GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 2017

 

HOUSE BILL 161

RATIFIED BILL

 

 

AN ACT to require state divestment from, and prohibit State Agencies from Contracting With, Companies That Boycott Israel and to amend the existing sudan and iran divestment statutes.

 

Whereas, boycotts and related tactics have become a tool of economic warfare that threaten the sovereignty and security of key allies and trade partners of the United States; and

Whereas, the State of Israel is the most prominent target of such boycott activity, which began with, but has not been limited to, the Arab League Boycott adopted in 1945, even before Israel's declaration of independence as the reestablished national state of the Jewish people; and

Whereas, companies that refuse to deal with United States trade partners such as Israel, or entities that do business with or in such countries, make discriminatory decisions on the basis of national origin that impair those companies' commercial soundness; and

Whereas, it is the public policy of the United States, as enshrined in several federal acts, to oppose boycotts against Israel, and Congress has concluded as a matter of national trade policy that cooperation with Israel materially benefits United States companies and improves American competitiveness; and

Whereas, Israel in particular is known for its dynamic and innovative approach in many business sectors, and, therefore, a company's decision to discriminate against Israel, Israeli entities, or entities that do business with or in Israel is an unsound business practice making such a company an unduly risky contracting partner or vehicle for investment; Now, therefore,

 

The General Assembly of North Carolina enacts:

 

PART I. DIVESTMENT FROM COMPANIES BOYCOTTING ISRAEL

SECTION 1.1.  Chapter 147 of the General Statutes is amended by adding a new Article to read:

"Article 6G.

"Divestment From Companies Boycotting Israel.

"§ 147‑86.80.  Definitions.

The following definitions apply in this Article:

(1)        Boycott Israel or boycott of Israel. – Engaging in refusals to deal, terminating business activities, or taking actions that are intended to penalize, inflict economic harm, or otherwise limit commercial relations specifically with Israel, or persons or entities doing business in Israel or in Israeli‑controlled territories. This term does not apply to decisions made for ordinary business purposes or for actions with an economic impact of less than twenty million dollars ($20,000,000) in a 12‑month period.

(2)        Company. – Any sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company, or other entity or business association, including all wholly owned subsidiaries, majority‑owned subsidiaries, parent companies, or affiliates of those entities or business associations.

(3)        Investment. – This term has the same meaning as G.S. 147‑86.57(3).

(4)        Restricted company. – A company that appears on the list of companies that are engaged in a boycott of Israel developed by the State Treasurer under G.S. 147‑86.81(a)(1).

(5)        State agency. – Any board, commission, department, executive department, officer, institution, and any political subdivision of the State.

"§ 147‑86.81.  Prohibitions on State investment.

(a)        No more than 30 days after October 1, 2017, the State Treasurer shall adopt a policy prohibiting the North Carolina Retirement Systems or the Department of State Treasurer from investing in any company engaged in a boycott of Israel. At a minimum, the policy shall provide for the following:

(1)        List of restricted companies. – Within 120 days of adoption of the policy, the State Treasurer shall develop and make publicly available a list of companies it determines to be engaged in a boycott of Israel. In the development of this list, the State Treasurer shall use any other state lists of restricted companies pursuant to similar laws and any federal information or guidance on companies that boycott Israel and any other credible information provided by nonprofit organizations, research firms, and governmental entities, and generally publicly available information. The State Treasurer shall make every effort to avoid erroneously including a company on the list. Before finalizing an initial or updated list, the State Treasurer must do all of the following before a company is included on the list:

a.         Provide 90 days' written notice of the State Treasurer's intent to include the company on the list. The notice shall inform the company that inclusion on the list would make the company ineligible for State investment, may result in the company becoming subject to divestment by the North Carolina Retirement Systems, and may affect the company's ability to conduct business with the State and its subdivisions. The notice shall specify that the company may be removed from the list if the company ceases its engagement in a boycott of Israel.

b.         The State Treasurer shall provide a company with an opportunity to comment in writing that the company is not engaged in a boycott of Israel or has ceased its boycott of Israel. If the company demonstrates to the State Treasurer that the company has not been engaged in a boycott of Israel, the company shall not be placed on the list. If a company had been engaged in a boycott of Israel but has ceased the boycott, it must submit a written certification to the State Treasurer that the company will not reengage in a boycott of Israel for the duration of any business with the State. The State Treasurer shall keep all written certifications from restricted and previously restricted companies.

