No Oil Producing and Exporting Cartels Act

The No Oil Producing and Exporting Cartels Act (NOPEC) was a U.S. Congressional bill, never enacted, known as H.R. 2264 (in 2007) and then as part of H.R. 6074 (in 2008). NOPEC was designed to remove the state immunity shield and to allow the international oil cartel, OPEC, and its national oil companies to be sued under U.S. antitrust law for anti-competitive attempts to limit the world's supply of petroleum and the consequent impact on oil prices. Despite popular sentiment against OPEC, legislative proposals to limit the organization's sovereign immunity have so far been unsuccessful. "Varied forms of a NOPEC bill have been introduced some 16 times since 2000, only to be vehemently resisted by the oil industry and its allied oil interests like the American Petroleum Institute and their legion of “K” Street Lobbyists."^[1]

The NOPEC Act was initially sponsored and introduced by Sen. Herb Kohl, D-WI, in June 2000 (S. 2778). The bill had 9 bipartisan cosponsors, including Sen. Chuck Schumer, D-NY, Patrick Leahy, D-VT; Chuck Grassley, R-IA; Arlen Specter, R-PA; and Sen. Joseph Lieberman, D-CT. That bill passed the Senate Judiciary Committee on September 21, 2000. https://www.congress.gov/bill/106th-congress/senate-bill/2778/all-actions-without-amendments The bill was reintroduced in the Senate by Sen. Kohl in every Congress until his retirement in 2013 and passed the Senate Judiciary Committee each Congress.

The identical text of the NOPEC bill was also introduced in the House of Representatives by Representative John Conyers, D-MI, in May 2007 and then as H.R. 6074 by Representative Steve Kagan, D-WI. In the U.S. House of Representatives, the 2007 bill had 12 bipartisan co-sponsors in the House, which included Rep. Dennis J. Kucinich, D-OH .^[2][3][4] H.R. 2264 also had strong bipartisan support in the U.S. Senate.^[5][6] Judiciary Committee Chairman Patrick Leahy, D-VT, said: "It is long past time for this to become law."^[7] H.R. 2264 was passed by the House of Representatives in May 2007 as a stand-alone bill by a vote of 345-72.^[8] That same month, it also passed the Senate by a vote of 70-23 as part of its energy measure.^[9] As part of the Gas Price Relief Act, NOPEC (H.R. 6074) was then passed in the House of Representatives, in May 2008, by a vote of 324-84.^[4][10][11] President George W. Bush reiterated his previous promise to veto the bill.^[12] Under a continued veto threat, a team of senators reintroduced the bill just a week before President Bush left office.^[13] However, NOPEC/H.R. 6074 did not then come to a final Senate vote and has not gone beyond its introduction subsequently.^[14]

NOPEC has been the Congressional effort to address the issue that, under federal law, foreign governments cannot be sued for predatory pricing or failing to comply with federal antitrust laws. Thus, the purpose of the bill was to extend similar Sherman Antitrust consumer protection, so as to include protection against collusion and predatory pricing by foreign governments and international cartels, such as the Organization of the Petroleum Exporting Countries (OPEC).^[15]

As written and passed, H.R. 2264:

Amends the Sherman Act to declare it to be illegal and a violation of the Act for any foreign state or instrumentality thereof to act collectively or in combination with any other foreign state or any other person, whether by cartel or any other association or form of cooperation or joint action, to limit the production or distribution of oil, natural gas, or any other petroleum product (petroleum), to set or maintain the price of petroleum, or to otherwise take any action in restraint of trade for petroleum, when such action has a direct, substantial, and reasonably foreseeable effect on the market, supply, price, or distribution of petroleum in the United States.

It also summarizes enforcement parameters as follows:

Denies a foreign state engaged in such conduct sovereign immunity from the jurisdiction or judgments of U.S. courts in any action brought to enforce this Act. States that no U.S. court shall decline, based on the act of state doctrine, to make a determination on the merits in an action brought under this Act. Authorizes the Attorney General to bring an action in U.S. district court to enforce this Act. Makes an exception to the jurisdictional immunity of a foreign state in an action brought under this Act.^[16]

Controversy surrounding passage under veto threat[]

At the time of passage, U.S. motorists were paying $3.21/gallon for gasoline. The London-based Center for Global Energy Studies cited OPEC restrictions on output as the driving force in pushing oil prices in 2008 to above $60/barrel. The study proposed that this OPEC-driven price increase was the central cause of the consumer gas price increase at the pump.^[17]

