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Second Circuit holds that fine assessed against U.S. Citizen for her travel to Iraq in violation of Iraqi Sanctions Act did not infringe her free speech rights or deny her due process
Judith Karpov (Plaintiff), a United States citizen, traveled to Iraq in 2003 in order to act as a “human shield” to prevent the bombing of civilian infrastructure. The Plaintiff claims she went to Iraq as an ordained minister, a professional journalist and as a human shield.
The United States Treasury sent Plaintiff a letter requiring that she provide a detailed written report concerning her trip to Iraq. Plaintiff responded to the letter but failed to provide an itemized list of travel related expenses. Defendant assessed a fine of $6,700 against Plaintiff for violating several executive orders and U.S. Treasury Department regulations that governed what interactions U.S. citizens could have with Iraq while economic sanctions were in place.
Plaintiff filed suit in federal court alleging violation of her First and Fifth Amendment rights. The district court dismissed Plaintiff’s complaint. She then appealed to the U.S. Court of Appeals for the Second Circuit, which affirms the district court.
In 1990, Congress passed the Iraqi Sanctions Act. It directed the President to ‘continue to impose the trade embargo and other economic sanctions with respect to Iraq.’ Pub. L. No. 101 513, § 586C(a), 104 Stat. 1979, 2048 (1990). President Bush issued Executive Orders on the assumption that Iraqi government policies pose an unusual and extraordinary threat to the national security of the United States, and thus imposed economic sanctions be imposed on Iraq. The Secretary of the Treasury promulgated regulations implementing prohibitions on, inter alia, the exportation of services and certain travel to Iraq. See Exec. Order No. 12,722, 55 Fed. Reg. 31,803 (Aug. 2, 1990); Exec. Order No. 12,724, 55 Fed. Reg. 33,089 (Aug. 9, 1990).
The Foreign Assets Control Office (OFAC.) of the U.S. Treasury Department issued the Iraqi Sanctions Regulations (Regulations) on January 18, 1991, to carry out the bans in the President’s Executive Orders, and to set up procedures for handling violations.
“On February 19, 2003 [Plaintiff] arrived in Iraq and remained there until March 9. [Defendant] did not obtain a license that might have authorized her, despite the economic sanctions, to engage in travel related transactions involving Iraq. While there, Plaintiff acted as a preemptive human shield.”
“Although [Plaintiff] left the country before the U.S. bombing campaign actually began, she was near an oil refinery while in Iraq. [Plaintiff] also went on guided tours in Barra and Baghdad, visited hospitals and schools, and spent time ‘looking, listening, talking, and writing.’ Her writing took the form of four letters sent back to America that were printed in installments by the “Jersey Journal.” The [OFAC.] learned of [Plaintiff]‘s unauthorized trip from press accounts.” [Slip op. 3 4]
The Circuit Court first discusses the Plaintiff’s claims under the Administrative Procedure Act.[APA]. On the APA’s “arbitrary and capricious” standard, the Circuit Court stated “In other words, so long as the agency examines the relevant data and has set out a satisfactory explanation including a rational connection between the facts found and the choice made, a reviewing court will uphold the agency action, even a decision that is not perfectly clear, provided the agency’s path to its conclusion may reasonably be discerned. [Cite].” [Slip op. 6]
“The three transactions [Plaintiff] was accused of were: (1) attempting to collect funds for travel expenses to/from/within Iraq, (2) departing Jordan for Iraq and arriving in Iraq, and (6) purchasing food while in Iraq. It was not arbitrary and capricious for the [OFAC.] to determine that [Plaintiff] had engaged in these three transactions. [Plaintiff]‘s own letter indicated that she solicited small donations to help finance her travel expenses to Iraq”
“[Plaintiff] admitted … that she traveled to Iraq during the winter of 2003. Insofar as the purchase of food in Iraq is concerned, [Plaintiff] conceded in an article she submitted to the “Jersey Journal” that, although she was not paying for living expenses during her first week in Iraq, she expected her group would start paying its way once they got organized.” [Slip op. 6 7]
“[W]e need not determine the exact contours of the conduct for which appellant was fined, since the [OFAC.] could have fined her $6,700 for committing any one of the six alleged acts. See 31 C. F. R. § 575.701. Thus, it is unnecessary to consider whether the services provided by [Plaintiff] to Iraq could have served as an alternative basis for this penalty.”
