WASHINGTON – In a dramatic upheaval that sharply divided the U.S. Supreme Court, a 5-4 majority ruled yesterday that under the First Amendment Congress may not bar corporations and unions from using their own money to make independent expenditures to support or oppose political candidates.

The Court in Citizens United v. Federal Election Commission, 08-205, ruled that the ban on direct corporate expenditures before elections, with criminal penalties, is a powerful chill on legitimate political speech.

See the transcript of the oral arguments in this case

“Its purpose and effect are to silence entities whose voices the government deems to be suspect,” Justice Anthony Kennedy wrote for the majority. “If the First Amendment has any force, it prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech.”

By a separate 8-1 vote, however, the Court upheld disclosure requirements imposed on corporations to give the public information about the sources of the spending.

The ruling drew charges of judicial activism for overturning two major high court precedents on campaign reform: Austin v. Michigan Chamber of Commerce, 494 U. S. 652 (1990), and a section of McConnell v. Federal Election Commission, 540 U. S. 93 (2003), which had upheld the corporate ban contained in the McCain-Feingold campaign finance law of 2002. The ruling is a substantial blow to that law. Senate Minority Leader Mitch McConnell, R-Ky., who launched the legal challenge to McCain-Feingold in 2002, was in the Court chamber when the ruling was announced.

Critics of the decision immediately predicted it would alter elections this year and beyond by unleashing a new flood of corporate and union money into a system already awash with special-interest funds.

“We are moving to an age where we won’t have the senator from Arkansas or the congressman from North Carolina, but the senator from Wal-Mart and the congressman from Bank of America,” said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington, D.C.

President Barack Obama attacked the ruling, asserting in a statement that “the Supreme Court has given a green light to a new stampede of special interest money in our politics. It is a major victory for big oil, Wall Street banks, health insurance companies and the other powerful interests that marshal their power every day in Washington to drown out the voices of everyday Americans.” Mr. Obama pledged to work with Congress to come up with a legislative response, though he did not detail what the response might be.

Supporters of the decision applauded the Court for embracing core First Amendment protections for political speech when it matters most—before elections.

“The Court has finally struck down blatant censorship that masquerades as campaign finance reform,” said Steve Simpson of the libertarian Institute for Justice.

The landmark decision was a personal triumph for former solicitor general Theodore Olson, now at Gibson, Dunn & Crutcher, who argued for Citizens United against the ban on corporate expenditures. He took over the case midstream and raised the stakes by directly challenging the Austin and McConnell precedents, which had not previously been part of the Citizens United legal strategy. After hearing the case last March, the Court ordered a reargument in September to address those cases.

In a statement yesterday, Mr. Olson said, “The vast majority of corporations are either nonprofit advocacy groups, like Citizens United, or small businesses. Far from ‘distorting’ the political process, the speech of these corporations reflects the views of their members or the entrepreneurial individuals who formed the corporation.”

Citizens United first challenged the ban in 2008 out of concern that its documentary “Hillary: The Movie” criticizing then-presidential candidate Hillary Clinton would be viewed as a campaign communication that violated the law because of its corporate funding.

Yesterday’s ruling, announced at a special sitting of the Court after months of now-apparent internal debate and delay, was sharply criticized by four dissenting justices from the Court’s liberal wing, led by Justice John Paul Stevens.

Justice Stevens, 89, summarized his 90-page dissent from the bench for more than 20 minutes, speaking haltingly and occasionally tripping over his words.

Justice Stevens said the majority had wrought a “radical change in the law” and overturned precedents without justification.

“The only relevant thing that has happened since Austin and McConnell is the composition of this Court,” Justice Stevens wrote. He attacked the majority for according corporations the same speech rights as individuals.

Impact on Local Elections

Professor Nathaniel Persily of Columbia Law School noted that since Chief Justice John Roberts Jr. and Justice Samuel Alito Jr. joined the Court it has consistently narrowed or struck down campaign regulations. The newest member, Justice Sonia Sotomayor, joined Justice Stevens’ dissent, along with Justices Ruth Bader Ginsburg and Stephen Breyer.

The dissenters agreed that the decision will have an impact well beyond federal elections, also affecting state judicial and legislative elections.

“The Court unleashes the floodgates of corporate and union general treasury spending in these races,” Justice Stevens said.

Bert Brandenburg of Justice at Stake, which filed a brief in the case warning about the impact of overturning the corporate ban on state judicial elections, agreed.

“This ruling pours gasoline on the fire of special-interest money that has been overtaking judicial elections,” Mr. Brandenburg said in a statement. “Interest group spending imperils our right to impartial justice by pressuring judges to rule with one eye on big-money contributors.”

But Mr. Persily said the impact of the decision may be overstated.

“I tend to think the practical effect is not going to be as great as some people think,” he said, “just because I don’t think corporations actually are itching to spend that much on electioneering expenditures.”

New York law already permits corporations to contribute to state and local campaigns although they are limited to a total of $5,000 in any given calendar year for all candidates. Affiliates can contribute an identical amount if they are separate legal entities..