subjects?

[00:13:58] Speaker 03:
Or are they simply claiming a vote?

[00:14:01] Speaker 03:
That is to say, do they say that they're entitled to deference about, for example, whether our clients are instrumentalities?

[00:14:09] Speaker 03:
Because if that's what they're seeking, their trial lawyers have twice confessed that, so to speak.

[00:14:16] Speaker 03:
And I would say those people should get deference.

[00:14:18] Speaker 03:
That's number one.

[00:14:21] Speaker 01:
What do you say to this line of authority, Hoffman, other statements in the Supreme Court case law about the importance of deference and the reason why we give it, right?

[00:14:31] Speaker 03:
I'm very happy to address that with the 35 seconds that I have left.

[00:14:35] Speaker 03:
But I'm very happy to address that.

[00:14:38] Speaker 03:
Those cases said that there were two reasons for that deference.

[00:14:42] Speaker 03:
One was that courts should not deny immunity

[00:14:47] Speaker 03:
where the government had recommended it so as to not embarrass the executive.

[00:14:52] Speaker 03:
That's obviously not a factor here.

[00:14:54] Speaker 01:
The second is... And you say that because you don't treat this lawsuit as an effective recommendation?

[00:15:00] Speaker 03:
No, it was not to deny immunity where the government had recommended it.

[00:15:07] Speaker 03:
Here, it's a very important distinction.

[00:15:09] Speaker 03:
Here, the government is not recommending immunity.

[00:15:12] Speaker 03:
So that rationale for deference doesn't exist.

[00:15:16] Speaker 03:
And the second reason that those courts offered was not to create new immunity where the government, the executive had not proposed it.

[00:15:26] Speaker 03:
And that's certainly not happening here either.

[00:15:28] Speaker 03:
And the reason that I, so that those two reasons were the reasons that were given by the courts for the deference that was shown

[00:15:41] Speaker 03:
in the earlier days, including in particular from 1952 to 1976.

[00:15:48] Speaker 03:
And I urge you to consider the following.

[00:15:52] Speaker 03:
What was happening from 52 to 76 was a two-part system.

[00:15:57] Speaker 03:
A defendant could either go to court and get an immunity decision, or it could go to the State Department, where there was a, and this is described in the study and in the Lowenfeld article,

[00:16:10] Speaker 03:
could go to the State Department, and they had informal conferences before State Department lawyers.

[00:16:18] Speaker 03:
I don't mean to be facetious, but this was not Dean Rusk or Dean Acheson sitting there and making complicated political decisions.

[00:16:28] Speaker 03:
As the sources that I've just cited state, what happened was the very same parties who were in court

[00:16:36] Speaker 03:
submitted pleadings and memos to the State Department's lawyers who, looking at those facts, came up with their conclusions.

[00:16:47] Speaker 03:
That was not the sensitive kinds of things

[00:16:52] Speaker 03:
that one would think ordinarily would get deference.

[00:16:55] Speaker 03:
And I suspect that were this court to be asked to defer to unknown State Department lawyers about something, you would not be so inclined.

[00:17:05] Speaker 03:
So I would urge you to look at those two sources, the study in note 18 of Samantar,

[00:17:13] Speaker 03:
and the Lohenfeld article, which is an exhibit to the Packard declaration below, to see what the regime actually was like.

[00:17:23] Speaker 04:
All right.

[00:17:23] Speaker 04:
We've taken you over your time.

[00:17:25] Speaker 04:
And I actually have one more question I want to ask before you sit down.

[00:17:28] Speaker 04:
But we'll give you time.

[00:17:30] Speaker 04:
OK.

[00:17:30] Speaker 03:
I hope I'm being helpful, because and on this.

[00:17:32] Speaker 03:
We've asked you a lot of questions.

[00:17:34] Speaker 04:
I have one more before you sit down.

[00:17:35] Speaker 03:
Yes.

[00:17:36] Speaker 04:
And that relates to if there

[00:17:38] Speaker 04:
If immunity is triggered, and we were to reach the question of whether there would be, under the common law, a commercial activities exception, you argued that under Boardie, this would be considered non-commercial.

