MOSCOW, October 3 - RAPSI, Ingrid Burke. The Chinese-owned Ralls Corporation has listed President Barrack Obama as a defendant in its claim challenging the US government’s decision to prohibit its acquisition of four windfarm properties located within close proximity of a “restricted airspace and bombing zone” operated by the US Navy.

Suing the president in his official capacity, the complaints seek, “to obtain a declaration that the conduct of CFIUS and the President was unlawful and unauthorized and to enjoin enforcement of the President’s [executive] order.”  The order, issued by Obama last Friday, demands Ralls’ prompt termination of business on the properties at issue, and its immediate divestment of all associated interests on the basis of national security concerns.  

The complaint was amended Monday to include the president as the first in its list of defendants, which had previously included only the Committee on Foreign Investment in the United States (CFIUS) and Secretary of the US Treasury Timothy Geithner as defendants. RAPSI obtained a copy of the amended complaint published by the Wall Street Journal.

Factual background

According to the complaint, US-owned Oregon Windfarms registered four limited liability companies in 2009 in order to facilitate the creation of four separate windfarms in Oregon, collectively referred to as the Butter Creek Projects.

The US Navy operates a “restricted airspace and bombing zone” within close proximity to the Butter Creek Projects; in fact, one of its properties is located within the restricted airspace. The complaint notes that the restricted airspace “encompasses the property of numerous private landowners, and at least several highways.” 

Oregon Windfarms owns several other windfarm properties in close proximity to the Butter Creek Projects. These other windfarms - referred to collectively as the Echo Projects - use foreign-made turbines, some manufactured by a German company that is owned  by an Indian conglomerate, and the rest manufactured by a Danish company. One of these properties is foreign-owned. Two of them are located within the restricted airspace, and the rest are located nearby. 

Ralls, a corporation owned by two Chinese nationals and registered in the state of Delaware, seeks out new windfarm properties and then furnishes them with turbines purchased from its Chinese affiliate, Sany Group.

Ralls was particularly game for the Butter Creek Projects as a means of demonstrating the superiority of Sany turbines by way of a side-by-side comparison with the numerous other foreign turbines populating the nearby windfarms.

CFIUS and its authority

CFIUS is an inter-agency US governmental committee which, in accordance with Section 721 of the Defense Production Act (1950), is charged with reviewing and investigating, “any merger, acquisition, or takeover … by or with any foreign person which could result in foreign control of any person engaged in interstate commerce in the [US].” Its primary purpose is to determine the existence of any national security threats associated with such transactions. In order to alert CFRIUS of the existence of a potential covered transaction, transacting parties voluntarily submit details of the transaction for consideration. Geithner serves as its chairman.

Ralls, CFIUS, national security drama, and Obama

On June 28, 2012, Ralls and the company it had acquired the Butter Creek Projects from jointly filed a notice informing CFIUS of the transaction.

On July 25, 2012, CFIUS issued an order instructing Ralls to cease operations, as it had “determined that there are national security risks to the [US] that arise as a result of the [transaction], and CFIUS seeks to mitigate those risks pending any further action by the President.” The order instructed Ralls to immediately cease construction and operations, remove all stockpiled or stored items, and to refrain from accessing the properties. It further instructed Ralls to hire US (citizen) contractors to carry out the removal of all items from the properties.

In August CFIUS expanded its set of instructions to include prohibitions on the sale or transfer of any Sany item to a third party. The amended instructions further required CFIUS to refrain from selling the Butter Creek Project companies until all other instructions had been complied and to give CFIUS the opportunity to object prior to completing any pending sales transaction.

On September 13, CFIUS submitted to Obama a detailed assessment of its investigation.

On September 28, Obama issued an executive order stating: “There is credible evidence that leads me to believe that [Sany, Ralls, and Ralls’ owners—two Chinese nationals]… through exercising control of [the Butter Creek Project companies] might take action that threatens to impair the national security of the [US.]”

The president accordingly ordered numerous measures, including a prohibition on the transactions that led to Ralls’ acquisition of the Butter Creek Project companies and an order to divest all of Ralls’ interests therein, as well as a number of other measures in line with the two prior CFIUS orders. He further authorized CFIUS to do what it deemed necessary and appropriate in order to protect national security during the course of this divestment.

Causes of action and relief sought

Central to Ralls’ concern with the CFIUS finding is the fact that it was never given the opportunity to review the evidence that had been gathered against it, or to discuss its position with the committee. 

In its complaint, Ralls listed five causes of action: Violation of the Administrative Procedure Act [for] Exceeding Statutory Authority by Prohibiting Transaction and Regulating Future Transaction; Violation of the Administrative Procedure Act [for] Arbitrary and Capricious Agency Action; Ultra Vires Action Facially Violating Statute and Regulations; Unconstitutional Deprivation of Property Without Due Process; and Unconstitutional Violation of Right to Equal Protection.

The President is only implicated in the latter three charges, whereas his codefendants Geithner and CFIUS are targeted by all five.

On Ralls’ litany of discontents with the president, the complaint charges: “By imposing restrictions far beyond the limited scope of the powers specifically granted to him in Section 721, the President has committed ultra vires acts in violation of the law. By failing to provide Ralls with sufficient notice and opportunity to be heard prior to prohibiting its acquisition of the windfarms and imposing extraordinary restrictions on the use and enjoyment of its property interests, CFIUS and the President have unconstitutionally deprived Ralls of its property absent due process.  And by unfairly and unjustly singling out Ralls for differential treatment compared to similarly situated parties, CFIUS and the President have violated Ralls’s right to equal protection of the law.”