Winston & Strawn Files Lawsuit Challenging Illinois Sudan Act

Winston & Strawn Files Lawsuit Challenging Illinois Sudan Act

September 11, 2006

CHICAGO - “ On behalf of the National Foreign Trade Council (NFTC), eight public pension funds and nine individual pension fund beneficiaries and taxpayers, Winston & Strawn on Aug. 7, 2006 filed a lawsuit challenging the constitutionality of the Illinois Act to End Atrocities & Terrorism in the Sudan (- œIllinois Sudan Act- ).

The lawsuit rests in part on the U.S. Supreme Court's decision in Crosby v. National Foreign Trade Council in which the NFTC successfully challenged a Massachusetts state law penalizing would-be vendors to the state that did business with the military regime in Burma.

Named as defendants in the new lawsuit are the Illinois state officials charged with implementation and enforcement of the Illinois Sudan Act.

Effective in stages beginning in Jan. 2006, the Illinois Sudan Act seeks to sever financial ties between the state of Illinois and the republic of the Sudan. It contains two major provisions.

The first prohibits the state treasurer from investing in financial institutions whose borrowers have ties to the Sudanese government or companies. The second requires public pension funds to divest their holdings in companies doing business in the Sudan.

Transactions relating to Sudan that are permitted and in some cases expressly authorized by the federal government nevertheless are grounds for classification as a - œforbidden entity-  under the Illinois Sudan Act. The lawsuit filed by Winston & Strawn raises four challenges to the constitutionality of the Illinois Sudan Act:

  1. It alleges that the act intrudes on the federal government's exclusive power over foreign affairs.
  2. It alleges that the act violates the clause of the U.S. Constitution that vests in Congress the power to legislate regarding foreign commerce.
  3. It alleges that the act is preempted by the federal government's own trade sanctions against Sudan.
  4. It alleges that insofar as the act applies to national banks it is preempted by the National Bank Act, which regulates deposits at banks established under federal law.
The lawsuit has been assigned to Judge Matthew F. Kennelly. Winston & Strawn intends to file papers seeking to preliminarily enjoin enforcement of the act and will ask for a ruling in advance of the Jan. 2007 deadline for partial divestment by the pension funds.

Click here to view more details from Winston & Strawn discussing the legal challenge to the act.