Petition for Writ of Certiorari — Lubman v. Mayor of Baltimore City

89-889

No.

Suprema Court, U,8,

FILED

NOV 30 360

SPAN

CLERK "a

In The

Supreme Court of the United Stat

October Term, 1989

,™

—

YALE LUBMAN, THOMAS J. MURPHY,

JOHN S. SEISS AND JOSEPH STEWART,

eee.

es

Petitioners,

MAYOR AND CITY COUNCIL OF

BALTIMORE CITY,

Respondents.

>

PETITION FOR A WRIT OF CERTIORARI

TO THE MARYLAND COURT OF APPEALS

>

DoucLas FOSTER

*MARrTIN S. KAUFMAN

*Counsel of Record

ATLANTIC LEGAL FOUNDATION

205 East 42nd Street

New York, NY 10017

(212) 573-1960

Attorneys for Petitioners

COCKLE LAW BRIEF PRINTING CO,, (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED

Ordinances adopted by the City of Baltimore, similar to

many such state, city and county statutes and ordinances

involving hundreds of billions of dollars of assets, require the

trustees of public employee pension funds to divest those

funds of securities of all American companies doing business

in South Africa and bar the trustees from buying any such

securities.

The questions presented are:

1. Does local legislation that seeks to influence the internal

policies of a foreign nation and by its mandate thereby passes

judgment upon those policies impermissibly intrude upon the

exclusive power under the Constitution of the Federal Gov-

ernment to conduct foreign relations?

2. Does local legislation that restricts the purchase and sale

of billions of dollars of securities, based on whether the

securities issuers do business in a foreign nation, violate the

Commerce Clause of the United States Constitution and

infringe upon the power of the Federal Government to regu-

late interstate and foreign commerce?

3. Is local legislation that seeks to pressure American com-

panies to stop doing business in South Africa preempted by

the Federal Government’s policy which encourages American

companies to do business in South Africa?

4. Does local legislation that reduces the value of the bene-

fits paid to beneficiaries from public employee pension trust

funds, contributions to which were made by the beneficiary-

petitioners, effect a taking of the petitioners’ property without

due process and therefore violate the Fifth and Fourteenth

Amendments to the United States Constitution and also vio-

late the impairment of contract clause of Art I, § 10 of the

Constitution?

il

PARTIES TO THE PROCEEDING

The parties before the Maryland Court of Appeals were:

The Board of Trustees of the Employees’ Retirement System

of the City of Baltimore, The Board of Trustees of the Fire

and Police Employees’ Retirement System of the City of

Baltimore, The Board of Trustees of the Elected Officials’

Retirement System of the City of Baltimore, Hyman Aaron

Pressman, Charles H. Whittum, Jr., William E. Dix, Harry

Deitchman, Bishop L. Robinson, Henry G. Parks, Jr., Kenneth

P. Taylor, Charles F. Peace, HI, Edward C. Heckrotte, Sr.,

Gary W. McLhinney, Mildred Zink, Yale Lubman, Thomas J.

Murphy, John S. Seiss, Joseph Stewart and the Mayor and

City Council of Baltimore. The plaintiff trustees of the pen-

sion funds have not petitioned for a writ of certiorari. The

sole petitioners are the intervenor-beneficiaries, Yale Lub-

man, Thomas J. Murphy, John S. Seiss and Joseph Stewart.

ili

TABLE OF CONTENTS

Page

og kG ys » Sr i

PARTIES TO THE PROCEEDING................... ii

ee eee ve Nawee ne weep pes Oe ses I

ee ose yc aee chee oe ee poner ck sees 2

8) 2

Dueeeememeee GOP Pete CASE... 2. ccc cecceccccces: 2

REASONS FOR GRANTING THE WRIT ............ 7

I. This Case Involves Important Issues of Law That

Should be Resolved By This Court............. 7

a ES er ern 7

i UI ooo vcctor sewer causes ees 13

he gE ane Wis wae Nw ee pe Moe ees 17

Te eT eee ee ere 21

Il. The Decision is in Conflict With an Important Deci-

Ee aed cs oa vg CaS Coe ee A ees 25

Ill. The Decision is in Conflict With Decisions of the

Highest Courts of Other States ................. 27

i odode se sy 06-0 en vee 608 ree 30

NS ee A-1

iv

TABLE OF AUTHORITIES

Page

CasEs

A&P Tea Co. v. Cottrell, 424 U.S. 366 (1976)......... 17

Allied Structural Steel Co v. Spannaus, 438 U.S. 234

CEPR ca Gh CrE es Siu ks dee ck dew Eee Ole een aN) 21

Armstrong v. United States, 364 U.S. 40 (1960)........ 20

California v. ARC America Corp. __U.S.__, 109

SAA SOGR, TO Eee OO CESOPR cc acca seeidsvavss 22

City of Burbank v. Lockheed Air Terminal, Inc., 411

Sa PE a Sc acc ue anaes ce Ke Pens oe eRe h ees 25

Char 0: AG Bee Sie ee CRT ir ocd cvneueyysesetas at

Connolly v. Pension Ben. Guar. Corp., 475 U.S. 211

D ) SRR RRR ERE pat CANE ER ry g ah Sat 5 Umer ar ee 6, 19

Dean Milk Co. v. Madison, 340 U.S. 349 (1951)....... 17

Edgar v. Mite Corp., 457 U.S. 624 (1982)............. 16

Hillsborough County v. Automated Medical Laborato-

ae ee ee el er 22, 23

Hines v. Davidowitz, 312 U.S. 52 (1941) ....... 10, 22, 23

Hughes vy. Alexandria Scrap Corp., 426 U.S. 794

CRP POE ass paws ndak eves Vater yp Geeae ee eeeaeeekewes ee

Japan Line, Ltd. v. County of Los Angeles, 441 U.S.

Bae CRs hack Pa ccaneesdewelioren aerate ian 14

Michelin Tire Corp. v. Wages, 423 U.S. 276 (1976)..... 14

Michigan Canners & Freezers Association v. Agri-

cultural Marketing and Bargaining Board, 467 U.S.

461 (1984) 25

onprvece € eC WTS CO Ce 6 eb 6.6 8 EO 2S Oe we SSS RS Oe. OO Oe

TABLE OF AUTHORITIES — Continued

New York Times Company v. City of New York Com-

mission on Human Rights, 41 N.Y.2d 345, 361

oe we BB gs rere Pe reer err errr

Nollan v. California Coastal Comm'n, 483 U.S. 825

CODE ao ce iodeas dead aha ene eee eee

Pacific Gas & Electric Co. v. State Energy Resource

Conservation and Development Comm'n, 461 U.S.

EGR CRs Sse oh edeesceonsaccaiv eure eeeeeess

Penn Central Transportation Co. v. New York City,

ee a ee ey err eee

Pike v. Bruce Church, Inc., 397 U.S. 137 (1970)....

Reeves, Inc. v. Stake, 447 U.S. 429 (1980).........

Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (1974)....

South-Central Timber Development, Inc. v. Wunnicke,

SGT US. Be Ce 6 sce es ca leewss wes seeous

Springfield Rare Coin Galleries, Inc. v. Johns, 115

1.20 221, SOS W.2G SO CIGSS) noes ceck een ns

Tayyari v. New Mexico State University, 495 F.Supp.

SOS. GERI As Fe dna saunie can ke easews wanes

United Building and Construction Trades Council of

Camden v. Mayor and Council of the City of Cam-

den, 468 Ge. Bee ee a6 os vv anedencke ete es

United States v. Belmont, 301 U.S. 324 (1937)......

United States v. Curtiss-Wright Export Corp., 299

U8. Fe CIPI i a.s vscdecasdnsacesneeeinerces.

United States v. Glen Cove, 233 F. Supp. 145

(E.D.N.Y.), aff'd per curiam, 450 F.2d 884 (2d Cir.

SFE voce ceccevenesi0e¥0bse «eee e reer eteae

Page

vi

TABLE OF AUTHORITIES — Continued

Page

United States v. Pink, 315 U.S. 203 (1942)............ 10

United States Trust Company of New York v. New

Jeveey,, Fat WH. UGG os oa eee ene 20

White v. Massachusetts Council of Construction

Employers, Inc., 460 U.S. 204 (1983) ............. A

Wickard v. Filburn, 317 U.S. 111 (1942) .......... 14, 16

Zschernig v. Miller, 389 U.S. 429 (1968)

eee Perey e et, i re ee ee 3. 18, i ML 4

CONSTITUTION, STATUTES AND ORDINANCES

United States Constitution

Avtheie 4, 8 Gina cc dvicc eh otek dente eee 13

ATUGEG 3, 4 UG nokia vevideeniase eee 10-11, 20, 21

ATOMS. FF occ ccenccvccesacnent vee ae

pe er rrr er rere rer 17

Anti-Apartheid Act of 1985; Hearings before the Sen-

ate Comm. on Banking, Housing and Urban Affairs

and the Senate Subcomm. on International Finance

and Monetary Policy on S.635, 99th Cong., Ist

SOUG., FOR. cn snack nas deek tens Tete e eee 24

Comprehensive Anti-Apartheid Act of 1986, Pub. L.

99-440, 100 Stat. 1086 (1986).................... - ae

Baltimore CHNGRMMROR TOG, FOS cose civicc neds cesecussuben 2

Bakimosve OCedemenee MO. Tis co icc its bi vencdeiecueeeee: 2

Baltimore Wis FG. GT iwc oi oe vse eas oe ee ee ee 2

Exec. Order No. 12532, 3 C.F.R. § 387 (1983S)......<.. 24

Vii

TABLE OF AUTHORITIES —- Continued

MISCELLANEOUS

Address by Secretary of State George P. Shultz before

the Business Council for International Understand-

ag, SOPOOMINET ZF, BFGF 2. wc cece eiscvessenes

132 Cong. Record S 11856 (Aug. 15, 1986).......

Damrosch, Foreign States and the Constitution, 73 Va.

we OS a fs erry eee ee ee ree ee

PN I a aaa kee teusaeekaes

Investor Responsibility Research Center, South Africa

Review Service, Divestment Action Roundup (May

FTEs NSE ETS ARLE MON ORT ONO eee ka

Investor Responsibility Research Center, South Africa

Review Service, Public Funds and South Africa-

Se Sa sos vo oo ee a a hee ks

Message to Congress on U.S. Actions, 21 Weekly

Comp. Pres. Doc. 10546 (Sept. 16, 1985) .......

Memorandum for the United States in Zschernig v.

Miller cited in 80 Northwestern L.Rev. 352, n. 236...

Note “Acts by State Governments affecting Foreign

Relations — Decision of New York and New Jersey

Governments to deny Soviet airplane clearance to

land, Sept. 1983”, 25 Harv. Int’l L.J. 200 (1984)

Restatement (Third) of Foreign Relations Law of the

United States § 201, Reporters Note 9..........

Shuman, Dateline Main Street: Local Foreign Poli-

cies, FOREIGN POLICY, No. 65, Winter 1986-87

Page

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i ty

>.

vw

In The

Supreme Court of the United States

October Term, 1989

&

vw

YALE LUBMAN, THOMAS J. MURPHY,

JOHN S. SEISS AND JOSEPH STEWART,

Petitioners,

MAYOR AND CITY COUNCIL OF

BALTIMORE CITY,

Respondents.

7

4

PETITION FOR A WRIT OF CERTIORARI

TO THE MARYLAND COURT OF APPEALS

y%

Vv

The petitioners Yale Lubman, Thomas J. Murphy, John S.

Seiss and Joseph Stewart respectfully pray that a writ of

certiorari issue to review the judgment and opinion of the

Maryland Court of Appeals, entered in the above-entitled

proceeding on September 1, 1989.

DECISIONS BELOW

The decision of the Maryland Court of Appeals is

reported at 317 Md. 72 (1989) and is reproduced at Appendix

(App.) D. Page references are to the version in the appendix.

The decision of the Circuit Court for Baltimore City is unre-

ported. It is reproduced at Appendix E.

2

JURISDICTION

The decision of the Maryland Court of Appeals, a final

decision by the highest state court in Maryland, review of

which is sought in this petition, was entered and filed on

September 1, 1989. This Court has jurisdiction over this

matter pursuant to 28 U.S.C. § 1257(a).

STATUTES INVOLVED

The relevant sections of the United States Constitution

are set forth in Appendix A. The Comprehensive Anti-Apart-

heid Act of 1986 is set forth in Appendix B. The Baltimore

Ordinance pertaining to the Employees Retirement System

and the Fire and Police Employees Retirement System is set

forth in Appendix C, as is its predecessor Bill.

STATEMENT OF THE CASE

In 1986, the Baltimore City Council passed, and on July

3, 1986 the Mayor of Baltimore signed, Ordinance No. 765,

which provides, among other things, that no funds of the

Employees Retirement System and the Fire and Police

Employees Retirement System (two pension plans for retired

employees of the City of Baltimore, Maryland) shall remain

invested in, or in the future shall be invested in, the securities

of any company doing business in or with South Africa. App.

C-2, C-3-4. Subsequently, Ordinance No. 792 was passed with

substantially the same provisions to cover the Elected Offi-

cials Retirement System. App. D-S5.

Ordinance No. 765 and Ordinance No. 792 (the “Ordi-

nances”) were passed to implement and carry out the purpose

of Bill No. 677, which in its “whereas” clauses denounced the

government of South Africa for its “morally repugnant” pol-

icy of apartheid and asserted that the investment of American

capital in South Africa contributed to “the maintenance and

enforcement of apartheid.”” App. C-9. Ordinance No. 765

(Ordinance No. 792 is ommitted as redundant) and Bill No.

677 are reproduced at Appendix C. The Ordinances are simi-

lar to many such statutes and ordinances enacted by other

3

States, cities and counties throughout the country which seek

to limit or bar investment by U.S. companies in politically

“disfavored” countries.

Under each of the Baltimore pension systems, members

are entitled to specific future benefits (defined benefits). The

systems also provide for “variable benefits” programs which

result in additional payments for retirees directly related to

the rate of return earned by the funds. If the rate of return in a

given year exceeds 7.5%, all of the excess between 7.5% and

10% is allocated for the payment of additional benefits. If the

rate of return exceeds 10%, one-half of the excess over 10%

is allocated to the payment of additional benefits while the

City receives the other haif. App. D-2.

The trustees of the three City of Baltimore employee

pension funds (the Employees Retirement System, the Fire

and Police Employees Retirement System and the Elected

Officials Retirement System) challenged the constitutionality

of the Ordinances.

At the inception of the lawsuit four beneficiaries, peti-

tioners herein, one current and one retired member of each of

the two major pension systems, the Employees Retirement

System and the Fire and Police Employees Retirement Sys-

tem, moved to intervene. The Circuit Court for Baltimore City

reserved decision on the intervention motion, but permitted

the beneficiaries to move for summary judgment, along with

the trustees, and to argue and brief the merits. In their

motions for summary judgment the trustees and beneficiaries

challenged the Ordinances on the following grounds:

1. the ordinances intrude on the exclusive power

of the Federal Government to conduct foreign

relations under the Constitution;

2. they infringe on the power of the Federal Gov-

ernment to regulate interstate and foreign com-

merce and violate the Commerce Clause;

3. they are preempted by the policy of the Federal

Government toward South Africa and the Com-

prehensive Anti-Apartheid Act of 1986;

4. they work a taking of the beneficiaries property

without due process and violate their rights

under the Fifth and Fourteenth Amendments;

4

5. they impair the contracts between the benefici-

aries and the City in violation of Article I, § 10

of the Constitution.

The Circuit Court denied the motions for summary judg-

ment, except for the claim of impairment of contract, which it

set down for trial to hear evidence concerning the financial

impact of the Ordinances. The Circuit Court also denied the

beneficiaries’ motion to intervene.

After trial, the Circuit Court filed its Opinion and Order,

dated July 17, 1987, upholding the constitutionality of the

Ordinances. The Circuit Court found that the Ordinances

barred investments in 120 of the 500 companies on the Stan-

dard & Poor’s 500 (“S&P 500”) list and that these companies

represent approximately 40% of the market capitalization of

the S&P 500. App. E-23. The Circuit Court further found that

the initial cost of divestment would be $750,000 and the

ongoing cost would be $1.2 million per year. App. E-30-31.

Concluding that the Ordinances would minimally impact the

pension funds, the Circuit Court rejected the impairment of

contract argument.

The trustees and beneficiaries thereupon appealed to the

Maryland Court of Special Appeals, but, at their request, the

Maryland Court of Appeals issued a writ of certiorari allow-

ing a direct appeal to the highest court of Maryland because

of the importance of the issues.

On September 1, 1989, the Maryland Court of Appeals

(sometimes the “Maryland court”) rendered its decision. It

held that the trial court erred in not permitting the benefici-

aries to intervene and modified that judgment by granting the

beneficiaries’ motion to intervene. In all other respects the

Maryland Court of Appeals affirmed the Circuit Court.

The Maryland Court of Appeals addressed each of the

issues raised by the trustees and beneficiaries. In doing so the

Maryland court operated from the premise that the purpose of

Baltimore in enacting the Ordinances “was simply to ensure

that the City’s pension funds would not be invested in a

manner that was morally offensive to many Baltimore resi-

dents and many beneficiaries of the pension funds.” App.

