## Facts

- Illinois enacted the Illinois Act to End Atrocities and Terrorism in the Sudan, targeting economic dealings tied to Sudan in response to atrocities in Darfur.
- The Act amended Illinois’s Deposit of State Moneys Act to bar the State Treasurer from depositing state funds with financial institutions unless they required loan applicants to certify they were not “forbidden entities” linked to Sudan, subject to limited humanitarian exclusions.
- After the Act took effect, Illinois withdrew roughly $275 million from financial institutions unable or unwilling to comply.
- The Act amended the Illinois Pension Code to restrict public pension fund investments unless managers certified they had not transferred pension assets to “forbidden entities,” and it required divestment from covered entities (with procedural steps and humanitarian exceptions).
- Plaintiffs (a trade association, municipal pension funds, and pension beneficiaries) sued state officials under 42 U.S.C. § 1983 seeking to stop enforcement.
- The court consolidated the preliminary-injunction hearing with a merits trial under Rule 65(a)(2), and the parties stipulated to the material facts.

## Issues

1. Whether the deposit-related provisions are invalid under the Supremacy Clause because they interfere with the federal government’s authority over foreign affairs and conflict with federal Sudan policy.
2. Whether the Act is invalid under the constitutional foreign affairs doctrine because it intrudes into foreign relations even apart from a direct statutory conflict.
3. Whether the pension-investment restrictions violate the Foreign Commerce Clause by regulating commerce with foreign nations and preventing the United States from speaking with one voice.
4. Whether Illinois was acting as a market participant (permitting greater latitude) or as a regulator imposing conditions on private actors.
5. Whether federal banking law (including the National Bank Act) preempts the Act’s deposit-related requirements.

## Decision

- The court held the Illinois Sudan Act unconstitutional and permanently enjoined its enforcement.
- The deposit-related amendments were held invalid under the Supremacy Clause based on interference with the federal foreign affairs power and obstruction of federal objectives concerning Sudan.
- The pension-investment amendments were held invalid under the Foreign Commerce Clause.
- The court rejected Illinois’s market-participant defense, finding the Act functioned as regulation by coercing private institutions and managers through certification conditions.
- The court found permanent injunctive relief appropriate and stated that the public interest is served by abating unconstitutional conduct.

## Legal Principles

- State measures that operate as state-imposed foreign policy sanctions may be preempted when they conflict with, or obstruct, federal foreign policy choices and the federal government’s need to speak with one voice in foreign affairs.
- A state law can be invalid under the Supremacy Clause when it stands as an obstacle to a federally selected balance of pressure, licensing, and executive discretion in dealing with a foreign nation.
- Under the Foreign Commerce Clause, states may not regulate commerce with foreign nations in a way that risks inconsistent state regimes or undermines national uniformity in international economic relations.
- The market-participant doctrine does not shield a state program that conditions access to state deposits or pension investments on private actors’ adoption of broader compliance policies affecting conduct beyond the state’s own transactions.
- A permanent injunction is warranted when ongoing enforcement of a state statute violates the U.S. Constitution, and the public interest favors preventing unconstitutional enforcement.

## Conclusion

The court invalidated and permanently enjoined Illinois’s Sudan-focused deposit and divestment regime because it interfered with federal control over foreign affairs and impermissibly regulated foreign commerce, notwithstanding the state’s humanitarian aims.


Nat'l Foreign Trade Council, Inc. v. Giannoulias, 523 F. Supp. 2d 731 (N.D. Ill. 2007)