(2)        Identification of investments. – Upon completion of the initial list of restricted companies created pursuant to subdivision (1) of this subsection, the State Treasurer shall identify any restricted companies in which the North Carolina Retirement Systems has investments.

(3)        Review of restricted companies list. – The State Treasurer shall review the list of restricted companies created pursuant to subdivision (1) of this subsection on an annual basis. This updated list shall be made publicly available and any updates shall be distributed to the North Carolina Retirement Systems.

(4)        Investments prohibited. – Neither the North Carolina Retirement Systems nor the State Treasurer may invest funds with a company that is identified on a list created pursuant to subdivision (1) of this section as a company engaging in restricted investment activities.

(5)        Existing investments. – Any existing investment with a company that is identified on a list created pursuant to subdivision (1) of this section as a company engaging in restricted activities must be divested within 180 days of the adoption of the list.

(b)        Nothing in the policy or in this Article shall require the North Carolina Retirement Systems or the State Treasurer to take action unless it is determined by the State Treasurer, in good faith, that the action is consistent with the fiduciary responsibilities of the Retirement Systems and the State Treasurer.

"§ 147‑86.82.  Restrictions on contracts with the State or subdivisions of the State.

(a)        A company that is identified as a restricted company is ineligible to contract with the State or any political subdivision of the State.

(b)        Any contract entered into with a company that is identified as a restricted company at the time of contract is void ab initio.

(c)        Upon receiving information that a company that was not identified as a restricted company at the time of contract has later been identified as a restricted company, the State agency shall review the information and offer the company an opportunity to respond. If the company fails to demonstrate that the company should not have been identified as a restricted company within 90 days after notification by the State agency, then the State agency shall take action as may be appropriate and provided for by law, rule, or contract.

(d)       Contracts in existence on October 1, 2017, with restricted companies shall be allowed to expire in accordance with the terms of the contract.

"§ 147‑86.83.  Exceptions.

G.S. 147‑86.82 shall not apply to contracts valued at one thousand dollars ($1,000) or less.

"§ 147‑86.84.  Reporting.

The State Treasurer shall report to the Joint Legislative Commission on Governmental Operations annually by October 1 on information regarding investments sold, redeemed, divested, or withdrawn in compliance with this Article."

SECTION 1.2.(a)  Pursuant to G.S. 147‑69.3(g), the State Treasurer is authorized to retain the services of consultants, professional individuals, analysts, data collection firms, or other persons possessing specialized skills or knowledge necessary for the proper implementation and administration of the requirements of this act.

SECTION 1.2.(b)  This section is effective when this act becomes law.

 

PART II. AMEND SUDAN (DARFUR) DIVESTMENT ACT

SECTION 2.1.  G.S. 147‑86.42 reads as rewritten:

"§ 147‑86.42.  Definitions.

As used in this article, the following definitions apply:

(1)        "Active Business Operations" means all Business Operations that are not Inactive Business Operations.

(2)        "Business Operations" operations" means engaging in commerce in any form in Sudan, including by acquiring, developing, maintaining, owning, selling, possessing, leasing, or operating equipment, facilities, personnel, products, services, personal property, real property, or any other apparatus of business or commerce.

(3)        "Company" means any sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company, or other entity or business association, including all wholly‑owned subsidiaries, majority‑owned subsidiaries, parent companies, or affiliates of such entities or business associations, that exists for profit‑making purposes.

(4)        "Complicit" means taking actions during any preceding 20‑month period which have directly supported or promoted the genocidal campaign in Darfur, including, but not limited to, preventing Darfur's victimized population from communicating with each other, encouraging Sudanese citizens to speak out against an internationally approved security force for Darfur, actively working to deny, cover up, or alter the record on human rights abuses in Darfur, or other similar actions.