D-61. With respect to the argument of petitioners that the

<tc

5

Ordinances impermissibly intrude upon the federal govern-

ment’s exclusive power to conduct the foreign policy of the

United States, the Maryland court held that “the Ordinances

do not intrude upon the federal government’s authority to

conduct foreign relations.” App. D-66. It sought to distin-

guish this Court’s decision in Zschernig v. Miller, 389 U.S.

429 (1968) by asserting that the Oregon statute involved there

made “unavoidable judicial criticism of nations established on

a more authoritarian basis than our own,” whereas the Ordi-

nances merely represent “a simple, general decision by Bal-

timore, mandating the divestment of the City’s pension

funds.” App. D-61.

The Maryland court rejected the argument that the Com-

prehensive Anti-Apartheid Act of 1986, Public Law 99-440

(the “Act’’) explicitly or implicitly preempts the Ordinances,

finding no inconsistency between the Ordinances and the Act.

The Maryland court did not address the issue of preemption

by federal government policy.

With respect to the challenge based on the Commerce

Clause and intrusion upon the right of the federal government

to regulate interstate and foreign commerce, the Maryland

court concluded that Baltimore was a “market participant” in

regulating the purchase and sale of securities by the Ordi-

nances. It relied on several decisions of this court, including

United Bldg. & Constr. Trades Council v. Mayor of Camden,

465 U.S. 208 (1984); White v. Mass. Council of Constr.

Employers, 460 U.S. 204 (1983); Reeves, Inc. v. Stake, 447

U.S. 429 (1980); and Hughes v. Alexandria Scrap Corp., 426

U.S. 794 (1976). It applied the market participant doctrine to

the area of foreign commerce.

The Maryland court also held that even if the Ordinances

were not exempt from Commerce Clause scrutiny because of

the market participant doctrine, they would nevertheless sur-

vive such scrutiny. Although it acknowledged that the Ordi-

nances “impose some burden on interstate commerce”, the

Maryland court concluded that the burden was “not excessive

in relation to the benefits.” App. D-82.

The Maryland court responded to the petitioners’ Fifth

Amendment “taking” claim first by recognizing that “[t]he

6

economic impact of the Ordinances might be to deprive the

beneficiaries of some variable benefits they would otherwise

receive if the Ordinances were not in effect,” App. D-44, bui

concluding that the economic impact was mitigated by several

factors and there was no “takings” under the tests articulated

by this Court in Connolly v. Pension Ben. Guar. Corp., 475

U.S. 211 (1986) and Penn Central Transportation Co. v. New

York City, 438 U.S. 104 (1978).

Although the Maryland court agreed that the pension

funds created contractual duties on the part of Baltimore

toward the beneficiaries and that the beneficiaries had con-

tractual rights to variable benefits and these benefits would be

adversely impacted by the Ordinances, it held nevertheless,

that there was no impairment of contract because the change

in the variable benefits would be insubstantial. The Marvland

court recognized that “in absolute terms, the costs of divesti-

ture may be large,” App. D-38, n.36, but found that “the costs

are de minimis when viewed in relation to the systems’ total

assets.” App. D-38, n.36.

The Maryland court also rejected the trustees’ argument

that the trustees’ duty of prudence was altered by the City’s

mandate that social factors would govern what investments

should be made. The Maryland court relied on a principle of

trust law that trustees may consider social factors in deciding

on what securities to buy and sell.

The federal issues on which review is sought in this

Court were first raised in the initial pleadings of the trustees

and of the petitioners herein and were subsequently raised at

each stage of the proceedings. The decision of the Maryland

Court of Appeals, review of which is sought, refers to these

issues on page 6 of its decision, App. D-6, and the Circuit

Court for Baltimore City refers to them on page 5 of its

decision. App. E-S.

7

REASONS FOR GRANTING THE WRIT

I. This Case Involves Important Issues of Law That

Should be Resolved By This Court

A. Foreign Policy

As the Constitution enters its third century, this Court has

the opportunity, by granting this petition, to clarify and reaf-

firm a major purpose of the Constitution: to place control of

foreign relations firmly in the hands of the national govern-

ment, and to create a unified nation, rather than a confedera-

tion of semi-autonomous states. The Baltimore Ordinances

violate this principle and the Maryland court’s decision must

therefore be reversed.

In 1788 James Madison wrote in The Federalist: “If we

are to be one nation in any respect, it clearly ought to be in

respect to other nations.” The Federalist No. 42, at 279 (J.

Madison) (J. Cooke ed. 1961). Yet 200 years later, by one

author’s estimate, more than one thousand state and local

governments are participating in foreign affairs, and the

number is expanding. Shuman, Dateline Main Street: Local

Foreign Policies, FOREIGN POLICY, No. 65, Winter

1986-87, at 154. It must be as clear today, as it was 200 years

ago, that the national interest requires that local interference

in foreign and defense policy — the cornerstones of our

national identity and survival — be curtailed lest the federal

government find itself embarrassed or worse by hundreds of

would-be state departments pursuing their own “diplomatic”

and political agendas.

State and local governments are presently involved in a

variety of activities with international aspects or conse-

quences. Many of these activities — promotion of foreign

investment in a City, “sister cities” programs, student

exchanges, and the like — are seemingly or actually innoc-

uous. Some are more problematic, as when state or local

legislatures adopt non-binding resolutions expressing their

views on matters of international concern. However, when, as

in the case at bar, localities adopt prescriptive legislation that

purports to have binding impact on the activities of Ameri-

cans abroad or on the conduct of foreign governments, such

8

local legislation must give way to the national foreign policy

power, because it may be in conflict with United States

policy, or cause the foreign country embarrassment or injury

and thus it has a direct impact on our foreign relations and is

invalid. Local actions to express or implement municipalities’

“foreign policies” have taken a variety of forms with respect

to a variety of foreign policy issues: in the days of the “cold

war,” localities sought to bar or limit the activities of Soviet

bloc diplomats or commercial organizations such as the

Soviet airline (see, e.g., United States v. Glen Cove, 233

F.Supp. 145 (E.D.N.Y.), aff'd per curiam, 450 F.2d 884 (2d

Cir. 1971); see also, Note “Acts by State Governments

Affecting Foreign Relations — Decision of New York and New

Jersey Governments to deny Soviet Airplane Clearance to

Land, Sept. 1983,” 25 HARV. INT’L L.J. 200 (1984). States

and localities have expressed their disapproval of the taking

of American hostages in Iran, see, Tayyari v. New Mexico

State Univ., 495 F.Supp. 1365 (D.N.M. 1980). They have

expressed their disapproval of the treatment of Catholics in

Northern Ireland; and in the instant case, they have sought to

denounce and influence South Africa’s racial policy by

penalizing United States companies that do business in or

with South Africa.

The Ordinances at issue here are similar to divestment

Statutes or ordinances enacted by 19 states, 51 cities and 9

counties, at recent count. California, Connecticut, Massa-

chusetts, Missouri, New Jersey and Oregon, for example,

have passed divestment statutes. In addition to Baltimore,

such major cities as Boston, Dallas, Denver, Detroit, Houston,

' In an analogous field, many cities, including Berkeley, Chicago,

Jersey City and Oakland, have passed “nuclear free zone” ordinances, an

example of local and state govenments intruding upon the exclusive

power of the federal government to conduct our defense policy, often an

aspect of and related to our foreign policy. These ordinances generally

prohibit the production of nuclear weapons, prohibit city contracts with

any business engaged in nuclear weapons work and in other ways

constrain our nuclear capability, an essential element of this nation’s

defense posture and a component of our foreign policy. Such local

legislation infringes on the exclusive federal war power.

Slntaites

9

Los Angeles, Minneapolis, New Orleans, Newark, Omaha,

Philadelphia, Pittsburgh, St. Louis and San Francisco have

adopted divestment ordinances. A number of important coun-

ties have also done so. Investor Responsibility Research Cen-

ter, South Africa Review Service, Divestment Action

Roundup, May 1989.

In addition, exclus’ ‘nary procurement laws have been

passed by several states, including Maryland, Massachusetts

and Michigan, and many cities, including Berkeley, Chicago,

Dallas, Houston, Los Angeles, New York, Newark, Oakland,

Pittsburgh, Raleigh, Richmond, Rochester, Sacramento and

San Francisco. Such laws prohibit companies doing business

in or with South Africa from bidding on state or city

contracts.

Divestment statutes and ordinances impact many public

employee pension funds with combined assets amounting to

over $200 billion. Investor Responsibility Research Center,

South Africa Review Service, Public Funds and South Africa-

Related Divestment. This type of legislation requires the

trustees of these funds to sell the securities of many of the

largest, soundest and most prominent companies in America.

Divestment legislation is symptomatic of a new wave of

politically based state and local legislation that intrudes on

the area of foreign policy. This legislation, if unchecked by

this Court, could severely restrict the federal government’s

ability to make and implement foreign policy.

In addition to South Africa, the issue of local encroach-

ment on the federal government’s foreign policy power arises

in other situations. Twelve states have passed legislation that

seeks divestment of securities of American companies doing

business in Northern Ireland if they do not comply with the

so-called MacBride principles.2 These statutes seek to bring

2 These states are: Connecticut, Florida, Illinois, Maine, Massa-

chusetts, Michigan, Minnesota, New Hampshire, New Jersey, New York,

Rhode Island and Vermont. Northern Ireland legislation was also passed

by the California legislature; however, it was vetoed by the Governor in

late September. Such legislation is being considered by, among other

states, Ohio and Pennsylvania.

10

economic pressure on the governments of Great Britain and

Northern Ireland to change their domestic policies. Legisla-

tion has been proposed in the California State Assembly that

would restrict state investments in United State companies

that do business in or with The People’s Republic of China.

Surprisingly, there has been little litigation concerning

local interference with the federal foreign policy prerogative,

and thus no recent opportunity for this Court to clarify the

relationship between the national government and states and

localities in this vital area. This case squarely presents such

an opportunity.

It is well settled that, in principle, the federal government

is the sole representative of the United States in dealings with

foreign nations, and that the Constitution entrusts the federal

government with exclusive responsibility, authority and con-

trol over the nation’s foreign relations. Conversely, the

authority of state and local governments in this area is, and

Ought to be, extremely limited. See, e.g., United States v.

Pink, 315 U.S. 203, 233 (1942) (“There are limitations on the

sovereignty of the States. No state can rewrite our foreign

policy to conform to its own domestic policies. Power over

external affairs is not shared with the States; it is vested in the

national government exclusively.”); Hines v. Davidowitz, 312

U.S. 52, 63 (1941) (“Our system of government is such that

the interest of the cities, counties and states .... imperatively

requires that federal power in the field affecting—foreign —

relations be left entirely free from local interference.”);

United States v. Belmont, 301 U.S. 324, 331 (1937) (“[I]n

respect of our foreign relations generally, state lines disap-

pear. As to such purposes the State .. . . does not exist.”);

United States v. Curtiss-Wright Export Corp., 299 U.S. 304,

317 (1936) (“[States] could not speak to any foreign sover-

eign whatever.”). The Constitution expressly or by clear

implication bars state or local activities that might — actually

or potentially — intrude upon the exercise of federal power in

this field. Thus, the states are expressly forbidden to make

treaties Or engage in war; they may make other “agreements

or compacts” only if Congress consents. U.S. Const., Art. I,

q

11

§ 10; see, RESTATEMENT (THIRD) OF FOREIGN RELA-

TIONS LAW OF THE UNITED STATES §201, Reporters’

Note 9. States may not negotiate with other governments on

matters that concern United States foreign policy. Curtiss-

Wright, supra, at 316.

The vital national interest in achieving United States

foreign policy objectives requires that our foreign policy be,

and be perceived by other nations to be, unified and coherent,

that we “speak with one voice.” State and local intrusion in

international issues, particularly in enacting prescriptive laws

Or ordinances, cannot be permitted to constrain the conduct of

United States foreign relations and undermine the credibility

of our positions on important international issues by giving

the appearance of confusion, uncertainty, weakness or dis-

agreement on our government’s foreign policy positions.

Moreover, state or local government actions may directly

impede or frustrate national foreign policy by causing injury

or offense to foreign nations. It is inappropriate, and some-

times irresponsible, for state or local political organs, acting

without regard for broad national policy, to take actions that

could result in adverse consequences for the United States as _

a whole. Our history and tradition mandate that the national

government — the President-and Congress — elected by the

people-as a whole, conduct our foreign policy. State and local

government officials lack the experience, information and

expertise to make the circumspect and sometime subtle judg-

ments necessary with respect to delicate foreign policy issues.

State and local officials are not elected because of their

foreign policy positions, nor are they responsible for the

conduct of foreign policy; and certainly they do not represent

a “national consensus” as to foreign policy, and are not

answerable for the success or failure of such policy.

The Maryland court ignored this principle and warped

constitutional law. Its holding and reasoning would sustain

every local community’s own preferred strategy of attempting

to influence the domestic policies of South Africa, or any

other global trouble spot, by its own notion of economic

12

leverage. The result is the approval of a theory of constitu-

tional law that contemplates as many different “state

departments” as there are cities, counties and states in the

United States. That is simply not supportable and does not

represent the Constitution we have.

The issue of constitutional preemption in the field of

foreign affairs is driven not by the Baltimore ordinances

alone, but rather by all of the similar state, city and county

legislation that assumes every city, county and state has a like

prerogative of deciding its own version of foreign policy vis-

a-vis South Africa, Northern Ireland, China, Iran, Nicaragua,

the Middle East, Eastern Europe, the Soviet Union or any

other nation or region. Under the decision of the Maryland

court any State or city in this country could adopt legislation

that penalized American companies for doing business in any

foreign nation witt™whose internal policies that particular

State or city administration disagreed. This cannot be the state

of our constitutional law.

It is not the law. This Court recognized the delicacy of

the conduct of foreign policy and the importance of the

federal prerogative in this field in Zschernig v. Miller, 389

U.S. 429 (1968). In that case (more fully discussed at pp.

25-27, infra), this Court held that if a local statute may

intrude upon the federal government’s exclusive foreign pol-

icy power it is unconstitutional. The strictness of that test,

based on the potential, not the actuality, for conflict or incon-

sistency, demonstrates this Court’s sensitivity, two decades

ago, to the importance of having one government voice in the

international arena. In this instant case, as we show below, the

Ordinances not only have the potential for intruding on the

federal government’s foreign policy domain, they actually

conflict with current United States policy as expressed in

legislation enacted by Congress and signed into law and in

pronouncements by the President and his foreign policy

experts on United States relations with South Africa.

If the Maryland court’s decision is allowed to stand and

this Court does not address the overriding significant issue of

who speaks for this nation in the field of foreign relations,

then there is no telling how far local governments may go in

13

their intrusion into foreign affairs. Suppose the State of Mich-

igan decides to ban the sale and purchase of securities of all

American companies that do business in or with Japan

because the Michigan legislature is angry about Japanese

trade policy and alarmed by the growing sales of Japanese

cars in America and wishes to send a signal to Japan. Or, the

Boston City Council, traditionally heavily Irish-American in

its make-up, might decide to impose a similar ban as to

American companies doing business in or with Great Britain

because of the latter’s Northern Ireland policy. Can such

actions be tolerated under the constitutional allocation of

power in our federal system?

The President must be free to deal with the problems

facing our nation in the world arena. Relations with South

Africa cannot be conducted on a simplistic level; they require

flexibility, continuous dialogue and an understanding of our

global interests. Divestment legislation by local governments

encroaches on the nation’s ability to conduct our relations

with South Africa and restrict options and the flexibility the

United States must have.

We submit that local governments may not participate in

the conduct of our foreign relations, for if they do so, it would

mean this nation would speak with many voices, not one, in

foreign affairs. This nation would revert to the days of the

Articles of Confederation if the Maryland court’s decision is

left standing and other courts follow it. This case presents an

opportunity for this Court to state clearly that local govern-

ments have no legitimate role in the articulation and imple-

mentation of our foreign policy.

B. Commerce Clause

It also cannot be the state of our constitutional law that

cites and states can bar the purchase and sale of billions of

dollars of securities of American issuers solely on the basis of

the localities’ opinion of a foreign nation in which those

American securities issuers do business. The Commerce

Clause of the Constitution, Art. 1, § 8 vests in Congress the

power to “regulate Commerce with foreign Nations... ”. As

14

interpreted by this Court that provision bars any state or local

legislation which “unduly“ burdens foreign commerce. And,

as with the foreign relations power, this Court has repeatedly

invoked the importance of this Nation “speaking with one

voice” in regulating foreign commerce because of the poten-

tial for creating discord and harm to the Nation as a whole if

local governments intrude upon this area. See, e.g., Michelin

Tire Corp. v. Wages, 423 U.S.276, 285 (1976); Japan Line

Ltd. v. County of Los Angeles, 441 U.S. 434, 451, 456 (1979).

The Maryland court failed to apply this principle, and failed

to subject the Baltimore Ordinances to the “more rigorous”

scrutiny of local legislation that implicates foreign commerce

(as compared with interstate commerce) required by this

Court’s jurisprudence.

