... Or I'll take my toys and go home: the Iran and Libya Sanctions Act of 1996.

• Author: McGee, Shane M.

1. BACKGROUND

   1. The History of the ILSA

   2. The GAYT

      1. History and Structure

      2. The WTO

   3. Economic Coercion & International Law

   4. Secondary Boycott

2. U.S. OBLIGATIONS UNDER THE WTO AND THE GATT

3. ECONOMIC COERCION AND INTERNATIONAL LAw

   1. Economic Coercion Under the Charter of the United

      Nations

   2. Economic Coercion under the U.N. Resolutions

4. SECONDARY BOYCOTTS.

5. CONCLUSION & RECOMMENDATIONS

   "Congress has the authority to enforce its laws beyond the territorial boundaries of the United States."(1) Extraterritorial legislation by its very nature applies to the territory or citizenry of another nation.(2) Thus, the recent increase in legislation aimed at foreign entities has given rise to an international outcry.(3) The United States has been accused by a number of nations of violating international law, national sovereignty, and self-imposed conventional-law obligations.(4)

   The most recent conflict arising out of this type of legislation surrounds the Iran and Libya Sanctions Act of 1996 (ILSA).(5) This Act, signed by President Clinton on August 5, 1996,(6) provides for sanctions against foreign companies investing in Iran or Libya.(7) The international response to the ILSA has been profoundly negative.(8) Not only are the cries of foul much louder than usual, but they are coming primarily from U.S. allies in the European Community and beyond.(9)

   In Part 1, this Article introduces the ILSA and the different legal principles and provisions under which it may be scrutinized. Part 11 analyzes the ILSA in light of the provisions of the World Trade Organization and the General Agreement on Tariffs and Trade. Part III examines economic coercion and its acceptance under international law. Part IV examines the incongruity between the ILSA and traditional U.S. policy towards secondary boycotts. Finally, this Article concludes that the ILSA is a violation of international law and a violation of U.S. international obligations as well as a departure from traditional U.S. policy.

1. BACKGROUND

   1. The History of the ILSA

      House Bill 3107 was introduced on March 19, 1996, as the Iran Oil Sanctions Act of 1996.(10) As the scope of the bill grew, so did its title.(11) Five days before the House of Representatives passed the bill, H.R. 3107 was renamed the Iran and Libya Sanctions Act of 1996.(12)

      The goal of the ILSA was twofold: to deter Iran and Libya from aiding international terrorism or obtaining weapons of mass destruction and to influence the President to pursue negotiations to form a multilateral sanctions regime concerning Iran.(13) To achieve these goals, the ILSA requires the President to impose two or more specified sanctions(14) on persons who engage in conduct prohibited by the bill.(15)

      The ILSA prohibits two types of conduct.(16) Foremost, it imposes sanctions on persons investing in or contributing to the ability of Iran or Libya to develop their petroleum resources.(17) Additionally, the ILSA imposes mandatory sanctions on persons exporting certain items that enhance Libya's weapons or aviation capabilities.(18) The requirement that all sanctions with respect to Libya be mandatory was a late addition to the bill.(19) In its original form, the bill gave the President discretion on whether to impose sanctions on parties contributing to the development of Libya's petroleum resources.(20)

      The President is responsible for determining whether a party has violated the ILSA's prohibitions.(21) Once that determination has been made, the President must either impose sanctions(22) or exercise a waiver.(23) The President's power of waiver may be used to exempt any offending party from sanctions.(24) The President may also waive sanctions with respect to all nationals of any country that has agreed to undertake substantial measures to inhibit Iran's efforts to support international terrorism or acquire weapons of mass destruction.(25)

      A determination by the President to impose sanctions under the ILSA is not reviewable in any court.(26) The purpose of this provision is to ensure that sanctions will be carried out in a timely fashion.(27) The ILSA's authors believed that with the help of congressional consultation, a careful review by the President eliminated the need for judicial accountability.(28)

      To understand the international reaction to this seemingly well-intentioned piece of legislation, one must first understand the climate into which it was introduced. The ILSA was passed at a time when the United States was under continuing fire for enacting a similarly controversial piece of legislation--the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996.(29) Title III of LIBERTAD created a federal cause of action against any person or government that traffics in property confiscated by the Cuban government which is claimed by U.S. nationals.(30) The section implementing this cause of action was to become effective just four days before President Clinton signed the ILSA.(31) In response to growing international disfavor with LIBERTAD, President Clinton, on July 16, 1996, suspended Title III for six months to rally more support from U.S. allies.(32)