(5)        "Direct Holdings" in a Company means all securities of that Company held directly by the Public Fund or in an account or fund in which the Public Fund owns all shares or interests.

(5a)      "Investment" means a commitment or contribution of funds or property, whatever the source, or a loan or other extension of credit. It does not include indirect beneficial ownership through index funds, commingled funds, limited partnerships, derivative instruments, or the like.

(6)        "Government of Sudan" means the government in Khartoum, Sudan, which is led by the National Congress Party (formerly known as the National Islamic Front) or any successor government formed on or after October 13, 2006 (including the coalition National Unity Government agreed upon in the Comprehensive Peace Agreement for Sudan), and does not include the regional government of southern Sudan.

(7)        "Inactive Business Operations" means the mere continued holding or renewal of rights to property previously operated for the purpose of generating revenues but not presently deployed for such purpose.

(8)        "Indirect Holdings" in a Company means all securities of that Company held in an account or fund, such as a mutual fund, managed by one or more persons not employed by the Public Fund, in which the Public Fund owns shares or interests together with other investors not subject to the provisions of this Article and securities held through index funds, commingled funds, limited partnerships, derivative instruments, or any other similar investment instrument.

(9)        "Marginalized Populations populations of Sudan" include, but are not limited to, the portion of the population in the Darfur region that has been genocidally victimized; the portion of the population of southern Sudan victimized by Sudan's North‑South civil war; the Beja, Rashidiya, and other similarly underserved groups of eastern Sudan; the Nubian and other similarly underserved groups in Sudan's Abyei, Southern Blue Nile, and Nuba Mountain regions; and the Amri, Hamadab, Manasir, and other similarly underserved groups of northern Sudan.

(10)      "Military Equipment"equipment" means weapons, arms, military supplies, and equipment that readily may be used for military purposes, including, but not limited to, radar systems or military‑grade transport vehicles; or supplies or services sold or provided directly or indirectly to any force actively participating in armed conflict in Sudan.

(11)      "Mineral Extraction Activities"extraction activities" include exploring, extracting, processing, transporting, or wholesale selling or trading of elemental minerals or associated metal alloys or oxides (ore), including gold, copper, chromium, chromite, diamonds, iron, iron ore, silver, tungsten, uranium, and zinc, as well as facilitating such activities, including by providing supplies or services in support of such activities.

(12)      "Oil‑Related Activities""Oil‑related activities" include, but are not limited to, owning rights to oil blocks; exporting, extracting, producing, refining, processing, exploring for, transporting, selling, or trading of oil; constructing, maintaining, or operating a pipeline, refinery, or other oil‑field infrastructure; and facilitating such activities, including by providing supplies or services in support of such activities, provided that the mere retail sale of gasoline and related consumer products shall not be considered Oil‑Related Activities.

(13)      "Power Production Activities"production activities" means any Business Operationbusiness operation that involves a project commissioned by the National Electricity Corporation (NEC) of Sudan or other similar Government of Sudan entity whose purpose is to facilitate power generation and delivery, including, but not limited to, establishing power‑generating plants or hydroelectric dams, selling or installing components for the project, providing service contracts related to the installation or maintenance of the project, as well as facilitating such activities, including by providing supplies or services in support of such activities.

(14)      "Public Fund"fund" means any funds held by the State Treasurer to the credit of:

a.         The Teachers' and State Employees' Retirement System.

b.         The Consolidated Judicial Retirement System.

c.         The Firemen's and Rescue Workers' Pension Fund.

d.         The Local Governmental Employees' Retirement System.

e.         The Legislative Retirement System.

f.          The Legislative Retirement Fund.

g.         The North Carolina National Guard Pension Fund.

(14a)    "Scrutinized Business Operations""Restricted business operations" means Business Operationsbusiness operations that have resulted in a Company company becoming a Scrutinized Company.restricted company.

