1 May 1998
The Financial Times
Nancy Dunne

State sanctions face challenge in US lawsuit

A US industry group yesterday filed a suit challenging the right of states and localities to impose economic sanctions for foreign policy purposes.

The case was filed by the National Foreign Trade Council on behalf of 580 of its member companies against a Massachusetts law imposing sanctions on companies which do business with Burma, or whose parent companies have business dealings there.

"We regard this law suit to be an important test case that will determine the very significant, perplexing and continuing issue concerning the constitutionality of state and local sanctions," said Frank Kittredge, president of the council.

The suit challenges the law on the grounds the US constitution vests responsibility for the conduct of foreign policy with the federal government. It says the state sanctions conflict with other sanctions enacted by Congress and the president. The suit argues there is a violation of the constitution, which prohibits state laws that "discriminate against foreign commerce, burden foreign commerce or impede the federal government's ability to speak with one voice when regulating commercial relations with foreign governments."

The European Union has also complained about the law. Discussions have been under way between US, EU and Massachusetts officials about amending the law to make it consistent with World Trade Organisation rules.

The suit does not name individual companies, although it submits a list compiled by Massachusetts of companies eligible for the sanctions. "They don't want to name individual companies because boycotts have been threatened against them," said a spokesman for the council.

It is not certain that any company has actually been directly injured by the law.

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