The many bipartisan supporters of the bill, in Congress and elsewhere, felt disavowed by President Bush's staunch veto threats. Representative Conyers stated: "The Bush administration's threat to veto this bill is just further proof that the administration favors the international oil cartel over the American consumer."^[15] Then-senators Barack Obama and Hillary Clinton both voted "yes" on NOPEC.^[1] Commodities trader and author Raymond J. Learsy put it this way: "In defiance of oil interests Congress voted overwhelmingly for the Bill (70 votes to 23 in the Senate and 345 to 72 in the House). This was an act of refreshing and courageous leadership by our Congress only to be abandoned after President George W. Bush, that great stalwart of oil interests and friend of Saudi Arabia, made it clear that he would veto the bill should it land on his desk."^[1]

Supporters of the veto included the U.S. Chamber of Commerce (USCC). In its 2007 letter to House members, the USCC stated opposition to the bill: "Although H.R. 2264 limits itself to restraint of trade in oil, natural gas, or petroleum products, it would create a dangerous precedent. There would be a domino effect: once sovereign immunity has been eliminated for one action of a state or its agents, it can be eliminated for all state actions and the actions of agents of the state."^[18] Energy analyst Kevin Book noted that increased regulatory fears, as a result of NOPEC, could prompt a flight of capital. Others, including some officials in the oil-producing countries, also expressed concerns that "a nation caught up in the throes of a populist movement" might look to seize plants and even non-energy assets in the United States that are owned by these foreign governments or their affiliated companies. Some officials in the Bush Administration agreed that OPEC countries' United States assets could be targeted, if a court were to award damages in a resulting antitrust lawsuit. They further feared that this "would likely spur retaliatory action against American interests in those countries and lead to a reduction in oil available to U.S. refiners."^[15]

Economist Dambisa Moyo wrote: "It is beyond question that if OPEC member nations were private companies, they would have been fined heavily and/or had their executives put in jail in the United States or the United Kingdom." Moyo cited the Bush veto of NOPEC, "for reasons of public policy" and in order to support market-based economies, as an indication to China that it too could also expect a continued "lack of any forceful international law," regarding China's potential future international monopolistic policies for "influencing prices, and violating antitrust rules."^[19]

Litigation, ongoing debate, and future possibilities[]

In 2011 a U.S. District Court case involving two class actions was brought by gasoline retailers against oil production companies most of which were owned in whole or in part by OPEC member nations (Citgo and the Venezuelan State Oil Company (PDVSA)), alleging antitrust violations. With a policy reversal of his position as senator, the Obama administration favored dismissal in an amicus brief supporting the "sovereign immunity" defense for international commodity producers.^[1]

The United States Court of Appeals, Fifth Circuit held that if a case presents a political question, they lacked subject matter jurisdiction, agreeing with the district court that adjudication of the case is barred by application of the political question doctrine. Given that the OPEC member nations included Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela, the Fifth Circut’s opinion sited much case precedence stating: “Such matters are so exclusively entrusted to the political branches of government as to be largely immune from judicial inquiry or interference.”

Textually, the 111th Congress NOPEC Act of 2009 would also expressly exclude a private right of action, and "leaves the decision to prosecute OPEC members in the hands of the executive branch by giving the Justice Department sole authority to prosecute." (statement of Sen. Arlen Specter). This reinforced the court’s conclusion that there is an unusual need for unquestioning adherence to the political decision made by the branches of government that are accountable to the electorate: “Relations with OPEC nations regarding U.S. oil supplies are not to be conducted through private litigation.” In their amicus brief the Obama Administration agreed that the appropriate means for achieving United States objectives, involving international energy markets, lies in diplomatic efforts with the countries involved rather than private lawsuits against sovereign nations in U.S. courts. Convinced that these matters deeply implicate concerns of foreign and defense policy, concerns that constitutionally belong in the executive and legislative departments, the Fifth Circut concluded that they lacked jurisdiction to adjudicate the claims presented.^[20]

As with all cartels, compliance from cartel members is a central factor in any price-fixing effectiveness.^[21] More significant may be the developments relating to antitrust/cartel enforcement efforts outside the United States. Brazil and the United Kingdom have strengthened their existing laws and their enforcement capabilities; the European Union and other nations may do likewise.^[22] At the start of 2015, efforts were continuing toward recourse for multinational price-fixing and future possibilities for more rigorous, international antitrust protection for consumers.^[23]

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