[Congressional Record Volume 146, Number 38 (Thursday, March 30, 2000)]
[Senate]
[Pages S1942-S1944]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        CONSPIRACIES OF CARTELS

  Mr. SPECTER. Mr. President, I have sought recognition to discuss a 
Dear Colleague letter which Senator Biden and I are circulating today. 
I expect to have the agreement of at least two other Senators to 
circulate this Dear Colleague letter. It is an effort to deal with the 
very serious problems which have been caused by the rise in the price 
of oil as a result of the activities of the OPEC countries.
  The price of imported crude oil rose from $10.92 per barrel, for the 
first quarter of 1999, to over $31 per barrel in this month. In the 
first quarter of last year gasoline prices were, on an average, 95 
cents per gallon, and heating oil was 80 cents per gallon. A year later 
both have peaked at $1.70.
  On Tuesday, the day before yesterday, OPEC agreed to raise oil 
production over the next 3 months by up to 1.7 million barrels a day. 
But this is far less than what is necessary to take care of the very 
serious problems imposed upon Americans at the gas pump, for heating 
oil, diesel fuel for the truckers, and our whole society beyond the 
United States--foreign countries, as well--as a result of these cartels 
and conspiracies.
  This conduct is reprehensible. If it were going on in the United 
States, it would be a clear-cut violation of our antitrust laws.
  There have been declarations at the international level. The 
Organization for Economic Development, consisting of some 29 countries, 
made a declaration in March of 1998 that conspiracies in restraint of 
trade constitute a violation of international law.
  At about the same time, 11 countries from Latin America made a 
similar declaration that conspiracies of cartels to restrain trade 
violate international law.
  After a considerable amount of research, we are writing to the 
President asking him to consider two courses of litigation going to 
court. One course of action would be to file suit under United States 
antitrust laws, because these conspiracies of cartels in restraint of 
trade have an economic impact on the United States. There is ample 
authority for the Government of the United States to proceed in this 
way.
  Suits were filed by private parties in 1979 in the Central District 
of California. The Court of Appeals for the Ninth Circuit concluded in 
1981 that it would be inappropriate for a U.S. court to pass on that 
subject because international law was not clearly defined at that time. 
But there have been significant developments in international law since 
that 1981 decision by the Court of Appeals for the Ninth Circuit so 
that, in my judgment, the opportunities would be excellent to win this 
case and certainly well worth the effort.
  The Dear Colleague letter which we are submitting has a second 
aspect, and that is a recommendation to the President that legal action 
be instituted in the International Court of Justice, perhaps for only 
an advisory opinion, that OPEC countries were violating international 
law.
  I was surprised to see the International Court of Justice take 
jurisdiction in a case involving the issue of the legality to use or 
threaten to use nuclear weapons in war. I had thought that such an 
issue would be what is called nonjusticiable law, that is, not subject 
to going to court. You talk

[[Page S1943]]

about national sovereignty. You talk about nuclear weapons. Such a 
subject would be really beyond the scope of what the International 
Court of Justice would decide. But the court did take jurisdiction on 
that issue. The court rendered an advisory opinion it would be illegal 
to either use or threaten to use nuclear weapons except in self-
defense.
  We have also seen, in the last few years, very significant 
developments in international law with the War Crimes Tribunal for the 
former Yugoslavia, where there have been indictments, prosecutions and 
convictions for crimes against humanity. There was also the extensive 
use of international law from the War Crimes Tribunal for Rwanda.

