Contempt (1963)

Rohan Skea: Cra Limited Corporate Counsel

CRA Limited Corporate Counsel, Rohan Skea, worked closely with Sir Roderick Carnegie, Executive Chairman of CRA, other CRA in-house counsel, and CRA’s US Counsel, Robert Osgood of Sullivan & Cromwell in New York, in the defense of CRA/RTZ against the USD7.5 billion antitrust treble damages claim launched in 1976 by Westinghouse Electric Corporation against 29 foreign and US domestic uranium producers alleged to be co-conspirators in an international cartel controlling the supply and price of uranium.  Westinghouse alleged that the cartel meetings took place in France, Australia, South Africa, Illinois, the Canary Islands and England.


Westinghouse was a supplier of multiple nuclear reactors, together with uranium fuel, to US electric utilities.  Westinghouse had entered into long term uranium fuel supply contracts with the US electricity utilities at low fixed prices.  Westinghouse alleged that the Uranium Producers Cartel, also known as the Uranium Club, had conspired to raise the price of uranium fuel from $6 per pound to about $40 per pound.  Westinghouse was sued by utilities for breach of the supply contracts with damages estimated initially at USD2 billion (Re Westinghouse Uranium Contract [1978] 1 AC 583).  Westinghouse faced further billions of dollars of contractual losses if forced to supply utilities at a low price while purchasing foreign sourced uranium fuel at an allegedly rigged price of $40 set by the Uranium Producers Cartel (in Re Westinghouse Electric Corporation Uranium Contracts Litigation (in the United States District Court for the Eastern District of Virginia) Ancillary Proceedings in the Matter of Subpoenas Duces Tecum Addressed To Rio Algom Corporation By George R. Albino and Mervyn Lawton., 563 F.2d 992 (10th Cir. 1977). The members of the alleged cartel comprised the world’s leading uranium producers.  The members, being defendants in the case, were, Rio Algom Limited, Rio Algom Corporation, Rio Tinto Zinc Corporation Limited, RTZ Services Limited, Rio Tinto Zinc Corporation, Conzinc Rio Tinto of Australia Limited (“CRA”), Mary Kathleen Uranium Limited, Pancontinental Mining Limited, Queensland Mines Limited, Nuclear Fuels Corporation, Anglo-American Corporation of South Africa, Limited, Engelhard Minerals and Chemicals Corporation, Denison Mines Limited, Denison Mines (U.S.) Incorporated, Noranda Mines Limited, Gulf Oil Corporation, Gulf Minerals Canada Limited, Kerr-McGee Corporation, the Anaconda Company, Getty Oil Company, Utah International Inc., Phelps Dodge Corporation, Western Nuclear, Inc., Homestake Mining Company, Federal Resources Corporation, Pioneer Nuclear, Inc., Atlas Corporation, Reserve Oil and Minerals Corporation, United Nuclear Corporation, and Atlas Alloys, Inc. CRA, the Australian subsidiary of global mining giant, RTZ in the United Kingdom, along with eight other foreign defendants, chose not to appear in the US Court.  The defaulting defendants comprised four Australian companies: Conzinc Rio Tinto of Australia Ltd (“CRA”), Mary Kathleen Uranium Ltd, Pancontinental Mining Ltd and Queensland Mines Ltd; two British companies: Rio Tinto Corp. Ltd. (“RTZ”) and RTZ Services Ltd.; two South African companies: Nuclear Fuels Corporation of South Africa and Anglo American Corporation of South Africa Ltd.; and one Canadian corporation, Rio Algom Ltd.  In effect, the RTZ Group, comprising RTZ, RTZ Services, CRA, Mary Kathleen and Rio Algom, refused to appear in US Courts and acknowledge the extraterritorial jurisdiction of US antitrust laws.