The Maryland court was too limited and narrow in its

consideration of the question.? The real issue is not limited to

the Baltimore Ordinances and pension plans, but compre-

hends divestment legislation generally. The Baltimore Ordi-

nances and the Maryland court’s decision directly affect over

$400 million of securities owned by the Baltimore pension

trusts in companies doing business in South Africa, but the

decision has significant implications for many other public

employee pension plans with over $200 billion of assets and

the attempt by local governments to express by such local

legislative action their opinion of the policies of several

foreign countries. The decision opens the gates for massive

state and local interference with our foreign commerce.

In deciding that the Ordinances did not violate the Com-

merce Clause, the Maryland court first invoked the “market

participant” exception to the strictures of the Commerce

3 The Maryland court should have considered the aggregate effect of

divestment legislation in the relevant commercial setting just as this Court

considered the contribution of all wheat farmers, not just the plaintiff

wheat farmer, in Wickard v Filburn, 317 U.S. 111, 127-28 (1942), in

determining whether a particular statute affected interstate commerce. As

this Court said: [E]ven though an individual farmer’s “contribution to the

demand for wheat may be trivial by itself . . . his contribution, taken

together with that of many others similarly situated, is far from trivial.”

rere ee EEEeEeEEee==—=—=EeEeEOE EE E_E_E_—__—_————————EO————————___ EEE ee

15

Clause, asserting that Baltimore was merely buying and sell-

ing securities in the market and thereby acting in its propri-

etary capacity. App. D-67-75. The Maryland court cited the

market participant cases of this Court, such as Hughes v.

Alexandria Scrap Corp., 426 U.S. 794 (1976); White v. Mass.

Council of Constr. Employers, 460 U.S. 204 (1983) and

Reeves, Inc. v. Stake, 447 U.S. 429 (1980), which involved

interstate commerce, and then applied the market participant

doctrine to foreign commerce, ignoring the clear warning of

this Court in Reeves that, as to foreign commerce, “it is

unlikely that the market participation doctrine would be so

extended.” 447 U.S. at 438, n.9. The Maryland court also

failed to heed South-Central Timber Development, Inc. v.

Wunnicke, 467 U.S. 82, 96 (1984), where this Court indicated

that state restraints on foreign commerce are subjected to a

“more rigorous” scrutiny than those affecting interstate com-

merce, and declined to apply the market participant theory in

a case involving foreign commerce.

Moreover, the Maryland court applied the market partici-

pant theory to facts which make that theory inapposite regard-

less of the impact on foreign commerce. Unlike general state

Or city revenues that are used for public works construction

projects or the purchase of goods and services by government

units, the funds invested by the pension funds are not solely

the property of the City of Baltimore but in significant part

belong to members of the retirement plans. First, employees

contribute to the pension funds; second, once the pensions are

“vested”, they really are the property of the employee. The

effect of the Ordinances is thus “regulatory”, that is they

directly affect persons who have a fiduciary duty to the

beneficiaries and who dispose of assets that are the property

of those beneficiaries, and, as in Wunnicke, are not saved by

the market participant exception.

This Court should decide whether the market participant

theory applies to foreign commerce and whether the theory

applies at all when the funds are not solely the property of the

governmental entity seeking to prescribe the use of such

funds.

16

In deciding that the Ordinances did not violate the Com-

merce Clause, the Maryland court also incorrectly applied the

tests set forth in Pike v. Bruce Church, Inc., 397 U.S. 137

(1970), in which this Court stated:

“Where the statute regulates evenhandedly to effec-

tuate a legitimate local public interest, and its

effects on interstate commerce are only incidental,

it will be upheld unless the burden imposed on such

commerce is clearly excessive in relation to the

putative local benefits. If a legitimate local purpose

is found, then the question comes to one of degree.

And the extent of the burden that will be tolerated,

will of course depend on the nature of the local

interest involved, and whether it could be promoted

as well with a lesser impact on interstate activities.”

Id. at 142 (emphasis added). Ignoring the relevance of Wick-

ard v. Filburn, 317 U.S. 111 (1942), the Maryland court

concluded that the impact of the Ordinances on interstate

commerce was incidental and, even if it imposed some bur-

den, which the Maryland court acknowledged, that burden

was “not excessive in relation to the benefits.” App. D-82.

First, the impact and intent of the Ordinances, and all

similar divestment legislation, is direct and substantial. The

pension plans subject to the Ordinances are required to sell

hundreds of millions of dollars of securities of many major

companies and forbidden to buy such securities. Transactions

in these securities are part of interstate commerce. Edgar v.

Mite Corp., 457 U.S. 624, 642 (1982). Standing alone, the

Ordinances have a substantial impact on interstate commerce.

Indeed, the impact of the Ordinances is exclusively or primar-

ily on interstate commerce because the securities markets are

national. If the impact of all divestment legislation is consid-

ered, the substantial effect on interstate commerce is even

more obvious.

Second, the Maryland court dismissed the importance of

the burden on interstate commerce by asserting that the bene-

fits of the Ordinances outweigh the burden. Its purported

rationale was that the City of Baltimore enacted the Ordi-

nances to express the City’s “moral condemnation of racial

discrimination.” App. D-82. However salutary this expression

17

of moral condemaation may be, the Ordinances are not the

least intrusive means of accomplishing that objective.

A & P Tea Co. v. Cottrell, 424 U.S. 366, 372-373 (1976);

Dean Milk Co. v. Madison, 340 U.S. 349 (1951). A simple

statement or proclamation by the City to that effect would

have achieved the stated objective.

The real purpose of the Ordinances, like all such divest-

ment legislation, however, is to regulate the activities of

American companies doing business in or with South Africa

and to influence the internal policies of South Africa. This

purpose is not a “legitimate local public interest” within the

meaning of that test as established by this Court in Pike. It is

not “local” because it does not affect only the actions of

residents of Baltimore and, indeed, is intended to have inter-

national impact. It is not “legitimate” because it intrudes on

the exclusive constitutional power of the national

government.

The Ordinances fail the Pike tests. In a real sense the

result of the Ordinances and all such divestment legislation is

to impose or create a secondary boycott, for the City and

other local governments compel trustees of civil servant pen-

sion plans to sell all stock they own in companies which

maintain economic relations with a nation deemed evil.

The Ordinances burden foreign commerce and must be

annulled.

C. Taking

Amendments V and XIV to the Constitution prohibit the

States (or local governments) from taking property without

due process of law.

The Maryland Court of Appeals recognized that “[t]he

economic impact of the Ordinances might be to deprive the

beneficiaries of some variable benefits they would otherwise

receive if the Ordinances were not in effect.” App. D-44. The

variable benefits are “property.” The Maryland court further

recognized that “ . .. as the system continues to generate

variable benefits, the amount of a beneficiary’s benefits will

continue to increase.” App. D-3, n.3. It also found that the

18

ongoing cost of divestment is $1.2 million per year, plus an

initial cost of $750,000, so that the first year cost is approx-

imately $2 million. App. D-11.

Although the Maryland court recognized that in absolute

terms, the costs of divestiture may be large, it erroneously

concluded that “the costs are de minimis when viewed in

relation to the systems’ total assets”, App. D-36, n.36, and

therefore held that there was no unconstitutional “taking”

caused by the Ordinances.

What the Maryland court failed to recognize is that the

beneficiaries are suffering an immediate, continuous and

irreparable loss as a result of the Ordinances. They contrib-

uted money to the pension funds, often over many years, and

now their investment is being diminished in value and their

rate of return on the variable benefits will be reduced by $1.2

million per year, compounded annually. The value of the

funds’ assets will be eroded by the mandate of the Ordinances

and the amount of retirement income payments to the bene-

ficiarieés will be diminished.

The beneficiaries are depending on an increase in those

retirement payments, not a decrease, to keep up with infla-

tion. They depend on the income from the trust funds, includ-

ing the variable benefits,* for their retirement. To deprive

them of any portion of that income is a “taking” within the

meaning of the Fifth Amendment.

Moreover, there is no proper justification for the “tak-

ing.” The Ordinances do not “substantially advance” the

“legitimate state interest” sought to be achieved, the standard

laid down by this Court in Nollan v. California Coastal

Comm'n, 483 U.S. 825 (1987). The Maryland court did not

inquire what legitimate local interest was advanced by

* Because the variable benefits portion of the retirement income

payment is directly related to the rate of return and because the Ordi-

nances mandate that the pension funds sell some of their best performing

holdings (which also happen to be among the most secure equity holdings

of the pension trusts) the rate of return of pension trust funds will decline.

App. D-8-11.

19

adoption of the Ordinances and whether that interest was

substantially advanced. The central purpose of the Ordi-

nances, namely to condemn the racial policies of South Africa

and to put economic pressure on either South Africa or

American companies doing business there to bring about a

change in those policies, does not advance a legitimate inter-

est of Baltimore and therefore the Ordinances fail to meet the

Nollan standard.

Instead, the Maryland court applied, pro forma, the three

tests announced by this Court in Connolly v. Pension Ben.

Guar. Corp., 475 U.S. 211, 224-225 (1986) and Penn Central

Transportation Co. v. New York City, 438 U.S. 104, 124

(1978), concluding that (1) the economic impact of the Ordi-

nances was minor; (2) they do not interfere with “distinct

invesiment-backed expectations”; and (3) the government

action was “to promote the common good by regulating its

Own investment policy.” However, the impact of the Ordi-

nances is not minor as they cause a substantial cost to the

pension plans and a decline in retirement income to the

beneficiaries; they interfere with investment expectations as

the trustees may not invest in 120 of the 500 leading S&P

companies; and the government action did not regulate the

City’s own investment policy but rather that of trustees of

funds set up for the benefit of retired city employees who

contributed their own money to those funds. The Ordinances

are not an exercise of a city’s traditional police powers. They

are not to enhance the safety or welfare of the residents of

Baltimore. They are a political statement intended to demon-

strate Baltimore’s antipathy toward the policies of South

Africa.

Moreover, because the purpose of the City of Baltimore

in enacting the Ordinances was, as the Maryland court wrote,

“to ensure that the City’s pension funds would not be invested

in a manner that was morally offensive to many Baltimore

20

residents and many beneficiaries> of the pension funds,” App.

D-61, this Court should examine the Maryland court’s deci-

sion in light of Armstrong v. United States, 364 U.S. 40, 49

(1960), where this Court said that one of the principal pur-

poses of the Taking Clause is “to bar Government from

forcing some people alone to bear public burdens which, in

all fairness and justice, should be borne by the public as a

whole.” See also, Nollan, supra, at 836, n.4.

Here the beneficiaries are being forced to bear the whole

burden of the political statement of the City Council on behalf

of the City of Baltimore vis-a-vis the government of ,South

Africa. Under the learning of Armstrong, supra, this was a

“taking” and this Court should consider this case for that

reason.

Furthermore, as the Maryland court recognized, the pen-

sion plans created contractual duties on the part of the City

toward persons with vested rights under the plans. App.

D-27-28. It further recognized that the beneficiaries had con-

tractual rights to the variable benefits. App. D-28, n.26.

However, the Maryland court erroneously concluded that the

beneficiaries’ contractual rights were not impaired because

although the divestment costs would “diminish the level of

the future variable benefits”, App. D-29, the costs are so

minimal that they do not “approach the constitutional stan-

dard for impairment.” App. D-30.

Under the Contract Clause of the United States Constitu-

tion, Article I, § 10, the City of Baltimore cannot impair its

contracts with private individuals unless it demonstrates that

its action is “reasonable and necessary to serve an important

public purpose.” United States Trust Company of New York v.

New Jersey, 431 U.S. 1, 25 (1977).

> The four petitioner-beneficiaries have not expressed am opinion

~ that investing in securities of companies such as General Motors, IBM

and Mobil is morally offensive to them nor is there any evidence in the

record that any beneficiaries shared that view.

21

By requiring the trustees to sell the pension funds’

investments in 120 of the 500 leading S&P companies, by

requiring divestment of 47% of the pension funds’ equity

portfolio and by causing an annual diminishment of the pen-

sion funds’ earnings of $1.2 million, there was an impairment

of the contract between the City and the beneficiaries.

Were the Ordinances “reasonable and necessary to serve

an important public purpose?” Under Allied Structural Steel

Co. v. Spannaus, 438 U.S. 234 (1978), the City had the burden

to meet this standard. The action taken by the City that

impaired the beneficiaries’ contracts with the City did not

advance an important public purpose nor was it reasonable or

necessary, aS discussed, supra.

This Court should reverse the Maryland court which

erroneously applied Art. I, § 10 of the Constitution.

D. Preemption

Petitioners argued that the Comprehensive Anti-Apart-

heid Act of 1986, Pub. L. 99-440, 100 Stat. 1086 (1986),

codified at 22 U.S.C. §§ 2151, 2346 (a), 5001-5116, pre-

empted state and local divestment legislation, and that the

federal government’s overall policy of encouraging the pres-

ence of American business in South Africa so as to promote

the economic development of all South Africans, occupied the

field. The Maryland court addressed and rejected the first

argument, but did not address the second.

The Maryland court was wrong in holding that the Com-

prehensive Anti-Apartheid Act of 1986 (the “Act”) did not

preempt local and state divestment legislation. The Act itself

States, in Section 4:

“The purpose of this Act is to set forth a compre-

hensive and complete framework to guide the

efforts of the United States in helping to bring an

end to apartheid in South Africa and lead to the

establishment of a nonracial, democratic form of

government. This Act sets out United States policy

toward the Government of South Africa, the victims

of apartheid, and the other states in southern Africa.

It also provides the President with additional

22

authority to work with the other industrial

democracies to help end apartheid and establish

democracy in South Africa.”

(emphasis added).

The Act proscribes certain business and economic activity by

American companies in and with South Africa but does not

provide for divestment, even though Congress was well aware

of divestment as a possible sanction when it considered the

Act. Indeed, the concept of divestment was discussed and

rejected. 132 Cong. Record S 11856 (Aug. 15, 1986).

The traditional preemption analysis, as most recently

explicated by this Court in California v. ARC America Corp.,

__ U.S. __, 109 S.Ct. 1661, 1665, 104 L.Ed.2d 86 (1989),

requires a court to make three inquiries with respect to federal

legislation and the state or local legislation allegedly pre-

empted: first, has Congress expressly stated its intent to

supersede state law through the enactment of the statute in

question; second, even in the absence of express preemptive

language, has Congress legislated so comprehensively that

federal law “occupies the field,” leaving no room for state

regulation; third, even when Congress has not occupied the

entire field, is state law nevertheless preempted because it

conflicts with federal law.

In the case at bar, the second and third criteria are clearly

met, and local legislation is preempted by the Act. The Act

declares itself to be “comprehensive and complete.” This,

combined with the exclusive federal foreign relations power,

occupies the field, leaving no room for local divestment

legislation. See, Pacific Gas & Electric Co. v. State Energy

Resource Conservation and Development Comm'n, 461 U.S.

190, 204 (1983). Moreover, the Ordinances “stand as an

obstacle to the accomplishment and execution of the full

purposes and objects of Congress.” Hines v. Davidowitz, 312

U.S. 52, 67 (1941); Hillsborough County v. Automated Medi-

cal Laboratories, Inc., 471 U.S. 707, 713 (1985). In addition

to declaring itself to be comprehensive and complete, the Act

also explicitly gives the President (not the states or localities)

“additional authority” to help end apartheid in South Africa.

Clearly, Congress intended to arm the President with the

;

23

flexibility to take measured steps to bring about change in

South Africa. If-Congress is not satisfied with those steps, it

is for the national legislature, not each local, parochial body,

to enjoin upon the President appropriate changes in United

States policy.

Moreover, the customary caution with which the federal

judiciary approaches preemption is not warranted here, for the

conflict is not between a federal statute and a local ordinance

in a field of shared federal-state authority. The Ordinances are

not an exercise of “historic police powers of the State,” Rice

v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947), but an

intrusion into an area reserved exclusively for the federal

government. Thus there is no presumption against preemp-

tion, and, we submit, there should be a presumption in favor

of preemption. Cf., Hillsborough County v. Automated Medi-

cal Laboratories, Inc., supra, at 715. Contrary to the Mary-

land court’s statement, App. D-48, the regulation of foreign

investment by residents of the locality is not an exercise of

traditional police power. Indeed, it is virtually unprecedented.

Thus, the Act, by its terms, “occupies the field” and

preempts state and local activity.

The second preemption theory is a corollary to the for-

eign policy argument. The principle is that in the area of

foreign affairs the federal government occupies the field

(Hines v. Davidowitz, supra) and here, where the federal

government has established a comprehensive and complete

policy which includes encouraging American business to

remain in South Africa, the local legislation is preempted.®

The Ordinances and the other local divestment legislation

directly undermine the federal government’s policy which

encourages American companies to do business in South

© Sometimes this principle is referred to as the “dormant federal

foreign relations power.” See, e.g., Damrosch, Foreign States and the

Constitution, 73 Va.L.Rev. 483, 507 et. seg. (1987).

24

Africa so that those companies can work to ameliorate the

economic and social conditions of blacks in South Africa.’

