Not So Old Habits Die Hard: States Back With Divestment Campaigns

There seems to be some resurgence in efforts to use state pension funds to foreign policy ends. California is looking to divest from companies doing business in Iran, and several states have done so with respect to Sudan (now supported by Mia Farrow and Martin Peretz).

Are these measures unconstitutional? In February, a federal district court judge struck down an Illinois divestment measure relating to Sudan, on preemption, Zschernig/dormant foreign affairs power, and foreign commerce grounds. National Foreign Trade Council, Inc. v. Giannoulias, 2007 U.S. Dist. LEXIS 13341. The Supreme Court’s decision in Crosby v. National Foreign Trade Council is the key case here. That involved a selective purchasing law (restricting state procurement, as opposed to investment); it also found the specific federal statutory scheme relating to Burma to be the touchstone in a preemption analysis. Crosby thus might not rule out divesment in the context of relations with other countries (although the specific statutory schemes relating to Iran and Sudan might well point in the same direction, although one suspects a conflict in a Crosby mode would not be hard to find with respect to either).

In any case, these developments show how subfederal actors continue to be inclined to take up the human rights gauntlet – and how the business community is now unafraid to challenge such activity.