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U.S.: Transnationals Win Court Vict (r)

Subject: U.S.: Transnationals Win Court Victory Over Grassroots   Activists 

U.S.: Transnationals Win Court Victory Over Grassroots Activists
Inter Press Service 06-NOV-98

WASHINGTON, (Nov. 5) IPS - U.S. and other transnational corporations (TNCs)
have scored a major victory against state and local governments in the
United States that penalize companies doing business in repressive
countries abroad.

A federal court judge ruled late yesterday that a two-year-old
Massachusetts law which makes it more difficult for companies that do
business in Burma (Myanmar) to win state contracts violates the U.S.

U.S. District Court Judge Joseph L. Tauro found that the law, which adds a
ten-percent penalty to bids for contracts by companies with investments in
Burma, "impermissibly infringes on the federal government's power to
regulate foreign affairs".

"State interests, no matter how noble, do not trump the federal
government's exclusive foreign affairs power," according to the ruling.

A spokesperson for the Massachusetts Attorney General intimated today that
a bid would be made to have the ruling overturned by a higher court. "We
expect to appeal although we want to analyze the decision further," said
the spokesperson, Marsha Cohen.

Some observers believe the case will eventually have to be decided by the
Supreme Court.

The judgement has major implications not just for human rights activists
opposed to the military regime in Burma, but also for the relationship
between state and other local political jurisdictions, on the one hand, and
the federal government on the other.

"The impact of this decision goes far beyond Massachusetts," said Bob
Stumberg, a law professor at the Georgetown Law Center here and a
recognized expert on the U.S. federal system. "It would deny the cities and
states the power to use moral standards for choosing their business
partners if foreign commerce is affected," he noted.

The Massachusetts law is one of dozens of so-called "selective purchasing"
laws which have been used by state and local jurisdictions for more than 20
years to pressure companies to cease doing business with repressive
governments abroad. Such laws are designed to force TNCs to choose between
bidding on often lucrative state and local government contracts and
continuing operations in the target country.

They were used most successfully during the late 1970s and 1980s to force
U.S. TNCs to withdraw from apartheid South Africa. Such laws were credited
with the exodus of scores of some of the biggest U.S. corporations, like
Coca-Cola, IBM, and General Motors, from South Africa between 1976 and
1986, when Congress imposed its own sanctions against Pretoria over the
opposition of then-president Ronald Reagan.

Similar laws in New York, California, Pennsylvania and other states and
cities targeting Swiss banks and insurance companies which had failed to
account adequately to Nazi Holocaust survivors and their families after
World War II helped prompt a settlement of outstanding claims last August.

Some two dozen states and cities have enacted selective purchasing laws
against companies doing business in Burma, where a military junta has
repressed the democratic opposition led by Nobel Peace Prize laureate Aung
San Suu Kyi. Other jurisdictions have targeted companies with operations in
Nigeria, China and Cuba.

TNCs have naturally opposed these initiatives because they curb their
freedom to do business where they like. But, until now, they have been
reluctant to bring a legal challenge to such laws, in part because of the
negative publicity that might accrue to any company claiming a right to do
business with repressive governments.

This case, however, was brought by the National Foreign Trade Council
(NFTC), an association of 580 of the largest U.S. corporations and U.S.
affiliates of foreign TNCs. Early in the case, the judge denied the state's
request that the NFTC identify specific companies which had been harmed by
the Burma law in order to establish their standing to bring the lawsuit.
Instead, Tauro, in one decision that may be part of an appeal, permitted
the NFTC to assert that more than 30 of its members had been affected.

The NFTC claimed vindication here today. "The ruling rests on clear
constitutional grounds, and should significantly deter states and cities
from imposing their own foreign-policy sanctions," said Frank Kittredge,
the council's president.

"We share concerns over reported human rights abuses in Burma, (but) our
system of government was not designed to allow the fifty states and
hundreds of municipalities to conduct their own individual foreign
policies," he added.

The Burma sanctions law has also provoked major interest abroad.

The European Union (EU) filed a brief to the court in support of the NFTC's
position, an action which earned it a strong rebuke from state officials
and Massachusetts lawmakers in the U.S. Congress.

The EU and Japan also filed formal challenges to the law with the World
Trade Organization (WTO) in Geneva, claiming that it violates a 1994
Government Procurement Agreement with Washington which forbids states from
using non-economic criteria in deciding on contract bids.

The administration of President Bill Clinton, which initially tried to
persuade Massachusetts lawmakers to amend the law so that the EU and Japan
would drop their WTO action, has since pledged to defend it in the WTO. The
International Federation of Chemical, Energy, Mine and General Workers'
Unions, which represents more than 20 million workers, last month called on
the EU to withdraw its WTO complaint and "sever all trading links with
Burma until democracy is restored there."

"We're pleased with the decision, and we're assessing the implications for
the WTO case," said Maeve O'Beirne, the EU's spokesperson here.

If the big TNCs were jubilant, supporters of the Burma measure were defiant
today. "Boycotts based on human rights have been a cornerstone of our
democracy since the Boston Tea Party," said Simon Billeness, a senior
analyst at Franklin Research and Development Corp. and a top leader of the
grassroots effort behind the law. "We cannot allow a few corporations to
remove this democratic tool so that they can profit from a murderous
military junta."

"If selective purchasing had been banned ten years ago, (South African
President) Nelson Mandela might still be in prison today," said State Rep.
Byron Rushing, chief sponsor of the bill in the Massachusetts legislature.

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