[00:17:52] Speaker 04:
But on page 595 of Boardie, the court distinguishes between stealing the trade secrets of a commercial rival and deploying them against that rival,

[00:18:04] Speaker 04:
from the kind of intelligence activities at issue in that case.

[00:18:08] Speaker 04:
Why aren't you on the other side of that line here?

[00:18:11] Speaker 03:
That's a difficult question for us, and I acknowledge that.

[00:18:15] Speaker 03:
I would acknowledge that with respect to much of the indictment, it's a difficult argument for us.

[00:18:20] Speaker 03:
It's not so hard with respect to the hacking allegation at paragraph 22, and there are several reasons for that.

[00:18:29] Speaker 03:
Number one, if you look

[00:18:31] Speaker 03:
for purposes of the commercial activity exception, Your Honor, you do not look to the purpose.

[00:18:36] Speaker 03:
You look to the nature of the activity by statute.

[00:18:41] Speaker 03:
And if the common law were to follow the FSIA.

[00:18:45] Speaker 04:
But the indictment specifically alleges in paragraph 30 that they made commercial use of the trade secrets stolen from DuPont.

[00:18:59] Speaker 04:
I don't believe that Paragraph 30 says... It says, Tsai Chao prepared a report for Pangang Group Titanium with specific suggestions for improving Yusapte's designs.

[00:19:12] Speaker 04:
Tsai Chao's suggestions relied in part on DuPont's trade secrets, which he included in his report.

[00:19:19] Speaker 03:
Yes, number one, that has nothing to do with hacking, number one.

[00:19:23] Speaker 03:
Number two, as Your Honor, if you look at Paragraph 30,

[00:19:27] Speaker 03:
That activity was alleged to take place in China.

[00:19:30] Speaker 03:
The Seichao's activity was alleged to take place in China.

[00:19:36] Speaker 03:
And if you look at the restatement, section 69, sorry.

[00:19:41] Speaker 04:
No, but I don't see why that's irrelevant, because Brady says that under Weltover,

[00:19:50] Speaker 04:
you're not precluding from consideration of the context of a sovereign's actions and what a foreign sovereign does with covertly obtained intelligence is certainly an aspect of the outward form of the conduct of the foreign state performs.

[00:20:04] Speaker 04:
So stealing DuPont's trade secrets and then putting them to commercial use, which is what that alleges, seems commercial under Broidy.

[00:20:14] Speaker 03:
I understand what your honor is saying, but with respect to that allegation in particular,

[00:20:19] Speaker 03:
It specifically says that that activity took place in China.

[00:20:24] Speaker 03:
And under the Restatement Section 69, once we establish that there is an instrumentality, the government has the burden in the cases that Your Honor has decided in Pangang and the cases that Pangang cites.

[00:20:39] Speaker 03:
The government has the burden of coming forward with evidence that that activity did not take place in China.

[00:20:47] Speaker 03:
That's restatement section 69.

[00:20:49] Speaker 03:
And it specifically says in that paragraph that it took place in China.

[00:20:55] Speaker 03:
That is true with respect to paragraph 30.

[00:20:58] Speaker 03:
And it is particularly true with respect to count two of the indictment.

[00:21:04] Speaker 03:
Count two of the indictment is the attempt count.

[00:21:08] Speaker 03:
Count two incorporates by reference only paragraphs one through 15.

[00:21:15] Speaker 03:
And there is nothing in those paragraphs that would satisfy either the basis or the basic commercial exception or the location of that activity as required by restatement section 69.

[00:21:29] Speaker 03:
So count two, unquestionably, irrespective of the excellent questions, Your Honor,

[00:21:37] Speaker 03:
to me, count two does not survive.

[00:21:41] Speaker 03:
And I would submit that paragraph 30 does not fully assist the government, because it's alleged to have taken place in China.

[00:21:49] Speaker 04:
OK.

[00:21:50] Speaker 04:
All right.

[00:21:50] Speaker 04:
Thank you, counsel.

[00:21:51] Speaker 03:
Thank you.

[00:21:52] Speaker 04:
So we'll hear now from Mr. Yelewitsch.

[00:22:02] Speaker 02:
Good afternoon.

[00:22:03] Speaker 02:
And may it please the court, Matthew Yelewitsch on behalf of the United States.

