A very interesting article in the New York Times talks about California state lawmakers who have begun the process of passing legislation designed to force two large national pension companies to divest from companies dealing with Iran. The state lawmakers claim that the legislation isn’t aimed at meddling in international affairs, but is instead simply a way of forcing companies to steer clear of what the lawmakers would consider a poor investment.

This is by no means the first state to employ the concept of divestment. In the past few years, a number of states, corporations, and insitutions of higher learning have sought to take money away from the government of Sudan for the atrocities committed in the Darfur region. The biggest question at hand here is the states power to interfere in Congress’s Article I power to regulate commerce (and by extention policy) with foreign nations. The Supremacy Clause of Article VI also comes into play when state action comes in conflict with existing federal legislation. The Supreme Court has long held that states have only very narrow powers to control entities outside of this country. Most recently, the Court held in the 2000 case Crosby v. National Foreign Trade Council that:

This Court will find preemption where it is impossible for a private party to comply with both state and federal law and where the state law is an obstacle to the accomplishment and execution of Congress’s full purposes and objectives. What is a sufficient obstacle is determined by examining the federal statute and identifying its purpose and intended effects.

The biggest difference between the most recent push for divestment and movements in the past is the level of hinderance this one places on the federal government’s capacity to act as the sole constructor of American foreign policy. This case seems clear-cut based on the lawmaker’s past rhetoric and the current state of American relations with Iran, but it will be interesting to see what happens if/when the bill takes effect.


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