Ukrainian sanctions by Mass. walk a fine legal line

State initiatives can bump up against federal actions

Gov. Charles Baker’s executive order imposing sanctions on Russia follows a long line of Massachusetts boycotts, divestments, and resolutions regarding foreign affairs.  Baker’s order walks another line as well:  the line between lawful sanctions and those exposed to challenges under federal law.

On March 3, Baker issued the “Commonwealth’s Response to and Condemnation of the Russian Invasion of Ukraine.”  The order resolves that the Commonwealth “stands with the free, democratic nation of Ukraine and condemns the Russian attack.”  The order further resolves that the “Commonwealth seeks to support and maximize the effect of the Federal sanctions against the Russian government.”

The order invokes the authority of the governor under Part 2, c. 2, § 1, Art. 1 of the Massachusetts Constitution, which “styles” the governor as the “Supreme Executive Magistrate.”  The order directs the Secretary of the Executive Office for Administration and Finance to take several actions “to verify that no executive department agency” is currently contracting with, or partnered, affiliated, or in an exchange with “any Russian state-owned company, Russian government controlled entity, or Russian governmental body.”  The order further directs the secretary to make “efforts” to “terminate” any such existing contracts, “to the extent allowed by law.”  The order also directs that as to “any other form of partnership, affiliation, or exchange” with such companies, executive departments should “terminat[e] . . . any such arrangements except where exceptional circumstances weigh against termination.”

Meanwhile, in the Legislature, Sens. Walter F. Timilty and Bruce Tarr and Rep. Jamie Zahlaway Belsito have filed SD. 3013, “An Act Relative to Pension Divestment from Russia.”  The stated purpose of the bill is “to divest [public] pensions from companies engaging in business operations in Russia.”  The bill would cover many more companies—and their subsidiaries and affiliates—than the Russia-owned businesses targeted by the Baker order.

The Massachusetts sanctions join those of other states that have imposed sanctions on Russia.  According to Stateline, “governors in at least 11 states are pushing state entities to review or cut financial ties with Russian companies,” and “lawmakers in at least seven states have proposed divestment bills.”

On February 26, New Hampshire Gov. Christopher Sununu issued an order decrying the “unprovoked and violent attack on Ukraine” and directing that “All Russian-made and Russian-branded spirits shall be removed from shelves in all New Hampshire Liquor and Wine Outlets” owned by the state.

The order echoes one issued by the New Hampshire State Liquor Commission in 1983, which “delisted” vodka made in the Soviet Union “because of the . . . Korean Airlines incident in which an airliner carrying civilian passengers was shot down by Russian aircraft.”  The New Hampshire Supreme Court struck down the 1983 order as beyond the authority of the commission, and the precedent was likely on the mind of the governor in his recent order.

For his current order, Sununu invoked Part II, Article 41 of the New Hampshire Constitution, which—like its Massachusetts counterpart—styles the governor as the state’s “supreme executive magistrate.” Sununu’s order pledges that “the Granite State will take whatever measures to support the people of Ukraine and oppose the unprovoked attack.”

The Massachusetts Russia sanctions have a long pedigree. In the 1980s, Massachusetts was one of scores of states and cities to enact divestment and selective purchasing laws regarding South Africa.  In 1996, Massachusetts restricted state purchasing from companies doing business in Burma, though the act was later struck down by the Supreme Court. Most recently, in 2010, Massachusetts passed “An Act Relative to Pension Divestment from Certain Companies that Invest in the Republic of Iran.”  The act directs the Massachusetts public pension funds to divest from certain companies “providing goods or services deployed to develop petroleum resources in Iran.”  Its status may become uncertain if the Biden Administration revives the 2015 “Joint Comprehensive Plan of Action” abandoned by the Trump Administration.  Massachusetts today also maintains laws restricting certain state investment or procurement with Sudan, China, and Northern Ireland.  The Legislature has also passed resolutions on foreign affairs.  The most relevant recent proposal (filed, presciently, in March, 2021) by Sen. Jason Lewis, Senate No. 2414, is a resolution stating “the need for general support” of the North Atlantic Treaty Organization.

The Massachusetts actions regarding Russia partake of boycott, divestment, and resolution.  Their substance and measure seem designed to avoid challenges by the federal government and global companies.  For example, Baker’s order applies to “state-owned” and “government controlled” Russian companies; it does not impose a boycott of all companies doing business in or with Russia.  Even as to covered companies, it directs state agencies to make “efforts” to terminate certain existing contracts; it does not direct their immediate termination.  This choice of terms may suggest an initial executive review of existing contractual language and relevant state law before termination.

For future agency procurement, the Baker order directs efforts to “disqualify” the same companies only “to the extent allowed by law,” presumably state procurement law, but perhaps also federal sanctions and federal statutory and constitutional law that might foreclose, preempt, or delay disqualification of bidders solely based on their ties to Russia.

Finally, as for “other form of partnership, affiliation, or exchange” with the same companies, the order directs termination of these arrangements “except where exceptional circumstances weigh against termination.”  “Exceptional circumstances” are not defined by the order.

These three aspects of the Baker order walk a legal line between (1) outright disqualification and immediate termination, and (2) more measured, adverse actions arguably permitted by federal, state, and international law.

The divestment bill proposed in the Massachusetts Senate, while broader in its application to many more companies, may be less exposed to challenge than primary or secondary boycotts.  Divestment of shares held by a public pension fund may not impact a large, publicly traded company or the public fund in ways that give the company, its shareholders, or beneficiaries of the fund an incentive—or legal standing—to mount a challenge.  Perhaps for this reason, the US Supreme Court has never considered the constitutionality of state and local divestment laws related to foreign affairs.

The potential for future conflict between federal sanctions toward Russia and state and local sanctions remains to be seen. Baker’s order carefully states the “Commonwealth seeks to support and maximize the effects of the Federal sanctions,” in a wise attempt to deflect claims of conflict.  However, if the Biden Administration stops short of full sanctions against the banking and energy sectors, or, as part of a negotiated settlement, eases current sanctions, the states that maintain or expand their own sanctions may be exposed to claims that their sanctions conflict with a different balance struck by federal officials.

Meet the Author

Thomas A. Barnico

Teacher, Boston College Law School
In the face of such claims, the terms of the federal sanctions may be crucial.  “Savings clauses” in future federal laws and executive orders regarding Russia may expressly foreswear preemption and preserve state and local authority to impose sanctions.  Congress enacted a similar clause in 2010 regarding sanctions against Iran, providing that “that the United States should support the decision of any state or local government that for moral, prudential, or reputational reasons divests from, or prohibits the investment of the assets of the state or local government in” Iran.  State and local governments should lobby for the same protection now.  Such a savings clause may thwart claims that state sanctions conflict with federal actions toward Russia, and likely defeat any related constitutional claims under the Foreign Commerce Clause or the federal foreign affairs clauses.  Challengers will be hard-pressed to argue that the Constitution implicitly forbids what Congress has expressly approved.

Thomas A. Barnico teaches at Boston College Law School.  He is the author of a recent novel, War College, set in the Vietnam War era.