[00:22:07] Speaker 02:
I'm happy to answer any questions the court has or else I'll just jump in on the conversation that the court was having with my friend.

[00:22:14] Speaker 02:
I heard my friend talk about Republic of Mexico versus Hoffman, the two instances in which the Supreme Court in that case articulated why deference would be important for the executive.

[00:22:28] Speaker 02:
One of those two instances is recognizing immunity where the executive has determined that no immunity should

[00:22:36] Speaker 02:
Be given and that's precisely the situation.

[00:22:38] Speaker 02:
We are in here the executive by instituting this prosecution has deemed that immunity is not merited to these defendants and that is directly on point with the concerns articulated in Hoffman.

[00:22:53] Speaker 02:
as to the conduct of our nation's foreign affairs and why deference would be important.

[00:22:59] Speaker 01:
So I didn't- Are you arguing for absolute deference or are you arguing that deference is some kind of significant factor or some plus factor?

[00:23:07] Speaker 02:
So we don't think that the court has to decide that precise question in this case, Your Honor, and I can explain a little bit why.

[00:23:14] Speaker 02:
We do think that the Supreme Court has suggested in Hoffman itself

[00:23:19] Speaker 02:
that it would essentially be dispositive, the deference given to the executive, and it would be particularly dispositive.

[00:23:25] Speaker 00:
Hello.

[00:23:28] Speaker 00:
I wanted just to weigh in on that a bit, because here we have the Department of Justice attorneys that have filed this lawsuit.

[00:23:40] Speaker 00:
Wouldn't we give more deference had it been the State Department?

[00:23:45] Speaker 00:
I mean, if the State Department wrote a letter and said,

[00:23:49] Speaker 00:
We, you know, there is no immunity for a paying group and the Department of Justice can proceed with its lawsuit.

[00:23:59] Speaker 00:
Wouldn't that be a stronger statement of the political calculation that's going on here?

[00:24:04] Speaker 02:
I appreciate the court's question and I apologize I didn't see you waving for time.

[00:24:10] Speaker 00:
I don't have a beeper or anything.

[00:24:13] Speaker 02:
I think our answer is no.

[00:24:16] Speaker 02:
I stand here today on behalf of the executive branch, not on behalf of the Department of Justice and all of the executive's components.

[00:24:25] Speaker 02:
case was instituted by the executive branch if the State Department were to speak in this case it would be through the Department of Justice's lawyers and you know we've given it considered judgment before bringing this case.

[00:24:37] Speaker 04:
Does the U.S.

[00:24:38] Speaker 04:
Attorney's Manual contain any requirement about a level of approval for the indictment of an entity that's owned by a foreign sovereign?

[00:24:51] Speaker 02:
So I'm happy to speak to that question, Your Honor.

[00:24:53] Speaker 02:
I want to be careful not to talk about particular consultations that happened in this case.

[00:24:57] Speaker 02:
The U.S.

[00:24:58] Speaker 04:
Attorney's Managers is a public document.

[00:24:59] Speaker 04:
And it does have lots of things.

[00:25:01] Speaker 04:
You have to go back to main justice for this.

[00:25:03] Speaker 04:
And it sets those out publicly.

[00:25:05] Speaker 02:
You're absolutely right.

[00:25:06] Speaker 04:
Because you'd have a provision that says that if you're going to indict a foreign sovereign, or what would be a foreign sovereign if the FSIA applied, which we know now it doesn't.

[00:25:17] Speaker 04:
that you have to go back to Maine Justice in D.C.

[00:25:20] Speaker 04:
and get approval at a certain level?

[00:25:22] Speaker 02:
It does not have that provision, Your Honor.

[00:25:24] Speaker 02:
I would point the Court to the provision in the Justice Manual that requires U.S.

[00:25:31] Speaker 02:
Attorney's Offices, all 93 U.S.

[00:25:33] Speaker 02:
Attorney's Offices, to file what are called urgent reports for any development in a significant case that's likely to generate attention

[00:25:41] Speaker 02:
either congressional or public or a significant development that the U.S.

[00:25:46] Speaker 02:
attorney considers significant in a significant case and those urgent reports go to top leadership in the department and so I think that in a case like your honor's positing where the court is concerned about the

[00:26:01] Speaker 02:
potential foreign policy implications of a charging decision.

