[Congressional Record Volume 147, Number 101 (Thursday, July 19, 2001)]
[Senate]
[Pages S7942-S7944]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
ENERGY, OPEC, AND ANTITRUST LAW
Mr. SPECTER. Mr. President, I have sought recognition to discuss
briefly this afternoon, in the absence of any activity on the pending
legislation, and in the absence of any other Senator seeking
recognition, to discuss a subject which was talked about at the energy
town meeting which Vice President Cheney had in Pittsburgh on Monday of
this week, July 16.
At that time, I had an opportunity to address very briefly a number
of energy issues. I talked about the possibility of action under the
U.S. antitrust laws against OPEC which could have the effect of
bringing down the price of petroleum and, in turn, the high prices of
gasoline which American consumers are paying at the present time.
I have had a number of comments about people's interest in that
presentation. I only had a little more then 3 minutes to discuss this
OPEC issue and some others. I thought it would be worthwhile to comment
on this subject in this Senate Chamber today so that others might be
aware of the possibility of a lawsuit against OPEC under the antitrust
laws.
I had written to President Clinton on April 11 of the year 2000 and
had written a similar letter to President George Bush on April 25 of
this year, 2001, outlining the subject matter as to the potential for a
lawsuit against OPEC. The essential considerations involved whether
there is sovereign immunity from a lawsuit where an act of state is
involved, and the decisions in the field make a delineation between
what is commercial activity contrasted with governmental activity.
Commercial activity, such as the sale of oil, is not something which is
covered by the act of state doctrine, and therefore is not an activity
which enjoys sovereign immunity.
There have also been some limitations on matters involving
international law, as to whether there is a consensus in international
law that price fixing by cartels violates international norms. In
recent years, there has been a growing consensus that such cartels do
violate international norms, so that now there is a basis for a lawsuit
under U.S. antitrust laws against OPEC and, beyond OPEC, against the
countries which comprise OPEC.
After writing these letters to President Clinton and President Bush,
I found that there had, in fact, been litigation instituted on this
precise subject in the U.S. District Court for the Northern District of
Alabama, Southern Division, in a case captioned ``Prewitt Enterprises,
Inc. v. Organization of the Petroleum Exporting Countries.'' In that
case, neither OPEC nor any of the other countries involved contested
the case, and a default judgment was entered by the Federal court,
which made some findings of fact right in line with the issues which
had been raised in my letters to both Presidents Clinton and Bush.
The court found that OPEC had conspired to implement extensive
production cuts, that they had established quotas in order to achieve a
specific price range of $22 to $28 a barrel, and that the cost to U.S.
consumers on a daily basis was in the range of $80 to $120 million for
petroleum products. That is worth repeating. The cost to U.S. consumers
was $80 to $120 million daily.
The court further found that OPEC was not a foreign state. The court
also found that the member states of OPEC, although not parties to the
action, were coconspirators with OPEC, and that the agreement entered
into by the member states of OPEC was a commercial activity, and the
states, therefore, did not have sovereign immunity for their actions.
The court further found that the act of state doctrine did not apply
to the member states and that OPEC's actions were illegal ``per se''
under the Sherman and Clayton Acts.
The court then issued an injunction, which is legalese for saying
OPEC could no longer act in concert to control the volume of the
production and export of crude oil.
The court found that the class of plaintiffs was not entitled to
monetary damages because they were what is called ``indirect
purchasers.'' That is a legal concept which is rather involved which I
need not discuss at this time. But the outline was established, and the
findings of fact and conclusions of law were established by the Federal
court that indeed there was a cartel, there was a conspiracy in
restraint of trade, U.S. laws were violated, U.S. consumers were being
prejudiced, and an injunction was issued.
Then, a unique thing occurred. After the court entered its default
judgment and injunction, OPEC entered a special appearance in the case,
and asked the court to dismiss the case. Three nations, who were not
parties to the case--Saudi Arabia, Kuwait, and Mexico--then sought
leave of the court to file ``amicus'' briefs in support of OPEC's
motion to dismiss, which means, in effect, that they wanted to assist
OPEC in defending the matter. I think it is highly significant that
those nations, which are characteristically and customarily oblivious
and indifferent and seek to simply ignore U.S. judicial action, had a
change of heart and decided to come in.
They must have concluded that an injunction by Federal court was
something to be concerned about. I think, in fact, it is something to
be concerned about.
In an era where we are struggling with an extraordinarily difficult
time of high energy costs, with real concerns laid on the floor of the
Senate about where additional drilling ought to be undertaken, about
the problems with fossil fuels, about our activities to try to find
clean coal technology to comply with the Clean Air Act, at a time when
we are looking for renewable energy sources such as air and wind and
hydroelectric power, there is a long finger to point at the OPEC
nations which are conspiring to drive up prices in violation not only
of U.S. law but in violation of international law.
