A privately-owned company in China yesterday sued US President Barack Obama over his decision to block its Oregon wind-farm project due to national security risks, claiming the order violates its constitutional rights.
Obama on Friday barred Ralls Corp from building wind turbines close to a Navy military site in Oregon. The order, which was the first in 22 years for a US president to block a transaction on national security grounds, comes as he campaigns for a second term against Republican Mitt Romney.
Ralls Corp added the president to a lawsuit it filed on September 12 at a US district court in Washington that challenged a ruling by the Committee on Foreign Investment in the US, known as CFIUS, which made the recommendations to Obama.
"The physical and regulatory takings of Ralls's property interests constitute unconstitutional takings in violation of the US Constitution, deprive Ralls of its property interests absent due process, and violate Ralls's constitutional right to equal protection," according to the amended complaint.
Ralls Corp has been involved in installing wind turbine generators made by Sany Group, parent company of Shanghai-listed Sany Heavy Industry Co, China's biggest construction equipment maker and the No.7 in the world. Sany's chairman and controlling shareholder, Liang Wengen, is China's fifth richest man, according to this year's Hurun Report.
The Obama administration said that Ralls has four wind farm projects that are within or in the vicinity of restricted air space at a naval weapons systems training facility. "There is credible evidence that leads me to believe" that Ralls Corp, Sany Group and the two Sany Group executives who own Ralls "might take action that threatens to impair the national security of the United States," Obama said in issuing his decision.
Ralls Corp is a Delaware-registered company controlled by Sany vice presidents Duan Dawei and Wu Jiadong. In March, the company acquired four wind farms in Oregon with a combined power generation capacity of 40 million watts. Ralls bought the wind-farm assets without reporting the transaction to CFIUS, according to a US filing in the case.
Ralls Corp said it filed the lawsuit against CFIUS for ordering it to stop all construction and operations at its projects while the government panel completed its investigation and finalized its recommendation to Obama.
According to US law, CFIUS can recommend the president block a foreign investment deal, rather than announce a termination itself. But the presidential order to block a deal in the US was rare as companies usually withdrew their deals or sell off their assets when the panel took issue with their transactions.
The last time a US president formally blocked a deal due to national security concerns was in 1990 when then President George Bush barred a Chinese aero-technology firm from acquiring a US manufacturing firm.
Although the order gives the Chinese company 90 days to sell all its interests in the projects, Rolls Corp has no immediate plan to quit the deal in the near term. After the decision was announced on Friday, Rolls Corp said it was confident that the US courts would vindicate the company's rights under the law and the US Constitution.
Ralls continues "to show its profound faith in transparency and due process, and seeks only fair treatment under the law and the Constitution," Tim Xia, a lawyer with Morris, Manning & Martin LLP, who represents Ralls, said in a statement.
Ralls Corp is the first Chinese company to take legal action against CFIUS since the committee was created. Previously, several Chinese companies, including China National Offshore Oil Corp, known as CNOOC, and telecommunications equipment maker Huawei Technologies Co, have faced objections from CFIUS on their acquisitions in the United States.
In recent years, CFIUS has forced Huawei to drop at least three deals. Last year Huawei halted its plans to buy assets from 3Leaf Systems, a computer services company, after facing problems with CFIUS. Although Huawei is also privately owned, CFIUS expressed worries about potential links between Huawei's founder and CEO, Ren Zhengfei, and the Chinese military. Ren retired from the military in 1984, and Huawei says he has not maintained any ties.
Obama's decision also comes as two other Chinese giants are seeking CFIUS approval for acquisitions. CNOOC is under way to buy Canada's Nexen for US$15.1 billion, and Chinese auto parts company Wanxiang Group Corp has announced plans to take over US battery maker A123 Systems Inc. Although Nexen is headquartered in Canada, CNOOC has to obtain approval from CFIUS since Nexen has substantial business in the US.
The US Treasury Department stressed on Friday that Obama's decision was not a precedent for other investments from China or any other country and the US generally welcomed investment from China.