In his message to Congress, Message to Congress on U.S.

Actions, 21 Weekly Comp. Pres. Doc. 1054, 1055 (Sept. 16,

1985), accompanying Exec. Order No. 12532, 3 C.F.R. § 387

(1985) which imposed certain economic sanctions on South

Africa, former President Reagan (echoing the language of the

leading decisions of this Court construing the exclusivity of

federal foreign relations competence) stated that “[iJn order

for this Nation successfully to influence events in [South

Africa], it is necessary for the United States to speak with one

voice and to demonstrate our opposition to apartheid by

7 As Deputy Secretary of State Kenneth Dam described United

States’ policy in 1985:

“Disinvestment would signal a U.S. unwillingness to pursue

the only logical course of action open to us, which is attempt-

ing to promote peaceful change in South Africa. Withdrawal

of U.S. business interests would remove one of the few tools

of influence available to us in helping to promote change and

would leave a moral void that would result in lessening of

both regional U.S. influence and our ability to help influence

movement away from apartheid. Disinvestment would clearly

embolden [communist elements] to increase assistance to

radical forces to push for the revolutionary overthrow of the

South African Government. Besides this psychological and

political signal, U.S. disinvestment could contribute to unem-

ployment and unrest, with not only 70,000 workers [sic] jobs

being jeopardized but the livelihood of the approximately

400,000 others who depend on them for support. This would

increase the great social unrest already widespread in that

country. We do not think this is what America is about.”

The Anti-Apartheid Act of 1985; Hearings Before the Senate Comm. on

Banking, Housing and Urban Affairs and the Senate Subcomm. on

International Finance and Monetary Policy on S. 635, 99th Cong., Ist

Sess., 103. See also, Address by Secretary of State George P. Shultz

before the Business Council for International Understanding, Sept. 29,

1987, p. 16, where he stated that the Administration “strongly supports

the continued presence of American business in South Africa.”

aed Bir ee

NN Ee ne a

25

taking certain actions directed specifically at key apartheid

policies and agencies.” (emphasis added) The mischief of

local divestment legislation is that it causes the United States

to speak with many voices, creating dissonance and uncer-

tainty as to the United States policy on this important foreign

relations issue. Such legislation also diminishes the ability of

the national government to utilize measured actions or

responses to encourage developments the United States favors

without the unnecessary risk of retaliation which might affect

the whole country, not just the states or cities that took the ill-

advised hostile action. Diplomacy is a business of subtlety

and timing, which requires finesse and coordination, not

Opportunistic political grandstanding or intemperate “moral

Outrage”.

The Maryland court incorrectly ignored the argument that

the federal government’s foreign policy toward South Africa

of encouragement of American business to participate in that

country’s economy preempts state and local divestment and

procurement legislation which seeks to cause American com-

panies to disengage from South Africa. In ignoring peti-

tioners’ argument the Maryland court slight-d the teachings

of this Court in such cases as Zschernig v. Miller, 389 U.S.

429 (1968); City of Burbank v. Lockheed Air Terminal, Inc.,

411 U.S. 624 (1973); and Michigan Canners & Freezers

Association v. Agricultural Marketing and Bargaining Board,

467 U.S. 461 (1984).

II. The Decision Is In Conflict With An Important Deci-

sion of This Court

In Zschernig v. Miller, 389 U.S. 429 (1968), this Court

held that an Oregon escheat statute was invalid because the

State was using that law to condemn the internal policies of

other nations, in particular communist countries. Even though

the Ordinances and other divestment legislation likewise con-

demn the internal policies of South Africa, the Maryland

court reached a decision that is in conflict with the reasoning

of Zschernig.

26

The teaching of Zschernig is that if a local statute poten-

tially intrudes upon the exclusive power of the federal gov-

ernment to conduct foreign policy, the statute is

unconstitutional. In Zschernig, the federal government specif-

ically refrained from certifying that the application of the

Oregon statute unduly interfered with the United States’ con-

duct of foreign relations. Indeed, the State Department had

advised this Court that the statute had “little effect on the

foreign relations and policy of this country.” Memorandum

for the United States at 5, cited in 80 Northwestern Law Rev.

352, n. 236. Nonetheless, because the statute had merely the

“potential for disruption or embarrassment,” this Court held it

to be unconstitutional. The rationale of Zschernig, in addition

to its vindication of the exclusive federal foreign policy

power, was that the Oregon statute made criticism of foreign

governments by states unavoidable. 389 U.S. at 441-42. Here,

criticism of a foreign state is not merely a likely future event,

it is an accomplished fact. Not only is there a potential

intrusion on the federal foreign relations power, the intrusion

is actual. Justices Stewart and Brennan, concurring in Zscher-

nig, concluded, simply and directly, that the Oregon statute

was unconstitutional on its face because the state legislature

by passing a law that prejudiced “a nation whose policies it

disapproved has trespassed upon an area where the constitu-

tion contemplates that only the National Government shall

operate.” 389 U.S. at 442.

The Maryland court missed the essence of Zschernig. It

concluded that because “the effect of the Ordinances on South

Africa is minimal and indirect,” App. D-61, they did not

interfere with the sovereign right of the federal government to

conduct foreign policy.*® The rationale of Zschernig, however,

is that if a local government purports to sit in judgment of a

8 Although the trial court recognized “the exciusive Federal power

to conduct foreign affairs,” App. E-16, it concluded that the Ordinance

did not violate that exclusive power because it had not brought “an end to

apartheid.” Under this reasoning, a city or state could forbid all trading

with Iron Curtain countries but if those governments did not renounce

communism, the legislation forbidding trade would be valid.

ene ee ren

ee ee cores

ee ee ey ae eee eS

27

foreign power, the potential interference with American for-

eign policy is enough to create a conflict with the Constitu-

tion. The Maryland court failed to consider the real purpose

of the Ordinances and other divestment legislation and the

“great potential for disruption or embarrassment” (Zschernig

at 443) which such legislation has.?

The Maryland court also tried to distinguish Zschernig by

emphasizing that in Zschernig this Court was concerned that

the Oregon courts, and courts in states with similar statutes,

would engage in criticism of the nature and conduct of for-

eign governments. App. D-59. The rule of Zschernig, of

course, is not limited to acts of state courts, but extends to the

acts of any state government agency. The Maryland court

ignored the obvious fact that the most blatant and severe sort

of criticism of a foreign power lies behind divestment

legislation.

One distinction between the case at bar and Zschernig

makes this an even more compelling case for a restatement of

federal foreign policy exclusivity and supremacy: in Zscher-

nig there was only a potential impact on United States foreign

relations; in the instant case, the Maryland court found that

there is actual impact on our foreign relations, App. D-62;

that alone requires reversal under Zschernig and its

antecedents.

III. The Decision is in Conflict With Decisions of The

Highest Courts of Other States

The decision and reasoning of the Maryland court is also

in conflict with the decisions and reasoning of the highest

9 In avoiding the thrust of Zschernig the Maryland courts mis-

takenly relied on Clark y. Allen, 331 U.S. 503 (1947), in which this Court

upheld a statute similar to the one at issue in Zschernig. In Clark the

purpose of the statute, and therefore its potential impact, was not in issue,

according to this Court’s opinion in Zschernig. In Zschernig it was, as it

is here. In light of the Maryland court’s reliance on Clark, this Court

should take this case to clarify and reemphasize Zschernig so that a clear

principle is enunciated: state and local governments cannot adopt legisla-

lion that may impact on the conduct of foreign policy.

28

courts of New York and Illinois in analogous cases involving

Statutes that had as their purpose condemnation of the policies

of South Africa.

In Springfield Rare Coin Galleries, Inc. v. Johns, 115

11l.2d 221, 503 N.E.2d 300 (1986) the Supreme Court of

Illinois struck down a statute which created an exemption

from Illinois occupancy_and use tax statutes for transactions

in the legal tender of all nations except South Africa. The

Illinois Supreme Court stated that:

“The undisputed purposes of the exclusion are

to express disapproval toward South Africa and to

discourage investment in its products. We thus hold

that the exclusion is an impermissible encroachment

upon a national prerogative — the authority of the

federal government to conduct foreign affairs.”

Id., at 226.

The same analysis was undertaken by the New York State

Court of Appeals in New York Times Company v. City of New

York Commission on Human Rights, 41 N.Y.2d 345, 361

N.E.2d 963 (1977) where the court struck down the deter-

mination of the New York City Commission on Human Rights

that advertisements for jobs in South Africa were discrimina-

tory. The court recognized that the purpose of the Commis-

sion was “to impose an economic boycott aimed at the present

government of the Republic of South Africa.” 41 N.Y.2d at

351, 361 N.E.2d at 968. The court did not consider whether

the action of the City Human Rights Commission in fact had

any impact on South Africa or our conduct of foreign affairs

with South Africa. The Court of Appeals stated:

It was beyond the ken of the City Commission on

Human Rights to enforce local antidiscrimination

laws by imposing an economic boycott of the

Republic of South Africa. In this very case, the

commission conducted an inquiry that might have

been considered offensive by the Republic of South

Africa and which might have been an embarrass-

ment to those charged with the conduct of our

Nation’s foreign policy. The true danger is that if

New York City could do this in one instance, it

could do so in many instances. Each locality in each

- 29

State may not adopt its own foreign policy. This

would be disastrous, not only because of multi-

plicity and divergence of policies, but because local

decisions are often influenced by pragmatic local

considerations which are not necessarily controlling

or even relevant to national policy as determined by

the Federal Government at Washington.

Id., 41 N.Y.2d at 353, 361 N.E.2d at 969.

The Baltimore Ordinances at issue in this case are like-

wise a potential embarrassment to those charged with the

conduct of foreign relations, and were motivated by local,

parochial, political considerations which diverge from those

controlling the foreign policy of the United States.

The Maryland Court of Appeals sought to distinguish

Springfield Rare Coin Galleries and New York Times Co. by

asserting that “although the Ordinances might be viewed as

having some tangential effect on economic relations between

American firms and South African businesses or government,

their impact on foreign affairs is far smaller than New York

City’s action... or that of Illinois ....” App. D-65. Not only

is the statement incorrect in view of the massive impact of all

local divestment legislation, or even the divestment caused to

the Baltimore pension funds alone of $400 million in stock,

but it is unsupported in the record. Moreover, implicit is

recognition by the Maryland court that the Ordinances have

actual impact on this nation’s foreign relations; this conces-

sion alone is sufficient to warrant review and reversal under

Zschernig.

30

CONCLUSION

The decision of the Maryland Court of Appeals incor-

rectly addresses several critical issues of national importance:

the intrusion of local governments in the conduct and articula-

tion of this nation’s foreign policy; whether local govern-

ments may bar the purchase and sale of billions of dollars of

securities under the Commerce Clause; the application of the

market participant doctrine to foreign commerce and to the

use of funds partly the property of the beneficiaries, not the

city; whether the reduction of the value of public pension

trust funds to satisfy the political and moral desires of local

governments works a taking of the property of the benefici-

aries Of those funds or is an impairment of the contracts

between the city and the beneficiaries; and preemption in the

areas Of foreign relations and foreign commerce by the fed-

eral government of local divestment legislation. Review by

this Court is necessary.

Petitioners respectfully urge this Court to grant this peti-

tion for writ of certiorari and reverse the decision and judg-

ment of the Maryland Court of Appeals.

Dated: November 30, 1989

Respectfully submitted,

DouG.Las FOsTER

*MARTIN S. KAUFMAN

*Counsel of Record

ATLANTIC LEGAL FOUNDATION

205 East 42nd Street

New York, NY 10017

(212) 573-1960

Attorneys for Petitioners

A-1

APPENDIX A

UNITED STATES CONSTITUTION

Article I

Section 8. . . .The Congress shall have Power. . . .To

regulate Commerce with foreign Nations, and among the

several States... .

Section 10. No State shall enter into any Treaty, Alli-

ance, or Confederation; ... pass any ... Law impairing

the Obligation of Contracts... .

No State shall, without the Consent of Congress... .

enter into any Agreement or Compact with... a foreign

Power, or engage in War, unless actually invaded, or in

such imminent Danger as will not admit of delay.

Article II

Section 2. The President . . . - shall have Power, by

and with the Advice and Consent of the Senate, to make

Treaties, provided two-thirds of the Senators present con-

cur; and he shall nominate, and by and with the Advice

and Consent of the Senate, shall appoint Ambassadors

Article VI

.... This Constitution, and the Laws of the United

States which shall be made in Pursuance thereof; and all

Treaties made, or which shall be made, under the Author-

ity of the United States, shall be the supreme Law of the

Land; and the Judges in every State shall be bound

thereby, any Thing in the Constitution or Laws of any

State to the Contrary notwithstanding ... .

A-2

Amendment V

No person shall. . . .be deprived of . . . property,

without due process of law; nor shall private property be

taken for public use, without just compensation.

Amendment XIV

Section 1..... No State shall make or enforce any law

which shall abridge the privileges or immunities of citi-

zens of the United States; nor shall any State deprive any

person of life, liberty, or property, without due process of

law; nor deny to any person within its jurisdiction the

equal protection of the laws.

it

B-1

APPENDIX B

PUBLIC LAW 99-440 [H.R. 4868]:

October 2, 1986

COMPREHENSIVE ANTI-APARTHEID

ACT OF 1986

For Legislative History of Act see Report for

P.L. 99-440 in Legislative History Section, post.

An Act to prohibit loans to, other investments in, and

certain other activities with respect to, South Africa, and

for other purposes.

Be it enacted by the Senate and House of Representatives

of the United States of America in Congress assembled,

SHORT TITLE

SecTION 1. This Act may be cited as the “Compre-

hensive Anti-Apartheid Act of 1986”.

TABLE OF CONTENTS

Sec. 2. The table of contents of this Act is as follows:

Sec. 1. Short title.

Sec. 2. Table of contents.

Sec. 3. Definitions.

Sec. 4. Purpose.

TITLE I - POLICY OF THE UNITED STATES

WITH RESPECT TO ENDING APARTHEID

Sec. 101. Policy toward the Government of South

Africa. : ;

Sec. 102. Policy toward the African National Con-

gress, etc.

Sec. 103. Policy toward the victims of apartheid.

B-2

Sec. 104. Policy toward other countries in Southern

Africa.

Sec. 105. Policy toward “frontline” states.

Sec. 106. Policy toward a negotiated settlement.

Sec. 107. Policy toward international cooperation

on measures to end apartheid.

Sec. 108. Policy toward necklacing.

Sec. 109. United States Ambassador to meet with

Nelson Mandela.

Sec. 110. Policy toward the recruitment and train-

ing of black South Africans by United States

employers.

TITLE I] - MEASURES TO ASSIST VICTIMS

; OF APARTHEID

Sec. 201. Scholarships for the victims of apartheid.

Sec. 202. Human rights fund.

Sec. 203. Expanding participation in the South Afri-

can economy.

Sec. 204. Export-Import Bank of the United States.

Sec. 205. Labor practices of the United States Gov-

ernment in South Africa.

Sec. 206. Welfare and protection of the victims of

apartheid employed by the United States.

Sec. 207. Employment practices of United States

nationals in South Africa.

Sec. 208. Code of Conduct.

Sec. 209. Prohibition on assistance.

Sec. 210. Use of the African Emergency Reserve.

Sec. 211. Prohibition on assistance to any person or

group engaging in “necklacing”.

Sec. 212. Participation of South Africa in agri-

cultural export credit and promotion programs.

TITLE II] - MEASURES BY THE UNITED STATES

TO UNDERMINE APARTHEID

Sec. 301. Prohibition on the importation of

krugerrands.

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Sec. 302. Prohibition on the importation of military

articles.

Sec. 303. Prohibition on the importation of products

from parastatal organizations.

Sec. 304. Prohibition on computer exports to South

Africa.

Sec. 305. Prohibition on loans to the Government of

South Africa.

Sec. 306. Prohibition on air transportation with

South Africa.

Sec. 307. Prohibitions on nuclear trade with South

Africa.

Sec. 308. Government of South Africa bank

accounts.

Sec. 309. Prohibition on importation of uranium

and coal from South Africa.

Sec. 310. Prohibition on new investment in South

Africa.

Sec. 311. Termination of certain provisions.

Sec. 312. Policy toward violence or terrorism.

Sec. 313. Termination of tax treaty and protocol.

Sec. 314. Prohibition on United States Government

procurement from South Africa.

Sec. 315. Prohibition on the promotion of United

States tourism in South Africa.

Sec. 316. Prohibition on United States Government

assistance to, investment in, or subsidy for trade

with, South Africa.

Sec. 317. Prohibition on sale or export of items on

Munition List.

Sec. 318. Munitions list sales, notification.

Sec. 319. Prohibition on importation of South Afri-

can agricultural products and food.

Sec. 320. Prohibition on importation of iron and

steel.

Sec. 321. Prohibition on exports of crude oil and

petroleum products.

Sec. 322. Prohibition on cooperation with the armed

forces of South Africa.

Sec. 323. Prohibition on sugar imports.

B-4

TITLE IV —- MULTILATERAL MEASURES

TO UNDERMINE APARTHEID

Sec. 401. Negotiating authority.