(15)      "Scrutinized Company""Restricted company" means any Company company that meets the criteria in sub‑subdivisions a., b., or c. below:

a.         The Company company has Business Operationsbusiness operations that involve contracts with and/or provision of supplies or services to the Government of Sudan, to companies in which the Government of Sudan has any direct or indirect equity share, Government of Sudan‑commissioned consortiums or projects, or to Companies companies involved in Government of Sudan‑commissioned consortiums or projects and at least one of the following conditions is satisfied:

1.         More than ten percent (10%) of the Company's company's revenues or assets linked to Sudan involve Oil‑Related Activities or Mineral Extraction Activities;oil‑related activities or mineral extraction activities less than seventy‑five percent (75%) of the Company's company's revenues or assets linked to Sudan involve contracts with and/or provision of Oil‑Related or Mineral Extractingoil‑related or mineral extracting products or services to the regional government of southern Sudan or a project or consortium created exclusively by that regional government; and the Company company has failed to take Substantial Action.substantial action.

2.         More than ten percent (10%) of the Company's company's revenues or assets linked to Sudan involve Power Production Activities; power production activities; less than seventy‑five percent (75%) of the Company's Power Production Activitiescompany's power production activities include projects whose intent is to provide power or electricity to the Marginalized Populationsmarginalized populations of Sudan; and the Company company has failed to take Substantial Action.substantial action.

b.         The Company company is Complicit complicit in the Darfur genocide.

c.         The Company company supplies Military Equipmentmilitary equipment within Sudan, unless it clearly shows that the Military Equipmentmilitary equipment cannot be used to facilitate offensive military actions in Sudan or the Company company implements rigorous and verifiable safeguards to prevent use of that equipment by forces actively participating in armed conflict, for example, through post‑sale tracking of such equipment by the Company,company, certification from a reputable and objective third party that such equipment is not being used by a party participating in armed conflict in Sudan, or sale of such equipment solely to the regional government of southern Sudan or any internationally recognized peacekeeping force or humanitarian organization.

Notwithstanding anything herein to the contrary, a Social Development Company social development company which is not Complicit complicit in the Darfur genocide shall not be considered a Scrutinized Company.restricted company.

(16)      "Social Development Company"development company" means a Company company whose primary purpose in Sudan is to provide humanitarian goods or services, including medicine or medical equipment, agricultural supplies or infrastructure, educational opportunities, journalism‑related activities, information or information materials, spiritual‑related activities, services of a purely clerical or reporting nature, food, clothing, or general consumer goods that are unrelated to Oil‑Related Activities, Mineral Extraction Activities, or Power Production Activities.oil‑related activities, mineral extraction activities, or power production activities.

(17)      "Substantial Action"action" means adopting, publicizing, and implementing a formal detailed plan to cease Scrutinized Business Operationsrestricted business operations within one year and to refrain from any such new Business Operations;business operations; undertaking significant humanitarian efforts on behalf of one or more Marginalized Populationsmarginalized populations of Sudan; or through engagement with the Government of Sudan, materially improving conditions for the genocidally victimized population in Darfur."

SECTION 2.2.  G.S. 147‑86.43 reads as rewritten:

"§ 147‑86.43.  Identification of companies.

(a)        Within 90 days of August 30, 2007, the Public Fund shall make its best efforts to identify all Scrutinized Companies in which the Public Fund has Direct or Indirect Holdings or could possibly have such holdings in the future. Such efforts shall include, as appropriate:public fund shall develop and make publicly available a list of companies it determines to be engaged in restricted business activities. In the development of this list, the public fund shall use any other state lists of restricted companies pursuant to similar laws and any federal information or guidance on companies engaged in restricted business activities, and any other credible information provided by nonprofit organizations, research firms, and governmental entities. The public fund shall make every effort to avoid erroneously, including a company on the list. Before finalizing an initial or update list, the public fund must do all of the following before a company is included on the list:

(1)        Reviewing and relying, as appropriate in the Public Fund's judgment, on publicly available information regarding Companies with Business Operations in Sudan, including information provided by nonprofit organizations, research firms, international organizations, and government entities;Provide 90 days written notice of the public fund's intent to include the company on the list. The notices shall inform the company that inclusion on the list would make the company ineligible for State investment, may result in the company becoming subject to divestment by the North Carolina Retirement Systems, and may affect the company's ability to conduct business with the State and its subdivisions. The notice shall specify that the company may be removed from the list if the company ceases engagement in the restricted business activities.

