Published on Tuesday, June 20, 2000 by Inter Press Service
Big Business Wins Big Supreme Court Case Over Activists
by Jim Lobe
In a victory for multinational
corporations and other forces for economic globalisation, the US
Supreme Court Monday struck down a Massachusetts law that
penalised companies doing business in Burma.
The case, which took two years to reach the Court, has major implications for grassroots human-rights and environmental activism.
It puts into question the future of such "selective purchasing" laws used by state and local governments over 25 years to pressure companies to withdraw from apartheid South Africa and, more recently, from Cuba, Nigeria, and Switzerland, among other countries.
"It invalidates all state and local sanctions aimed at Burma and sends an extremely strong message to states and local governments that they should not be in the business of making foreign policy," said Greg Costanias, the lead attorney for the National Foreign Trade Council (NFTC), an association of some 600 companies which brought the lawsuit.
Supporters of the Massachusetts law, on the other hand, insisted that the Court's opinion did not go that far. "It's a yellow light; not a red light (for selective-purchasing laws)," said Robert Stumberg, a law professor at Georgetown University who helped Massachusetts prepare its case.
Other Burma campaigners said they will introduce new laws designed to punish companies doing business in Burma in other ways in coming months.
The case, which was filed by the NFTC in 1998, is based on a law approved by the Massachusetts legislature in 1996. It required companies doing business in Burma to add 10 percent to all of its bids for procurement contracts with the state.
Such selective-purchasing laws are designed to force companies to choose between continuing to do business with repressive governments abroad and bidding on often-lucrative state or local governments contracts.
Such laws were used most successfully during the late 1970s and 1980s to force scores of US multinationals - including such giants as Coca-Cola, IBM, and General Motors - to withdraw from South Africa. According to most experts, the resulting divestment played a major role in bringing about majority rule there.
Some two dozen states and cities, including New York, Los Angeles, Minneapolis, and San Francisco have enacted similar laws against companies doing business in Burma, where a military junta has repressed the democratic opposition led by Nobel Peace Laureate Aung San Suu Kyi. As a result, some of the country's best-known companies, including several from the retail apparel industry, withdrew.
Multinationals naturally oppose these initiatives because they curb companies' freedom to do business where they please. Until the NFTC lawsuit, however, they were reluctant to challenge these laws in court due to the negative publicity that would result from a company claiming a right to do business with abusive governments.
The NFTC was backed by the European Union (EU) and Japan whose companies were also affected by the Massachusetts law. Claiming that Massachusetts had violated a multilateral ban on sub-national governments using non-economic criteria in deciding contract bids, they also filed challenges to the law in the World Trade Organisation (WTO) and amicus curiae briefs with the courts here in support of the NFTC.
The Clinton administration, which was deeply split on the issue, stayed out of the case until last February when it submitted its own brief arguing that the Massachusetts law had violated the US constitution by "impermissibly infring(ing) upon the national government's exclusive authority to conduct foreign affairs."
That position echoed the judgements of the district court in Massachusetts and the appeals court both of which decided the case on sweeping constitutional grounds that appeared to invalidate acts by state and local governments designed to affect conditions in foreign countries.
For its part, Massachusetts, which was supported by amicus briefs from more than two dozen states and cities and some 78 members of Congress and dozens of state attorneys-general, argued that states "should be free ... to apply a moral standard to their spending decisions ... Nothing in the federal Constitution ... requires the states to trade with dictators."
Monday's 9-0 decision declined to explicitly endorse the more- sweeping holdings by two lower courts.
Instead, the Court ruled more narrowly that a Congressionally enacted law directed at specific countries, such as Burma, pre- empts any action taken by local governments vis-à-vis the same countries. In Burma's case, it found, Congress had passed a law that gave President Bill Clinton broad discretion to impose or lift sanctions directed against the country.
"Because the state Act's provisions conflict with Congress's specific delegation to the President of flexible discretion (on sanctions) ... and with direction to develop a comprehensive, multilateral strategy under the federal Act, it is pre-empted, and its application is unconstitutional," the Court said in a 10-page opinion by Justice David Souter.
By failing to rule explicitly on whether all selective-purchasing laws - including those which target a country that is not the subject of Congressional sanctions legislation - violate constitutional provisions on the president's power, the Court appeared to invite further debate.
"Yes, it's a red light when Congress has specifically delegated power to the president," said Stumberg, who added that where Congress has not done so, selective-purchasing laws may still be permitted. "This was not decided by a sweeping constitutional theory that says states have no role in adopting standards of public morality in determining purchasing," he said.
But the NFTC's Costanias disagreed. "If there isn't a red light, then it's an awfully pink one," he told IPS. Citing passages in the opinion which referred to the president's foreign-policy- making authority as an "exclusively national power," Costanias added: "It's hard to read that language as allowing any role for the states and local governments to conduct their own little versions of foreign policy."
Still, Burma activists said they were undaunted.
They said they are currently mulling over several possible responses: using state and local governments to require companies bidding on public contracts to disclose where they do business; using public pension funds and investment agencies more to press shareholder resolutions requiring divestment or other similar measures; and persuading local and state legislatures to petition Congress to explicitly provide the legal authority for selective purchasing laws, as was done in federal anti-apartheid legislation.
"Over the next six months, we plan to introduce new Free-Burma laws in several key cities and states in New England," said Simon Billenness, co-ordinator of the New England Burma Roundtable. "Our message to corporations is clear: If you do business in Burma, your business will suffer in New England."
Copyright 2000 Inter Press Service