      Just twenty days after this attempt at detente, Clinton signed the ILSA into law.33 A number of nations, already angry about LIBERTAD, immediately took issue with both laws.(34) These nations contended that LIBERTAD and the ILSA infringed upon their sovereign rights.(35) While some considered instituting legal and retaliatory measures against the United States in response to these acts,(36) others have already done So.(37)

      Even as President Clinton suspended the harshest portion of LIBERTAD, the European Union (EU) began considering four retaliatory measures.(38) These measures included adopting EU legislation to neutralize the extraterritorial effects of LIBERTAD, submitting a reference to WTO dispute resolution, making changes to the entry conditions into EU countries for U.S. corporate representatives, and monitoring U.S. enterprises that plan to take action under Title III of LIBERTAD.(39) On July 30, 1996, the EU moved beyond the mere contemplation of action by drafting antiboycott legislation to counter the effects of LIBERTAD.(40) This legislation was later extended to include the ILSA.(41) If passed, this legislation will forbid EU citizens from complying with the provisions of either LIBERTAD or the ILSA.(42) In addition, the antiboycott legislation will enable EU companies to sue to recover amounts awarded against them by U.S. courts under either of these laws.(43)

      The EU has also instituted proceedings against the United States(44) before the World Trade Organization (WTO).(45) While the pending action only concerns the EU's objections over LIBERTAD,(46) a similar proceeding in response to the ILSA is forthcoming.(47)

   2. The GATT

      1. History and Structure

         The General Agreement on Tariffs and Trade (GATT-118 was signed in 1947 to liberalize and make secure the terms of world trade.(49) Each contracting party has a commitment to expand world trade through international harmonization and the adjustment of national policies.(50) Although the GATT was never intended to be an organization, it functioned much like one until the early 19909.(51)

         Perhaps the most important provision of the GATT is the principle of most-favored-nation (MFN) treatment.(52) MFN treatment embodies the underlying concept of the GATT: that treatment given to any country, whether or not a member of the GATT, must be afforded to all contracting parties.(53) Accordingly, any form of disparate treatment between or among member nations is a per se violation of the GATT.(54)

         The GATT provides for a number of general exceptions to its provisions.(55) Among others, these exceptions protect measures by nations to preserve life, health, national treasures, public morals, and natural resources.(56) Each of these exceptions, however, is subject to the condition that the protected measure was not adopted as a means of arbitrary or unjustifiable discrimination or as a disguised restriction on international trade.(57)

         The principle of MFN treatment, like the other principles in the GATT, can also be set aside in the interest of national security.(58) Article XXI(b)(iii) exempts from the basic principles of the GATT any action "taken in time of war or other emergency in international relations."(59) While the validity of the general exceptions to the GATT rely on those exceptions being justifiable,(60) the GATT security exception has no such mandate.(61)

      2. The WTO

         Since 1947, there have been eight different multilateral negotiations under the GAIT called "rounds."(62) The most recent of these, the Uruguay Round,(63) was the most extensive and successful trade negotiation ever undertaken by the GATT system.(64) One of the major accomplishments of the Uruguay Round, and one essential to the total package, was the establishment of the World Trade Organization (WTO).(65)

         The WTO provides a "common institutional framework for the conduct of trade relations among its Members."(66) In reality, the WTO is an "institutional umbrella" which encompasses the agreements finalized during the Uruguay Round.(67) One of these agreements established a "new," superseding GATT(68) (GATT 1994) which incorporates the protocols from the 1947 version.(69)

         With the emergence of the WTO, the dispute resolution authority for all of the agreements coming out of the Uruguay round, including the GATT 1994, were vested in one body.(70) This agreement, which is similar to dispute resolution practices under the GATT,(71) uses dispute resolution panels to resolve conflicts between member nations.(72) This panel, made up of three or five diplomats from countries not involved in the dispute, is formed only if all other negotiations between the affected parties are unsuccessful.(73) The Dispute Settlement Body (DSB) now has exclusive authority to form dispute panels and adopt the reports from those panels.(74)

         These new...