“[I]n Plaintiff is correct that some of the transactions she engaged in in Iraq related to journalistic activities and thus were exempted from sanction by § 575.207, remand on that basis would be futile. Plaintiff overlooks § 575.416( c), which notes that ‘[authorised travel transactions are limited to those incident to travel for the purpose of collecting and disseminating information for a recognized newsgathering organization, and do not include travel transactions related to any other activity in Iraq'. [Plaintiff] admits that, among her activities within Iraq, were excursions to ‘defend Iraqi civilian infrastructure from bombing.’ Such activity clearly would not fall within the journalistic exception, and thus we are confident the Agency would reach the same conclusion even were we to determine that some of [Plaintiff]‘s activities in Iraq were exempted by the journalistic exception.” [Slip op. 7]
The Circuit Court then rejects Plaintiff’s Due Process claims. Addressing the Defendant’s notice and an opportunity to be heard, the Court declares: “[t]he Agency’s procedural safeguards guaranteed that, prior to fining [Plaintiff], the [OFAC.] informed her of its tentative assessment, explained to her the basis for that assessment, provided her with a summary of the evidence it considered relevant, and offered her an opportunity to respond in a written presentation. [Cite].” [Slip op. 9 10]
The Court then spurns the Plaintiff’s Fifth Amendment right to travel claims. “[T]he right to travel internationally is simply an aspect of the liberty protected by the Due Process Clause of the Fifth Amendment, and as such may be regulated within the bounds of due processthe Iraqi Sanctions Act of 1990, declared that the ‘policies and actions of the Government of Iraq constitute an unusual and extraordinary threat to the national security and foreign policy of the United States,’ and therefore ordered that transactions by United States citizens relating to travel to Iraq be prohibited. Exec. Order No. 12,722, 55 Fed. Reg. 31,803 (Aug. 2, 1990). Since the restriction on engaging in such transactions was based on these concerns of foreign policy, the travel restriction was not a violation of [Plaintiff]‘s liberty interests under the Fifth Amendment’s Due Process Clause.” [Slip op. 11]
Finally the Circuit Court sees no merit in the free speech issue. “Under the First Amendment, a restriction against traveling to a specified country is ‘an inhibition of action,’ not speech. Zemel v. Rusk, 381 U.S. 1, 16 (1965). As the Zemel Court explained, many restrictions on action could ‘be clothed by ingenious argument in the garb of decreased data flow.’ Id. at 16 17. Yet such arguments are to no avail since the First Amendment guarantees a citizen the right to speak and publish, but does not guarantee an unrestrained right to gather information. Id. at 17. [Plaintiff] was fined because of her actions in violating the travel regulations, not for her speech. Consequently, her First Amendment rights were not violated.” [Slip op. 11]
Citation: Karpov v. Snow, 2007 WL 2302015 (2d Cir. 2007).
Filed in: 2007 International Law Update, Issue8
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By Executive Order, the U.S. President has removed many non-statutory economic sanctions against Libya in light of latter’s cooperation in disclosing and eliminating its nuclear and chemical weapons programs
According to the U.S. State Department, the President issued an Executive Order on January 20, 2004 that takes away a number of restrictions he had imposed on Libya. For example, the Order ends the National Emergency announced in 1986 under the International Emergency Economic Powers Act (IEEPA).
It also abolishes economic curbs on aviation services with Libya, allowing direct scheduled air service and regular passenger charter flights. In addition, the Order unblocks about $1.3 billion in assets frozen under the Libya sanctions program as it applied to both Libyan and non Libyan entities.
During 2004, Libya has been working closely with several international organizations such as the International Atomic Energy Agency (IAEA) and the Organization for the Prohibition of Chemical Weapons (OPIC). Furthermore, Libya has asked the United States and the United Kingdom for their help in “transparently and verifiably” doing away with its weapons of mass destruction and its MTCR class missile programs.
On the nuclear front, Libya has enabled the removal of all critical elements of its hitherto undeclared nuclear programs. It has also started cooperating with the international community to remove its highly enriched uranium and has agreed to alter its reactor at Tajura to run on low enriched uranium fuel. Finally, Libya has signed and is carrying out the IAEA Additional Protocol and has agreed to allow unimpeded site access by international personnel.
Furthermore, Libya has acceded to the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction with Annexes of April 29, 1997 [Jan 13, 1993, 32 I.L.M. 800, entered into force April 29, 1997] Moreover, it has presented a declaration of its chemical agents to the Organization for the Prohibition of Chemical Weapons (OPC).
On the other hand, ending the national emergency will not affect a wide variety of statutory sanctions imposed on Libya. For instance, it remains labeled as a “State Sponsor of Terrorism” under Section 620A of the Foreign Assistance Act. Moreover, strictures laid down by Section 40 of the Arms Export Control Act and Section 6(j) of the Export Administration Act of 1979 (exports of certain items on the Commodity Control List), as well as other similar constraints, continue to apply to Libya.
Citation: Fact Sheet No. 2004/1001, U.S. State Department, Office of Spokesman, Washington, D.C.; Monday, September 20, 2004.
