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Efforts by states to put financial pressure on the government of Sudan to stop the genocide in Darfur are being challenged by big-business interests. Illinois, New Jersey, Maine, and Oregon have all passed laws to divest their public funds from companies doing business in the northern African nation, and similar legislation either is pending or will be introduced soon in more than a dozen other states. A number of municipalities, public and private universities, and pension funds have adopted divestment schemes of their own. Although federal law already largely bans U.S. companies from doing business in Sudan, the idea behind the divestment campaigns is that pension and other public funds are supporting the regime by bankrolling foreign companies involved in Sudan’s rapidly developing oil industry, whose revenues support the military regime, says Jason Miller, national policy director of the Sudan Divestment Task Force. Top offenders include the parent companies of PetroChina and Sinopec, both Chinese oil giants, he says. “If we can stop the flow of money into Sudan, maybe we can get the Sudanese government to start paying attention,” explains Rep. Jim McDermott (D-Wash.), a proponent of divestment bills in the U.S. House of Representatives. But the constitutionality of the state laws is now in question. Last month attorneys at Winston & Strawn filed a lawsuit challenging the constitutionality of the Illinois law on behalf of the National Foreign Trade Council, a D.C.-based group that lobbies for major companies on international trade and investment issues. If the court strikes down the Illinois law, it could prove to be a significant blow to the divestment movement overall, according to sources on both sides of the issue. “Every state will have cold feet,” Miller says. Meanwhile, a Darfur-sanctions bill that passed in the House in April contained a provision designed to protect states’ right to mandate divestment from Sudan. But the provision has failed to gain support in the Senate. SUING ILLINOIS In a complaint filed on Aug. 7 in the U.S. District Court for the Northern District of Illinois, the NFTC, joined by eight Illinois pension funds and several individual beneficiaries of those funds, argued that the Illinois law is pre-empted by the federal government’s own trade sanctions against Sudan and that the law is an unconstitutional infringement on the federal government’s right to regulate foreign commerce and foreign affairs. The Illinois law requires state public-pension funds to divest completely from companies doing business in Sudan, referred to as “forbidden entities,” by July 27, 2007. The law also prohibits the state’s treasurer from investing any state money in forbidden entities or depositing state money in any bank unless that bank certifies that it has implemented policies requiring its loan applicants to attest that they are not doing business in Sudan.
A Look at the Darfur Situation
Darfur is a province in western Sudan about the size of France.The conflict there began in 2003 and is separate from the civil war that raged in southern Sudan from 1983 to 2004.In Darfur, tensions between mostly black African farmers and Arabic herders, who compete for scarce resources, had simmered for years.In February 2003 a rebel group, the Sudan Liberation Army, started attacking Sudanese government targets. It accused the government of President Omar Hassan al-Bashir of neglecting the region and oppressing black Africans in favor of Arabs in Darfur. In response, the Sudanese government allowed free rein to militias known as the Janjaweed, which began attacking the villages of civilians belonging to the same ethnicities as the rebels. The Janjaweed have engaged in a scorched-earth campaign, systematically raping and killing villagers and destroying homes, property, livestock, and water sources. Government troops have also attacked villages alongside the Janjaweed and have bombed villages using aircraft before Janjaweed raids. An estimated 200,000 have been killed over the past three years, and the conflict has created more than 2 million refugees, although some estimates put the figures much higher. In a Sept. 21 speech before the U.N. General Assembly, President George W. Bush said the United States had concluded that the killings in Darfur constituted genocide.In May 2006 the Sudanese government and the Sudan Liberation Army signed a peace accord, but two smaller rebel groups rejected the deal. The African Union has sent troops to Darfur, but they have been unable to protect civilians from attacks by armed groups, and the violence has actually intensified. There’s been a move to replace the African Union force with U.N. peacekeeping troops, but Sudan rejected a resolution calling for U.N. troops in August, saying U.N. peacekeepers would compromise the country’s sovereignty. The African Union troops were slated to leave at the end of September, but their mandate has been extended through December. Last week, Bush appointed Andrew Natsios, a former administrator of the U.S. Agency for International Development, as special envoy to Darfur.Meanwhile, the Sudanese economy is booming on the back of rising oil exports, with about 50 percent of those going to China. — Alexia Garamfalvi

