New Jersey Governor Narrows Scope of Anti-Russia Law Following Federal Court Setback

New Jersey Governor Phil Murphy’s administration has significantly reduced the scope of a state law aimed at restricting government dealings with Russian-affiliated businesses. This move comes after a federal court loss that challenged the law’s constitutionality. Originally intended to blacklist companies linked to Russia and Belarus, the law faced criticism for its broad application, even affecting businesses with Russian subsidiaries. However, following a court ruling in favor of Japanese electronics company Kyocera, the state will now align its sanctions with federal measures, effectively limiting the law’s impact.

Key Points:

1. Legislative Intentions: Governor Murphy signed a bill into law shortly after Russia’s invasion of Ukraine, intending to penalize companies affiliated with Russia and Belarus. The law sought to restrict these companies from state and local government contracts, tax breaks, and investments in the state’s pension system.
2. Court Setback: In December, a U.S. District Court Judge granted a permanent injunction to Kyocera, preventing the state from enforcing the law against the American subsidiary of the Japanese company. The judge argued that New Jersey overstepped by setting its own foreign policy when applying sanctions to Kyocera.
3. Narrower Interpretation: In response to the court ruling, the state Treasury announced a narrower interpretation of the law, now aligning New Jersey’s sanctions with the U.S. Treasury’s Specially Designated Nationals and Blocked Persons list for Russia or Belarus. This significantly limits the law’s original scope.
4. Matching Federal Sanctions: The state’s new interpretation essentially mandates that New Jersey follows federal sanctions, a practice that, according to experts, should have been in place regardless of the state-specific law. Observers note that states are generally obligated to avoid business dealings with federally sanctioned individuals or entities.
5. Avoiding Legal Battles: The Murphy administration opted not to appeal the court ruling in favor of Kyocera, possibly anticipating legal challenges similar to past instances where states’ attempts to regulate international business relations were struck down.
6. Impact on Companies: Major companies, including JPMorgan Chase, Xerox, and a turf field supplier, previously targeted by the state for potential sanctions, are now relieved from state-level concerns. Xerox has since fully divested from Russia.
7. Legislative Fast Track: The anti-Russia law underwent a swift legislative process, moving from introduction to becoming law in less than ten days, emphasizing the urgency perceived by the state government following the Russian invasion of Ukraine.

While the law was initially designed to assert state-level sanctions, its transformation into a measure aligning with federal sanctions has raised questions about its necessity and effectiveness. The decision to narrow the law’s scope appears to be a response to constitutional concerns and legal precedent, impacting New Jersey’s approach to international relations within the context of state legislation.