Sec. 402. Limitation on imports from other

countries.

Sec. 403. Private right of action.

TITLE V - FUTURE POLICY TOWARD SOUTH

AFRICA

Sec. 501. Additional measures.

Sec. 502. Lifting of prohibitions.

Sec. 503. Study of health conditions in the “home-

lands” areas of South Africa.

Sec. 504. Reports on South Africa imports.

Sec. 505. Study and report on the economy of

southern Africa.

Sec. 506. Report on relations between other indus-

trialized democracies and South Africa.

Sec. 507. Study and report on-deposit accounts of

South African nationals in United States banks.

Sec. 508. Study and report on the violation of the

international embargo on sale and export of military

articles to South Africa.

Sec. 509. Report on Communist activities in South

Africa.

Sec. 510. Prohibition on the importation of Soviet

gold coins.

Sec. 511. Economic support for disadvantaged

South Africans.

Sec. 512. Report on the African National Congress.

TITLE VI - ENFORCEMENT AND ADMINISTRA-

TIVE PROVISIONS

Sec. 601. Regulatory authority.

Sec. 602. Congressional priority procedures.

Sec. 603. Enforcement and penalties.

Sec. 604. Applicability to evasions of Act.

am ™ <<

—

B-5

Sec. 605. Construction of Act.

Sec. 606. State or local anti-apartheid laws, enforce.

DEFINITIONS

Sec. 3. As used in this Act —

(1) the term “Code of Conduct” refers to

the principles set forth in section 208(a);

(2) the term “controlled South African

entity” means —

(A) a corporation, partnership, or

other business association or entity orga-

nized in South Africa and owned or con-

trolled, directly or indirectly, by a national

of the United States; or

(B) a branch, office, agency, or sole

proprietorship in South Africa of a national

of the United States;

(3) the term “loan” —

(A) means any transfer or extension of

funds or credit on the basis of an obligation

to repay, Or any assumption or guarantee of

the obligation of another to repay an exten-

sion of funds or credit, including -

(i) overdrafts,

(ii) currency swaps,

(iii) the purchase of debt or equity

securities issued by the Government of

South Africa or a South African entity

on or after the date of enactment of this

Act,

(iv) the purchase of a loan made

by another person,

(v) the sale of financial assets sub-

ject to an agreement to repurchase, and

(4)

B-6

(vi) a renewal or refinancing

whereby funds or credits are trans-

ferred or extended to the Government

of South Africa or a South African

entity, and

(B) does not include —

(i) normal short-term trade

financing, as by letters of credit or simi-

lar trade credits;

(ii) sales on open account in cases

where such sales are normal business

practice; or

(iii) rescheduling of existing

loans, if no new funds or credits are

thereby extended to a South African

entity or the Government of South

Africa;

the term “new investment” —

(A) means —-

(i) a commitment or contribution

of funds or other assets, and

(ii) a loan or other extension of

credit, and

(B) does not include —

(i) the reinvestment of profits gen-

erated by a controlled South African

entity into that same controlled South

African entity or the investment of such

profits in a South African entity;

(ii) contributions of money or

other assets where such contributions

are necessary to enable a controlled

South African entity to operate in an

economically sound manner, without

expanding its operations; or

(iii) the ownership or control of a

share or interest in a South African

B-7

entity or a controlled South African

entity or a debt or equity security

issued by the Government of South

Africa or a South African entity before

the date of enactment of this Act, or the

transfer or acquisition of such a share,

interest, or debt or equity security, if

any such transfer or acquisition does

not result in a payment, contribution of

funds or assets, or credit to a South

African entity, a controlled South Afri-

can entity, or the Government of South

Africa;

(5) the term “national of the United

States” means —

(A) a natural person who is a citizen

of the United States or who owes permanent

allegiance to the United States or is an alien

lawfully admitted for permanent residence

in the United States, as define by section

101(a) (20) of the Immigration and Nation-

ality Act (8 U.S.C. 1101(a) (20)); or

(B) a corporation, partnership, or

other business association which is orga-

nized under the laws of the United States,

any State or territory thereof, or the District

of Columbia;

(6) the term “South Africa” includes -

(A) the Republic of South Africa;

(B) any territory under the Adminis-

tration, legal or illegal, of South Africa; and

(C) the “bantustans” or “homelands”,

to which South African blacks are assigned

on the basis of ethnic origin, including the

Transkei, Bophuthatswana, Ciskei, and

Venda; and

B-8

(7) the term “South African entity” means

(A) a corporation, partnership, or

other business association or entity orga-

nized in South Africa; or

(B) a branch, office, agency, or sole

proprietorship in South Africa of a person

that resides or is organized outside South

Africa; and

(8) the term “United States” includes the

States of the United States, the District of

Columbia, the Commonwealth of Puerto Rico,

and any territory or possession of the United

States. :

PURPOSE

Sec. 4. The purpose of this Act is to set forth a

comprehensive and complete framework to guide the

efforts of the United States in helping to bring an end to

apartheid in South Africa and lead to the establishment of

a nonracial, democratic form of government. This Act sets

out United States policy toward the Government of South

Africa, the victims of apartheid, and the other states in

southern Africa. It also provides the President with addi-

tional authority to work with the other industrial

democracies to help end apartheid and establish democ-

racy in South Africa.

+ otra

B-9

TITLE I - POLICY OF THE UNITED STATES

WITH RESPECT TO ENDING APARTHEID

POLICY TOWARD THE GOVERNMENT

OF SOUTH AFRICA

Sec. 101. (a) United States policy toward the Gov-

ernment of South Africa shall be designed to bring about

reforms in that system of government that will lead to the

establishment of a nonracial democracy.

(b) The United States will work toward this goal by

encouraging the Government of South Africa to -

(1) repeal the present state of emergency

and respect the principle of equal justice under

law for citizens of all races;

(2) release Nelson Mandela, Govan Mbeki,

Walter Sisulu, black trade union leaders, and all

political prisoners;

(3) permit the free exercise by South Afri-

cans of all races of the right to form political

parties, express political opinions, and other-

wise participate in the political process;

(4) establish a timetable for the elimination

of apartheid laws;

(5) negotiate with representatives of all

racial groups in South Africa the future political

system in South Africa; and

(6) end military and paramilitary activities

aimed at neighboring states.

(c) The United States will encourage the actions set

forth in subsection (b) through economic, political, and

diplomatic measures as set forth in this Act. The United

States will adjust its actions towards the Government of

South Africa to reflect the progress of lack of progress

B-10

made by the Government of South Africa in meeting the

goal set forth in subsection (a).

POLICY TOWARD THE AFRICAN

NATIONAL CONGRESS,ETC.

Sec. 102 (a) United States policy toward the African

National Congress, the Pan African Congress, and their

affiliates shall be designed to bring about a suspension of

violence that will lead to the start of negotiations

designed to bring about a nonracial and genuine democ-

racy in South Africa.

(b) The United States shall work toward this goal by

encouraging the African National Congress and the Pan

African Congress, and their affiliates, to —

(1) suspend terrorist activities so that

negotiations with the Government of South

Africa and other groups representing black

South Africans will be possible;

(2) make known their commitment to a

free and democratic post-apartheid South

Africa;

(3) agree to enter into negotiations with

the South African Government and other groups

representing black South Africans for the peace-

ful solution of the problems of South Africa;

(4) reexamine their ties to the South Afri-

can Communist Party.

(c) The United States will encourage the actions set

forth in subsection (b) through political and diplomatic

measures. The United States will adjust its actions toward

the Government of South Africa not only to reflect pro-

gress or lack of progress made by the Government of

B-11

South Africa in meeting the goal set forth in subsection

101 (a) but also to reflect progress or lack of progress

made by the ANC and other organizations in meeting the

goal set forth in subsection (a) of this section.

POLICY TOWARD THE VICTIMS OF APARTHEID

Sec. 103. (a) The United States policy toward the

victims of apartheid is to use economic, political, diplo-

matic, and other effective means to achieve the removal

of the root cause of their victimization, which is the

apartheid system. In anticipation of the removal of the

system of apartheid and as a further means of challeng-

ing that system, it is the policy of the United States to

assist these victims of apartheid as individuals and

through organizations to overcome the handicaps

imposed on them by the system of apartheid and to help

prepare them for their rightful roles as full participants in

the political, social, economic, and intellectual life of their

country in the post-apartheid South Africa envisioned by

this Act.

(b) The United States will work toward the pur-

poses of subsection (a) by -

(1) providing assistance to South African

victims of apartheid without discrimination by

race, color, sex, religious belief, or political ori-

entation, to take advantage of educational

opportunities in South Africa and in the United

States to prepare for leadership positions in a

post-apartheid South Africa;

(2) assisting victims of apartheid;

B-12

(3) aiding individuals or groups in South

Africa whose goals are to aid victims of apart-

heid or foster nonviolent legal or political chal-

lenges to the apartheid laws;

(4) furnishing direct financial assistance to

those whose non-violent activities had led to

their arrest or detention by the South African

authorities and (B) to the families of those killed

by terrorist acts such as “necklacings”;

(5) intervening at the highest political

levels in South Africa to express the strong

desire of the United States to see the develop-

ment in South Africa of a nonracial democratic

society;

(6) Supporting the rights of the victims of

apartheid through political, economic, or other

sanctions in the event the Government of South

Africa fails to make progress toward the

removal of the apartheid laws and the establish-

ment of such democracy; and

(7) supporting the rights of all Africans to

be free of terrorist attacks by setting a time limit

after which the United States will pursue diplo-

matic and political measures against those pro-

moting terrorism and against those countries

harboring such groups so as to achieve the

objectives of this Act.

POLICY TOWARD OTHER COUNTRIES

IN SOUTHERN AFRICA

Sec. 104. (a) The United States policy toward the

other countries in the Southern African region shall be

designed to encourage democratic forms of government

full respect for human rights, an end to cross-border

terrorism, political independence, and economic

development.

B-13

(b) The United States will work toward the pur-

poses of subsection (a) by -

(1) helping to secure the independence of

Namibia and the establishment of Namibia as a

nonracial democracy in accordance with appro-

priate United Nations Security Council

resolutions;

(2) supporting the removal of all foreign

military forces from the region;

(3) encouraging the nations of the region

to settle differences through peaceful means;

(4) promoting economic development

through bilateral and multilateral economic

assistance targeted at increasing opportunities

in the productive sectors of national economies,

with a particular emphasis on increasing oppor-

tunities for non-governmental economic

activities;

(5) encouraging, and when necessary,

strongly demanding, that all countries of the

region respect the human rights of their citizens

and noncitizens residing in the country, and

especially the release of persons persecuted for

their political beliefs or detained without trial;

(6) encouraging, and when necessary,

strongly demanding that all countries of the

region take effective action to end cross-border

terrorism; and

(7) providing appropriate assistance,

within the limitations of American respon-

sibilities at home and in other regions, to assist

regional economic cooperation and the develop-

ment of interregional transportation and other

capital facilities necessary for economic growth.

B-14

POLICY TOWARD “FRONTLINE” STATES

Sec. 105. It is the sense of the Congress that the

President should discuss with the governments of the

African “frontline” states the effects on them of disrup-

tions in transportation or other economic links through

South Africa and of means of reducing those effects.

POLICY TOWARD A NEGOTIATED SETTLEMENT

Sec. 106. (a) (1) United States policy will seek to

promote negotiations among representatives of all citi-

zens of South Africa to determine a future political sys-

tem that would permit all citizens to be full participants

in the governance of their country. The United States

recognizes that important and legitimate political parties

in South Africa include several organizations that have

been banned and will work for the unbanning of such

organizations in order to permit legitimate political view-

points to be represented at such negotiations. The United

States also recognizes that some of the organizations

fighting apartheid have become infiltrated by Commu-

nists and that Communists serve on the governing boards

of such organizations. :

(2) To this end, it is the sense of the Congress that

the President, the Secretary of State, or other appropriate

high-level United States officials should meet with the

leaders of opposition organizations of South Africa, par-

ticularly but not limited to those organizations represent-

ing the black majority. Furthermore, the President, in

concert with the major allies of the United States and

other interested parties, should seek to bring together

—

B-15

opposition political leaders with leaders of the Govern-

ment of South Africa for the purpose of negotiations to

achieve a transition to the post-apartheid democracy

envisioned in this Act.

(b) The United States will encourage the Govern-

ment of South Africa and all participants to the negotia-

tions to respect the right of all South Africans to form

political parties, express political opinions, and otherwise

participate in the political process without fear of retribu-

tion by either governmental or nongovernmental organi-

zations. It is the sense of the Congress that a suspension

of violence is an essential precondition for the holding of

negotiations. The United States calls upon all parties to

the conflict to agree to a suspension of violence.

(c) The United States will work toward the achieve-

ment of-agreement to suspend violence and begin nego-

tiations through coordinated actions with the major

Western allies and with the governments of the countries

in the region.

(d) It is the sense of the Congress that the achieve-

ment of an agreement for negotiations could be promoted

if the United States and its major allies, such as Great

Britain, Canada, France, Italy, Japan, and West Germany,

would hold a meeting to develop a four-point plan to

discuss with the Government of South Africa a proposal

for stages of multilateral assistance to South Africa in

return for the Government of South Africa implement-

ing -

(1) an end to the state of emergency and

the release of the political prisoners, including

Nelson Mandela; ‘

B-16

(2) the unbanning of the African National

Congress, the Pan African Congress, the Black

Consciousness Movement, and all other groups

willing to suspend terrorism and to participate

in negotiations and a democratic process;

(3) a revocation of the Group Areas Act

and the Population Registration Act and the

granting of universal citizenship to all South

Africans, including homeland residents; and

(4) the use of the international offices of a

third party as an intermediary to bring about

negotiations with the object of the establishment

of power-sharing with the black majority.

POLICY TOWARD INTERNATIONAL COOPERATION

ON MEASURES TO END APARTHEID

Sec. 107. (a) The Congress finds that -

(1) international cooperation is a prerequi-

site to an effective anti-apartheid policy and to

the suspension of terrorism in South Africa; and

(2) The situation in South Africa consti-

tutes an emergency in international relations

and that action is necessary for the protection of

the essential security interests of the United

States.

(b) Accordingly, the Congress urges the President to

seek such cooperation among all individuals, groups, and

nations.

POLICY TOWARD NECKLACING

Sec. 108. It is the sense of the Congress that the

African National Congress should strongly condemn and

B-17

take effective actions against the execution by fire, com-

monly known as “necklacing”, of any person in any

country.

UNITED STATES AMBASSADOR TO MEET

WITH NELSON MANDELA

Sec. 109. It is the sense of the Senate that the United

States Ambassador should promptly make a formal

request to the South African Government for the United

States Ambassador to meet with Nelson Mandela.

POLICY TOWARD THE RECRUITMENT

AND TRAINING OF BLACK SOUTH

AFRICANS BY UNITED STATES EMPLOYERS

Sec. 110. (a) The Congress finds that -

(1) the policy of apartheid is abhorrent

and morally repugnant;

(2) the United States believes strongly in

the principles of democracy and individual

freedoms;

(3) the United States endorses the policy of

political participation of all citizens;

(4) a free, open, and vital economy is a

primary means for achieving social equality and

economic advancement for all citizens; and

(5) the United States is committed to a pol-

icy of securing and enhancing human rights and

individual dignity throughout the world.

(b) It is the sense of the Congress that United States

employers operating in South Africa are obliged both

generally to actively oppose the policy and practices of

apartheid and specifically to engage in recruitment and

B-18

training of black and colored South Africans for manage-

ment responsibilities.

TITLE II - MEASURES TO ASSIST VICTIMS

OF APARTHEID

SCHOLARSHIPS FOR THE VICTIMS OF APARTHEID

Sec. 201. (a) Section 105 (b) of the Foreign Assis-

tance Act of 1961 is amended -

(1) by inserting “(1)” after “(b)”; and

(2) by adding at the end thereof the fol-

lowing new paragraph:

“(2) (A) Gi) Of the amounts authorized to be appro-

priated to carry out this section for the fiscal years 1987,

1988, and 1989, not less than $4,000,000 shall be used in

each such fiscal year to finance education, training, and

scholarships for the victims of apartheid, including

teachers and other educational professionals, who are

attending universities and colleges in South Africa.

Amounts available to carry out this subparagraph shall

be provided in accordance with the provision of section

802 (c) of the International Security and Development

Cooperation Act of 1985.

“(ii) Funds made available for each such fiscal year

for purposes of chapter 4 of part II of this Act may be

used to finance such education, training, and scholar-

ships in lieu of an equal amount made available under

this subparagraph.

“(B) G) In addition to amounts used for purposes of

subparagraph (A), the agency primarily responsible for

administering this part, in collaboration with other

B-19

appropriate departments or agencies of the United States,

shall use assistance provided under this section or chap-

ter 4 of part II of this Act to finance scholarships for

students pursuing secondary school education in South

Africa. The selection of scholarship recipients shall be by

a nationwide panel or by regional panels appointed by

the United States chief of diplomatic mission to South

Africa.