Filed in: 2004 International Law Update, Issue9
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In reviewing challenge by Illinois charitable organization to freeze of its assets under I.E.E.P.A. after September 2001 terrorist attacks, Seventh Circuit rules that restrictions turn on “beneficial” rather than “legal” ownership of corporation
After the terrorist attacks of September 11, 2001, the U.S. President issued an Executive Order declaring a national emergency. It froze the assets of groups that “assist in, sponsor, or provide financial, material, or technological support for, or financial or other services to or in support of, such acts of terrorism.” See Executive Order 13224, Section 1(d)(1), 66 Federal Register 49079 (September 23, 2001). This Executive Order rested on the International Emergency Economic Powers Act (IEEPA) [50 U.S.C. Sections 1701-1707], which was later amended by the USA PATRIOT Act [Pub. L. 107-56, Title I, Section 106, 115 Stat. 272, October 26, 2001].
Global Relief Foundation, Inc. (GRF), is an Illinois charitable corporation operating in about 25 foreign countries, including Afghanistan, Albania, Pakistan, Somalia, and Syria. On December 14, 2001, the U.S. Secretary of the Treasury blocked its assets, pursuant to IEEPA, Section 1702(a)(1)(B). This provision authorizes the U.S. President to “investigate, block during the pendency of an investigation, regulate … prevent or prohibit, any acquisition … with respect to … any property in which any foreign country or a national thereof has any interest …, subject to the jurisdiction of the United States.”
GRF requested a district court to enjoin the blocking order. It denied that any “foreign … national” has an “interest” in its assets, and argued that IEEPA did not apply to corporations holding charters issued in the U.S. The district court turned down the request, and GRF appealed. (Meanwhile, on October 18, 2002, the Office of Foreign Assets Control listed GRF as a “Specially Designated Global Terrorist organization.”) The U.S. Court of Appeals for the Seventh Circuit affirms and remands.
The Court first rejects GRF’s argument that IEEPA does not apply to corporations that hold charters issued within the U.S. because all its assets are under U.S. control. It is incorrect to contend that the property of all corporations chartered within the U.S. is necessarily domestic U.S. property.
“Cases such as Sumitomo Shoji America, Inc. v. Avagliano, 457 U.S. 176 (1982), illustrate the application of this principle to federal statutes. Treaties that the United States has negotiated with many foreign nations grant citizens (including corporations) of those nations certain privileges within the United States. Avagliano holds that a U.S. subsidiary of a foreign corporation is a U.S. citizen, not a foreign citizen, for the purpose of these treaties. This meant that the subsidiary has to comply fully with U.S. law even though 100% of its stock may be held by foreign nationals.”
“Some statutes prescribe a different rule. The Foreign Sovereign Immunities Act, for example, treats a corporation as having the sovereign attributes of a government that owns the majority of its stock. 28 U.S.C. Section 1603(b)(2). … But under the Foreign Sovereign Immunities Act, a corporation chartered within the United States always is treated as a private U.S. citizen, even if a foreign nation owns all of its stock. 28 U.S.C. Section 1603(b)(3) …”
“GRF reads the word ‘interest’ in Section 1702(a)(1)(B) as referring to a legal interest, in the way that a trustee is legal owner of the corpus even if someone else enjoys the beneficial interest. … The legal interest in GRF’s property lies in the United States, but we need to know whether Section 1702(a)(1)(B) refers to legal as opposed to beneficial interests.”
“The function of the IEEPA strongly suggests that beneficial rather than legal interests matter. The statute is designed to give the President means to control assets that could be used by enemy aliens. When an enemy holds the beneficial interest in property, that is a real risk even if a U.S. citizen is the legal owner.”
“Consider for a moment what would happen if Osama bin Laden put all of his assets into a trust, under Illinois law, administered by a national bank. If the trust instrument directed the trustee to make the funds available for purchases of weapons to be used by al Qaeda, then foreign enemies of the United States would have an ‘interest’ in these funds even though legal ownership would be vested in the bank …”
“Nothing in the text of the IEEPA suggests that the United States’ ability to respond to an external threat can be defeated so easily. Thus the focus must be on how assets could be controlled and used, not on bare legal ownership. GRF conducts its operations outside the United States; the funds are applied for the benefit of non-citizens and thus are covered by Section 1702(a)(1)(B).” [Slip op. 9-12] The Court remands the case to the district court to decide whether GRF in fact does support terrorism.
Citation: Global Relief Foundation, Inc. v. O’Neill, No. 02-2536, 2002 WL 31890724 (7th Cir. December 31, 2002). [See also “Appeals court won’t lift curbs on Islamic charity,” Chicago Tribune, January 1, 2003, page C3; “When Justice Goes Mute,” Los Angeles Times, January 5, 2003, page M4].
