• Doing Business with Sudan and Iran: Not Just Federal Sanctions Anymore
  • December 7, 2007 | Authors: Mark F. Brzezinski; Debra S. P. Cheng
  • Law Firm: McGuireWoods LLP - Washington Office
  • Concerned by the continued genocide in Sudan, numerous American states have adopted legislation requiring some level of divestment or at a minimum, identification of public companies doing business with and/or having financial ties to Sudan.1 More states are in the process of considering adopting such legislation.2 Similarly, prompted by Iran’s continued development of nuclear capability, as well as its state sponsorship of terrorism, several American states have adopted or are considering Iran divestment legislation, much along the lines of the Sudan divestment legislation. In addition, a number of local governments have enacted restrictions on doing business with companies conducting business in Sudan.3

    Pending Federal Legislation

    In the face of increasing state and local divestment legislation, in 2006, the National Foreign Trade Council (“NFTC”) and eight boards of Illinois public employee pension funds filed suit (NFTC v. Topinka) against the Illinois Act to End Terrorism and Atrocities in the Sudan on constitutional grounds. On February 23, 2007, the Federal District Court for the Northern District of Illinois ruled to enjoin permanently enforcement of the Illinois Act. Congress has since acted to address the issue.

    On July 31, 2007, the Darfur Accountability and Divestment Act (H.R. 180) passed the House by an overwhelming majority of 418:1. H.R. 180 is now pending in the Senate where it is expected not to face much opposition. It is also anticipated that the President will be amenable to signing such legislation.

    H.R. 180:

    - Directs the U.S. Department of Treasury Secretary to publish a list of persons with ties to certain Sudan industries.
    - Authorizes state and local governments to enact divestment legislation, as well as to prohibit contracting or renewing contract(s) with such a listed company.
    - Prohibits the U.S. government from contracting or renewing contract(s) with such a listed company.
    - Provides certain safe harbors relating to such authorized divestment activities.
    - Excludes the southern semi-autonomous region of Sudan.

    The Iran Sanctions Enabling Act of 2007 (H.R. 2347) passed the House by an overwhelming majority of 408:6. H.R. 2347 is now pending in the Senate where it is also expected not to face much opposition.

    - Directs the President to publish a list biannually in the Federal Register of any persons that: (1) have an investment of more than $20 million in the energy sector in Iran; (2) sell arms to the government of Iran; or (3) is a financial institution that extends $20 million or more in credit for 45 days or more to the government of Iran.
    - Authorizes a governmental entity to adopt and enforce measures to divest its assets from, or prohibit investment of assets in such a listed person or is included on a state or local government-authorized list of entities invested in or doing business in or with Iran.
    - Provides certain safe harbors relating to such authorized divestment activities.

    Impact

    Companies doing business in or with Sudan and Iran are advised to pay close attention to legislative developments on the local, state, as well as federal levels in case such legislation might impact their business.


    1 “California, Colorado, Florida, Hawaii, Indiana, Illinois, Iowa, Kansas, Maine, Minnesota, New Jersey, New York, Oregon, Rhode Island, Texas and Vermont have passed legislation to divest State funds from companies that conduct business operations in Sudan. . . . Arkansas, Connecticut, Maryland, and Ohio have passed non-binding divestment legislation with respect to Sudan.” H.R. 180, Section 2(8) (110th Congress).

    2 “Massachusetts, Michigan, North Carolina, Ohio, Pennsylvania, South Carolina, and Wisconsin are considering legislation to divest State funds from companies that conduct business operations in Sudan.” H.R. 180, Section 2(8) (110th Congress).

     

    3 “Denver, Colorado, Los Angeles, California, Miami Beach, Florida, New Haven, Connecticut, Newton, Massachusetts, Philadelphia, Pennsylvania, Pittsburgh, Pennsylvania, Providence, Rhode Island, and San Francisco, California have passed legislation mandating divestment of city funds from companies that conduct business operations in Sudan.” H.R. 180, Section 2(9) (110th Congress).