(2)        Contacting asset managers contracted by the Public Fund that invest in Companies with Business Operations in Sudan; orThe public fund shall provide a company with an opportunity to comment in writing that it is not engaged in restricted activities in Sudan. If the company demonstrates to the public fund that the company is not engaged in restricted activities, the company shall not be included on the list.

(3)        Contacting other institutional investors that have divested from and/or engaged with Companies that have Business Operations in Sudan.

(b)        By the first meeting of the Public Fund following the 90‑day period described in subsection (a), the Public Fund shall assemble all Scrutinized Companies identified into a "Scrutinized Companies List."

(c)        The Public Fundpublic fund shall update the Scrutinized Companies Listlist on a quarterlyan annual basis based on evolving information from, among other sources, those listed in subsection (a) of this section."

SECTION 2.3.  G.S. 147‑86.44 reads as rewritten:

"§ 147‑86.44.  Required actions.

(a)        General. – The Public Fund shall adhere to the procedure for Companies on the Scrutinized Companies List as provided in this section:

(b)        Engagement. –

(1)        The Public Fund shall immediately determine the Companies on the Scrutinized Companies List in which the Public Fund owns Direct or Indirect Holdings.

(2)        For each Company identified in subdivision (1) of this section with only Inactive Business Operations, the Public Fund shall send a written notice informing the Company of this article and encouraging it to continue to refrain from initiating Active Business Operations in Sudan until it is able to avoid Scrutinized Business Operations. The Public Fund shall continue such correspondence on a semiannual basis.

(3)        For each Company newly identified in subdivision (1) of this section with Active Business Operations, the Public Fund shall send a written notice informing the Company of its Scrutinized Company status and that it may become subject to divestment by the Public Fund. The notice shall offer the Company the opportunity to clarify its Sudan‑related activities and shall encourage the Company, within 90 days, to either cease its Scrutinized Business Operations or convert such operations to Inactive Business Operations in order to avoid qualifying for divestment by the Public Fund.

(4)        If, within 90 days following the Public Fund's first engagement with a Company pursuant to subdivision (3) of this section that Company ceases Scrutinized Business Operations, the Company shall be removed from the Scrutinized Companies List and the provisions of this Section shall cease to apply to it unless it resumes Scrutinized Business Operations. If, within 90 days following the Public Fund's first engagement, the Company converts its Scrutinized Active Business Operations to Inactive Business Operations, the Company shall be subject to all provisions relating thereto.

(c)        Divestment. –

(1)        If, after 90 days following the Public Fund's first engagement with a Company pursuant to subdivision (b)(3) of this section, the Company continues to have Scrutinized Active Business Operations, and only while such Company continues to have Scrutinized Active Business Operations, the Public Fund shall sell, redeem, divest, or withdraw all publicly traded securities of the Company within 15 months after the Company's most recent appearance on the Scrutinized Companies List.

(2)        If a Company that ceased Scrutinized Active Business Operations following engagement pursuant to subdivision (b)(3) of this section resumes such operations, subdivision (1) of this subsection shall immediately apply, and the Public Fund shall send a written notice to the Company. The Company shall also be immediately reintroduced onto the Scrutinized Companies List.

(d)       Prohibition.Investments Prohibited. – At no time shall the Public Fund acquire securities of Companies on the Scrutinized Companies List that have Active Business Operations, except as provided below.public fund invest with companies on the list created pursuant to G.S. 147‑86.43.