Filed in: 2003 International Law Update, Issue 1
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In response to U.S. safeguards to protect its domestic steel industry, European Union has imposed additional customs duties ranging from 8% to 100% on various U.S. products such as rice, T-shirts, flat-rolled steel products and building structures
In response to the safeguard measures in the form of tariff increases or tariff quotas that the U.S. has imposed on imports of EU steel products from March 20, 2002, the EU has responded with Regulation 1031/2002. It lays down “additional customs duties on imports of certain products originating in the United States of America.” These duties range from 8% to 100%. According to the Regulation, the EUR 626 million in duties collected will not exceed the amount of duties that the U.S. has imposed on EU exports.
The Regulation notes that the U.S. safeguards affect European Union exports worth at least EUR 2,407 million per year. Furthermore, the Regulation states that the EU notified the WTO Council for Trade in Goods on May 14, 2002, and that the Council has not notified the EU that it disapproved Regulation 1031/2002.
The Annexes to the Regulation list the U.S. products on which the EU has imposed higher duties. Among the affected U.S. products are (additional duties in parentheses): rice (100%), t-shirts (100%), flat-rolled products of iron or non-alloy steel (100%), and building structures (100%). The additional duties listed in Annex II will apply from March 20, 2005 on, or from date on which the WTO issues a finding that the U.S. safeguard measures are at war with WTO obligations. The U.S. products of Annex II include: vegetables (13%), paper (15%), and apparel items (30%).
In a related matter, on July 17, 2002, the EU Commission issued a report to the EU Council on the impact of the U.S. safeguard measures for steel. The report also describes the current state of negotiations, the EU products excluded from the U.S. by its safeguard measures, and the resulting EU export losses.
Citation: Council Regulation (EC) No 1031/2002, 2002 O.J. of the European Communities (L 157) 8, June 15, 2002; Commission Regulation (EC) No 1287/2002, 2002 O.J. of the European Communities (L 187) 25, July 16, 2002; European Union RAPID Press Release IP/02/1083 (17 July 2002); [Agence France Presse “US says EU steel retaliation flouts rules” (June 10, 2002); The New York Times “W.T.O. Loophole Allows a Surge in Protectionism” (page W1, June 13, 2002);] European Report “EU/US: EU Stand-Down in Steel Stand-Off” (No. 2702, July 20, 2002).
Filed in: 2002 International Law Update, Issue 8
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On appeal of conviction under sanctions regulations against Iran, Fourth Circuit holds that prior conviction for same offense was admissible to show scienter and that such sanctions also apply to Iranian goods imported to U.S. through third countries
In February of 2000, officials at Dulles International Airport in Virginia stopped a shipment consisting of eighty-three carpets en route to a carpet distribution company operated by Zia Hassanzadeh. After an appraisal of the seized carpets, officials determined that sixty-one of the carpets had been made in Iran. He was initially charged and sentenced with aiding, abetting and illegally importing Iranian carpets in violation of 18 U.S.C. Sections 542 and 545.
While Hassanzadeh was in custody, an employee of his reportedly went to the warehouse facility and marked the remaining carpets as having been manufactured in Russia and Turkey. At the same time, he removed a tag from one carpet which identified it as of Iranian origin. The investigation also revealed that the individual who had shipped the carpets to the U.S. was located in Germany and happened to be Hassanzadeh’s brother. At a nonjury trial, Hassanzadeh was convicted of one count of knowingly importing Iranian products and a Virginia federal court sentenced him to 18 months in prison.
On appeal, Hassanzadeh argued that the district court had abused its discretion in admitting evidence of his 1997 conviction for importing Iranian carpets on the theory that the prejudicial impact of the evidence outweighed its probative value. The U.S. Court of Appeals for the Fourth Circuit, however, affirms the conviction and sentence.
“Hassanzadeh initially argues that knowledge is not an element of Section 545, eliminating the probative value of the evidence of his prior conviction. He is wrong, Section 545 prohibits anyone from ‘knowingly and willfully, with intent to defraud the United States, smugglingany merchandise which should have been invoiced’ or ‘fraudulently or knowingly importing or bringing into the United States, any merchandise contrary to law’ or otherwise ‘facilitating’ smuggling ‘knowing’ that the smuggled goods were illegally imported.” Defendant also contended that the prejudicial impact of the 1997 conviction outweighed its probative value. According to Federal Rule of Evidence 404(b), “[e]vidence of a prior act is admissible if (1) relevant to an issue, such as an element of an offense, and not … offered to establish the general character of the defendant, (2) necessary in the sense that it is probative of an essential claim or an element, (3) reliable, and (4) not so prejudicial that its prejudicial effect outweighs its probative value, in the sense that it tends to subordinate reason to emotion in the fact-finding process.” [Slip op. 6-7]
The Court writes that “Hassanzadeh’s prior conviction for importing carpets of Iranian origin is reliable and both relevant and necessary to establish knowledge, an element of the instant offense; indeed, evidence of the 1997 conviction is particularly salient because it involves a recent Section 545 offense identical to the one at issue here. Moreover, we have confidence that at the bench trial, the experienced district judge was able to separate the emotional impact from the probative value of this potentially prejudicial evidence.” [Slip op. 7]
Finally, the appellee argues three additional points with regard to the factors affecting his sentence. First, Hassanzadeh argues that the method of calculating the validity loss figure on which his offense level was based was erroneous. Second, the value assigned to the carpet was erroneous. Finally, the inclusion in the sentencing calculation of carpets made before the modern state of Iran came into existence in 1935 was erroneous.