“(ii) Of the amounts authorized to be appropriated

to carry out this section and chapter 4 of part II of this

Act for the fiscal years 1987, 1988, and 1989, up to an

aggregate of $1,000,000 may be used in each such fiscal

year for purposes of this subparagraph.

“(C) (i) In addition to the assistance authorized in

subparagraph (A), the agency primarily responsible for

administering this part shall provide assistance for inser-

vice teacher training programs in South Africa through

such nongovernmental organizations as TOPS or

teachers’ unions.

“(ii) Of the amounts authorized to be appropriated

to carry out this section and chapter 4 of part II of this

Act, up to an aggregate of $500,000 for the fiscal year 1987

and up to an aggregate of $1,000,000 for the fiscal year

1988 may be used for purposes of this subparagraph,

subject to standard procedures for project review and

approval.”.

(b) The Foreign Assistance Act of 1961 is amended

by inserting after section 116 the following new section:

“Sec. 117. AssisTANCE FOR DISADVANTAGED SOUTH AFRI-

cANs. . In providing assistance under this chapter or

B-20

under chapter 4 of part II of this Act for disadvantaged

South Africans, priority shall be given to working with

and through South African nongovernmental organiza-

tions whose leadership and staff are selected on a nonra-

cial basis, and which have the support of the

disadvantaged communities being served. The measure

of this community support shall be the willingness of a

substantial number of disadvantaged persons to partici-

pate in activities sponsored by these organizations. Such

organizations to which such assistance may be provided

include the Educational Opportunities Council, the South

African Institute of Race Relations, READ, professional

teachers’ unions, the Outreach Program of the University

of the Western Cape, the Funda Center in Soweto,

SACHED, UPP Trust, TOPS, the Wilgespruit Fellowship

Center (WFC), and civic and other organizations working

at the community level which do not receive funds from

the Government of South Africa.”.

HUMAN RIGHTS FUND

Sec. 202. (a) Section 116 (e) (2) (A) of the Foreign

Assistance Act of 1961 is amended —-

(1) by striking out “1984 and” and insert-

ing in lieu thereof “1984,”; and

(2) by inserting after “1985” a comma and

the following: “and $1,500,000 for the fiscal year

1986 and for each fiscal year thereafter”.

(b) Section 116 of such Act is amended by adding at

the end thereof the following new subsection:

“(f) (1) Of the funds made available to carry out

-subsection (e) (2) (A) for each fiscal year, not less than

B-21

$500,000 shall be used for direct legal and other assis-

tance to political detainees and prisoners and their fami-

lies, including the investigation of the killing of

protesters and prisoners, and for support for actions of

black-led community organizations to resist, through

nonviolent means, the enforcement of apartheid policies

such as —

“(A) removal of black populations from

certain geographic areas on account of race or

ethnic origin,

“(B) denationalization of blacks, including

any distinctions between the South African citi-

zenships of blacks and whites,

“(C) ‘residence restrictions based on race

or ethnic origin,

“(D) restrictions on the rights of blacks to

seek employment in South Africa and to live

wherever they find employment in South Africa,

and

“(E) restrictions which made it impossible

for black employees and their families to be —.

housed in family accommodations near their

place of employment.

“(2) (A) No grant under this subsection may exceed

$100,000.

“(B) The average of all grants under this paragraph

made in any fiscal year shall not exceed $70,000.

“(g) Of the funds made available to carry out sub-

section (e) (2) (A) for each fiscal year, $175,000 shall be

used for direct assistance to families of victims of vio-

lence such as ‘necklacing’ and other such inhumane acts.

B-22

An additional $175,000 shall be made available to black

groups in South Africa which actively working toward a

multi-racial solution to the sharing of political power in

that country through nonvioient, constructive means.”.

EXPANDING PARTICIPATION IN THE

SOUTH AFRICAN ECONOMY

Sec. 203. (a) The Congress declares that -

(1) the denial under the apartheid laws of

South Africa of the rights of South African

blacks and other nonwhites to have the oppor-

tunity to participate equitably in the South Afri-

can economy as managers or owners of, or

professionals in, business enterprises, and

(2) the policy of confining South African

blacks and other nonwhites to the status of

employees in minority-dominated businesses,

is an affront to the values of a free society.

(b) The Congress hereby -

(1) applauds the commitment of nationals

of the United States adhering to the Code of

Conduct to assure that South African blacks and

other nonwhites are given assistance in gaining

their rightful place in the South African econ-

omy; and

(2) urges the United States Government to

assist in appropriate ways the realization by

South African blacks and other nonwhites of

their rightful place in the South African

economy.

(c) Notwithstanding any other provision of law, the

Secretary of State and any other head of a department or

agency of the United States carrying out activities in

Wine»

B-23

South Africa shall, to the maximum extent practicable, in

procuring goods or services, make affirmative efforts to

assist business enterprises having more than 50 percent

beneficial ownership by South African blacks or other

nonwhite South Africans.

EXPORT-IMPORT BANK OF THE UNITED STATES

Sec. 204. Section 2 (b) (9) of the Export-Import Bank

Act of 1945 is amended -

(1) by striking out “(9) In” and inserting in

lieu thereof “(9) (A) Except as provided in sub-

paragraph (B), in”; and

(2) by adding at the end thereof the

following:

“(B) The Bank shall take active steps to encourage the

use of its facilities to guarantee, insure, extend credit, or

participate in the extension of credit to business enter-

prises in South Africa that are majority owned by South

African blacks or other nonwhite South Africans. The

certification requirement contained in clause (c) of sub-

paragraph (A) shall not apply to exports to or purchases

from business enterprises which are majority owned by

South African blacks or other nonwhite South Africans.”.

LABOR PRACTICES OF THE UNITED STATES

GOVERNMENT IN SOUTH AFRICA

Sec. 205. (a) It is the sense of the Congress that the

labor practices used by the United States Government -

(1) for the direct hire of South Africans,

(2) for the reimbursement out of official

residence funds of South Africans and

B-24

employees of South African organizations for

their long-term employment services on behalf

of the United States Government, and

(3) for the employment services of South

Africans arranged by contract,

should represent the best of labor practices in the United

States and should serve as a model for the labor practices

of nationals of the United States in South Africa.

(b) The Secretary of State and any other head of a

department or agency of the United States carrying out

activities in South Africa shall promptly take, without

regard to any provision of law, the necessary steps to

ensure that the labor practices applied to the employment

services described in paragraphs (1) through (3) of sub-

section (a) are governed by the Code of Conduct. Nothing

in this section shall be construed to grant any employee

of the United States the right to strike.

WELFARE AND PROTECTION OF VICTIMS

OF APARTHEID BY THE UNITED STATES

Sec. 206. (a) The Secretary of State shall acquire,

through lease or purchase, residential properties in the

Republic of South Africa that shall be made available, at

rents that are equitable, to assist victims of apartheid who

are employees of the United States Government in obtain-

ing adequate housing. Such properties shall be acquired

only in neighborhoods which would be open to occu-

pancy by other employees of the United States Govern-

ment in South Africa.

(b) There are authorized to be appropriated

$10,000,000 for the fiscal year 1987 to carry out the pur-

poses of this section.

B-25

EMPLOYMENT PRACTICES OF UNITED STATES

NATIONALS IN SOUTH AFRICA

Sec. 207. (a) Any national of the United States that

employs more than 25 persons in South Africa shall take

the necessary steps to insure that the Code of Conduct is

implemented.

(b) No department or agency of the United States

may intercede with any foreign government or foreign

national, regarding the export marketing activities in any

country of any national of the United States employing

more than 25 persons in South Africa that is not imple-

menting the Code of Conduct.

CODE OF CONDUCT

Sec. 208. (a) The Code of Conduct referred to in

sections 203, 205, 207, and 603 of this Act is as follows:

(1) desegregating the races in each

employment facility;

(2) providing equal employment oppor-

tunity for all employees without regard to race

or ethnic origin;

(3) assuring that the pay system is applied

to all employees without regard to race-or ethnic

o1igin;

(4) establishing a minimum wage and sal-

ary structure based on the appropriate local

minimum economic level which takes into

account the needs of employees and their

families;

(5) increasing by appropriate means the

number of persons in managerial, supervisory,

B-26

administrative, clerical, and technical jobs who

are disadvantaged by the apartheid system for

the purpose of significantly increasing their rep-

resentation in such jobs;

(6) taking reasonable steps to improve the

quality of employees’ lives outside the work

environment with respect to housing, transpor-

tation, schooling, recreation, and health; and

(7) implementing fair labor practices by

recognizing the right of all employees, regard-

less of racial or other distinctions, to self-organi-

zation and to form, join, or assist labor

organizations, freely and without penalty or

reprisal, and recognizing the right to refrain

from any such activity.

(b) It is the sense of the Congress that in addition to

the principles enumerated in subsection (a), nationals of

the United States subject to section 207 should seek to

comply with the following principle: taking reasonable

measures to extend the scope of influence on activities

outside the workplace, including -

(1) supporting the unrestricted rights of

black businesses to locate in urban areas;

(2) influencing other companies in South

Africa to follow the standards of equal rights

principles;

(3) supporting the freedom of mobility of

black workers to seek employment oppor-

tunities wherever they exist, and make provi-

sion for adequate housing for families of

employees within the proximity of workers’

employment; and

(4) supporting the rescission of all apart-

heid laws.

B-27

(c) The President may issue additional guidelines

and criteria to assist persons who are or may be subject to

section 207 in complying with the principles set forth in

subsection (a) of this section. The President may, upon

request, give an advisory opinion to any person who is or

may be subject to this section as to whether that person is

subject to this section or would be considered to be in

compliance with the principles set forth in subsection (a).

(d) The President may require all nationals of the

United States referred to in section 207 to register with

the United States Government.

(e) Notwithstanding any other provision of law, the

President may enter into contracts with one or more

private organizations or individuals to assist in imple-

menting this section.

PROHIBITION ON ASSISTANCE

Sec. 209. No assistance may be provided under this

Act to any group which maintains within its ranks any

individual who has been found to engage in gross viola-

tions of internationally recognized human rights (as

defined in section 502B (d) (1) of the Foreign Assistance

Act of 1961).

USE OF THE AFRICAN EMERGENCY RESERVE

Sec. 210. Whenever the President determines that

such action is necessary or appropriate to meet food

shortages in southern Africa, the President is authorized

to utilize the existing, authorized, and funded reserve

entitled the “Emergency Reserve for African Famine

B-28

Relief” to provide food assistance and transportation for

that assistance.

PROHIBITION ON ASSISTANCE TO ANY PERSON

OR GROUP ENGAGING IN “NECKLACING”

Sec. 211. No assistance may be provided under this

Act, the Foreign Assistance Act of 1961, or any other

provision of law to any individual, group, organization,

or member thereof, or entity that directly or indirectly

engages in, advocates, supports, or approves the practice

of execution by fire, commonly known as “necklacing”.

PARTICIPATION OF SOUTH AFRICA

IN AGRICULTURAL EXPORT CREDIT

AND PROMOTION PROGRAMS

Sec. 212. Notwithstanding any other provision of

this Act or any other provision of law, the Secretary of

Agriculture may permit South Africa to participate in

agricultural export credit and promotion programs con-

ducted by the Secretary at similar levels, and under simi-

lar terms and conditions, as other countries that have

traditionally purchased United States agricultural com- _

modities and the products thereof.

TITLE II] - MEASURES BY THE UNITED STATES

TO UNDERMINE APARTHEID

PROHIBITION ON THE IMPORTATION

OF KRUGERRANDS

Sec. 301. No person, including a bank, may import

into the United States any South African krugerrand or

any other gold coin minted in South Africa or offered for

sale by the Government of South Africa.

B-29

PROHIBITION ON THE IMPORTATION

OF MILITARY ARTICLES

Sec. 302. No arms, ammunition, or military vehicles

produced in South Africa or any manufacturing data for

such articles may be imported into the United States.

PROHIBITION ON THE IMPORTATION OF PRODUCTS

FROM PARASTATAL ORGANIZATIONS

Sec. 303. (a) Notwithstanding any other provision of

law, no article which is grown, produced, manufactured

by, marketed, or otherwise exported by a parastatal orga-

nization of South Africa may be imported into the United

States, (1) except for agricultural products during the 12-

month period from the date of enactment; and (2) except

for those strategic minerals for which the President has

certified to the Congress that the quantities essential for

the economy or defense of the United States are unavail-

able from reliable and secure suppliers and except for any

article to be imported pursuant to a contract entered into

before August 15, 1986: Provided, That no shipments may

be received by a national of the United States under such

contract after April 1, 1987.

(b) For purposes of this section, the term “parastatal

organization” means a corporation or partnership owned

or controlled or subsidized by the Government of South

Africa, but does not mean a corporation or partnership

which previously received start-up assistance from the

South African Industrial Development Corporation but

which is now privately owned.

B-30

PROHIBITION ON COMPUTER EXPORTS TO

SOUTH AFRICA

Sec. 304. (a) No computers, computer software, or

goods or technology intended to manufacture or service

computers may be exported to or for use by any of the

following entities of the Government of South Africa;

(1) The military.

(2) The police.

(3) The prison system.

(4) The national security agencies.

(5) ARMSCOR and its subsidiaries or the

weapons research activities of the Council for

Scientific and Industrial Research.

(6) The administering authorities for con-

trolling the movements of the victims of

apartheid. ‘

(7) Any apartheid enforcing agency.

(8) Any local, regional, or homelands gov-

ernment entity which performs any function of

any entity described in paragraphs (1) through

(7).

(b) (1) Computers, computer software, and goods or

technology intended to service computers may be

exported, directly or indirectly, to or for use by an entity

of the Government of South Africa other than those set

forth in subsection (a) only if a system of end use veri-

fication is in effect to ensure that the computers involved

will not be used for any function of any entity set forth in

subsection (a).

B-31

(2) The Secretary of Commerce may prescribe such

rules and regulations as may be necessary to carry out

this section.

PROHIBITION ON LOANS TO THE GOVERNMENT

OF SOUTH AFRICA

Sec. 305. (a) No national of the United States may

make or approve any loan or other extension of credit,

directly or indirectly, to the Government of South Africa

or to any corporation, partnership or other organization

which is owned or controlled by the Government of

South Africa.

(b) The prohibition contained in subsection (a) shall

not apply to -

(1) a loan or extension of credit for any

education, housing, or humanitarian benefit

which —

(A) is available to all persons on a

nondiscriminatory basis; or

(B) is available in a geographic area

accessible to all population groups without

any legal or administrative restriction; or

(2) a loan or extension of credit for which

an agreement is entered into before the date of

enactment of this Act.

PROHIBITION ON AIR TRANSPORTATION

WITH SOUTH AFRICA

Sec. 306. (a) (1) The President shall immediately

notify the Government of South Africa of his intention to

suspend the rights of any air carrier designated by the

Government of South Africa under the Agreement

B-32

Between the Government of the United States of America

and the Government of the Union of South Africa Relat-

ing to Air Services Between Their Respective Territories,

signed May 23, 1947, to service the routes provided in the

Agreement.

(2) Ten days after the date of enactment of this Act,

the President shall direct the Secretary of Transportation

to revoke the right of any air carrier designated by the

Government of South Africa under the Agreement to

provide service pursuant to the Agreement.

(3) Ten days after the date of enactment of this Act,

the President shall direct the Secretary of Transportation

not to permit or otherwise designate any United States air

carrier to provide service between the United States and

South Africa pursuant to the Agreement.

(b) (1) The Secretary of State shall terminate the

Agreement Between the Government of the United States

of America and the Government of the Union of South

Africa Relating to Air Services Between Their Respective

Territories, signed May 23, 1947, in accordance with the

provisions of that agreement.

(2) Upon termination of such agreement, the Secre-

tary of Transportation shall prohibit any aircraft of a

foreign air carrier owned, directly or indirectly, by the

Government of South Africa or by South African

nationals from engaging in air transportation with

respect to the United States.

(3) The Secretary of Transportation shall prohibit

the takeoff and landing in South Africa of any aircraft by

an air carrier owned, directly or indirectly, or controlled

B-33

by a national of the United States or by any corporation

or other entity organized under the laws of the United

States or of any State.

(c) The Secretary of Transportation may provide for

such exceptions from the prohibition contained in subsec-

tion (a) or (b) as the Secretary considers necessary to

provide for emergencies in which the safety of an aircraft

or its crew or passengers is threatened.

(d) For purposes of this section, the terms “air-

a” M4

craft”, “air transportation”, and “foreign air carrier” have

the meanings given those terms in section 101 of the

Federal Aviation Act of 1958 (49 U.S.C. 1301).