[00:26:04] Speaker 04:
The urgent reports provide some backstop, but you're— I think Judge Wardlaw's point is that it's one thing to give deference when we have a formal representation at a high level of the government.

[00:26:20] Speaker 04:
It's another thing where we don't have anything indicating more than the approval

[00:26:24] Speaker 04:
of a U.S.

[00:26:25] Speaker 04:
attorney.

[00:26:25] Speaker 04:
And there are some things like, you know, the state secrets doctrine has to be invoked by a cabinet level officer in order to be effective.

[00:26:32] Speaker 04:
So there are some judicial doctrines where we require, if you want to have a certain level of deference, it has to be at a certain level of responsibility.

[00:26:42] Speaker 02:
I appreciate that point, Your Honor.

[00:26:43] Speaker 02:
I would make two points in response.

[00:26:45] Speaker 02:
The first is the actual charges in this case under the Economic Espionage Act require consultation with the National Security Division in Washington, D.C.

[00:26:54] Speaker 02:
And what consultations happen between the components of the executive after that consultation requirement is satisfied.

[00:27:02] Speaker 02:
are obviously a case by case and aren't required in the justice manual, but that is one point I would make.

[00:27:09] Speaker 02:
The second is that I don't think in the 200 year history of deferring to the executive on these immunity decisions, the courts have demanded in the common law context, a certain level of cabinet officer be personally weighing in with the judgment on behalf of the executive.

[00:27:25] Speaker 02:
As I said,

[00:27:26] Speaker 02:
I stand here today on behalf of the executive branch in articulating our position that immunity is not appropriate for these defendants, that they have violated allegedly the criminal laws of the United States and that the prosecution should be permitted to go forward.

[00:27:41] Speaker 01:
What about if it was an actual state?

[00:27:44] Speaker 01:
What if you had come in and said, we're suing an actual foreign country?

[00:27:49] Speaker 01:
Do you get deference for that?

[00:27:50] Speaker 02:
So what the Deputy Solicitor General articulated in the Hawk Bank oral argument is our position on that question, which is that the government would not do that, bring a suit against a state qua state.

[00:28:07] Speaker 02:
And there are many, many reasons, as articulated in the government's brief, as to why these defendants are not

[00:28:12] Speaker 02:
the state cost state, but our separate corporate persons that are treated as such under the law going back to the founding.

[00:28:18] Speaker 01:
I'm trying to get at what are the limits on the deference request because Hoffman wasn't a criminal case.

[00:28:25] Speaker 01:
And one thing Justice Gorsuch flagged was there may be some different considerations in a criminal case.

[00:28:33] Speaker 02:
Yes, Your Honor, I think that whether the deference that's given here is binding or just significant weight as the Fourth Circuit articulated, I think the result is the same given the history of how the common law has treated separate corporate entities, again, going back to the founding, the history of the executive having the prerogative of bringing prosecutions against foreign officials, again, dating back to the founding, two cases from 1794 cited in the government's brief

[00:29:02] Speaker 02:
where the foreign official invoked these same claims that they were being indicted as the state qua state and the courts had no problem saying that one the executive institute of those prosecutions that claim is no longer valid for those defendants this uh... as to the the

[00:29:21] Speaker 02:
Precise question that the court asked the limits of the deference.

[00:29:26] Speaker 02:
I think that although unlikely one could envision a hypothetical where the executive came in and asked for deference in a matter that was so clearly

[00:29:38] Speaker 02:
I think it would be inconsistent with the executive's constitutional role for where the court might second guess that deference.

[00:29:49] Speaker 02:
Obviously, that's not the case here.

[00:29:51] Speaker 02:
There's simply no record to support that kind of allegation, and I don't take my friends to be making it.

[00:29:56] Speaker 02:
But it would be unprecedented to just completely disregard the executive's discretion here in terms of granting immunity or denying immunity.

[00:30:07] Speaker 04:
the underlying substantive standard, do you disagree with the defendant's argument that the restatement test that I quoted earlier from Section 66G is a fair statement of the state of the common law at the time of the Foreign Sovereign Immunities Act enactment?