On the first argument, the Court holds that Hassanzadeh was convicted of importing goods banned by Executive Order 12,613 and related federal regulations. The Order in question bans importation of goods from Iran so as to ensure that the United States does not contribute to the financial support of terrorism. Hassanzadeh argued, however, that the carpets were imported from a warehouse in Germany and not directly from Iran. The Court disagrees, noting that the Executive Order bars the importation of Iranian goods originating in countries other than Iran. The Court also finds that the district court did not err in fixing a value for the carpets.
Finally, Hassanzadeh argues that the lower court should not have included 42 carpets made before 1935 in the calculation of the loss amount for sentencing purposes. The Court rejects this notion. “The 1935 change of the country’s name from Persia to Iran does notbear the weight Hassanzadeh seeks to place on it[a] country study on Iran by the Federal Reserve Division of the Library of Congress, completed in 1987 – the same year in which the executive order was issued – refers to the country as ‘Iran,’ even when speaking of events long before 1935. Similarly, the State Department’s 1994 background note on the country calls the country Iran in describing its pre-1935 history.” [Slip op. 15].
Moreover, the regulatory definition of Iran defines the country as: “The territory of Iran, and any other territory or marine area, including the exclusive economic zone and continental shelf, over which the Government of Iran claims sovereignty, sovereign rights or jurisdiction, provided that the Government of Iran exercises partial or total de facto control over the area or derives a benefit from economic activity in the area pursuant to an international agreement.” [Slip op. 18]. See also 31 C.F.R. Section 560.303.
Citation: United States v. Hassanzadeh, No. 01-4155 (4th Cir. November 13, 2001).
Filed in: 2001 International Law Update, Issue12
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U.S. President Clinton again suspends lawsuit provisions of LIBERTAD Act for another six months period
On January 16, 2001, shortly before leaving office, U.S. President Bill Clinton suspended for an additional six months the lawsuit provision in Title III of the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act (Public Law No. 104-114). The President certified that a continued suspension is necessary to protect the national interest and to expedite the transition to democracy in Cuba.
Title III of the Act allows U.S. parties with claims to confiscated property in Cuba to file suits in U.S. courts. Though Title III entered into force on August 1, 1996, the President immediately suspended the law suit provision to permit a multilateral approach to promote democracy and human rights in Cuba. Each time the President continued the suspension of that provision, he referred to the international efforts and the pressure exerted by other countries on Cuba.
The ongoing suspension, from February 1, through July 31, 2001, will permit international efforts to continue. A Press Statement and accompanying Fact Sheet issued by the Department of State describe the various efforts and initiatives of the international community to promote democracy in Cuba.
The Fact Sheet notes, for example, (1) that Canada would invite only “democracies” to the 2001 Summit of the Americas in Quebec City; (2) that friction developed at the Ibero-American Summit in Panama November 17-18, 2000, because only Cuba refused to sign a statement condemning ETA terrorists in Spain; and (3) that international NGOs continue to support dissidents in Cuba. For example, Human Rights Watch produced an end-of-year human rights report that lists Cuba as one of the world’s worst human rights violators.
In a related matter, the U.S. International Trade Commission (ITC) has released a report on The Economic Impact of U.S. Sanctions with Respect to Cuba (USITC Publication No. 3398, February 2001). The report is available on the ITC website “www.usitc.gov”. It analyzes the impact of U.S. sanctions on specific economic sectors of Cuba, concluding that the sanctions affect the U.S. and Cuban economies only minimally. The report also notes that some U.S. industries may benefit from the removal of these sanctions.
Citation: U.S. Department of State Press Statement of Jan.17, 2001, and accompanying fact sheet; The White House, Transmittal Letter Concerning Report of Title III of Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 (January 16, 2001); U.S. International Trade Commission News Release 01-025 (Feb. 16, 2001).
