Missouri’s Chance to Hold China Accountable for COVID

More than four years after the outbreak of the COVID virus in Wuhan, the Chinese Communist Party (CCP) may finally face responsibility for its actions in an American court.

Not long after COVID arrived in the United States, Missouri sued the Chinese government and several affiliated entities in federal district court. The state argued that China allowed COVID to spread, covered up critical information about the virus, and hoarded personal protective equipment (PPE), causing massive economic disruptions and loss of life that harmed the state and its citizens.

For its part, China refused to respond to the lawsuit, leading the clerk of the court to enter a default judgment in favor of Missouri.

The district court judge, however, saw things differently. He independently raised the question of whether the court had jurisdiction over China under the 1976 Foreign Sovereign Immunities Act (FSIA), which generally prohibits lawsuits against foreign states in American courts. Concluding that each Chinese defendant was immune, the judge dismissed the case. Missouri appealed, arguing that its claims fell within statutory exceptions to immunity in the FSIA for tortious or commercial activity that has a direct effect within the United States.

Most legal observers thought Missouri’s lawsuit stood little chance. According to Yale law professor Lea Brilmayer, the lawsuit was a doomed “last-ditch effort to do something to respond to the political situation,” and former State Department Legal Adviser John Bellinger agreed that Missouri’s arguments were “likely to fail.”

Defying those predictions, the U.S. Court of Appeals for the Eighth Circuit revived the lawsuit earlier this year. Writing for a three-judge panel, Judge David Stras agreed with the lower court that the FSIA barred most of Missouri’s claims. But Stras, joined by another judge, held that one of the state’s claims—China’s hoarding of PPE—fell under the statutory exception for commercial activity by foreign states.

As investigations have shown, China quickly learned of the potential severity of COVID, but hid its knowledge from the rest of the world and obstructed international efforts to learn more about the virus. China used its knowledge to stockpile PPE for itself while selling lower-quality equipment abroad and taking over factories that made masks for U.S. companies to stop any export of PPE.

With its power over production and its superior knowledge of COVID, China could corner the PPE market before other participants knew what was happening. The allegations amounted to “classic anti-competitive behavior, except on a country-wide scale.” Stras therefore concluded that CCP’s hoarding was commercial activity that had a direct effect in the United States, and sovereign immunity did not shield China from Missouri’s lawsuit.

Missouri will now return to the district court to present evidence of China’s PPE hoarding. But there is no guarantee that it will succeed. The state must still prove that China hoarded PPE and that the direct effect of that hoarding caused a harm to Missouri and its citizens.

Missouri will also have to define the contours of a “duty not to hoard,” which the Eighth Circuit framed as an antitrust claim. China’s decision not to participate in the lawsuit, however, makes Missouri’s task easier. The state will be able to present witnesses and documents without any cross-examination or rebuttal from China.

The lawsuit may also pave the way to other plaintiffs bringing similar claims. Even if private individuals may find it difficult to establish direct harm from China’s exploitation of its knowledge about COVID to hoard PPE, other states can follow Missouri’s lead to seek compensation for the injuries that they and their citizens suffered.

Congress should also consider expanding plaintiffs’ ability to sue China. In 2020, Sen. Tom Cotton (R-AR) introduced the “Holding the Chinese Communist Party Accountable for Infecting Americans Act.” That bill would have allowed China to be sued in specified federal courts for tortious activity related to the spread of COVID, opening the door for a wide range of claims that are currently barred by the FSIA. Non-legal remedies, such as sanctions and diplomatic initiatives, could complement these efforts to ensure that China is held accountable for its actions.

Critics of Missouri’s attempt to do so point to the prospect of Chinese retaliation, but the narrowness of the Eighth Circuit’s ruling may limit that possibility. U.S. courts have traditionally been hesitant to allow plaintiffs to pursue claims against foreign sovereigns, in part because immunity is a shield for the United States against claims in foreign courts. If we allow our courts to hear claims against foreign governments, the critics say, foreign governments will allow plaintiffs to haul the United States before tribunals around the world, including similar lawsuits in Chinese courts against U.S. government officials.

But the CCP engages in a range of commercial activity that has no equivalent in the United States. Commercial research, manufacturing, and distribution in China are all controlled directly by the CCP itself or indirectly through state-owned companies. In this respect, there is no U.S. government behavior equivalent to China’s. And with several notable exceptions, the U.S. private sector is quickly reducing its exposure to possible retaliation from China.

Foreign sovereign immunity questions always involve balancing. If too few lawsuits proceed against foreign states, American plaintiffs will never receive justice for the wrongs committed against them; if too many proceed, the U.S. government will be exposed to legal harassment in foreign courts.

With its decision to allow Missouri to pursue one of its claims, the Eighth Circuit has applied an exception that respects the balance Congress struck in the FSIA. As a result, the citizens of Missouri will be the first with a chance to hold China accountable for its wrongful actions during the outbreak of the COVID pandemic.

Michael Ellis is a Visiting Fellow for Law and Technology at The Heritage Foundation.

This article was originally published by RealClearWorld and made available via RealClearWire.