[00:30:32] Speaker 02:
We do think that sovereign versus non-sovereign functions is the test as to whether an entity merits immunity.

[00:30:41] Speaker 02:
So we agree that the functions comparable to an agency of the state would be the analysis as to whether immunity would be granted in the ordinary course.

[00:30:52] Speaker 04:
Do you see that test as being different from the

[00:30:56] Speaker 04:
organ component of the FSIA's definition of foreign state, or do you see that one as being different?

[00:31:04] Speaker 02:
The organ component of, so the FSIA abrogated the common law when it came to defining the foreign state broadly.

[00:31:11] Speaker 04:
Right, because it clearly covers more corporations.

[00:31:14] Speaker 04:
But he's made a sub-argument that the organ part of the definition is actually sort of the restatement 66G version and other parts in addition.

[00:31:26] Speaker 04:
is an innovation which Congress is entitled to do on the common law.

[00:31:31] Speaker 04:
But that would have significance because it would mean we'd look to the organ case law under the FSIA as relevant to the state of the common law.

[00:31:39] Speaker 04:
So that's why I wanted to ask you what your view is specifically on that question.

[00:31:43] Speaker 02:
Our view is that the defendants are not organs of the foreign state.

[00:31:49] Speaker 02:
Our view is also that you look at the type of activity that they're engaged in in the allegations of the case.

[00:31:55] Speaker 04:
But I wanted to get specifically at the level of sort of the legal substantive test.

[00:32:00] Speaker 04:
Do you think that there's a difference between the common law standard under 66G and the organ standard under FSIA?

[00:32:13] Speaker 02:
I don't think so, Your Honor.

[00:32:15] Speaker 02:
I think that the particulars of the FSIA are not present in the common law in terms of what requirements are needed to be met, but the bedrock test of whether the entity is engaged in sovereign functions versus non-sovereign functions I think is something we embrace in our briefing.

[00:32:35] Speaker 02:
The question is just here.

[00:32:38] Speaker 02:
There's no question that they're not engaged in sovereign functions.

[00:32:41] Speaker 02:
They're engaged in core commercial activity.

[00:32:44] Speaker 04:
How do you deal with the PowerX case?

[00:32:49] Speaker 02:
What part of the PowerX case, Your Honor?

[00:32:52] Speaker 04:
Because PowerX was found, despite the outward commercial nature of its activity, to be covered by the FSIA's definition.

[00:33:02] Speaker 02:
I think that the

[00:33:05] Speaker 02:
In this case, I think that the district court correctly held that these defendants are not organs of the foreign state from the first instance.

[00:33:13] Speaker 02:
So they don't meet the definition.

[00:33:15] Speaker 02:
They are separate legal persons.

[00:33:18] Speaker 02:
They are not sufficiently tied to the state or the state's public functions.

[00:33:23] Speaker 02:
And that flows from this court's decision in Patrickson cited in the government's brief at page 32.

[00:33:29] Speaker 02:
In addition to that, the allegations in the indictment are

[00:33:35] Speaker 02:
You know, pure commercial activity and whether you whether you view that at the ex ante stage as part of the analysis as to whether there is common law immunity at all or whether you view it as an exception to immunity.

[00:33:47] Speaker 02:
I think the result is the same, which is a separate corporate entity that's engaged in commercial activity as these entities are alleged to be engaged in.

[00:33:56] Speaker 02:
has not been granted immunity under the common law, and particularly has not been granted immunity under the common law over the executive's objection.

[00:34:06] Speaker 00:
When you say common, I'm sorry.

[00:34:08] Speaker 01:
Go right ahead Judge Warlaw.

[00:34:10] Speaker 00:
So just to follow up on that, I mean, I think in PowerX the entity did perform government functions, and I think that's what the answer would be by PENGANG Group, and then they rely on,

[00:34:23] Speaker 00:
the allegations, the initial allegations of the third superseding indictment that said, you know, this was a high priority for the People's Republic of China to develop this, and that that's why the Pangyang Group was somehow charged with carrying out this priority and this initiative in obtaining the TIO2 material.

[00:34:53] Speaker 02:
We think that that blurs the distinction between the purpose behind the type of activity that these defendants were engaged in.

