Judge's ruling may set precedent for
state bans.
In a sweeping victory for trade interests, a federal
judge has struck down as unconstitutional a Massachusetts
law that penalizes companies doing business with
military-ruled Myanmar.
The ruling could halt enforcement of the 1996
selective purchasing law aimed at Myanmar, the former
Burma. It also may serve as the basis to challenge
a host of other "subfederal" sanctions that have
been enacted by states, counties and municipalities.
In his decision of a suit brought in April by
the National Foreign Trade Council, Chief Judge
Joseph Tauro of the U.S. District Court for the
District of Massachusetts said the state's law "impermissibly
infringes on the federal government's power to regulate
foreign affairs."
"The Massachusetts Burma Law was designed with
the purpose of changing Burma's domestic policy,"
the judge wrote in a decision released late Wednesday.
"State interests, no matter how noble, do not trump
the federal government's exclusive foreign affairs
power."
Frank Kittredge, president of the Washington-based
trade council, hailed the ruling in a statement,
saying that it "should significantly deter states
and cities from imposing their own foreign policy
sanctions." The trade council, which filed the suit
on behalf of its 580 members, sees it as a key part
of its campaign to halt the spread of unilateral
economic measures.
It is unlikely that the first-round victory over
the Massachusetts law will mean the end of the fight.
Advocates on both sides expect the ruling to be
appealed within 30 days. "I'm certainly going to
be urging the (state) attorney general to appeal
this," said state Rep. Byron Rushing who wrote the
Myanmar curbs and similar legislation aimed at South
Africa in 1988. Legal experts say the issue may
eventually have to be decided by the Supreme Court.
Assistant Attorney General Thomas Barniclo said
Thursday that an appeal was being considered and
that the state may ask that the law remain enforced
pending the appeal.
The law, which adds 10% to state contracting bids
from companies conducting business with Myanmar,
has been a primary weapon in grass-roots efforts
to end that country's brutal repression of democracy
by putting pressure on foreign investment and trade.
The statute also sparked controversy overseas.
Last month, the World Trade Organization agreed
to convene a dispute resolution panel to resolve
complaints against the law by the European Union
and Japan. The EU argues that the state statute
violates a 1994 Government Procurement Agreement
with the United States on open bidding.
Although the court case centered on the issue
of federal vs. state powers, the Clinton administration
has pledged to defend the state law before the WTO.
An important second front
While the broader struglle over unilateral sanctions
has been fought out in Congress this year, the conflict
over subfederal curbs has been an important second
front for corporate interests. A recent report by
the International Trade Commission found 27 state,
county and city sanctions dealing with Myanmar,
Nigeria, Cuba and Tibet.
It is unclear now whether WTO action will be suspended
if the Massachusetts law is held to be without force
because of a court injunction. The EU filed a friend
of the court brief supporting the trade council
case. Judge Tauro specifically cited the EU brief
as evidence that the state law has a "disruptive
impact on foreign relations." "We welcome the decision
and are accessing its implications for the WTO case,"
an EU official said.
The ruling hinges on a 1968 probate ruling decided
by the Supreme Court involving the right of a non-resident
alien to inherit property from an Oregon resident,
only if reciprocal treatment was allowed by the
beneficiary's country of origin.
More than incidental effect
The high court ruled in the case that state laws
are invalid if they have more than "some incidental
or indirect effect in some countries," or if they
have "great potential for disruption or embarrassment,"
Judge Tauro said.
Mr. Rushing, a Boston Democrat, disagreed with
the interpretation, saying that state legislatures
commonly pass resolutions on human rights abroad
and are free to do so, even if they embarrass foreign
countries.
States are also free to spend their money as they
see fit through selective purchasing, he said.
Judge Tauro ruled only on the basis of the foreign
affairs power argument. He declined to rule on the
issue of federal powers under the Constitution's
Foreign Commerce Clause. The state maintained that,
as a "market participant" it has an exception to
federal commerce powers in making purchasing choices
for itself. The Judge also said he was not persuaded
by another trade council argument that federal Myanmar
sanctions preempt the state curbs.
