Washington Outlook

Supreme Court Strikes Down Massachusetts Law Barring State Agencies From Doing Business With Companies That Conduct Business In Myanmar

By Larry Jones
July 17, 2000

In a 9-0 decision on June 19, the Supreme court unanimously ruled a Massachusetts state law unconstitutional that prohibited state agencies from doing business with any company that conducts business in Myanmar, formerly known as Burma. The Court explained that the Massachusetts law was irreconcilable with a milder federal law which gives the President broad flexibility to impose or lift sanctions on Myanmar as a form of diplomatic leverage to discourage the country's repressive military regime.

Due to the huge differences between the federal and state sanctions, the Court reasoned that enforcement of the state law would "compromise the very capacity of the President to speak for the nation with one voice in dealing with other governments." Citing the Supremacy Clause of the U.S. Constitution, which provides Congress the authority to pre-empt state laws, the Court struck down the state law because it "stands in the way of Congress's diplomatic objectives."

The Court's decision also nullifies a similar state law adopted by Vermont and numerous local laws adopted by the cities across the nation including New York, Los Angeles and Philadelphia, that restrict municipal purchases from companies conducting business in Myanmar. Legal experts also believe it is highly likely that the Court's decision strikes down Miami's embargo against Cuba, which is stricter than the federal embargo.

However, because the Court's ruling was narrowly drawn on the basis of conflict between the state and federal law, legal experts believe it leaves open the possibility for other state and local sanctions that do not conflict with federal law. One such sanction involves divestment by state and local pension funds of the stock of companies that do business with Myanmar.

A Washington-based trade organization filed the lawsuit (Crosby v. National Foreign Trade Council, No. 99-474) against the Massachusetts law in 1998 on behalf of its 550 member companies that engage in foreign commerce. A total of 34 of the National Foreign Trade Council's members were on the state's restricted-purchase list of companies doing business in Myanmar.s

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