The claim for extraterritorial application of US antitrust laws has had a controversial history for it clashes with the sovereignty of other nation states and its opponents argue it is contrary to the principles international law and comity (in Re Westinghouse Electric Corporation Uranium Contracts Litigation (in the United States District Court for the Eastern District of Virginia) Ancillary Proceedings in the Matter of Subpoenas Duces Tecum Addressed To Rio Algom Corporation By George R. Albino and Mervyn Lawton., 563 F.2d 992 (10th Cir. 1977)).     While extraterritoriality was initially criticized (American Banana Co. v. United Fruit Co., 213 U.S. 347, 29 S.Ct. 511, 53 L.Ed. 826 (1909), the Sherman Act has been applied by US courts to conduct outside the United States so long as some of the acts occurred within the United States and the parties were American (United States v. Sisal Sales Corp., 274 U.S. 268, 47 S.Ct. 592, 71 L.Ed. 1042 (1927); Timkin Roller Bearing Co. v. United States, 341 U.S. 593, 71 S.Ct. 971, 95 L.Ed. 1199 (1951)). In United States v. Aluminum Co. of America (Alcoa), 148 F.2d 416 (2nd Cir. 1945), Judge Learned Hand articulated what is known as the “intended effects” test. In Alcoa Judge Hand reasoned that agreements made outside of the United States which restrain trade or commerce within the United States have the same effect as similar agreements entered into within US borders. Since “any state may impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders which the state reprehends,” (at p 433) he concluded that Congress did intend to apply the Act to conduct abroad so long as the intended effect of that conduct is prohibited by the Act. Since Alcoa, United States Courts have exercised jurisdiction over antitrust activity outside the United States so long as there is an intended effect on American commerce (Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 705, 82 S.Ct. 1404, 1413, 8 L.Ed.2d 777 (1962); Mannington Mills v. Congoleum Corporation, 595 F.2d 1287, 1299 (3rd Cir. 1979); U. S. v. The Watchmakers of Switzerland Information Center, Inc., 1963 Trade Cases P 70,600, at p. 77, 456-57 (S.D.N.Y.1962); Fleischman Distilling Corp. v. Distillers Co. Ltd., 395 F.Supp. 221, 226-227 (S.D.N.Y.1975)). US courts subsequently modified the effects doctrine with a “balancing of interests” test (Timberlane Lumber Co v Bank of America, 549 F2d 597 (9th Cir. 1976); Mannington Mills v Congoleum Corp., 595 F2d 1287 (3rd Cir, 1979)).  US courts are now required to establish whether the foreign conduct has had an effect on US domestic commerce then, under the “balancing of interests” doctrine, also known as the “jurisdictional rule of reason”, the court is required, when deciding whether or not to exercise jurisdiction, to consider the interests of all stakeholders, be they domestic, foreign, private or governmental Westinghouse retaliated against the defaulters and successfully obtained interlocutory orders in the US against the defaulting defendants, which severely constrained the ability of those companies to conduct business in the US and with US companies. These orders placed the flow of funds into and out of the US based entities, and the disposal of assets, under the control of US courts.  Some of the defaulting defendants continued to flagrantly ignore those orders and attempted to transfer funds out of the US resulting in further orders being successfully sought by Westinghouse (in Re Uranium Antitrust Litigation, 617 F. 2d 1248 (7th Cir.1980)).  These orders were very stringent. For example, Westinghouse successfully enjoined RTZ subsidiary, Rio Algom Corporation, from making deposits in bank accounts outside the United States; from making any transfers out of the United States without twenty days’ prior notice to the Court; requiring Rio Algom to deposit the revenues of its Utah mining operation in United States banks; and enjoining the officers, directors and employees of the defaulting Rio Algom Limited from making withdrawals from bank accounts of Rio Algom Corporation (in Re Westinghouse Electric Corporation Uranium Contracts Litigation (in the United States District Court for the Eastern District of Virginia) Ancillary Proceedings in the Matter of Subpoenas Duces Tecum Addressed To Rio Algom Corporation By George R. Albino and Mervyn Lawton., 563 F.2d 992 (10th Cir. 1977).  The defaulting defendants refused to appear and address the issues relating to the interlocutory orders and subject matter jurisdiction and, instead, the Governments of Australia, Canada, South Africa and the United Kingdom filed briefs as amici curiae to challenge subject matter jurisdiction.   The US Federal Court rejected the amici curiae arguments and, in so doing, scathingly criticized the defendants and the foreign governments.  The Court referred to the “defaulters contumaciously [having] refused to come into court and present evidence as to why the District Court should not exercise its jurisdiction”.  But, the Court was particularly damning of the relationship between the defaulters and the foreign governments involved and commented that the defaulters “have chosen instead to present their entire case through surrogates.    Wholly owned subsidiaries of several defaulters have challenged the appropriateness of the injunctions, and shockingly to us, the governments of the defaulters have subserviently presented for them their case against the exercise of jurisdiction.” (Re Uranium Antitrust Litigation, 480 F Supp 1138, 1148 (9th Cir, 1979); Re Uranium Antitrust Litigation, 617 F 2d 1248, 1255 (7th Cir, 1980). The Court’s frustration at the contempt shown by the defaulters, and the US judicial attack on the apparent complicity of sovereign governments, caused an international sensation.