Filed in: 2001 International Law Update, Issue 2
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U.S. Supreme Court holds that subsequent federal enactment on sanctions against repressive regime in Burma preempts Massachusetts statute barring state entities from buying goods or services from companies that do business with Burma
Massachusetts enacted a statute in 1996 (An Act Regulating State Contracts with Companies Doing Business with or in Burma (Myanmar),” 1996 Mass. Acts 239, ch. 130) (the state Act). With some exceptions, it prevented state entities from buying goods or services from U.S. or foreign companies doing business with Burma/Myanmar mainly because of its poor human rights record. Several months later, Congress also legislated in the field, directing mandatory and conditional sanctions upon Burma. (Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1997, Section 570, 110 Stat. 3009 166 to 3009 167) (the federal Act).
The National Foreign Trade Council (NFTC) had over thirty member companies claiming to have been adversely impacted by the state Act and haled Massachusetts into federal court. The NFTC alleged that the state Act contravened the U.S. Constitution by encroaching upon the federal foreign affairs power, and by breaching the Foreign Commerce Clause. In addition, it contended that the later federal Act preempted the state Act.
Agreeing with the NFTC, the district court permanently enjoined the enforcement of the state Act and the First Circuit affirmed [see 181 F.3d 88]. The U.S. Supreme Court granted certiorari and affirms.
In general terms, the Court first points out that state law must yield to an Act of Congress either if Congress intends to take over the field or to the degree the state law conflicts with the federal enactment. The preemption doctrine should apply if the Court finds that a private party could not comply with both the federal and state law and that the state statute hinders Congress from carrying out its goals and purposes. In this case, the state Act impedes the will of Congress by subverting the provisions of at least three federal enactments.
In the first place, the state Act hinders the federal Act’s delegation of discretion to the President to regulate and fine-tune the economic sanctions the Act sets up.
“Within the sphere defined by Congress, then, the statute has placed the President in a position with as much discretion to exercise economic leverage against Burma, with an eye toward national security, as our law will admit. And it is just this plenitude of Executive authority that we think controls the issue of preemption here. The President has been given this authority not merely to make a political statement but to achieve a political result, and the fullness of his authority shows the importance in the congressional mind of reaching that result. It is simply implausible that Congress would have gone to such lengths to empower the President if it had been willing to compromise his effectiveness by deference to every provision of state statute or local ordinance that might, if enforced, blunt the consequences of discretionary Presidential action.” [Slip op. 7]
In addition the state Act obstructs Congress’s plan to limit economic pressure on the Burmese Government to a specific flexible range. “It [the state Act] restricts all contracts between the State and companies doing business in Burma, (cit.) except when purchasing medical supplies and other essentials (or when short of comparable bids), (cit.). It is specific in targeting contracts to provide financial services, (cit.) and general goods and services, (cit.) to the Government of Burma, and thus prohibits contracts between the State and United States persons for goods, services, or technology, even though those transactions are explicitly exempted from the ambit of new investment prohibition when the President exercises his discretionary authority to impose sanctions under the federal Act.” [Slip op. 8]
In addition, the state Act reaches much farther than the federal scheme. “The Massachusetts law directly and indirectly imposes costs on all companies that do any business in Burma, (cit.) save for those reporting news or providing international telecommunications goods or services, or medical supplies, (cits.) It sanctions companies promoting the importation of natural resources controlled by the government of Burma, or having any operations or affiliates in Burma. (cit.) The state Act thus penalizes companies with pre existing affiliates or investments, all of which lie beyond the reach of the federal act’s restrictions on ‘new investment’ in Burmese economic development. (cits.) The state Act, moreover, imposes restrictions on foreign companies as well as domestic, whereas the federal Act limits its reach to United States persons.” [Id.]
Last of all, the state Act clashes with the President’s authority to speak for the United States with a single voice among the community of nations to bring about a workable multilateral Burma strategy. “First, in response to the passage of the state Act, a number of this country’s allies and trading partners filed formal protests with the National Government, (cit.) including an official Note Verbale from the EU to the Department of State protesting the state Act. EU officials have warned that the state Act ‘could have a damaging effect on bilateral EU US relations.’” [Slip op. 10]
“Second, the EU and Japan have gone a step further in lodging formal complaints against the United States in the World Trade Organization (WTO), claiming that the state Act violates certain provisions of the Agreement on Government Procurement, (cit.) and the consequence has been to embroil the National Government for some time now in international dispute proceedings under the auspices of the WTO.” [Id.]
“Third, the Executive has consistently represented that the state Act has complicated its dealings with foreign sovereigns and proven an impediment to accomplishing objectives assigned it by Congress. Assistant Secretary of State Larson, for example, has directly addressed the mandate of the federal Burma law in saying that the imposition of unilateral state sanctions under the state Act ‘complicates efforts to build coalitions with our allies’ to promote democracy and human rights in Burma. …This evidence in combination is more than sufficient to show that the state Act stands as an obstacle in addressing the congressional obligation to devise a comprehensive, multilateral strategy.” [Slip op. 10-11]
Finally, the Court rejects the State’s argument that Congress’s failure to expressly preempt the state Act evidences an implicit consent to its validity. “A failure to provide for preemption expressly may reflect nothing more than the settled character of implied preemption doctrine that courts will dependably apply, and in any event, the existence of conflict cognizable under the Supremacy Clause does not depend on express congressional recognition that federal and state law may conflict, (cit.). The State’s inference of congressional intent is unwarranted here, therefore, simply because the silence of Congress is ambiguous.” [Slip op. 12]
Joining only in the Court’s judgment, two justices file a concurring opinion. It mainly objects to what it calls the majority’s extensive and unnecessary use of legislative history to show that the federal Act means what it’s operative language says on its face.