PROHIBITIONS ON NUCLEAR TRADE

WITH SOUTH AFRICA

Sec. 307. (a) Notwithstanding any other provision of

law -

(1) the Nuclear Regulatory Commission

shall not issue any license for the export to

South Africa of production or utilization facili-

ties, any source or special nuclear material or

sensitive nuclear technology, or any component

parts, items, or substances which the Commis-

sion has determined, pursuant to section 109b.

of the Atomic Energy Act, to be especially rele-

vant from the standpoint of export control

because of their significance for nuclear explo-

sive purposes;

(2) the Secretary of Commerce shall not

issue any license for the export to South Africa

of any goods or technology which have been

determined, pursuant to section 309 (c) of the

Nuclear Non-Proliferation Act of 1978, to be of

significance for nuclear explosive purposes for

B-34

use in, or judged by the President to be likely to

be diverted to, a South African production or

utilization facility;

(3) the Secretary of Energy shall not, under

section 57b. (2) of the Atomic Energy Act, autho-

rize any person to engage, directly or indirectly,

in the production of special nuclear material in

South Africa; and

(4) no goods, technology, source or special

nuclear material, facilities, components, items,

or substances referred to in clauses (1) through

(3) shall be approved by the Nuclear Regulatory

Commission or an executive branch agency for

retransfer to South Africa,

unless the Secretary of State determines and certifies to

the Speaker of the House of Representatives and the

chairman of the Committee on Foreign Relations of the

Senate that the Government of South Africa is a party to

the Treaty on the Non-Proliferation of Nuclear Weapons,

done at Washington, London, and Moscow on July 1,

1968, or otherwise maintains International Atomic Energy

Agency safeguards on all its peaceful nuclear activities,

as defined in the Nuclear Non-Proliferation Act of 1978.

(b) Nothing in this section shall preclude -

(1) any export, retransfer, or activity gen-

erally licensed or generally authorized by the

Nuclear Regulatory Commission or the Depart-

ment of Commerce or the Department of

Energy; or

(2) assistance for the purpose of develop-

ing of applying International Atomic Energy

Agency or United States bilateral safeguards, for

International Atomic Energy Agency programs

generally available to its member states, for

reducing the use of highly enriched uranium in

B-35

research or test reactors, or for other technical

programs for the purpose of reducing prolifera-

tion risks, such as programs to extend the life of

reactor fuel and activities envisaged by section

223 of the Nuclear Waste Policy Act of 1982 or

which are necessary for humanitarian reasons to

protect the public health and safety.

(c) The prohibitions contained in subsection (a)

shall not apply with respect to a particular export,

retransfer, or activity, or a group of exports, retransfers,

or activities, if the President determines that to apply the

prohibitions would be seriously prejudicial to the

achievement of United States nonproliferation objectives

or would otherwise jeopardize the common defense and

security of the United States and, if at least 60 days before

the initial export, retransfer, or activity is carried out, the

President submits to the Speaker of the House of Repre-

sentatives and the chairman of the Committee on Foreign

Relations of the Senate a report setting forth that deter-

mination, together with his reasons therefor.

GOVERNMENT OF SOUTH AFRICA BANK ACCOUNTS

Sec. 308. (a) A United States depository institution

may not accept, receive, or hold a deposit account from

the Government of South Africa or from any agency or

entity owned or controlled by the Government of South

Africa except for such accounts which may be authorized

by the President for diplomatic or consular purposes. For

purposes of the preceding sentence, the term “depository

institution” has the same meaning as in section 19 (b) (1)

of the Federal Reserve Act.

B-36

(b) The prohibition contained in subsection (a) shall

take effect 45 days after the date of enactment of this Act.

PROHIBITION ON IMPORTATION OF URANIUM

AND COAL FROM SOUTH AFRICA

Sec. 309. (a) Notwithstanding any other provision of

law, no —

(1) uranium ore,

(2) uranium oxide,

(3) coal, or

(4) textiles,

that is produced or manufactured in South Africa may be

imported into the United States.

(b) This section shall take effect 90 days after the

date of enactment of this Act.

PROHIBITION ON NEW INVESTMENT

IN SOUTH AFRICA

Sec. 310. (a) No national of the United States may,

directly or through another person, make any new invest-

ment in South Africa.

(b) The prohibition contained in subsection (a) shall

take effect 45 days after the date of enactment of this Act.

(c) The prohibition contained in this section shall

not apply to a firm owned by black South Africans.

TERMINATION OF CERTAIN PROVISIONS

Sec. 311. (a) This title and sections 501 (c) and 504

(b) shall terminate if the Government of South Africa —

| B-37

(1) releases all persons persecuted for their

political beliefs or detained unduly without trial

and Nelson Mandela from prison;

(2) repeals the state of emergency in effect

on the date of enactment of this Act and releases

all detainees held under such state of

emergency;

(3) unbans democratic political parties and

permits the free exercise by South Africans of all

races of the right to form political parties,

express political opinions, and otherwise partic-

ipate in the political process;

(4) repeals the Group Areas Act and the

Population Registration Act and institutes no

other measures with the same purposes; and

(5) agrees to enter into good faith negotia-

tions with truly representative members of the

black majority without preconditions.

(b) The President may suspend or modify any of the

measures required by this title or section 501 (c) or sec-

tion 504 (b) thirty days after he determines, and so

reports to the Speaker of the House of Representatives

: and the chairman of the Committee on Foreign Relations

; of the Senate, that the Government of South Africa has -

(1) taken the action described in para-

graph (1) of sub-section (a), -

(2) taken three of the four actions listed in

paragraphs (2) through (5) of subsection (a), and

(3) made substantial progress toward dis-

mantling the system of apartheid and establish-

ing a nonracial democracy,

unless the Congress enacts within such 30-day period, in

accordance with section 602 of this Act, a joint resolution

B-38

disapproving the determination of the President under

this subsection.

(c) It is the policy of the United States to support

the negotiations with the representatives of all commu-

nities as envisioned in this Act. If the South African

Government agrees to enter into negotiations without

preconditions, abandons unprovoked violence against its

opponents, commits itself to a free and democratic post-

apartheid South Africa under a code of law; and if none-

theless the African National Congress, the Pan African

Congress, or their affiliates, or other organizations, refuse

to participate; or if the African National Congress, the

Pan African Congress or other organizations —

(1) refuse to abandon unprovoked vio-

lence during such negotiations; and

(2) refuse to commit themselves to a free

and democratic post-apartheid South Africa

under a code of law,

then the United States will support negotiations which do

not include these organizations.

POLICY TOWARD VIOLENCE OR TERRORISM

Sec. 312. (a) United States policy toward violence in

South Africa shall be designed to bring about an

immediate end to such violence and to promote negotia-

tions concluding with a removal of the system of apart-

heid and the establishment of a non-racial democracy in

South Africa.

(b) The United States shall work toward this goal by

diplomatic and other measures designed to isolate those

who promote terrorist attacks on unarmed civilians or

ca EI me Oe

WT See RS ee A ahs Se ae

B-39

those who provide assistance to individuals or groups

promoting such activities.

(c) The Congress declares that the abhorrent prac-

tice of “necklacing” and other equally inhumane acts

which have been practices in South Africa by blacks

against fellow blacks are an affront to all throughout the

world who value the rights of individuals to live in an

atmosphere free from fear of violent reprisals.

TERMINATION OF TAX TREATY AND PROTOCOL

Sec. 313. The Secretary of State shall terminate

immediately the following convention and protocol, in |

accordance with its terms, the Convention Between the

Government of the United States of America and the

Government of the Union of South Africa for the Avoid-

ance of Double Taxation and for Establishing Rules of

Reciprocal Administrative Assistance With Respect to

Taxes on Income, done at Pretoria on December 13, 1946,

and the protocol relating thereto.

PROHIBITION ON UNITED STATES GOVERNMENT

PROCUREMENT FROM SOUTH AFRICA

Sec. 314. On or after the date of enactment of this

Act, no department, agency or any other entity of the

United States Government may enter into a contract for

the procurement of goods or services from parastatal

organizations except for items necessary for diplomatic

and consular purposes.

B-40

PROHIBITION ON THE PROMOTION OF UNITED

STATES TOURISM IN SOUTH AFRICA

Sec. 315. None of the funds appropriated or other-

wise made available by any provision of law may be

available to promote United States tourism in South

Africa.

PROHIBITION ON UNITED STATES GOVERNMENT

ASSISTANCE TO, INVESTMENT IN, OR SUBSIDY FOR

TRADE WITH, SOUTH AFRICA

Sec. 316. None of the funds appropriated or other-

wise made available by any provision of law may be

available for any assistance to investment in, or any sub-

sidy for trade with, South Africa, including but not lim-

ited to funding for trade missions in South Africa and for

participation in exhibitions and trade fairs in South

Africa.

PROHIBITION ON SALE OR EXPORT OF ITEMS

ON MUNITIONS LIST

Sec. 317. (a) Except as provided in subsection (b),

no item contained on the United States Munition List

which is subject to the jurisdiction of the United States

may be exported to South Africa.

(b) Subsection (a) does not apply to any item which

is not covered by the United Nations Security Council

Resolution 418 of November 4, 1977, and which the Presi-

dent determines is exported solely for commercial pur-

poses and not exported for use by the armed forces,

police, or other security forces of South Africa or for

other military use.

B-41

(c) The President shall prepare and submit to Con-

gress every six months a report describing any license

issued pursuant to subsection (b).

MUNITIONS LIST SALES, NOTIFICATION

Sec. 318. (a) Notwithstanding any other provision of

this Act, the President shall:

(i) notify the Congress of his intent to

allow the export to South Africa any item which

is on the United States Munition List and which

is not covered by the United Nations Security

Council Resolution 418 of November 4, 1977,

and

(ii) certify that such item shall be used

solely for commercial purposes and not

exported for use by the armed forces, police, or

other security forces of South Africa or for other

military use.

(b) The Congress shall have 30 calendar days of

continuous session (computed as provided in section 906

(b) of title 5, United States Code) to disapprove by joint

resolution of any such sale.

PROHIBITION ON IMPORTATION OF SOUTH

AFRICAN

AGRICULTURAL PRODUCTS AND FOOD

Sec. 319. Notwithstanding any other provision of

law, no:

(1) agricultural commodity, product,

byproduct of derivitive [sic] thereof,

(2) article that is suitable for human con-

sumption, that is a product of South Africa may

be imported into the customs territory of the

B-42

United States after the date of enactment of this

Act.

PROHIBITION ON IMPORTATION OF

IRON AND STEEL

Sec. 320. Notwithstanding any other provision of

law, no iron or steel produced in South Africa may be

imported into the United States.

. PROHIBITION ON EXPORTS OF CRUDE OIL

AND PETROLEUM PRODUCTS

Sec. 321. (a) No crude oil or refined petroleum

product which is subject to the jurisdiction of the United

States or which is exported by a person subject to the

jurisdiction of the United States may be exported to South

Africa.

(b) Subsection (a) does not apply to any export pur-

suant to a contract entered into before the date of enact-

ment of this Act.

PROHIBITION ON COOPERATION WITH THE

ARMED FORCES OF SOUTH AFRICA

Sec. 322. No agency or entity of the United States

may engage in any form of cooperation, direct or indirect,

with the armed forces of the Government of South Africa,

except activities which are reasonably designed to facili-

tate the collection of necessary intelligence. Each such

activity shall be considered a significant anticipated intel-

ligence activity for purposes of section 501 of the

National Security Act of 1947.

B-43

PROHIBITIONS ON SUGAR IMPORTS

Sec. 323. (a) (1) Notwithstanding any other provi-

sion of law, no sugars, sirups, or molasses that are prod-

ucts of the Republic of South Africa may be imported into

the United States after the date of enactment of this Act.

(2) The aggregate quantity of sugars, sirups, and

molasses that -

(A) are products of the Philippines, and

(B) may be imported into the United States

(determined without regard to this paragraph)

under any limitation imposed by law on the

quantity of all sugars, sirups, and molasses that

may be imported into the United States during

any period of time occurring after the date of

enactment of this Act,

shall be increased by the aggregate quantity of sugars,

sirups, and molasses that are products of the Republic of

South Africa which may have been imported into the

United States under such limitation during such period if

this section did not apply to such period.

(b) (1) Paragraph (c) (i) of headnote 3 of subpart A

of part 10 of schedule 1 of the Tariff Schedules of the

United States is amended -

(A) by striking out “13.5” in the item relat-

ing to the Philippines in the table and inserting

in lieu thereof “15.8”, and

(B) by striking out the item relating to the

Republic of South Africa in the table.

(2) Paragraph (c) of headnote 3 or subpart A of part

10 of schedule 1 of the Tariff Schedules of the United

B-44

States is amended by adding at the end thereof the fol-

lowing new subparagraph:

“(iii) Notwithstanding any authority given to the

United States Trade Representative under paragraphs (e)

and (g) of this headnote -

“(A) the percentage allocation made to the

Philippines under this paragraph may not be

reduced, and

“(B) no allocation may be made to the

Republic of South Africa,

in allocating any limitation imposed under any para-

graph of this headnote on the quantity of sugars, sirups,

and molasses described in items 155.20 and 155.30 which

may be entered.”.

TITLE IV - MULTILATERAL MEASURES

TO UNDERMINE APARTHEID

NEGOTIATING AUTHORITY

Sec. 401. (a) It is the policy of the United States to

seek international cooperative agreements with the other

industrialized democracies to bring about the complete

dismantling of apartheid. Sanctions imposed under such

agreements should be both direct and official executive or

legislative acts of governments. The net economic effect

of such cooperative should be measurably greater than

the net economic effect of the measures imposed by this

Act.

(b) (1) Negotiations to reach international coopera-

tive arrangements with the other industrialized

democracies and other trading partners of South Africa

on measures to bring about the complete dismantling of

B-45

apartheid should begin promptly and should be con-

cluded not later than 180 days from the enactment of this

Act. During this period, the President or, at his direction,

the Secretary of State should convene an international

conference of the other industrialized democracies in

order to reach cooperative agreements to impose sanc-

tions against South Africa to bring about the complete

dismantling of apartheid.

(2) The president shall, not less than 180 days after

the date of enactment of this Act, submit to the Congress

a report containing —

(A) a description of United States efforts

to negotiate multilateral measures to bring

about the complete dismantling of apartheid;

and

(B) a detailed description of economic and

other measures adopted by the other indus-

trialized countries to bring about the complete

dismantling of apartheid, including an assess-

ment of the stringency with which such mea-

sures are enforced by those countries.

(c) If the President successfully concludes an inter-

national agreement described in subsection (b) (1), he

may, after such agreement enters into force with respect

to the United States, adjust, modify, or otherwise amend

the measures imposed under any provision of sections

301 through 310 to conform with such agreement.

(d) Each agreement submitted to the Congress

under this subsection shall enter into force with respect

to the United States if (and only if) -

(1) the President, not less than 30 days

before the day on which he enters into such

B-46

agreement, notifies the House of Representa-

tives and the Senate of his intention to enter into

such an agreement, and promptly thereafter

publishes notice of such intention in the Federal

Register;

(2) after entering into the agreement, the

President transmits to the House of Representa-

tives and to the Senate a document containing a

copy of the final legal text of such agreement,

together with —

(A) a description of any administrative

action proposed to implement such agree-

ment and an explanation as to how the pro-

posed administrative action would change

or affect existing law, and

(B) a statement of his reasons as to how

the agreement serves the interest of United

States foreign policy and as to why the pro-

posed administrative action is required or

appropriate to carry out the agreement; and

(3) a joint resolution approving such

agreement has been enacted within 30 days of

transmittal of such document to the Congress.

(e) It is the sense of the Congress that the President

should instruct the Permanent Representative of the

United States to the United Nations to propose that the

United Nations Security Council, pursuant to Article 41

of the United Nations Charter, impose measures against

South Africa of the same type as are imposed by this Act.

LIMITATION ON IMPORTS FROM OTHER COUNTRIES

Sec. 402. The President is authorized to limit the

importation into the United States of any product or

service of a foreign country to the extent to which such

B-47

foreign country benefits from, or otherwise takes com-

mercial advantage of, any sanction or prohibition against

any national of the United States imposed by or under

this Act.

PRIVATE RIGHT OF ACTION

Sec. 403. (a) Any national of the United States who

is required by this Act to terminate or curtail business

activities in South Africa may bring a civil action for

damages against any person, partnership, or corporation

that takes commercial advantage or otherwise benefits

from such termination or curtailment.

(b) The action described in subsection (a) may only

be brought, without respect to the amount in controversy,

in the United States district court for the District of

Columbia or the Court of International Trade. Damages

which may be recovered include lost profits and the cost

of bringing the action, including a reasonable attorney’s

fee.

(c) The injured party must show by a prepon-

derance of the evidence that the damages have been the

direct result of defendant’s action taken with the deliber-

ate intent to injure the party.

TITLE V - FUTURE POLICY TOWARD SOUTH AFRICA

ADDITIONAL MEASURES

Sec. 501. (a) It shall be the policy of the United

States to impose additional measures against the

Government of So. Africa if substantial progress has

not been made within twelve months of the date of

~

B-48

enactment of this Act in ending the system of apartheid

and establishing a nonracial democracy.

(b) The President shall prepare and transmit to the

Speaker of the House of Representatives and the chair-

man of the Committee on Foreign Relations of the Senate

within twelve months of the date of enactment of this

Act, and every twelve months thereafter, a report on the

extent to which significant progress has been made

toward ending the system of apartheid, including -

(1) an assessment of the extent to which

the Government of South Africa has taken the

steps set forth in section 101 (b) of this Act;

(2) an analysis of any other actions taken

by the Government of South Africa in ending

the system of apartheid and moving toward a

nonracial democracy; and

(3) the progress, or lack of progress, made

in reaching a negotiated settlement to the con-

flict in South Africa.

