Congressional Update – Combatting BDS Act

On June 14 the Senate passed the National Defense Authorization Act, S2943, by a vote of 85-13.  The vote occurred after a compromise manager’s amendment by Senator John McCain (R-Arizona) fell apart.  McCain excoriated senators ahead of the vote as senators repeatedly blocked other senators from offering their amendments.

The amendment process on the bill came to a halt late earlier this week, with both McCain and Senator Lindsay Graham (R-South Carolina) blaming Mike Lee (R-Utah) for refusing to let any other amendments get a vote unless he got a separate vote on his proposal to ban detaining US citizens on US soil.

Combatting BDS Act — Senator Mark Kirk (R-Illinois), Joe Manchin (D-West Virginia), Pat Roberts (R-Kansas), Bob Menendez (D-New Jersey), Lisa Murkowski (R-Alaska), Ben Cardin (D-Maryland), Marco Rubio (R-Florida), David Vitter (R-Louisiana), Thom Tillis (R-North Carolina), Ted Cruz (R-Texas), Rob Portman (R-Ohio), Kelly Ayotte (R-New Hampshire), Orrin Hatch (R-Utah) and Bill Nelson (D-Florida) had planned to offer an amendment titled “Combatting BDS Act

Although the amendment was not offered to the FY 2017 Defense Authorization bill, it bears careful watching.  The Senate has yet to take up the FY 2017 Defense Appropriations bill, which is pending on the Senate calendar.  It is possible that Kirk could try to offer his amendment to the Defense Appropriations bill. [1]

The Senate Combatting BDS bill currently has 29 cosponsors, about one-quarter of the Senate.  The Administration opposes the amendment.  If offered and adopted, it is unlikely the President would veto the Defense Appropriations bill over the BDS amendment.  He could however, issue a signing statement indicating he will not implement the provision.  The President took this action in February when Congress presented the Customs bill, HR644, to President Obama for signature into law, which included a BDS provision regarding countering the BDS movement against Israel.  The provision in effect would have required the US to treat both as sovereign Israel. In signing the bill into law, the President issued a signing statement observing provision that provision contradicted longstanding US foreign policy and violates the Executive’s constitutional foreign policy prerogative; therefore the provision would not be implemented.

The text of the amendment as prepared for the Defense Authorization follows.

This subtitle may be cited as the “Combating BDS Act of 2016”.

The amendment is identical to the bill S2531 introduced by Senator Kirk and 28 cosponsors last February.  The amendment authorizes a state or local government to adopt and enforce measures to divest its assets from, or prohibit investment of its assets in: (1) an entity that such government determines, using credible information available to the public, engages in a commerce or investment-related boycott, divestment, or sanctions activity targeting Israel; or (2) an entity that owns or controls, is owned or controlled by, or is under common ownership or control with, such an entity. Such government shall provide written notice to such an entity before applying such a measure.

Such a measure by a state or local government is not preempted by any federal law. The bill applies to any measure adopted by a state or local government before, on, or after the date of this Act’s enactment.

The amendment amends the Investment Company Act of 1940 to prohibit any person from bringing any civil, criminal, or administrative action against any registered investment company, or any officer or employee thereof, based solely upon such company divesting from, or avoiding investing in, securities issued by persons that such company determines, using credible information available to the public, engage in any commerce or investment-related boycotts, divestments, or sanctions activities targeting Israel. The text of the amendment appears at the end of this documents.

 

Authority of State and Local Governments to Divest from Entities that Engage in Certain Boycott Divestment, or Sanctions Activities Targeting Israel.

(a) Authority To Divest.–Notwithstanding any other provision of law, a State or local government may adopt and enforce measures that meet the notice requirement of subsection (b) to divest the assets of the State or local government from, or prohibit investment of the assets of the State or local government in–

(1) An entity that the State or local government determines, using credible information available to the public, engages in a commerce-related or investment-related boycott, divestment, or sanctions activity targeting Israel;

(2) a successor entity or subunit of an entity described in paragraph (1); or

(3) an entity that owns or controls, is owned or controlled by, or is under common ownership or control with, an entity described in paragraph (1).

(b) Notice Requirement.–

(1) In General –A State or local government shall provide written notice to each entity to which a measure taken by the State or local government under subsection (a) is to be applied before applying the measure with respect to the entity.

(2) Rule of Construction.–Paragraph (1) shall not be construed to prohibit a State or local government from taking additional steps to provide due process with respect to an entity to which a measure is to be applied under subsection (a).

(c) Nonpreemption.–A measure of a State or local government authorized under subsection (a) is not preempted by any Federal law.

(d) Effective Date.–This section applies to any measure adopted by a State or local government before, on, or after the date of the enactment of this Act.

(e) Rule of Construction.–Nothing in this section shall be construed to abridge the authority of a State to issue and enforce rules governing the safety, soundness, and solvency of a financial institution subject to its jurisdiction or the business of insurance pursuant to the Act of March 9, 1945 (59 Stat. 33, chapter 20; 15 U.S.C. 1011 et seq.) (commonly known as the “McCarran-Ferguson Act”).

(f) Definitions.–In this section:

(1) Assets.–

(A) In General.–Except as provided in subparagraph (B), the term “assets” means any pension, retirement, annuity, or endowment fund, or similar instrument, that is controlled by a State or local government.

(B) Exception.–The term “assets” does not include employee benefit plans covered by title I of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.).

(2) Boycott, Divestment, or Sanctions Activity Targeting Israel. –-The term “boycott, divestment, or sanctions activity targeting Israel” means any activity that is intended to penalize, inflict economic harm on, or otherwise limit commercial relations with Israel or persons doing business in Israel or in Israeli-controlled territories for purposes of coercing political action by, or imposing policy positions on, the Government of Israel.

(3) Entity–The term “entity” includes–

(A) any corporation, company, business association, partnership, or trust; and

(B) any governmental entity or instrumentality of a government, including a multilateral development institution (as defined in section 1701(c)(3) of the International Financial Institutions Act (22 U.S.C. 262r(c)(3))).

(4) Investment.–The term “investment” includes–

(A) a commitment or contribution of funds or property;

(B) a loan or other extension of credit; and

(C) the entry into or renewal of a contract for goods or services.

(5) State.–The term “State” means each of the several States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, the United States Virgin Islands, and any other territory or possession of the United States.

(6) State or Local Government. –The term “State or local government” includes–

(A) any State and any agency or instrumentality thereof;

(B) any local government within a State and any agency or instrumentality thereof; and

(C) any other governmental instrumentality of a State or locality.

 

Safe Harbor or Changes of Investment Policies by Asset Managers.

Section 13(c)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a-13(c)(1)) is amended-

(1) in subparagraph (A), by striking “; or” and inserting a semicolon;

(2) in subparagraph (B), by striking the period at the end and inserting “; or”; and

(3) by adding at the end the following:

“(C) engage in any boycott, divestment, or sanctions activity targeting Israel described in section 1282 of the Combating BDS Act of 2016.”.


 

[1] The Defense Authorization bills set the funding levels and policy language.  The Defense Appropriation bill actually appropriates the funding levels for specific programs.