Constitutionality of South African Divestment Statutes Enacted by State and Local Governments

In response to conditions in South Africa, a number of state and local governments passed statutes or ordinances requiring the divestment of pension funds from companies that do business in South Africa or prohibiting governmental bodies from entering into contracts with such companies. The divestment laws survive constitutional scrutiny.

The divestment laws do not place an impermissible burden on foreign commerce. Under the market participation doctrine, the Supreme Court has held that proprietary, as opposed to governmental, actions of state and local governments may be shielded from the strictures of the Commerce Clause. The divestment laws fall within that doctrine. Nor do such laws represent an unconstitutional interference with the federal government’s foreign affairs power. Finally, such laws are not preempted by either the Export Administration Act or Executive Order No. 12532, which imposes certain economic sanctions on South Africa.