Illinois has become the first U.S. state to identify specific companies it will no longer invest state assets in because they engage in the Boycott, Divest and Sanction (“BDS”) campaign.  LI has discussed various state anti-BDS laws here.

The Illinois Investment Policy Board included eleven companies on its new “Prohibited Investment List” because those companies boycott Israel.  The list also includes five companies for their business in or with Iran and dozens of companies for their activities in Sudan.

The listed companies have a grace period before the state actually begins divesting.  Under Illinois General Statute 1-110.16:

(e) The Illinois Investment Policy Board shall adhere to the following procedures for companies on the list of restricted companies:

(1) For each company newly identified in subsection (d), the Illinois Investment Policy Board shall send a written notice informing the company of its status and that it may become subject to divestment by the retirement systems.  (2) If, following the Illinois Investment Policy Board’s engagement pursuant to this subsection (e) with a restricted company, that company ceases activity that designates the company to be . . . a company that boycotts Israel, the company shall be removed from the list of restricted companies and the provisions of this Section shall cease to apply to it unless it resumes such activities.

As the first of its kind, Illinois’s list also raises complex issues of identifying what companies engage in BDS.  Several companies Illinois identified dispute that they engage in BDS.  Some say they divested Israeli assets for pure business reasons, or dis-invested in Israeli defense businesses as part of a broader policy of not investing with any defense businesses at all, whether or not the businesses are Israeli. According to JTA:

Danske Bank of Denmark, refuses to invest in companies that operate in the West Bank, and also lists as banned for investment an Israeli security equipment manufacturer, Elbit. However, Danske Bank lists a number of non-Israeli security equipment manufacturers it targets for not comporting with its values.

Another entity listed, Nordea, a Swedish bank, investigated several years ago whether to disinvest from partner banks in Israel that operated in the West Bank, but ultimately decided that Nordea’s investments were separate from the Israeli banks’ West Bank activity and remained partnered with the Israeli banks.

Two of the entities — GS4, a major British security firm, and Dexia Bank of Belgium — have sold off Israeli affiliates. In both cases, while BDS activists claimed victories, the companies said the sell-offs were part of broader divestments made strictly for commercial reasons. Dexia, for instance, was hard hit by the 2008 financial crisis, and forced by the French and Belgian governments to sell some of its holdings.

There is no explicit means for a company to challenge its inclusion on the list, aside from provision in 1-110.16(e)(2) permitting the company to show it has “cease[d] activity that designates the company.”  For companies that dispute that they engage in BDS and concerned about a potential false impression that they used to but no longer engage in BDS, the 1-110.16)e)(2) procedure may be inadequate.

The statute also requires the Illinois Investment Policy Board to review the list of restricted companies on a quarterly basis, so banned companies can be de-listed by ending their discriminatory policy.

Keep an eye on how Illinois handles these disputes.  If the state fails to give listed companies a robust opportunity to challenge their designation, they may seek recourse in court.

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