Corporations Sue Massachusetts Over State Ban on Burma

by Jim Lobe

The legal assault is part of a major offensive by business groups against dozens of local and state governments which have enacted "selective purchasing" laws designed to sanction companies which do business in countries accused of serious human rights or other abuses.

"We regard this lawsuit to be an important test case that will determine the very significant, perplexing and continuing issue concerning the constitutionality of state and local sanctions," said Frank Kittredge, president of the National Foreign Trade Council (NFTC), which represents 580 of the most important corporations in the United States.

"The Massachusetts Burma Law directly intrudes on the exclusive power of the national government to determine foreign policy, discriminates against companies engaged in foreign commerce, and conflicts with the policies and objectives of the federal statute imposing sanctions on the Union of Myanmar," he added. Myanmar is the name imposed on Burma by the military regime in Rangoon.

Human rights activists responded quickly. "By filing this lawsuit, the companies which make up the NFTC are attacking the very fabric of local democracy in the United States while defending their ability to do business with a brutal, narco-dictatorship," said Simon Billeness of the Franklin Research and Development Corporation in Boston. "This will rebound very badly on the companies connected to the lawsuit."

At the same time, the chief sponsor of the Burma Law, Massachusetts State Rep. Byron Rushing, told IPS he was "disappointed" by the NFTC's action. "We have no doubt that what we do is constitutional," he said.

The result was an exodus of big U.S. companies from South Africa, which, in turn, weakened the apartheid regime. Since then, selective purchasing laws have been used by grassroots activists to press their foreign-policy concerns at the local level.

Currently, there are about 50 such laws on the books nationwide, about half of which target Burma, while most of the rest are directed against companies doing business in Nigeria, China, and Indonesia.

The Massachusetts law does not ban companies from bidding on procurement contracts. Instead, it imposes a ten percent penalty on companies doing in business in Burma. The law and others like it have generally had the desired effect: most U.S. companies, including Apple Computer, Eastman Kodak, and Pepsico, which were active in Burma in the early 1990s have withdrawn.

This has angered companies eager to do business in Burma, but the NFTC lawsuit is based primarily on the notion that the federal government has the most to lose from selective purchasing laws.

"The proliferation of laws in states and cities throughout the country creates a problem not only for business, but for the ability of the United States to conduct a coherent foreign policy," Kittredge said today.

The administration of President Bill Clinton, a major supporter of U.S. companies doing business overseas, has expressed some sympathy for this view. "State and local sanctions do have the practical effect of interfering with the President's ability to conduct our foreign policy," a senior Commerce Department official told California's legislature last October.

That argument was repeated by the State Department last month in a successful bid to head off a selective purchasing law against Nigeria in Maryland's legislature. But the administration has been concerned about the Massachusetts law for another reason.

Last year, the European Union (EU) and Japan formally complained to the World Trade Organization (WTO) in Geneva that the law violates the General Procurement Agreement (GPA), an accord agreed by 39 U.S. states, including Massachusetts, to ensure that procurement contracts are awarded according to economic criteria only.

He told IPS that the amendment constituted an "offer" to the EU with which he remains in contact. He added that the amendment will be enacted into law if the EU imposes additional sanctions against Burma pursuant to recommendations by the European Parliament. He said he was heartened by the fact that the EU has not yet acted on threats to convene a WTO panel to pursue its complaint.

EU officials, while refusing to comment on Rushing's amendment, voiced some support for the NFTC lawsuit. "We're basically sympathetic with that case," said spokeswoman Ella Krukoff. "We have many of the same concerns."

Rushing and other Massachusetts activists say the NFTC should be thrown out of court because it lacks "standing" to pursue the claim. U.S. constitutional law usually requires plaintiffs to show that they have been damaged in some way, but the NFTC, as a business association, will be hard put to meet that condition.

"Specific companies will have to come forward to pursue the case," said Billeness who noted that, in doing so, they will become identified with the military junta. "That's a risky strategy," he said.

The administration declined all comment on the matter. Top officials, who see no political gain to be made from taking one side or the other, had tried to persuade the NFTC to delay the case in hopes that a settlement could be reached. But, if the NFTC can keep the case alive beyond the initial challenges to its standing, the administration may be required by the court to take a clear position.