  In a surprising case which has captured international headlines for 
months, an effort has been made to try Pinochet, former leader of 
Chile, on the application of the courts of Spain, although the acts did 
not occur in Spain. Customarily under criminal law, the prosecution is 
brought where the acts occurred. Pinochet was in England. There was a 
tremendous amount of litigation there. Surprisingly, there was an 
extension of international law into areas where conduct is really 
despicable, as are the allegations related to Pinochet. Recently the 
former dictator from Chad was tried in the courts of Senegal on charges 
of torture and violation of human rights.
  We are looking at a rapidly expanding international picture. I 
believe we ought to be taking every step possible to deal with these 
cartels and this conspiratorial and reprehensible conduct by the OPEC 
nations. While they have agreed to raise production slightly, we are at 
their whim for action any time they see fit to cut back on production, 
to extract and extort enormous sums of money from consumers in the 
United States and consumers around the world.
  This is not a problem for this day only. This is a problem which 
plagued the United States, with the long gas lines in 1974, 26 years 
ago, but I remember them well. People lined up for three blocks waiting 
in a gas line to get some fuel. By the time you got there, the pumps 
sometimes were out or sometimes it was limited. There is no reason why 
we should have to put up with this kind of conduct because it does 
violate international norms and really ought to be stopped.
  This letter does not contain any reference to actions on a class 
action basis by consumers. Right now, the antitrust law calls for 
actions only by so-called direct purchasers. But consideration is being 
given by a number of Senators to an amendment to the existing antitrust 
laws to allow indirect purchasers; that is, somebody who buys gas at 
the pump. Texaco could sue OPEC, at least would have standing to sue 
OPEC. There would be the other considerations that would have standing 
as a direct purchaser.
  Under a case denominated Illinois v. Brick, an indirect consumer 
cannot sue. But I believe there would be good reason to amend our 
antitrust laws, limited to the field of purchases relating to oil. That 
is a distinction, because oil is such a critical part of our economy 
and such a critical part of our everyday life: for keeping our houses 
and offices warm, our general buildings warm, to supplying gasoline for 
truckers who transport necessary items for everyday life, and for the 
gasoline which is necessary for our automobiles. This is where we have 
been gouged by the OPEC conduct.
  Some have raised the question: What good would it do to take these 
cases to court; what would the remedy be? The fact is, there are 
considerable assets from these OPEC countries in the United States 
which would be subject to attachment. With respect to the suit in the 
International Court of Justice, there would be considerable opprobrium 
in being sued, hauled into court. Nobody likes to be sued, whether an 
individual, a company, or a country. This conduct is reprehensible and 
we ought to call them on it.
  I do believe, in the final analysis, our U.S. laws on antitrust would 
enable us to get a remedy. Actually, the International Court of Justice 
would hold out these international pirates to be nothing more than they 
are, really preying on the weak, those who have to buy the oil at any 
price. This conspiracy and restraint of trade and these cartels ought 
not to be allowed to go on.
  Mr. President, I ask unanimous consent that the full text of the 
letter to the President be printed in the Record, together with a copy 
of a Dear Colleague letter which Senator Biden and I are circulating.
  There being no objection, the letters were ordered to be printed in 
the Record, as follows:

