1 May 1998
Journal of Commerce
Michael S. Lelyveld

Industry group takes Massachusetts
to court over Myanmar sanctions

Complaint charges state with violating the Constitution

An assistant attorney general said the state will defend the law,
which penalizes companies that do business with Myanmar.

BOSTON -- An industry lobbying group filed a landmark federal lawsuit against Massachusetts on Thursday, charging that the state's sanctions aimed at Myanmar represent an unconstitutional infringement on U.S. government powers.

The suit by the Washington-based National Foreign Trade Council follows two years of industry complaints about the 1996 Massachusetts law, which penalizes companies that do business with Myanmar, formerly known as Burma.

Thomas Barnico, a Massachusetts assistant attorney general, said the state will defend its selective purchasing law, authored by state Rep. Byron Rushing, a Boston Democrat.

"Our view is that we're doing our own business and spending our own money," Mr. Barnico said.

In its suit before the U.S. District Court in Boston, the council attacked the state curbs on the grounds that they violate constitutional clauses giving the federal government authority over foreign policy and commerce. The group also charged that a 1996 federal ban on new U.S. investment in military-ruled Myanmar also pre-empts the state statute, according to officials familiar with the case.

The council is known to be working on behalf of USA-Engage, a coalition of more than 600 corporations and associations that are fighting all unilateral sanctions. But USA-Engage refused to discuss the long-awaited suit before the filing. The trade council and its Boston attorneys, Dwyer & Collora, did not return calls Wednesday.

In a one-page release, USA-Engage argued that Myanmar's rights abuses are "reprehensible," but it questioned whether the Massachusetts law is "constitutionally permissible."

"America cannot and should not approach the world as 50 sovereign states with thousands of municipalities, but as a single nation with a single federal foreign policy," the group said.

The industry interests are trying to set a precedent that would go far beyond the Myanmar suit with a ruling that would undercut all subfederal sanctions against countries ranging from Indonesia to Nigeria.

Legal scholars have said that the issue may ultimately have to be decided by the Supreme Court. But USA-Engage has apparently stepped back from an earlier plan to file simultaneous suits in more than one jurisdiction to elevate the question quickly.

Simon Billenness, a Myanmar rights advocate and senior analyst at Franklin Research & Development Corp., said that a key question in the case is whether individual companies will step forward and take the political heat.

"It would really open up any company to tremendous criticism and activist campaigns," Mr. Billenness said. But unless damage from the Massachusetts law can be demonstrated, the case would be open to attack on the grounds that the plaintiffs lack legal standing, he said.

"We've seen no companies named or even mentioned," Mr. Barnico said.

Like a 1988 Massachusetts law aimed at the former government of South Africa, also authored by Mr. Rushing, the curbs impose a 10% penalty on state contract bids from companies known to be dealing with Myanmar.

Several major U.S. companies have pulled out of Myanmar, specifically citing the influence of the Massachusetts sanctions. They include Apple Computer Inc., Eastman Kodak Co. and Hewlett-Packard Co., Mr. Billenness said.

Companies continuing to do business in Myanmar, either directly or through subsidiaries, include Unocal Corp. and United Technologies, according to an official Massachusetts listing compiled with information from the Investor Responsibility Research Center in Washington.

The European Union and Japan have been fighting the Massachusetts law separately on the grounds that it conflicts with a 1994 General Procurement Agreement on open bidding negotiated by the United States and the EU. Mr. Rushing recently filed an amendment to exempt large contracts from the state sanctions in an effort to defuse the dispute with the EU.

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