“The federal government has established its own carefully calibrated scheme of regulations with respect to the Republic of Sudan,” the NFTC wrote. These laws include a 1997 executive order and a number of other federal measures that largely prohibit U.S. companies from doing business in Sudan. In a Aug. 28 motion, the Illinois Attorney General’s Office argued that the NFTC and the pension funds don’t have standing to bring the suit because they have failed to allege how they actually have been injured by the law. No NFTC members have been named in the suit, and NFTC President Bill Reinsch declined to comment on which of its members were behind the suit or the specifics of how their business has been compromised by the Illinois law. Winston & Strawn will file a response to Illinois’ motion to dismiss and make a motion for a preliminary injunction this week, says Eric Hirschhorn, a partner with the firm’s D.C. office who is working on the suit. The firm won a nine-firm beauty contest to get the case, according to Reinsch. A key to the lawsuit will be how closely the Illinois law resembles a Massachusetts law struck down by the U.S. Supreme Court in 2000 in another lawsuit brought by the NFTC. In that case, Crosby v. NFTC, the NFTC challenged a Massachusetts law barring state entities from buying goods or services from companies doing business with the military regime in Burma on the same grounds at issue in the Illinois suit. The Court struck down the Massachusetts law on pre-emption grounds but didn’t rule on the NFTC’s constitutional claims. Robert Stumberg, a Georgetown University law professor who filed a brief in the Crosby case on behalf of members of Congress in support of the Massachusetts law, says it’s not clear whether the Illinois suit will survive the motion to dismiss because of the standing issues, but if it does, “people will start to take the complaint seriously and file amicus briefs.” LOBBYING LUGAR The NFTC’s pre-emption arguments could have been undercut by a provision in a House bill designed to protect states’ right to mandate divestment, but the provision failed to make it into the Darfur-sanctions bill passed in the Senate last week. The divestment language was originally included in the Darfur Peace and Accountability Act, passed by the House in a 416-to-3 vote in April. The measure, known as Section 11, states that nothing in the Darfur bill or any other provision of law shall be construed “to preempt any State law that prohibits the investment of State funds, including State pension funds, in or relating to the Republic of the Sudan.” That language would have sent the courts the message that the federal sanctions legislation is not intended to pre-empt state action, according to Stumberg. But the divestment measure proved to be controversial in the Senate. “The language would doom the bill in the Senate,” wrote Sen. Richard Lugar (R-Ind.), chairman of the Foreign Relations Committee, in a Sept. 7 letter to The Hill newspaper responding to criticism that he had been holding up the Darfur bill. Andy Fisher, a Lugar spokesman, says the State Department has made it clear that it finds the language problematic. The NFTC also spoke with Lugar about its concerns with the divestment language, according to Reinsch. The bill Lugar introduced (without the divestment provision) on Sept. 11 passed in the Senate on Sept. 21, after Democrats agreed to drop their objections to the omission, given the urgency of the situation in Darfur. “While it isn’t perfect, the recently passed Darfur Peace and Accountability Act includes some valuable elements,” Sen. Russ Feingold (D-Wis.) said last week. The Darfur sanctions bill without the divestment language is expected to pass the House in the coming days, say House aides. Rep. Donald Payne (D-N.J.), one of the leading proponents of the divestment language, agreed to drop objections to the sanctions bill over the divestment issue after talking to House International Relations Committee Chairman Henry Hyde (R-Ill.) last week, according to House aides. “We couldn’t sacrifice the whole bill,” one aide says. In an attempt to revive the divestment issue, Rep. Barbara Lee (D-Calif.), along with 48 co-sponsors, last week introduced a new bill, the Darfur Accountability and Divestment Act, which again included the Section 11 language. The legislation, aimed at cutting “the economic lifeline of the Sudan,” also includes a provision to bar foreign companies doing business in Sudan, which directly or indirectly support the genocide in Darfur, from receiving federal contracts. “We’ve got to hit the [Sudan] government where they feel it the most, in their pocketbooks,” Lee told reporters at a Sept. 21 press conference. Based on procurement data from the U.S. General Services Administration, Lee estimates that companies that do business in Sudan, such as Siemens AG, Alstom Power Inc., ABB Inc., the Schlumberger Technology Corp., and the Kuwait Petroleum Corp., have received more than $600 million in federal contracts during fiscal years 2004 to 2006. “It’s not enough to call it genocide; it’s not enough to call a spade a spade,” Delegate Eleanor Holmes Norton (D-D.C.) told reporters at the Sept. 21 press conference. “You have got to take actions commensurate to the problem.”

Alexia Garamfalvi can be contacted at [email protected].

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