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Trade Group Eyes Suit Over State Sa



Oil Daily
13 February 1998

Trade Group Eyes Suit Over State Sanctions

As the number of countries put off limits to US oil and other companies
mounts, a Washington trade group says it is considering taking legal action
against state and local organizations that introduce their own sanctions on
firms doing business in what they deem to be pariah nations.

States and localities have made themselves unwelcome guests in the foreign
policy arena by enacting "selective purchasing ordinances" in certain
nations - including oil or gas producers such as Myanmar (Burma).

And according to the National Foreign Trade Council (NFTC) that violates the
US consitution - charges it hopes to prove in the courts NFTC president Frank
Kittredge said Thursday.

The Council has already hired Washington based law firm Jones, Day, Reavis,
and Pogue.  But "we still have to decide exactly whether to go forward and
how to do it," Kittredge told a Cato Institute meeting on state and local
sanctions against Myanmar.

The NFTC litigation team still is deciding under which statute to sue and in
which jurisdictions.  "I would expect that we'll make that decision in the
next two weeks," he said.

Kittredge said state and local sanctions are beginning to be a real problem.
There are 26 state and local laws in place in 22 jurisdictions and 12
pending legal actions in nine jurisdictions.  Thats on top of unilateral
federal sanctions, 61 of which have been imposed on 35 nations since 1993,
many of them oil producers.

According to David Schmahmann, a lawyer who believes state and local
sanctions on Myanmar are unconstitutional, the local policies impinge on
thee federal government's exclusive authority to conduct affairs with
foreign entities, as granted by the constitution.  

"I have no doubt state and local sanctions are unconstitutional...but no one
has challenged that in court." said  Schmahmann who co-wrote an article on
the unconstitutionality of state and local measures against Myanmar last
year.  Fearing a public backlash, companies have shied away from suits that
might make them appear insensitive to the human rights issues.

"This unchallenged run should be of great concern," Schmahmann said.

It remains to be seen whether the federal government will be drawn into the
case, but "they certainly haven't shown a great zealousness in protecting
their turf." Schmahmann said.

The administration has its own sanctions policy against Myanmar, formally
issued in a May 1997 executive order under the International Emergency
Economic Powers Act.  The federal sanctions, required by Senate legislative
language, ban new investments but allow existing businesses to continue - a
partial relief to companies such as Unocal Corp.

Texaco Inc. sold its 42.9% interest in the Yetagun natural gas field in
Myanmar last year.  But Unocal has a stake in the $1.2 billion Yadana gas
project, while Atlantic Richfield Co. has been involved in two offshore
blocks.

Under the emergency economic powers act, the Myanmar sanctions have to
recertified annually.  In the meantime, Sen. Mitch McConnell (R-KY) who has
made Myanmar one of his prime concerns, inserted a paragraph in last year's
foreign operations spending bill ordering the Department of Labor to provide
a report on labor practices in Burma.  That report is due March 26.

Human rights groups charge that the Yadana gas pipeline, being built by
Unocal, France's Total S.A., and the Myanmar Oil and Gas Enterprise to take
gas to Thailand, has relied on slave labor -- something Unocal adamantly
denies.

Calls to McConnell's office were not just answered, but industry sources
just hope the report won't cause "the other shoe to drop" and lead McConnell
to push, again, for divestiture.

But Schmahmann noted that in the area of corporate responsibility, "Unocal
has a number of tangible successes to its credit.  What on earth do you
achieve by making them leave?"

ENDS