                                         United States Senate,

                                                   Washington, DC.
     President William Jefferson Clinton,
     The White House,
     Washington, DC.
       Dear Mr. President: In light of the very serious problems 
     caused by the recent increase in oil prices, we know you will 
     share our view that we should explore every possible 
     alternative to stop OPEC and other oil-producing states from 
     entering into agreements to restrict oil production in order 
     to drive up the price of oil.
       This conduct is nothing more than an old-fashioned 
     conspiracy in restraint of trade which has long been 
     condemned under U.S. law, and which should be condemned under 
     international law.
       After some considerable research, we suggest that serious 
     consideration be given to two potential lawsuits against OPEC 
     and the nations conspiring with it:
       (1) A suit in Federal district court under U.S. antitrust 
     law.
       (2) A suit in the International Court of Justice at the 
     Hague based, perhaps, upon an advisory opinion under ``the 
     general principles of law recognized by civilized nations,'' 
     which includes prohibiting oil cartels from conspiring to 
     limit production and raise prices.
     (1) A suit in Federal district court under U.S. antitrust law
       A case can be made that your Administration can sue OPEC in 
     Federal district court under U.S. antitrust law. OPEC is 
     clearly engaging in a ``conspiracy in restraint of trade'' in 
     violation of the Sherman Act (15 U.S.C. Sec. 1). The 
     Administration has the power to sue under 15 U.S.C. Sec. 4 
     for injunctive relief to prevent such collusion.
       In addition, the Administration should consider suing OPEC 
     for treble damages under the Clayton Act (15 U.S.C. Sec. 
     15a), since OPEC's behavior has caused an ``injury'' to U.S. 
     ``property.'' After all, the U.S. government is a major 
     consumer of petroleum products and must now pay higher prices 
     for these products. In Reiter v. Sonotone Corp., 442 U.S. 330 
     (1979), the Supreme Court held that the consumers who were 
     direct purchasers of certain hearing aides who alleged that 
     collusion among manufacturers had led to an increase in 
     prices had standing to sue those manufacturers under the 
     Clayton Act since ``a consumer deprived of money by reason of 
     allegedly anticompetitive conduct is injured in `property' 
     within the meaning of [the Clayton Act].'' Indirect 
     purchasers would appear to be precluded from suit, even in a 
     class action, under Illinois Brick v. Illinois, 431 U.S. 720 
     (1977), but this would not bar the United States Government, 
     as a direct purchaser, from having the requisite standing.
       One potential obstacle to such a suit is whether the 
     Foreign Sovereign Immunities Act (``FSIA'') provides OPEC, a 
     group of sovereign foreign nations, with immunity from suit 
     in U.S. courts. To date, there has been a ruling on this 
     issue in only one case. In International Association of 
     Machinists v. OPEC, 477 F. Supp. 553 (1979), the District 
     Court for the Central District of California held that the 
     nations which comprise OPEC were immune from suit in the 
     United States under the FSIA. We believe that this opinion 
     was wrongly decided and that other district courts, including 
     the D.C. District, can and should revisit the issue.
       This decision in Int. Assoc. of Machinists turned on the 
     technical issue of whether or not the nations which comprise 
     OPEC are engaging in ``commercial activity'' or 
     ``governmental activity'' when they cooperate to sell their 
     oil. If they are engaging in ``governmental activity,'' then 
     the FSIA shields them from suit in U.S. courts. If, however, 
     these nations are engaging in ``commercial activity,'' then 
     they are subject to suit in the U.S. The California District 
     Court held that OPEC activity is ``governmental activity.'' 
     We disagree. It is certainly a governmental activity for a 
     nation to regulate the extraction of petroleum from its 
     territory by ensuring compliance with zoning, environmental 
     and other regulatory regimes. It is clearly a commercial 
     activity, however, for these nations to sit together and 
     collude to limit their oil production for the sole purpose of 
     increasing prices.
       The 9th Circuit affirmed the District Court's ruling in 
     Int. Assoc. of Machinists in 1981 (649 F.2d 1354), but on the 
     basis of an entirely different legal principle. The 9th 
     Circuit held that the Court could not hear this case because 
     of the ``act of state'' doctrine, which holds that a U.S. 
     court will not adjudicate a politically sensitive dispute 
     which would require the court to judge the legality of the 
     sovereign act of a foreign state.
       The 9th Circuit itself acknowledged in its Int. Assoc. of 
     Machinists opinion that ``The [act of state] doctrine does 
     not suggest a rigid rule of application,'' but rather 
     application of the rule will depend on the circumstances of 
     each case. The Court also noted that, ``A further 
     consideration is the

[[Page S1944]]

     availability of internationally-accepted legal principles 
     which would render the issues appropriate for judicial 
     disposition.'' The Court then quotes from the Supreme Court's 
     opinion in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 
     (1964):

       ``It should be apparent that the greater the degree of 
     codification or consensus concerning a particular area of 
     international law, the more appropriate it is for the 
     judiciary to render decisions regarding it, since the courts 
     can then focus on the application of an agreed principle to 
     circumstances of fact rather than on the sensitive task of 
     establishing a principle not inconsistent with the national 
     interest or with international justice.''

