by Jacob T. Levy

Over on The Spine, Marty Peretz seemingly endorses state-level divestments from businesses doing business in Sudan. Apart from the merits of divestment as a strategy of effecting change, I have a question: Isn't such a policy unconstitutional? Per Crosby v. National Foreign Trade Council, states are prohibited from conducting independent foreign policies through economic boycotts; the federal government occupies the whole field of legitimate action on foreign trade. Isn't a divestment policy just a narrow case of an economic boycott? The Massachusetts Burma law that was struck down in that case prohibited "state entities from buying goods or services from companies doing business with Burma"; the proposed Massachusetts law (and existing law in a half-dozen states) prohibits state pension agencies and the like from buying shares of the future profits of companies doing business with Sudan. I don't see a distinction there that's likely to make a difference. The Massachusetts Burma case turned on the existence of a congressional statute on sanctions against Burma, leaving open the question of whether state action could be preempted by congressional silence. But, in any event, Congreess hasn't been silent here; the Sudan Peace Act of 2002, like the earlier Burma Act, applies (in this case very limited) pressure to Sudan and authorizes the president to step the pressure up in prescribed ways under prescribed circumstances. The Supreme Court held that the Burma Act was undermined by independent state-level sanctions--the latter undermined the incentive structure the president and Congress were applying. I don't think it's quite clear how broad the ruling was, and how much turned on the particular finding that the state statute actually was incompatible with federal policy. But I think it would take some pretty fine contortions to uphold the current state-level divestments; they parallel the Burma Act so closely that they trip over most of the objections that the Court made then. I may well be missing something--maybe there's caselaw distinguishing investment from trade for these kinds of purposes? Does anyone know?