[Congressional Record (Bound Edition), Volume 147 (2001), Part 10]
[Senate]
[Pages 13947-13950]
[From the U.S. 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

[[Page 13948]]

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 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

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     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 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

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     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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