[00:35:05] Speaker 02:
and the nature of the defendants as entities.

[00:35:08] Speaker 02:
So you asked earlier, Your Honor, about tying that sovereign function to these defendants and the indictment, the allegations in the indictment do not do that.

[00:35:19] Speaker 02:
Now we will have to prove at trial that the defendants engaged in this, the acts that they're alleged to have engaged in for the purpose of benefiting

[00:35:29] Speaker 02:
a foreign state or a foreign instrumentality.

[00:35:31] Speaker 02:
That is the motive that we will have to prove at trial.

[00:35:35] Speaker 02:
But that's not a part of the activity that's charged in the indictment in terms of the acts that were taken.

[00:35:41] Speaker 02:
And it's not alleged that that is why these defendants were formed as companies or what their core function was in order to achieve this sovereign purpose.

[00:35:53] Speaker 01:
Earlier, you mentioned in this line of questioning the common law.

[00:35:58] Speaker 01:
The question is, what is the content of that and where are we drawing that from?

[00:36:01] Speaker 01:
Are we drawing that only from decisions of US courts?

[00:36:06] Speaker 01:
Are we drawing them also from decisions of US courts under the FSIA, even though that statute we now know doesn't apply to criminal cases?

[00:36:16] Speaker 01:
Are we also looking to international decisions?

[00:36:18] Speaker 01:
How do you want us to give meaning to what this test should look like?

[00:36:22] Speaker 02:
So I think that the common law is drawn from the cases in this country applying principles going back to the founding.

[00:36:31] Speaker 02:
I think that cases under the FSIA would be instructive to the extent they are talking about principles that were codified from the common law, not principles that were abrogated by the FSIA, like the definition of a foreign state and the expansive view that the FSIA took on that front.

[00:36:48] Speaker 02:
So for example, the Supreme Court has said that the definition of commercial is the same under the FSIA as it was under the common law.

[00:36:57] Speaker 02:
And so those cases would be instructive on that point.

[00:37:00] Speaker 02:
But the content of the common law, I think, is two centuries, as Your Honor mentioned earlier, of cases.

[00:37:06] Speaker 02:
And those cases, I think, make four

[00:37:10] Speaker 02:
principle points that I would just quickly want to highlight.

[00:37:13] Speaker 02:
The first is the executive has had the authority to prosecute foreign officials going back to the founding, as I mentioned, even though those defendants claim they were the state quasi-state like these defendants.

[00:37:25] Speaker 02:
The second is the bedrock principle that separate corporate persons have been treated separately for immunity determinations from the sovereign.

[00:37:33] Speaker 02:
That also goes back to the founding, the Planner's Bank case from Chief Justice Marshall cited in the government's brief.

[00:37:39] Speaker 02:
The third, I would say, is the sovereign versus non-sovereign functions.

[00:37:43] Speaker 02:
If you look at the case law on that, again, the common law on that that's developed over time, and the East India cases, to pick an example from British courts, show that when the East India Company was engaged in sovereign functions treaty-making,

[00:37:58] Speaker 02:
It was immune, engaged in commercial activity.

[00:38:01] Speaker 02:
It was not immune.

[00:38:02] Speaker 02:
It wasn't a test based on simply the nature of the East India Company as an entity.

[00:38:08] Speaker 02:
It was based on the type of activity in which it was engaged.

[00:38:10] Speaker 01:
How different is this analysis than what we already do for civil cases under the FSIA applying the commercial exception?

[00:38:17] Speaker 01:
Is it meaningfully different?

[00:38:20] Speaker 02:
The government's position is that the definition of commercial activity is the same, although I think that we would get a little bit more leeway in the common law because we wouldn't have to precisely locate where the acts are, unlike the statutory definition for the commercial activity exception in the FSIA.

[00:38:36] Speaker 02:
So I think that the definition of what qualifies as commercial would be the same, but we wouldn't have to meet one of the three prongs that are in the statutory framework for the FSIA.

[00:38:46] Speaker 04:
What's your response to his argument on count 2 that because you didn't incorporate paragraph 30, you don't have the commercial use incorporated into that count?

[00:38:59] Speaker 02:
That is an argument that the defendants have raised for the first time this morning or this afternoon.