This international political controversy created by the attempt to extraterritorially apply the US antitrust laws, underscored by the scathing US judicial criticisms of the actions and motives of the Governments of Australia, Canada, South Africa and the United Kingdom, and the legislative countermeasures, in the form of “blocking” and “clawback” statutes enacted by those foreign governments, led to most of the Westinghouse suits being settled in 1981.  For example, Australia reacted quickly to the initial Westinghouse proceedings, and the issue of letters rogatory seeking document discovery and evidence from the four Australian defendants, and enacted the Foreign Proceedings (Prohibition of Certain Evidence) Act 1976 (Cth) (“FPA”).  The FPA prohibited the production of documents or the giving of evidence in foreign proceedings where a foreign court had failed to comply with international law or comity, or where it was considered necessary to protect national interests.  The orders made under the FPA thwarted Westinghouse’s attempts to gain production of documents in Australia or the giving of evidence by executives of the four Australian defendants (Commonwealth of Australia, Government Gazette, Special Gazette S 214 (29 November 1976); Commonwealth of Australia, Government Gazette, Special Gazette S 237 (23 December 1976); Commonwealth of Australia, Government Gazette, Special Gazette S239 (24 December 1976)).    Further, when Westinghouse obtained default judgments and injunctions against the defaulting defendants, Australia enacted the Foreign Antitrust Judgment (Restriction of Enforcement) Act 1979 (Cth)(“FAJA”).  The FAJA empowered the Australian Attorney-General to order certain foreign antitrust judgments to be unenforceable in Australia if the Attorney-General was satisfied that the foreign court had exercised jurisdiction in a manner inconsistent with international law or comity, and the recognition of the judgment may be detrimental, or adversely affect, Australian trade or commerce, or if was in the Australian national interest.  The Australian Attorney-General subsequently made an order under the FAJA declaring that the judgment on the issues of liability given in favor of Westinghouse against the nine defaulting defendants, together with the interlocutory injunctions in favor of Westinghouse, would not be recognized or enforceable in Australia (Foreign Antitrust Judgments (Restriction of Enforcement) Act 1979: Order by the Attorney-General: Commonwealth of Australia, Government Gazette, Special Gazette S 105 (8 June 1979)).  Faced with determined efforts of foreign governments to prevent Westinghouse obtaining documents or evidence, and preventing extraterritorial enforcement of US antitrust judgments, Westinghouse settled for a fraction of the billions of dollars it was claiming, rumored to be USD100 million, together with commitments from various defendants to supply 23 million pounds of uranium at favorable prices.  Nonetheless, the bitterness arising from the extraterritorial application of US antitrust laws, and the foreign government legislative responses in an effort to protect their respective national interests remained for years.


To know more, please visit the site http://rohanskea.net

Note: John Connor, “Global Antitrust Prosecutions of Modern International Cartels”, Dept. of Agricultural Economics, Purdue University, Ind., Staff Paper #04-15, Nov. 2004; Simon Evenett, Margaret Levenstein and Valerie Suslow, “International Cartel Enforcement: Lessons from the 1990s” (2001) 24 World Economy 1221

About the Author

Rohan Skea has been involved in some interesting cases. Rohan Skea , along with other Australian lawyers, worked closely with NI’s US counsel, Rooks, Pitts, Fullagar & Poust in Chicago in coordinating the massive logistics involved in mounting NI’s global legal defense strategy.

Contempt – Trailer

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