State and Local Economic Sanctions: Constitutional Issues

Publication Date: April 2007

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Economics

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Abstract:

States and localities have often proposed or enacted measures restricting their agencies' economic transactions with firms that do business with or in foreign countries whose conduct the jurisdictions find objectionable. While some maintain that sub-federal entities may enact such laws under sovereign proprietary powers and other constitutional prerogatives, others argue that such statutes impermissibly invade federal commerce and foreign affairs authorities and in some cases may be preempted by federal law. In 2000, the U.S. Supreme Court unanimously held in Crosby v. National Foreign Trade Council that a Massachusetts law restricting state transactions with firms doing business in Burma was preempted by a federal Burma statute. In American Insurance Association v. Garamendi, a 2003 case, the Court reaffirmed the relevance of the dormant federal foreign affairs power to preempt state law, but the scope of the 5-4 decision is unclear.

Due to the current situation in Darfur, a number of states have recently proposed or enacted some type of divestment legislation against Sudan. In the 109th Congress, House-passed H.R. 3127, the Darfur Peace and Accountability Act, provided that federal statutes were not to be construed to preempt certain state sanctions against Sudan, but the final, enacted version (P.L. 109-344) does not contain the provision. On February 23, 2007, a federal district court held Illinois' Sudan sanctions law to be unconstitutional and permanently enjoined its enforcement. Two 110th Congress bills -- H.R. 180 (Lee) and S. 831 (Durbin) -- contain provisions in support of state Sudan-related divestment measures. This report will be updated.