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Posted on April 19, 2016 at 8:45 AM by Paige Worsham
The Iran Divestment Act
By a vote of 113-4 in the House and a vote of 48-0 in the Senate, the N.C. General Assembly passed the Iran Divestment Act (S.L. 2015-118, Senate Bill 455) during the 2015 legislative session. The law stems from a 2010 federal law, which authorized states and local governments to adopt legislation that would prohibit States or local governments from investing in or contracting with any entity engaged in investment activities in Iran’s energy sector.
N.C. Iran Divestment Policy
The State Treasurer is directed to adopt a policy prohibiting the N.C. Retirement Systems or the Treasurer’s Office from investing with an entity engaged in investment activities in the energy sector of Iran (defined as activities to develop petroleum or natural gas resources or nuclear power in Iran). Click here to see the State Treasurer’s Iran Divestment Policy.
The State Treasurer is also directed to compile a list of entities (“Final Divestment List”) engaged in these types of investment activities in Iran, and to update the list every six months. The law requires the Treasurer to perform several verification functions before including an entity on the Divestment List, including providing written notice to the affected entity and accepting responses. Any entity that has not engaged in investment activities in Iran for five years will be removed from the Divestment List. The State Treasurer must divest any existing investments within 6 months of the policy’s adoption.
“Investment activities in Iran” has a specific definition under the law. It means:
Exceptions to Prohibition on Investing
The State Treasurer may, however, invest with an entity engaged in investment activities in Iran if:
How Does the New Law Affect Local Government Contracts?
The Iran Divestment Act requires entities attempting to contract or renewing a contract with the State or with a local government to certify that the entity or the entity’s assignee is not identified on the Divestment List. Also, any entity that contracts with the State or with a local government may not use a subcontractor that is on the Divestment List for performance under the contract. The certification is required at the time when a bid is submitted, or when a contract is entered into, renewed, or assigned.
Entities identified on the Divestment List are prohibited from contracting with the State or any local government, and any prohibited contract entered into is automatically void. Any existing contracts that are prohibited as a result of the Iran Divestment Act will expire under the terms of the contract.
Exceptions to the Contracting Provision
The prohibition on contracts does not apply to contracts valued at $1,000 or less.
As indicated above, an entity engaged in investment activities in Iran may still contract with the State or a local government, provided the entity is engaged in substantial positive action, meaning the State Treasurer determines that the investment activities occurred before October 1, 2015; the investment activities have not since been expanded or renewed; and the entity is publicly implementing a plan to end investment activities.
The State or a local government may contract with an entity on the Divestment List if the State or local government makes a good faith determination that the goods or services are necessary to perform functions and the State or local government is otherwise unable to obtain the goods or services. Local governments must enter exception determinations in the procurement record.
How to Locate the Divestment List?
The State Treasurer 's Office published the initial Final Divestment Act (as of Feb. 26, 2016) here. The Office also posted this list of Parent and Subsidiary Guidance, which lists parent entities and subsidiaries of the companies found on the Final Divestment List. The State Treasurer's complete page of resources is found here.
The Local Government Commission in the State Treasurer’s Office has issued this memo to local governments. The memo outlines the new obligations, effective Feb. 26, 2016, on each new bid process, new contract, and any renewal or assignment of an existing contract. The memo also includes a sample “Contract Certification” form, which local governments can use to certify that their vendors or bidders are not listed on the Divestment List.
According to the United Against Nuclear Iran group, 30 states and D.C. have enacted Iran divestment legislation or policies.