Myanmar sanctions

The US Supreme Court has eased one of the headaches for US companies active overseas.

The US Supreme Court has eased one of the headaches for US companies active overseas.

The court affirmed the supremacy of the US federal government in foreign policy considerations.

In Crosby vs. the National Foreign Trade Council, it ruled unanimously that Massachusetts infringed on federal powers when it passed a statute in 1996 that effectively blocked the state from doing business with companies that also did business with Myanmar, formerly known as Burma.

State legislators intended the statute to be a protest against Myanmar's alleged human rights and labor violations.

The state law added 10% to the bid, from any company active in Myanmar, that the firm submitted to Massachusetts.

Massachusetts has not been the only state to protest against Myanmar, and even some cities have banned business with companies active in Myanmar, Nigeria, or Indonesia.

Opinion

The high court's narrowly written opinion, written by Justice David Souter, does not ban states from taking other measures that could have foreign policy applications.

But it said the Massachusetts state law specifically conflicted with a federal law-passed 3 months later that banned US firms from signing contracts with Myanmar-and is "an obstacle to the accomplishment of Congress' full objectives under the federal act."

In the opinion, Souter concluded, "It is not merely that the differences between the state and federal acts in scope and type of sanctions threaten to complicate discussions; they compromise the very capacity of the president to speak for the nation with one voice in dealing with other governments."

Seventy-eight members of Congress filed a brief with the court, saying that they had not intended to preempt local laws with the federal legislation.

And the European Union filed a brief urging the justices to find the federal law unconstitutional.

Oil angle

Unocal Corp. was the largest international oil company to be directly affected by the court's ruling, although it was not mentioned by name in the opinion.

About 3 years ago, US firms had invested about $240 million in Myanmar, mostly in the oil and gas sectors (OGJ, Apr. 28, 1997, p. 37).

Unocal, which has a 28% interest in the Yadana gas development and pipeline project in Myanmar, has been the target of numerous demonstrations in the US demanding its withdrawal from the country (see related story, p. 24).

The Clinton administration imposed federal sanctions against US firms from doing business in Myanmar in 1997, but the Unocal project was grandfathered.

Unocal is a member of the National Foreign Trade Council. The latter argued in the lawsuit that, if the court did not strike the Massachusetts law, US companies that operate overseas would have to contend with the possibility of every state and city setting its own foreign policy.

Barry Lane, a Unocal spokesman, said, "We've long been an advocate for engagement in countries such as Burma, and we know unilateral sanctions don't work. Our experience in Asia has shown that values accrue to the people of these countries from US investments."

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