       Since the 9th Circuit issued its opinion in 1981, there 
     have been major developments in international law that impact 
     directly on the subject matter at issue. As we discuss in 
     greater detail below, the 1990's have witnessed a significant 
     increase in efforts to seek compliance with basic 
     international norms of behavior through international 
     courts and tribunals. In addition, there is strong 
     evidence of an emerging consensus in international law 
     that price fixing by cartels violates such international 
     norms. Accordingly, a court choosing to apply the act of 
     state doctrine to a dispute with OPEC today may very well 
     reach a different conclusion than the 9th Circuit reached 
     almost twenty years ago.
       You should also examine whether the anticompetitive conduct 
     of the international oil cartel is being effectuated by 
     private companies who are subject to the enforcement of U.S. 
     antitrust laws (for example, former state oil companies that 
     have now been privatized) rather than sovereign foreign 
     states. If such private oil companies are determined to in 
     fact be participating in the anticompetitive conduct of the 
     oil cartel, then we would urge that these companies be named 
     as defendants in an antitrust lawsuit in addition to the OPEC 
     members.
     (2) A suit in the International Court of Justice at the Hague 
         based upon ``the general principles of law recognized by 
         civilized nations,'' which includes prohibiting oil 
         cartels from conspiring to limit production and raise 
         prices
       In addition to such domestic antitrust actions, we believe 
     you should give serious consideration to bringing a case 
     against OPEC before the International Court of Justice (the 
     ``ICJ'') at the Hague. You should consider both a direct suit 
     against the conspiring nations as well as a request for an 
     advisory opinion from the Court through the auspices of the 
     U.N. Security Council. The actions of OPEC in restraint of 
     trade violate ``the general principles of law recognized by 
     civilized nations.'' Under Article 38 of the Statute of the 
     ICJ, the Court is required to apply these ``general 
     principles'' when deciding cases before it.
       This would clearly be a cutting-edge lawsuit, making new 
     law at the international level. But there have been exciting 
     developments in recent years which suggest that the ICJ would 
     be willing to move in this direction. In a number of 
     contexts, we have seen a greater respect for and adherence to 
     fundamental international principles and norms by the world 
     community. For example, we have seen the establishment of the 
     International Criminal Court in 1998, the International 
     Criminal Tribunal for Rwanda in 1994, and the International 
     Criminal Tribunal for the former Yugoslavia in 1993. Each of 
     these bodies has been active, handing down numerous 
     indictments and convictions against individuals who have 
     violated fundamental principles of human rights. For example, 
     as of December 1, 1999 the Yugoslavia tribunal alone had 
     handed down 91 public indictments.
       Today, adherence to international principles has spread 
     from the tribunals in the Hague to individual nations around 
     the world. Recently, the exiled former dictator of Chad, 
     Hissene Habre, was indicted in Senegal on charges of torture 
     and barbarity stemming from his reign, where he allegedly 
     killed and tortured thousands. This case is similar to the 
     case brought against former Chilean dictator Augusto Pinochet 
     by Spain on the basis of his alleged atrocities in Chile. At 
     the request of the Spanish government, Pinochet was detained 
     in London for months until an English court determined that 
     he was too ill to stand trial.
       The emerging scope of international law was demonstrated in 
     an advisory opinion sought by the U.N. General Assembly in 
     1996 to declare illegal the use or threat to use nuclear 
     weapons. Such an issue would ordinarily be thought beyond the 
     scope of a judicial determination given the doctrines of 
     national sovereignty and the importance of nuclear weapons to 
     the defense of many nations. The ICJ ultimately ruled eight 
     to seven, however, that the use or threat to use nuclear 
     weapons ``would generally be contrary to the rules of 
     international law applicable in armed conflict, and in 
     particular the principles and rules of humanitarian law.'' 
     The fact that this issue was subject to a decision by the 
     ICJ, shows the rapidly expanding horizons of international 
     law.
       While these emerging norms of international behavior have 
     tended to focus more on human rights than on economic 
     principles, there is one economic issue on which an 
     international consensus has emerged in recent years--the 
     illegitimacy of price fixing by cartels. For example, on 
     April 27, 1998, the Organization for Economic Cooperation and 
     Development issued an official ``Recommendation'' that all 
     twenty-nine member nations ``ensure that their competition 
     laws effectively halt and deter hard core cartels.'' The 
     recommendation defines ``hard core cartels'' as those which, 
     among other things, fix prices or establish output 
     restriction quotas. The Recommendation further instructs 
     member countries ``to cooperate with each other in enforcing 
     their laws against such cartels.''
       On October 9, 1998, eleven Western Hemisphere countries 
     held the first ``Antitrust Summit of the Americas'' in Panama 
     City, Panama. At the close of the summit, all eleven 
     participants issued a joint communique in which they express 
     their intention ``to affirm their commitment to effective 
     enforcement of sound competition laws, particularly in 
     combating illegal price-fixing, bid-rigging, and market 
     allocation.'' The communique further expresses the intention 
     of these countries to ``cooperate with one another . . . to 
     maximize the efficacy and efficiency of the enforcement of 
     each country's competition laws.'' One of the countries 
     participating in this communique, Venezuela, is a member of 
     OPEC.
       The behavior of OPEC and other oil-producing nations in 
     restraint of trade violates U.S. antitrust law and basic 
     international norms, and it is injuring the United States and 
     its citizens in a very real way. Consideration of such legal 
     action could provide an inducement to OPEC and other oil-
     producing countries to raise production to head off such 
     litigation.
       We hope that you will seriously consider judicial action to 
     put an end to such behavior.
                                  ____