(d1)     Existing Investments. – Any existing investment with a company that is identified on a list created pursuant to G.S. 147‑86.43 as a company engaging in restricted business activities must be divested within 180 days of the adoption of the list.

(e)        Exemption. – No Company company which the United States Government affirmatively declares to be excluded from its present or any future federal sanctions regime relating to Sudan shall be subject to divestment or investment prohibition pursuant to subsections (c) and (d) of this section.

(e1)      Nothing in this Article shall require the North Carolina Retirement Systems or the State Treasurer to take action unless it is determined by the State Treasurer, in good faith, that the action is consistent with the fiduciary responsibilities of the Retirement Systems and the State Treasurer.

(f)        Excluded Securities. – Notwithstanding anything herein to the contrary, subsections (c) and (d) of this section shall not apply to Indirect Holdings. The Public Fund shall, however, submit letters to the managers of such investment funds containing Companies with Scrutinized Active Business Operations requesting that they consider removing such Companies from the fund or create a similar actively managed fund with Indirect Holdings devoid of such Companies. If the manager creates a similar fund, the Public Fund shall replace all applicable investments with investments in the similar fund in an expedited time frame consistent with prudent investing standards. For the purposes of this section, "private equity" funds shall be deemed to be actively managed investment funds."

SECTION 2.4.  G.S. 147‑86.45 reads as rewritten:

"§ 147‑86.45.  Reporting.

(a)        The Public Fund shall file a publicly available report to the General Assembly that includes the Scrutinized Companies List annually.public fund shall report to the Joint Legislative Commission on Governmental Operations annually on October 1 on information regarding investments sold, redeemed, divested, or withdrawn in compliance with this Article.

(b)        Annually thereafter, the Public Fund shall file a publicly available report to the General Assembly and send a copy of that report to the United States Presidential Special Envoy to Sudan (or an appropriate designee or successor) that includes:

(1)        A summary of correspondence with Companies engaged by the Public Fund under G.S. 147‑86.44(b)(2) and (b)(3).

(2)        All investments sold, redeemed, divested, or withdrawn in compliance with G.S. 147‑86.44(c).

(3)        All prohibited investments under G.S. 147‑86.44(d); and

(4)        Any progress made under G.S. 147‑86.44(f)."

SECTION 2.5.  G.S. 147‑86.47 and G.S. 147‑86.48 are repealed.

 

PART III. AMEND IRAN DIVESTMENT ACT

SECTION 3.1.  G.S. 147‑86.56 reads as rewritten:

"§ 147‑86.56.  Findings.

The General Assembly finds that:

(7)        In order to effectively address the need for this State to respond to the policies of Iran in a uniform fashion, prohibiting contracts with persons companies engaged in investment activities in the energy sector of Iran must be accomplished on a statewide basis.

…."

SECTION 3.2.  G.S. 147‑86.57 reads as rewritten:

"§ 147‑86.57.  Definitions.

As used in this Article:

(1)        "Company" means any sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company, or other entity or business association, including all wholly owned subsidiaries, majority‑owned subsidiaries, parent companies, or affiliates of those entities or business associations.

(1a)      "Energy sector of Iran" means activities to develop petroleum or natural gas resources or nuclear power in Iran.

(2)        "Financial institution" means the term as used in Section 14 of the Iran Sanctions Act of 1996, as amended (Public Law 104‑172; 50 U.S.C. 1701 § note).

(3)        "Investment" means a commitment or contribution of funds or property, whatever the source, a loan or other extension of credit, and the entry into or renewal of a contract for goods or services. It does not include indirect beneficial ownership through index funds, commingled funds, limited partnerships, derivative instruments, or the like.

(4)        "Investment activities in Iran" means a person company engages in investment activities in Iran if:

a.         The person company provides goods or services of twenty million dollars ($20,000,000) or more within any 12‑month period in the energy sector of Iran, including a person company that provides oil or liquefied natural gas tankers, or products used to construct or maintain pipelines used to transport oil or liquefied natural gas, for the energy sector of Iran; or

b.         The person company is a financial institution that extends twenty million dollars ($20,000,000) or more in credit to another person,company, for 45 days or more, if (i) the financial institution knows, or reasonably should know, that person company will use the credit to provide goods or services in the energy sector in Iran, and (ii) the person company receiving credit is identified on a list created pursuant to G.S. 147‑86.60 as a person company engaging in investment activities in Iran as described in this section.

