Senate Bill Attacks OPEC
April 09, 2001
U.S. Senators Herb Kohl (D-Wis.) and Mike DeWine (R-Ohio) have introduced legislation to allow the U.S. government to take action against the Organization of Petroleum Exporting Countries.
Kohl and DeWine lead the Senate Subcommittee on Antitrust, Business Rights and Competition. The bill, the No Oil Producing and Exporting Cartels Act (NOPEC), would allow the U.S. Department of Justice and the Federal Trade Commission to bring actions against foreign states - such as OPEC members - for collusive practices in setting the price or production of petroleum products.
According to DeWine, a report from the FTC on gas prices "shows that the system for producing gas and oil in this country leaves no room for error….As long as OPEC is allowed to control the world's energy supply, we are guaranteed to have more and more of those supply shocks, and therefore more and more problems for American consumers."
A federal district court found OPEC's actions are protected from prosecution under the Federal Sovereign Immunities Act, which allows prosecution of foreign governments when they are engaged in commercial activity, but prohibits prosecution if those states are engaged in governmental activity. The court ruled that OPEC's activities fell under governmental activity rather than commercial. The NOPEC bill introduced by Kohl and DeWine would exempt price fixing and other anti-competitive behavior affecting the pricing, production and distribution of petroleum products from FSIA.
OPEC Secretary General Ali Rodriguez called the proposed bill "absurd."
"To judge an organization - whose members are sovereign states and act to defend their common interests - as a simple commercial entity is an absurdity that violates the most basic legal principles," he said in a statement.
OPEC officials also took issue with an Alabama judge's order that OPEC stop controlling crude oil production.
Carl and Debbie Prewitt, gas station owners in Birmingham, Ala., filed a lawsuit against OPEC last year, arguing that the organization had illegally limited oil production to send prices higher. The case was certified as a nationwide class-action lawsuit. When OPEC did not respond to the suit, the judge granted all the Prewitt's requests in a March ruling, barring OPEC from doing virtually anything to set or enforce production quotas.
Venezuelan Oil Minister Alvaro Silva said the ruling is "an action that makes no sense, and [is] absolutely contrary to law."
Jonathan Berck, who specializes in international law at the University of Alabama, told the Associated Press that a U.S. Court doesn't have any power to tell OPEC what to do.