[00:39:05] Speaker 02:
Since 2012, we've been litigating this case, so I have not heard that argument before.

[00:39:11] Speaker 02:
I suppose on the merits, I would say, I don't know why the incorporation of the 15 paragraphs, paragraphs one through

[00:39:26] Speaker 02:
15 being re-alleged would be insufficient to show that commercial activity occurred and the overt acts for count to incorporate paragraphs 32 through 50.

[00:39:40] Speaker 02:
So I suppose I'm a little bit at a loss both on how the defendants are able to raise that argument for the first time this afternoon, but also on the merits of

[00:39:53] Speaker 02:
Why that would be the case?

[00:39:54] Speaker 04:
Were the additional paragraphs incorporated in count two?

[00:39:58] Speaker 02:
So count two, I'm at excerpts of record 125 in the overt acts section, paragraph 54.

[00:40:23] Speaker 04:
Is that the page number again?

[00:40:27] Speaker 02:
So at excerpts of record 125, it incorporates paragraphs 32 through 50 in the conspiracy counts.

[00:40:59] Speaker 02:
I'm happy to answer any other questions the court has.

[00:41:02] Speaker 02:
I see I'm well over my time.

[00:41:08] Speaker 04:
Thank you, Your Honor.

[00:41:10] Speaker 04:
All right.

[00:41:10] Speaker 04:
We took you over your time.

[00:41:13] Speaker 04:
So let's put three minutes on for Republicans.

[00:41:17] Speaker 03:
I have a few things to say that may be helpful.

[00:41:25] Speaker 03:
With respect to the Republic of Mexico versus Hoffman,

[00:41:29] Speaker 03:
The two points that the court made were it is therefore not for the courts to deny an immunity which the government has seen fit to allow, not our situation, or to allow an immunity on new grounds which the government has not seen fit to recognize.

[00:41:48] Speaker 03:
It was not a question of, as counsel phrased it, of disagreeing with the government about immunity in a particular case.

[00:41:58] Speaker 03:
That's number one.

[00:41:59] Speaker 03:
Number two, I take very seriously the court's questions about where the State Department is.

[00:42:06] Speaker 03:
I would articulate it this way.

[00:42:09] Speaker 03:
The Tate letter was a very comprehensive, thoughtful survey of the law of the world with respect to the adoption of the restrictive theory of sovereign immunity.

[00:42:21] Speaker 03:
There is nothing like that in this case.

[00:42:25] Speaker 03:
With due respect to, I'll say my friends, and it's my former office, this is a group of assistant U.S.

[00:42:32] Speaker 03:
attorneys who decided to indict a case for all we know.

[00:42:35] Speaker 03:
It wasn't well conceived.

[00:42:38] Speaker 03:
They've changed their mind about

[00:42:39] Speaker 03:
the instrumentality status multiple times.

[00:42:42] Speaker 03:
Service was a mess.

[00:42:44] Speaker 03:
There's no indication that there's a thought out standard or process in this case that would justify deference.

[00:42:55] Speaker 03:
I would agree that if there were a analog to the Tate letter adopted by the State Department or what should have happened, which is Congress passing a statute

[00:43:05] Speaker 03:
directing a comprehensive scheme, which the courts have routinely said about the FSIA, we'd have an entirely different case.

[00:43:13] Speaker 03:
With respect to the subject of deference, you asked several times, what degree of deference?

[00:43:19] Speaker 03:
You didn't ask, but might have, about what?

[00:43:22] Speaker 03:
Or is it just that you are supposed to treat the government as if they're sitting there with Judge Jeffrey White, and they get a vote, or a partial vote, about whether there's immunity?

[00:43:33] Speaker 03:
And how much does their vote count?

[00:43:36] Speaker 03:
With all due respect to everybody, that's silly.

[00:43:39] Speaker 03:
The government might get deference or did get some deference from 52 to 76 about whether certain requisites of commercial activity or instrumentality had been developed sufficiently.

[00:43:53] Speaker 03:
It was a mess.

[00:43:54] Speaker 03:
It was bedlam, according to Judge Scalia, and led to the adoption of the FSIA.

[00:44:01] Speaker 03:
So ultimately, there was no real purpose and satisfaction from that deference.