(5)        "Iran" includes the Government of Iran and any agency or instrumentality of Iran.

(6)        "Person" means any of the following:

a.         A natural person, corporation, company, limited liability company, business association, partnership, society, trust, or any other nongovernmental entity, organization, or group.

b.         Any governmental entity or instrumentality of a government, including a multilateral development institution, as defined in section 1701(c)(3) of the International Financial Institutions Act (22 U.S.C. § 262r(c)(3)).

c.         Any successor, parent entity owning more than 20%, or majority‑owned subunit or subsidiary of any entity described in sub‑subdivisions (a) and (b) of this subdivision.

(7)        "State agency" means any board, commission, department, executive department, officer, institution, and any political subdivision of the State."

SECTION 3.3.  G.S. 147‑86.58 reads as rewritten:

"§ 147‑86.58.  Prohibitions on State investment.

No more than 30 days after October 1, 2015, the State Treasurer shall adopt a policy prohibiting the North Carolina Retirement Systems or the Department of the State Treasurer from investing funds with a person company engaging in investment activities in Iran. At a minimum, the policy shall provide:

(1)        List of persons engaged in investment.restricted companies. – Within 120 days of adoption of the policy, the State Treasurer shall develop and make publically available, using federal sanctions lists and any other credible information available to the public, a list of persons companies it determines engage in investment activities in Iran. The State Treasurer shall use any other state lists of restricted companies pursuant to similar laws and any federal information or guidance on companies engaged in investment activities in Iran and any other credible information provided by nonprofit organizations, research firms, governmental entities, and generally public information. The State Treasurer shall make every effort to avoid erroneously including a person company on the list. The State Treasurer shall update the list every 180 days.annually. Before finalizing an initial list or an updated list, the State Treasurer must do all of the following before a person company is included on the list:

a.         Provide 90 days' written notice of the State Treasurer's intent to include the person company on the list. The notice shall inform the person company that inclusion on the list would make the person company ineligible for State investment and may affect the person's company's ability to conduct other business with the State and its subdivisions. The notice shall specify that the person, if it ceases its engagement in investment activities in Iran, company may be removed from the list.list if it ceases its investment activities in Iran.

b.         The State Treasurer shall provide a person company with an opportunity to comment in writing that it is not engaged in investment activities in Iran. If the person company demonstrates to the State Treasurer that the person company is not engaged in investment activities in Iran, the person company shall not be included on the list.

(2)        Investments prohibited. – Neither the North Carolina Retirement Systems nor the State Treasurer may invest funds with a person company that is identified on a list created pursuant to subdivision (1) of this section as a person company engaging in investment activities in Iran.

(3)        Existing investments. – Any existing investment with a person company that is identified on a list created pursuant to subdivision (1) of this section as a person company engaging in investment activities in Iran must be divested within 180 days of the adoption of the policy.being placed on the list created pursuant to subdivision (1) of this section.

(4)        Fiduciary duties. – Nothing in the policy or in this Article shall require the North Carolina Retirement Systems or the State Treasurer to take action unless it is determined by the State Treasurer, in good faith, that the action is consistent with the fiduciary responsibilities of the Retirement Systems and the State Treasurer.

(5)        Exceptions. – Notwithstanding the policy, an investment may be made in a person company engaged in investment activities in Iran if:

a.         The person company is eligible to contract with the State under the exception in G.S. 147‑86.61.

b.         The State Treasurer makes a good‑faith determination, on a case‑by‑case basis, that the investments are necessary to perform its functions."

SECTION 3.4.  G.S. 147‑86.59 is repealed.

SECTION 3.5.  G.S. 147‑86.60 reads as rewritten:

"§ 147‑86.60.  Restrictions on contracts with the State or subdivisions of the State.