(c) If the President determines that significant pro-

gress has not been made by the Government of South

Africa in ending the system of apartheid and establishing

a nonracial democracy, the President shall include in the

report required by subsection (b) a recommendation on

which of the following additional measures should be

imposed:

(1) a prohibition on the importation of

steel from South Africa;

(2) a prohibition on military assistance to

those countries that the report required by sec-

tion 508 identifies as continuing to circumvent

the international embargo on arms and military

technology to South Africa;

B-49

(3) a prohibition on the importation of

food, agricultural products, diamonds, and tex-

tiles from South Africa;

(4) a prohibition on United States banks

accepting, receiving, or holding deposit

accounts from South African nationals; and

(5) a prohibition on the importation into

the United States of strategic minerals from

South Africa.

(d) A joint resolution which would enact part or all

of the measures recommended by the President pursuant

to subsection (c) shall be considered in accordance with

the provisions of section 602 of this Act.

LIFTING OF PROHIBITIONS

Sec. 502. (a) Notwithstanding any other provision of

this Act, the President may lift any prohibition contained

in this Act imposed against South Africa if the President

determines, after six months from the date of the imposi-

tion of such prohibition, and so reports to Congress, that

such prohibition would increase United States depen-

dence upon any member country or observer country of

the Council for Mutual Economic Assistance (C.M.E.A.)

for the importation of coal or any strategic and critical

material by an amount which exceeds by weight the

average amounts of such imports from such country dur-

ing the period 1981 through 1985.

(b) (1) Not later than 30 days after the date of

enactment of this Act, the Secretary of Commerce shall

prepare and transmit to the Congress a report setting

forth for each country described in subsection (a) -

B-50

(A) the average amount of such imports

from such country during the period of 1981

through 1985; and ‘

(B) the current amount of such imports

from such country entering the United States.

(2) Thirty days after transmittal of the report

required by paragraph (1) and every thirty days thereaf-

ter, the President shall prepare and transmit the informa-

tion described in paragraph (1) (B).

STUDY OF HEALTH CONDITIONS IN THE

“HOMELANDS” AREAS OF SOUTH AFRICA

Sec. 503. The Secretary of State shall conduct a

study to examine the state of health conditions and to

determine the extent of starvation and malnutrition now

prevalent in the “homelands” areas of South Africa and

shall, not later than December 1, 1986, prepare and trans-

mit to the Speaker of the House of representatives and

the chairman of the Committee on Foreign Relations of

the Senate a report setting forth the results of such study.

REPORT ON SOUTH AFRICAN IMPORTS

Sec. 504. (a) Not later than 90 days after the date of

enactment of this Act, the President shall submit to the

Speaker of the House of Representatives and the chair-

man of the Committee on Foreign Relations of the Senate

a report on the extent to which the United States is

dependent on the importation from South Africa of -

(1) chromium,

(2) cobalt,

(3) manganese,

B-51

(4) platinum group metals,

(5) ferroalloys, and

(6) other strategic and critical materials

(within the meaning of the Strategic and Critical

Materials Stock Piling Act).

(b) The President shall develop a program which

reduces the dependence, if any, of the United States on

the importation from South Africa of the materials identi-

fied in the report submitted under subsection (a).

STUDY AND REPORT ON THE ECONOMY OF

SOUTHERN AFRICA

Sec. 505. (a) The President shall conduct a study on

the role of American assistance in southern Africa to

determine what needs to be done, and what can be done

to expand the trade, private investment, and transport

prospects of southern Africa’s landlocked nations.

(b) Not later than 180 days after the date of enact-

ment of this Act, the President shall prepare and transmit

to the chairman of the Committee on Foreign Affairs of

the House of Representatives and the chairman of the

Committee on Foreign Relations of the Senate a report

setting forth the findings of the study conducted under

subsection (a).

REPORT ON RELATIONS BETWEEN OTHER

INDUSTRIALIZED DEMOCRACIES

AND SOUTH AFRICA

Sec. 506. (a) Not later than 180 days after the date of

enactment of this Act, the President shall prepare and

transmit to the Speaker of the House of Representatives

B-52

and the chairman of the Committee on Foreign Relations

of the Senate a report containing a detailed assessment of

the economic and other relationships of other indus-

trialized democracies with South Africa. Such report shall

be transmitted without regard to whether or not the

President successfully concluded an international agree-

ment under section 401.

(b) For purposes of this section, the phrase “eco-

nomic and other relationships” includes the same types

of matters as are described in sections 201, 202, 204, 205,

206, 207, sections 301 through 307, and sections 309 and

310 of this Act.

STUDY AND REPORT ON DEPOSIT ACCOUNTS

OF SOUTH AFRICAN NATIONALS

IN UNITED STATES BANKS

Sec. 507. (a) (1) The Secretary of the Treasury shall

conduct a study on the feasibility of prohibiting each

depository institution from accepting, receiving, or hold-

ing a deposit account from any South African national.

(2) For purposes of paragraph (1), the term “deposi-

tory institution” has the same meaning as in section 19 (b)

(1) of the Federal Reserve Act.

(b) Not later than 180 days after the date of enact-

ment of this Act, the Secretary of the Treasury shall

submit to the Speaker of the House of Representatives

and the chairman of the Committee on Foreign Relations

of the Senate a report detailing the findings of the study

required by subsection (a).

B-53

STUDY AND REPORT ON THE VIOLATION OF THE

INTERNATIONAL EMBARGO ON SALE AND EXPORT

OF MILITARY ARTICLES TO SOUTH AFRICA

Sec. 508. (a) The President shall conduct a study on

the extent to which the international embargo on the sale

and exports of arms and military technology to South

Africa is being violated.

(b) Not later than 179 days after the date of enact-

ment of this Act, the President shall submit to the

Speaker of the House of Representatives and the chair-

man of the Committee on Foreign Relations of the Senate

a report setting forth the findings of the study required

by subsection (a), including an identification of those

countries engaged in such sale or export, with a view to

terminating United States military assistance to those

countries.

REPORT ON COMMUNIST ACTIVITIES

IN SOUTH AFRICA

Sec. 509. (a) Not later than 90 days after the date of

enactment of this Act, the President shall prepare and

transmit to the Speaker of the House of Representatives

and the chairman of the Committee on Foreign Affairs of

the House of Representatives and the chairman of the

Committee on Foreign Relations of the Senate an unclas-

sified version of a report, prepared with the assistance of

the Director of the Central Intelligence Agency, the Direc-

tor of the Defense Intelligence Agency, the National Secu-

rity Advisor, and other relevant United States

Government officials in the intelligence community,

which shall set forth the activities of the Communist

—=z{z=—=—_—eooo@ee ©

B-54

Party in South Africa, the extent to which Communists

have infiltrated the many black nonwhite South African

organizations engaged in the fight against the apartheid

system, and the extent to which any such Communist

infiltration or influence sets the policies and goals of the

organizations with which they are involved.

(b) At the same time the unclassified report in sub-

section (a) is transmitted as set forth in that subsection, a

classified version of the same report shall be transmitted

to the chairmen of the Select Committee on Intelligence of

the Senate and of the Permanent Select Committee on

Intelligence of the House of Representatives.

PROHIBITION ON THE IMPORTATION

OF SOVIET GOLD COINS

Mc. 510. (a) No person, including a bank, may

mport into the United States any gold coin minted in the

Union of Soviet Socialist Republics or offered for sale by

the Government of the Union of Soviet Socialist

Republics.

(b) For purposes of this section, the term “United

States” includes the States of the United States, the Dis-

trict of Columbia, the Commonwealth of Puerto Rico, and

any territory or possession of the United States.

(c) Any individual who violates this section or any

regulations issued to carry out this section shall be fined

not more than five times the value of the rubles involved.

ee ee es eet

+ Semen wn re Yaw Steet bod Oe

B-55

ECONOMIC SUPPORT FOR DISADVANTAGED

SOUTH AFRICANS

Sec. 511 (a) Chapter 4 of part II of the Foreign

Assistance Act of 1961 is amended by adding at the end

thereof the following new section:

“Sec. 535. Economic Suprort FOR DISADVANTAGED SOUTH

Arricans. — (a) (1) Up to $40,000,000 of the funds autho-

rized to be appropriated to carry out this chapter for the

fiscal year 1987 and each fiscal year thereafter shall be

available for assistance for disadvantaged South Africans.

Assistance under this section shall be provided for activ-

ities that are consistent with the objective of a majority of

South Africans for an end to the apartheid system and the

establishment of a society based on non-racial principles.

Such activities may include scholarships, assistance to

promote the participation of disadvantaged South Afri-

cans in trade unions and private enterprise, alternative

education and community development programs.

“(2) Up to $3,000,000 of the amounts provided in

each fiscal year pursuant to subsection (a) shall be avail-

able for training programs for South Africa’s trade

unionists.

“(b) Assistance provided pursuant to the section

shall be made available notwithstanding any other provi-

sion of law and shall not be used to provide support to

organizations or groups which are financed or controlled

by the Government of South Africa. Nothing in this sub-

section may be construed to prohibit programs which are

consistent with subsection (a) and which award scholar-

ships to students who choose to attend South African-

supported institutions.”.

B-56

(b) Not later than 90 days after the date of enact-

ment of this Act, the Secretary of State shall prepare and

transmit to the Congress a report describing the strategy

of the President during the five-year period beginning on

such date regarding the assistance of black Africans pur-

suant to section 535 of the Foreign Assistance Act of 1961

and describing the programs and projects to be funded

under such section.

REPORT ON THE AFRICAN NATIONAL CONGRESS

Sec. 512. (a) Not later than 180 days after the date of

enactment of this Act, the Attorney General shall prepare

and transmit to the Congress a report on actual and

alleged violations of the Foreign Agents Registration Act

of 1938, and the status of any investigation pertaining

thereto, by representatives of governments or opposition

movements in Subsaharan Africa, including, but not lim-

ited to, members or representatives of the African

National Congress.

(b) For purposes of conducting any investigations

necessary in order to provide a full and complete report,

the Attorney General shall have full authority to utilize

civil investigative demand procedures, including but not

limited to the issuance of civil subpenas [sic].

TITLE VI - ENFORCEMENT AND ADMINISTRATIVE

PROVISIONS

REGULATORY AUTHORITY

Sec. 601. The President shall issue such rules, regu-

lations, licenses, and orders as are necessary to carry out

the provisions of this Act, including taking such steps as

imams aaa

B-57

may be necessary to continue in effect the measures a

imposed by Executive Order 12532 of September 9, 1985,

and Executive Order 12535 of October 1, 1985, and by any

rule, regulation, license, or order issued thereunder (to

the extent such measures are not inconsistent with this

Act).

CONGRESSIONAL PRIORITY PROCEDURES

Sec. 602. (a) (1) The provisions of this subsection

apply to the consideration in the House of Representa-

tives of a joint resolution under sections 311 (b), 401 (d),

and 501 (d).

(2) A joint resolution shall, upon introduction, be

referred to the Committee on Foreign Affairs of the

House of Representatives.

(3) (A) At any time after the joint resolution placed

on the appropriate calendar has been on that calendar for

a period of 5 legislative days, it is in order for any

Member of the House (after consultation with the

Speaker as to the most appropriate time for the consider-

ation of that joint resolution) to move that the House

resolve itself into the Committee of the Whole House on

the State of the Union for the consideration of that joint

resolution. The motion is highly privileged and is in

order even though a previous motion to the same effect

has been disagreed to. All points of order against the joint

resolution under clauses 2 and 6 of Rule XXI of the Rules

of the House are waived. If the motion is agreed to, the

resolution shall remain the unfinished business of the

House until disposed of. A motion to reconsider the vote

by which the motion is disagreed to shall not be in order.

et le AE Ce ons

B-58

(B) Debate on the joint resolution shall not exceed

ten hours, which shall be divided equally between a

Member favoring and a Member opposing the joint reso-

lution. A motion to limit debate is in order at any time in

the House or in the Committee of the Whole and is not

debatable.

(C) An amendment to the joint resolution is not in

order.

(D) At the conclusion of the debate on the joint

resolution, the Committee of the Whole shall rise and

report the joint resolution back to the House, and the

previous question shall be considered as ordered on the

Joint resolution to final passage without intervening

motion.

(b) (1) The provisions of this subsection apply to the

consideration in the Senate of a joint resolution under

section 311 (b), 401 (d), or 501 (d).

(2) A joint resolution shall, upon introduction, be

referred to the Committee on Foreign Relations of the

Senate.

(3) A joint resolution described in this section shall

be considered in the Senate in accordance with pro-

cedures contained in paragraphs (3) through (7) of sec-

tion 8066 (c) of the Department of Defense

Appropriations Act, 1985 (as contained in Public Law

98-473), except that -

(A) references in such paragraphs to the

Committee on Appropriations of the Senate

shall be deemed to be references to the Commit-

tee on Foreign Relations of the Senate; and

B-59

(B) amendments to the joint resolution are

in order.

(c) For purposes of this subsection, the term “joint

resolution” means only -

(A) in the case of section 311 (b), a joint

resolution which is introduced in a House of

Congress within 3 legislative days after the Con-

gress receives the report described in section 311

(b) and for which the matter after the resolving

clause reads as follows: “That the Congress,

having received on ___ the report of the Presi-

dent containing the determination required by

section 311 (b) of the Comprehensive Anti-

Apartheid Act of 1986, disapproves of such

determination.”, with the date of the receipt of

the report inserted in the blank; es

(B) in the case of section 401 (d) (3), a joint

resolution which is introduced in a House of

Congress within 3 legislative days after the Con-

gress receives the document described in section

401 (d) (2) and for which the matter after the

resolving clause reads as follows: “That the

Congress, having received on ___ the text of the

international agreement described in section 401

(d) (3) of the Comprehensive Anti-Apartheid

Act of 1986, approves of such agreement.”, with

the date of the receipt of the text of the agree-

ment inserted in the blank; and

ca Sha ee eh an ra net La

(C) in the case of section 501 (d), a joint

resolution which is introduced in a House of

Congress within 3 legislative days after the Con-

gress receives the determination of the President

pursuant to section 501 (c) and for which the

matter after the resolving clause reads as fol-

lows: “That the Congress, having received on

___ a determination of the President under sec-

tion 501 (c) of the Comprehensive Anti-Apart-

heid Act of 1986, approves the President’s

B-60

determination.”, with the date of the receipt of

the determination inserted in the blank.

(d) As used in this section, the term “legislative

day” means a day on which the House of Representatives

or the Senate is in session, as the case may be.

(e) This section is enacted —

(1) as an exercise of the rulemaking

powers of the House of Representatives and the

Senate, and as such it is deemed a part of the

Rules of the House and the Rules of the Senate,

respectively, but applicable only with respect to

the procedure to be followed in the House and

the Senate in the case of joint resolutions under

this section, and it supersedes other rules only

to the extent that it is inconsistent with such

rules; and

(2) with full recognition of the constitu-

tional right of the House and the Senate to

change their rules at any time, in the same man-

ner, and to the same extent as in the case of any

other rule of the House or Senate, and of the

right of the Committee on Rules of the House of

Representatives to report a resolution for the

Consideration of any measure.

ENFORCEMENT AND PENALTIES

Sec. 603. (a) (1) The President with respect to his

authorities under section 601 shall take the necessary

steps to ensure compliance with the provisions of this Act

and any regulations, licenses, and orders issued to carry

out this Act, including establishing mechanisms to moni-

tor compliance with this Act and such regulations,

licenses, and orders.

(2) In ensuring such compliance, the President may -

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B-61

(A) require any person to keep a full

record of, and to furnish under oath, in the form

of reports or otherwise, complete information

relative to any act or transaction described in

this Act either before, during, or after the com-

pletion thereof, or relative to any interest in

foreign property, or relative to any property in

which a foreign country or any national thereof

has or has had any interest, or as may be other-

wise necessary to enforce the provisions of this

Act; and

(B) conduct investigations, hold hearings,

administer oaths, examine witnesses, receive

evidence, take depositions, and require by sub-

pena the attendance and testimony of witnesses

and the production of all books, papers, and

documents relating to any matter under

investigation.

(b) Except as provided in subsection (d) -

(1) any person that violates the provisions

of this Act, or any regulation, license, or order

issued to carry out this Act shall be subject to a

civil penalty of $50,000;

(2) any person, other than an individual,

that willfully violates the provisions of this Act,

or any regulation, license, or order issued to

carry out this Act shall be fined not more than

$1,000,000;

(3) any individual who willfully violates

the provisions of this Act or any regulation,

license, or order issued to carry out this Act

shall be fined not more than $50,000, or

imprisoned not more than 10 years, or both; and

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(4) any individual who violates section 301

(a) or any regulations issued to carry out that

section shall, instead of the penalty set forth in

paragraph (2), be fined not more than 5 times

the value of the krugerrands or gold coins

involved.

(c) (1) Whenever a person commits a violation

under subsection (b) -

(A) any officer, director, or employee of

such person, or any natural person in control of

such person who knowingly and willfully

ordered, authorized, acquiesced in, or carried

ou

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