[00:44:07] Speaker 03:
And there's certainly no occasion for deference here where the government can't even articulate about what or to what degree.

[00:44:15] Speaker 03:
With respect to paragraph, with respect to count two, Your Honor, you were directed to the 2012 indictment.

[00:44:23] Speaker 03:
We are here about the third superseding indictment, which is ER 99, count two, says the allegate, I'm reading this, the allegations contained in paragraphs one through 15 are realleged and incorporated as if fully set forth herein.

[00:44:43] Speaker 03:
And the most important point there is that if you look at those paragraphs, in addition to not alleging any commercial activity, there's no indication of where commercial activity, if one were to have concluded it occurred, where that activity itself had occurred.

[00:45:01] Speaker 03:
I have one more comment if I may.

[00:45:05] Speaker 04:
I wanted to clarify because I was confused by this point because the copy of count two of the indictment that I have and that I've been looking at is the third superseding and I don't see any reference

[00:45:21] Speaker 04:
in count two to incorporating anything other than one through 13.

[00:45:26] Speaker 04:
Fifteen, Your Honor.

[00:45:29] Speaker 04:
One through 15, excuse me.

[00:45:30] Speaker 04:
That's correct.

[00:45:31] Speaker 04:
And now I see, and it was, it wasn't E.R., it's actually S.E.R.

[00:45:36] Speaker 04:
125 does incorporate more, but that's a different, it's a different count, too.

[00:45:43] Speaker 04:
It's a conspiracy count in the prior indictment.

[00:45:45] Speaker 03:
Correct.

[00:45:45] Speaker 04:
Are you reading that correctly?

[00:45:46] Speaker 03:
You're 100 percent correct.

[00:45:48] Speaker 03:
And then I would say with, depending on how much more time the courts would give, I would say this with respect to the subject of instrumentality.

[00:46:02] Speaker 03:
How shall I put this politely?

[00:46:04] Speaker 03:
The trial lawyers who were before Judge White twice and in effect conceded on instrumentality the first time and then specifically with respect to organ the second time.

[00:46:17] Speaker 03:
And he's so found.

[00:46:18] Speaker 03:
and you had to write something about what to do when the government concedes something.

[00:46:23] Speaker 03:
Those trial lawyers know that there's gonna be a mountain of what they, or they hope there will be, a mountain of evidence to establish that our clients are instrumentalities under the Economic Espionage Act.

[00:46:36] Speaker 03:
And while there may be some daylight between, I shouldn't say may, while there is some daylight between that definition, as Your Honor has correctly written,

[00:46:46] Speaker 03:
and the definition in the FSIA, which no longer matters that much.

[00:46:52] Speaker 03:
I hate to say it this way, but this is sort of a theater.

[00:46:57] Speaker 03:
There's going to be tremendous, if the government has its way, tremendous evidence that our clients are instrumentalities of the Chinese government.

[00:47:08] Speaker 03:
So this issue should

[00:47:10] Speaker 03:
not be one the government resists at this stage.

[00:47:14] Speaker 03:
What we should do is defer to the people who are going to try this case.

[00:47:18] Speaker 03:
And instrumentality status was conceded below in the form of Oregon, and it should be, I say with all due respect, a no-brainer for this proceeding.

[00:47:30] Speaker 04:
All right.

[00:47:31] Speaker 04:
Thank you, counsel.

[00:47:32] Speaker 04:
Thank you.

[00:47:33] Speaker 04:
Unless my colleagues have any further questions.

[00:47:36] Speaker 04:
All right.

[00:47:37] Speaker 04:
Thank you, counsel.

[00:47:37] Speaker 04:
We thank both counsel for their helpful arguments in this case.

[00:47:41] Speaker 04:
And the case just argued will be submitted, and we stand in recess.

[00:47:44] Speaker 03:
Thank you, your honor.

[00:47:45] Speaker 03:
Have a nice weekend.

[00:47:59] Speaker 00:
Hear ye, hear ye.

[00:48:01] Speaker 00:
All persons having had business with the Honorable the United States Court of Appeals for the Ninth Circuit will now depart for this court for this session.

[00:48:08] Speaker 00:
Outstands adjourned.