This is a subject which ought to be known to people generally. It
ought to be the subject of debate, and it ought to be, in my opinion,
beyond a class action brought into the Federal court by private
plaintiffs, which is something that the Government of the United States
of America ought to consider doing as has been set forth in the letters
which I sent to President Clinton last year and to President Bush this
year.
It is especially telling when we have Kuwait gouging American
consumers, after the United States went to war in the Persian Gulf to
save Kuwait. It is equally if not more telling that Saudi Arabia
engages in these conspiratorial tactics at a time when we have over
5,000 American men and women in the desert outside of Riyadh. I have
visited there. It is not even a nice place to visit, let alone a nice
place to live, in a country where Christians can't have Christmas trees
in the windows and Jewish soldiers don't wear the Star of David for
fear of being the victims of religious persecution; and Mexico, a party
to these practices, notwithstanding our efforts to be helpful to the
Government of Mexico.
But fair is fair. Conspiracies ought not to be engaged in. Price
fixing ought not to be engaged in. If there is a way within our laws to
remedy this, and I believe there is, that is something which ought to
be considered.
I am not unmindful of the tender diplomatic concerns where every time
an issue is raised, we worry about what one of the foreign governments
is going to do, what Saudi Arabia is going to do--that we should handle
them with ``silk gloves'' only. But when American consumers are being
gouged up to $100 million a day on petroleum products, this is
something we ought to consider and, in my judgment, we ought to act on.
We have seen beyond the issue of antitrust enforcement a new era of
international law, with the War Crimes Tribunal at The Hague
prosecuting war criminals from Yugoslavia, and now former President
Milosevic is in custody. We also have the War Crimes Tribunal at
Rwanda. A new era has dawned where we are finding that the
international rule of law is coming into common parlance. That long arm
of
[[Page S7943]]
the law, I do believe, extends to OPEC, and there could be some very
unique remedies for U.S. consumers.
I ask unanimous consent to print my letter to President Bush, dated
April 25, 2001, in the Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
U.S. Senate,
Washington, DC, April 25, 2001.
President George Walker Bush.
The White House,
Washington, DC.
Dear Mr. President: In light of the energy crisis and the
high prices of OPEC oil, we know you will share our view that
we must 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 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.''
(1) A suit in Federal district court under U.S. antitrust
law.
A strong 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 has the power to sue 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 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 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].''
One issue that would be raised by 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, only one Federal court,
the District Court for the Central District of California,
has reviewed this issue. In International Association of
Machinists v. OPEC, 477 F. Supp. 553 (1979), the Court 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 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'a 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.
(2) A suit in the International Court of Justice at the
Hague based upon ``the general principles of law recognized
by civilized nations.''
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.
Today, adherence to international principles has spread
from the tribunals in the Hague to individual nations around
the world. The exiled former dictator of Chad, Hissene Habre,
was indicted in Senegal on changes 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.
While these emerging norms of international behavior have
tended to focus 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, 1988, 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.''
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. We hope you will seriously
consider judicial action to put an end to such behavior.
We hope that you will seriously consider judicial action to
put an end to such behavior.
Arlen Specter.
Charles Schumer.
Herb Kohl.
Strom Thurmond.
Mike DeWine.
Mr. SPECTER. I will not include my letter to President Clinton, dated
April 11, 2000, because the two letters are largely the same.
I further ask unanimous consent that the first caption page of the
case entitled ``Prewitt Enterprises v. Organization of Petroleum
Exporting Countries'' be printed in the Record so that
[[Page S7944]]
those who study the Congressional Record may have a point of reference
to get the entire case and do any research which anybody might care to
do.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[In the United States District Court for the Northern District of
Alabama, Southern Division, Civil Action Number CV-00-W-0865-S]
Prewitt Enterprises, Inc., on its own behalf and on behalf of all
Others Similarly Situated, plaintiffs, vs. Organization of the
Petroleum Exporting Countries, Defendant
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This antitrust class action is now before the Court on the
Application and Memorandum of Law in Support of Application
for Default Judgment and Appropriate Declaratory and
Injunctive Relief by plaintiff Prewitt Enterprises, Inc., on
its own behalf and on behalf of the Class.
On January 9, 2001, the Court entered a Show Cause Order
directing defendant Organization of the Petroleum Exporting
Countries, to appear before the Court on March 8, 2001, and
show cause, if any it has, why plaintiff's Application should
not be granted and why judgment by default against it should
not be entered. Defendant OPEC was served with the said Show
Cause Order and the Application by means of Federal Express
international delivery at its offices in Vienna, Austria, to
the attention of the Office of the Secretary General. The
proof . . .
* * * * *
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