“I consider that to be not just wasteful (it was not preordained, after all, that this was to be a 25 page essay) but harmful, since it tells future litigants that, even when a statute is clear on its face, and its effects clear upon the record, statements from the legislative history may help (and presumably harm) the case. If so, they must be researched and discussed by counsel which makes appellate litigation considerably more time consuming, and hence considerably more expensive, than it need be. This to my mind outweighs the arguable good that may come of such persistent irrelevancy, at least when it is indulged in the margins: that it may encourage readers to ignore our footnotes.” [Slip op. 14]
Citation: Crosby v. National Foreign Trade Council, No. 99-474 (U.S. June 19, 2000).
Filed in: 2000 International Law Update, Issue 6
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EU issues “Common Position” on Taliban regime in Afghanistan expressing EU’s intent to resist terrorism, to curtail drug and munitions trafficking as well as to foster peace and political stability; it also enacts Regulation that freezes Taliban assets and bans its planes from EU airspace
Concerns over terrorism, drugs, and political instability having to do with Afghanistan, have led the European Union (EU) to issue a “Common Position” (2000/55/CFSP) which sets forth its intent to play an effective role in restoring peace and stability to that nation. The EU commits itself, among other things, to support the U.N. Special Mission to Afghanistan (UNSMA), to maintain the arms and munitions embargo it imposed in 1996, and to urge countries involved in the Afghanistan conflict to withdraw their personnel and to cut off their military support (Article 2).
In addition, the EU pledges to continue its humanitarian support of Afghanistan’s people. Moreover, it will carry on the fight against drugs, such as by furthering sustainable alternative development to replace cultivation of drug sources with other crops (Articles 4 & 5). Finally, the Common Position condemns terrorism and urges the Taliban faction to close down the sites of foreign terrorists inside Afghanistan and to comply with U.N. Security Council Resolution 1267/99.
In a related matter, the EU has issued a Regulation spelling out its sanctions against the Taliban. It freezes all Taliban financial assets, and bars the entry into the EU’s airspace of all aircraft listed in the Regulation (e.g., Afghan military and civil aircraft). The Regulation also specifies the competent government authorities in each EU Member State charged with enforcing the sanctions. For example, in Belgium, the Finance Ministry administers the freezing of Taliban funds; in the UK, the Department of Environment, Transport and the Regions oversees the flight bans. [Editorial Note: Afghanistan's ruling Taliban movement will not give in to the U.S.-led international pressure to expel terrorism suspect Osama bin Laden. The Washington Post reported that Taliban Foreign Minister Wakil Ahmad Muttawakil confirmed this during his recent visit to Pakistan. The U.S. suspects that Bin Laden had planned the fatal bombings of two U.S. embassies in East Africa and other terrorist acts. See Washington Post, January 25, 2000, page A13.]
Citation: 2000 O.J. of European Communities (L 21) 1, 26 January 2000 (common position). [The EU had issued Common Position imposing sanctions on Taliban in November 1999, see 1999 O.J. of European Communities (L 294) 1, 16 November 1999.]; 2000 O.J. of the European Communities (L 43) 1, 16 February 2000 (specifying sanctions).
Filed in: 2000 International Law Update, Issue 3
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As further economic sanctions against Yugoslavia, EU freezes Yugoslav funds abroad and bars future investments in Serbia
The European Union (EU) has broadened the sanctions that it recently imposed on the Federal Republic of Yugoslavia because of Yugoslavia’s repressive policies and human rights violations (see 1999 Int’l Law Update 51 & 76). To this end, the EU has issued Regulation 1294/1999 to freeze Yugoslav funds and to ban investments in Serbia. Council Decision 1999/424/CFSP also enlarged the list of Yugoslav individuals who may not enter the EU.
Regulation 1294/1999 aims to increase the pressure on Yugoslavia and Serbia by freezing funds held abroad by their governments and by prohibiting new investments in Serbia (Articles 3 and 4). It supersedes previous Regulations and expands sanctions that are already in place by also freezing assets that (1) may generate funds or other financial resources for Yugoslavia and Serbia, or (2) belong to companies and entities owned or controlled by those governments, or (3) belong to individuals acting for, or on behalf of, those governments. There are exemptions from these requirements such as for payments of salaries, insurance premiums, debt service, or if urgent circumstances so require (Articles 7 and 8).