                                         United States Senate,

                                                   Washington, DC.
       Dear Colleague: In light of the very serious problems 
     caused by the recent increase in oil prices, we know you will 
     share our view that we should explore every possible 
     alternative to stop OPEC and other oil-producing states from 
     entering into agreements to restrict oil production in order 
     to drive up the price of oil.
       This conduct is nothing more than an old-fashioned 
     conspiracy in restraint of trade which has long been 
     condemned under U.S. law, and which should be condemned under 
     international law.
       After some considerable research, we suggest that serious 
     consideration be given to two potential lawsuits against OPEC 
     and the nations conspiring with it:
       (1) A suit in Federal district court under U.S. antitrust 
     law.
       (2) A suit in the International Court of Justice at the 
     Hague based upon ``the general principles of law recognized 
     by civilized nations,'' which includes prohibiting oil 
     cartels from conspiring to limit production and raise prices.
       We ask you to sign the enclosed letter to President Clinton 
     which urges him to consider these two litigation options. As 
     you will note from the letter, the subject is quite 
     complicated and is set forth in that letter as succinctly as 
     it can be summarized.
       If you are interested in co-sponsoring, please have staff 
     call David Brog of Senator Specter's staff at 224-9037 or 
     Bonnie Robin-Vergeer of Senator Biden's staff at 224-6819.
           Sincerely,
     Arlen Specter.
     Joseph Biden.

  Mr. SPECTER. Any Senators who may be listening to this or any staff 
members, I invite them to call David Brog of my office at 224-4254 or 
Bonnie Robin-Vergeer of Senator Biden's office at 224-5042. We would 
like to get a good showing and see if we can't get the President to 
take a really tough position against these cartels which have so 
disadvantaged so many Americans.
  The PRESIDING OFFICER. The distinguished Senator from Arkansas is 
recognized.
  Mrs. LINCOLN. Mr. President, I ask unanimous consent to speak as in 
morning business for up to 15 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________