(a)        A person company that is identified on a list created by the State Treasurer pursuant to G.S. 147‑86.58 as a person company engaging in investment activities in Iran is ineligible to contract with the State or any political subdivision of the State.

(b)        Any contract entered into with a person company that is ineligible to contract with the State or any political subdivision of the State is void ab initio.

(c)        Existing contracts with persons companies made ineligible to contract with the State or any political subdivision of the State under this Article shall be allowed to expire in accordance with the terms of the contract."

SECTION 3.6.  G.S. 147‑86.61 reads as rewritten:

"§ 147‑86.61.  Exceptions.

(a)        G.S. 147‑86.60 does not apply to contracts valued at one thousand dollars ($1,000) or less.

(b)        Persons Companies engaged in substantial positive action. – Notwithstanding any other provision of this Article, a person company engaged in investment activities in Iran may contract with the State or a political subdivision of the Statenot be placed on the list developed pursuant to G.S. 147‑86.58(1) if the State Treasurer determines, using U.S. government statements and any other credible information available to the public, that the person's company's investment activities in Iran were made before October 1, 2015, the investment activities in Iran have not been expanded or renewed after October 1, 2015, and the person company has adopted, publicized, and is implementing a detailed plan to cease the investment activities in Iran and to refrain from engaging in any new investments in Iran. The State Treasurer shall develop and make publically available a "Substantial Positive Action Exception List" of these persons.companies. The State Treasurer shall update the list every 180 days.annually. Once a person has not engaged in investment activities in Iran within the previous five years, the State Treasurer shall remove that person from the list created pursuant to G.S. 147‑86.58.

(c)        Necessary commodities or services. – Notwithstanding any other provision of this Article, a person company engaged in investment activities in Iran may contract with the State or a political subdivision of the State, on a case‑by‑case basis, if the State agency or political subdivision makes a good‑faith determination that the commodities or services are necessary to perform its functions and that, absent such an exemption, the State agency would be unable to obtain the commodities or services for which the contract is offered. The determination shall be entered into the procurement record."

SECTION 3.7.  G.S. 147‑86.62 reads as rewritten:

"§ 147‑86.62.  Report; application.

(a)        The State Treasurer shall report to the Joint Legislative Commission on Governmental Operations and the Governor annually by October 1 on the status of the federal "Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010" (Public Law 111‑195), the "Iran Divestment Act of 2015," and any rules or regulations adopted thereunder.information regarding investments sold, redeemed, divested, or withdrawn in compliance with this Article.

(b)        The restrictions provided for in this Article apply only until:

(1)        The President or Congress of the United States, by means including, but not limited to, legislation, executive order, or written certification, declares that divestment of the type provided for in this Article interferes with the conduct of United States foreign policy; or with respect to restrictions on any particular investment activities in Iran, those activities have been specifically exempted from U.S. government sanctions by an affirmative declaration authorized by the Congress of the United States; or

(2)        Congress revokes authority to divest in the manner provided for in this Article."

SECTION 3.8.  G.S. 147‑86.63 reads as rewritten:

"§ 147‑86.63.  No private right of action.

(a)        This Article does not create or authorize a private right of action to enforce the provisions of the Article.

(b)        A person company may challenge being included on the lists established in this Article using the procedures in Article 3 of Chapter 150B of the General Statutes, except that no person company may file a contested case more than once every 365 days, and no attorneys' fees may be awarded under G.S. 150B‑33(b)(11)."

SECTION 4.  Except as otherwise provided, this act becomes effective October 1, 2017.

In the General Assembly read three times and ratified this the 29th day of June, 2017.

 

 

                                                                    s/  Daniel J. Forest

                                                                         President of the Senate

 

 

                                                                    s/  Tim Moore

                                                                         Speaker of the House of Representatives

 

 

 

 

                                                                        _____________________________________

                                                                         Roy Cooper

                                                                         Governor

 

 

Approved __________.m. this ______________ day of ___________________, 2017