Annex I of the Regulation contains a list of “Persons acting or purporting to act for … Yugoslavia … or … Serbia.” The list includes the President, Mr. Milosevic, as well as the members of the government, the members of the Serbian government, and executives of key institutions. This list is virtually identical to the above-mentioned Council Decision 1999/424/CFSP, that bars specified individuals from entry into the EU.
Annex II lists several companies and other entities that are located abroad but that Yugoslavia and Serbia control. Finally, Annex III names competent authorities in the EU Member States to interpret and enforce the sanctions. For example, the list of authorities includes the Danish Agency for Trade and Industry and the Bank of England, Sanctions Emergency Unit.
Citation: Council Regulation … No 1294/1999 of 15 June 1999 concerning a freeze of funds and a ban on investment in relation to the Federal Republic of Yugoslavia …, 1999 O.J. of the European Communities (L 153) 63, 19 June 1999; Council Decision … (1999/424/CFSP), 1999 O.J. of the European Communities (L 163) 86, 29 June 1999.
Filed in: 1999 International Law Update, Issue 7
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Resolving several issues of first impression regarding state sanctions on companies doing business with undemocratic foreign nations, First Circuit strikes down “Massachusetts’ Burma Law” based on supremacy of federal power in foreign affairs
In 1996, the State of Massachusetts enacted a law to penalize companies that are doing business with Myanmar, referred to as the “Massachusetts Burma Law” [ch. 130, Sections 22G-22M, 40F 1/2 (West Supp. 1998)] [N.B. Current military regime in Burma changed its name to "Myanmar" in 1989]. The Law effectively forced companies to choose between doing business either with Myanmar or with Massachusetts.
According to the legislative history, the statute seeks to promote democracy in Myanmar by deterring investment by U.S. firms in that country. By early 1998, there were 346 companies on the restricted purchase list. Massachusetts annually spends more than $2 billion in goods and services. At least 19 municipal governments have passed comparable statutes. Several local jurisdictions have enacted similar laws relating to China, Cuba, Nigeria and other nations.
Three months after Massachusetts enacted the Law, the U.S. Congress imposed sanctions on Myanmar through the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1997, Section 570, 110 Stat. 3009-166 to 3009-167.
On April 30, 1998, the National Foreign Trade Council filed its action challenging the Massachusetts Law. In November 1998, the Massachusetts federal court enjoined the enforcement of the law and Massachusetts appealed.
The U.S. Court of Appeals for the First Circuit affirms. The Court finds that the Law unconstitutionally interferes with the foreign affairs powers of the federal government. It also violates the foreign commerce clause. Finally, the federal sanctions against Burma pre-empted state law.
“[T]he Supreme Court has long held that ‘power over external affairs is not shared by the States; it is vested in the national government exclusively. … In The Chinese Exclusion Case, for example, the Court commented that for local interests the several States of the Union exist, but for national purposes, we are but one people, one nation, one power.’ … ”
“[W]hen it comes to foreign affairs, the powers of the federal government are not limited: ‘the broad statement that the federal government can exercise no powers except those specifically enumerated in the Constitution, and such implied powers as are necessary and proper to carry into effect the enumerated powers, is categorically true only in respect of our internal affairs.’” [Slip op. 22-23]
In Zschernig v. Miller, 389 U.S. 429 (1968), for example, the Supreme Court struck down an Oregon statute that barred non-resident aliens from inheriting property unless certain conditions of reciprocity with their country of residence were satisfied. The Supreme Court opined that the Oregon statute required probate courts to inquire into the actual administration of foreign law, the credibility of foreign diplomatic statements, and other international conjectures.
Though the precise boundaries of Zschernig are unclear, the Court agrees with the district court that the Massachusetts Law is unconstitutional under the interpretations of Zschernig taken by other federal courts.
“The conclusion that the Massachusetts law has more than an incidental or indirect effect on foreign relations is dictated by the combination of factors present here: (1) the design and intent of the law is to affect the affairs of a foreign country; (2) Massachusetts, with its $2 billion in total annual purchasing power by scores of state authorities and agencies, is in a position to effectuate that design and intent and has had an effect; (3) the effects of the law may well be magnified should Massachusetts prove to be a bellwether for other states (and other governments); (4) the law has resulted in serious protests from other countries, ASEAN, and the European Union; and (5) Massachusetts has chosen a course divergent in at least five ways from the federal law, thus raising the prospect of embarrassment for the country.” [Slip op. 33]
Citation: Nat’l Foreign Trade Council v. Natsios, No. 98-2304 (1st Cir. June 22, 1999).
Filed in: 1999 International Law Update, Issue 7
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