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A BILL TO BE ENTITLED
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AN ACT
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relating to prohibiting the investment of state funds in certain |
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private business entities doing business in Sudan. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. LEGISLATIVE FINDINGS. (a) On July 23, 2004, the |
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United States Congress declared that "the atrocities unfolding in |
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Darfur, Sudan, are genocide." |
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(b) On September 9, 2004, Secretary of State Colin L. Powell |
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told the United States Senate Foreign Relations Committee that |
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"genocide has occurred and may still be occurring in Darfur" and |
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"the Government of Sudan and the Janjaweed bear responsibility." |
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(c) On September 21, 2004, addressing the United Nations |
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General Assembly, President George W. Bush affirmed the secretary |
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of state's finding and stated, "At this hour, the world is |
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witnessing terrible suffering and horrible crimes in the Darfur |
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region of Sudan, crimes my government has concluded are genocide." |
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(d) On December 7, 2004, the United States Congress noted |
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that the genocidal policy in Darfur has led to reports of |
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"systematic rape of thousands of women and girls, the abduction of |
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women and children, and the destruction of hundreds of ethnically |
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African villages, including the poisoning of their wells and the |
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plunder of their crops and cattle upon which the people of such |
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villages sustain themselves." |
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(e) Also on December 7, 2004, the congress found that "the |
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Government of Sudan has restricted access by humanitarian and human |
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rights workers to the Darfur area through intimidation by military |
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and security forces, and through bureaucratic and administrative |
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obstruction, in an attempt to inflict the most devastating harm on |
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those individuals displaced from their villages and homes without |
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any means of sustenance or shelter." |
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(f) On September 25, 2006, the congress reaffirmed that "the |
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genocide unfolding in the Darfur region of Sudan is characterized |
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by acts of terrorism and atrocities directed against civilians, |
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including mass murder, rape, and sexual violence committed by the |
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Janjaweed and associated militias with the complicity and support |
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of the National Congress Party-led faction of the Government of |
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Sudan." |
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(g) On September 26, 2006, the United States House of |
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Representatives stated that "an estimated 300,000 to 400,000 people |
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have been killed by the Government of Sudan and its Janjaweed allies |
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since the Darfur crisis began in 2003, more than 2,000,000 people |
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have been displaced from their homes, and more than 250,000 people |
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from Darfur remain in refugee camps in Chad." |
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(h) The Darfur crisis represents the first time the United |
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States government has labeled ongoing atrocities a genocide. |
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(i) The United States government has imposed sanctions |
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against the Government of Sudan since 1997. These sanctions are |
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monitored through the United States Treasury Department's Office of |
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Foreign Assets Control (OFAC). |
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(j) According to a former chair of the United States |
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Securities and Exchange Commission, "the fact that a foreign |
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company is doing material business with a country, government, or |
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entity on OFAC's sanctions list is, in the SEC staff's view, |
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substantially likely to be significant to a reasonable investor's |
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decision about whether to invest in that company." |
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(k) Since 1993, the United States secretary of state has |
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determined that Sudan is a country the government of which has |
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repeatedly provided support for acts of international terrorism, |
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thereby incurring restrictions of United States assistance, |
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defense exports and sales, and financial and other transactions |
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with the Government of Sudan. |
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(l) A 2006 United States House of Representatives report |
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states that "a company's association with sponsors of terrorism and |
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human rights abuses, no matter how large or small, can have a |
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materially adverse result on a public company's operations, |
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financial condition, earnings, and stock prices, all of which can |
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negatively affect the value of an investment." |
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(m) In response to the financial risk posed by investments |
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in companies doing business with a terrorist-sponsoring state, the |
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Securities and Exchange Commission established its Office of Global |
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Security Risk to provide for enhanced disclosure of material |
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information regarding such companies. |
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(n) The current Sudan divestment movement encompasses |
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nearly 100 universities, cities, states, and private pension plans. |
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(o) Companies facing such widespread divestment present |
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further material risk to remaining investors. |
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(p) It is a fundamental responsibility of the state to |
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decide where, how, and by whom financial resources in its control |
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should be invested, taking into account numerous pertinent factors. |
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(q) It is the prerogative and desire of the state, in |
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respect to investment resources in its control and to the extent |
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reasonable, with due consideration for, among other things, return |
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on investment, on behalf of itself and its investment |
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beneficiaries, not to participate in an ownership or |
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capital-providing capacity with entities that provide significant |
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practical support for genocide, including certain non-United |
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States companies presently doing business in Sudan. |
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(r) It is the judgment of the legislature that this Act |
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should remain in effect only insofar as it continues to be |
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consistent with, and does not unduly interfere with, the foreign |
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policy of the United States as determined by the United States |
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government. |
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(s) It is the judgment of the legislature that mandatory |
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divestment of public funds from certain companies is a measure that |
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should be employed sparingly and judiciously. A congressional and |
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presidential declaration of genocide satisfies this high |
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threshold. |
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SECTION 2. Subtitle F, Title 10, Government Code, is |
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amended by adding Chapter 2264 to read as follows: |
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CHAPTER 2264. PROHIBITION ON INVESTMENT IN SUDAN |
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SUBCHAPTER A. GENERAL PROVISIONS |
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Sec. 2264.001. DEFINITIONS. In this chapter: |
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(1) "Active business operations" means all business |
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operations that are not inactive business operations. |
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(2) "Business operations" means engaging in commerce |
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in any form in Sudan, including by acquiring, developing, |
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maintaining, owning, selling, possessing, leasing, or operating |
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equipment, facilities, personnel, products, services, personal |
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property, real property, or any other apparatus of business or |
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commerce. |
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(3) "Company" means a sole proprietorship, |
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organization, association, corporation, partnership, joint |
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venture, limited partnership, limited liability partnership, |
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limited liability company, or other entity or business association, |
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including a wholly owned subsidiary, majority-owned subsidiary, |
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parent company, or affiliate of such entities or business |
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associations, that exists for profit-making purposes. |
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(4) "Complicit" means taking actions that have |
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directly supported or promoted the genocidal campaign in Darfur, |
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including: |
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(A) preventing members of Darfur's victimized |
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population from communicating with each other; |
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(B) encouraging Sudanese citizens to speak out |
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against an internationally approved security force for Darfur; or |
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(C) actively working to deny, cover up, or alter |
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the record on human rights abuses in Darfur. |
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(5) "Direct holdings in a company" means all |
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securities of that company held directly by the state in an account |
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or fund in which the state owns all shares or interests. |
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(6) "Government of Sudan" means the government in |
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Khartoum, Sudan, which is led by the National Congress Party |
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(formerly known as the National Islamic Front) or any successor |
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government formed on or after October 13, 2006 (including the |
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coalition National Unity Government agreed upon in the |
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Comprehensive Peace Agreement for Sudan). The term does not |
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include the regional government of southern Sudan. |
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(7) "Inactive business operations" means the mere |
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continued holding or renewal of rights to property previously |
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operated for the purpose of generating revenues but not presently |
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deployed for such purpose. |
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(8) "Indirect holdings in a company" means all |
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securities of that company held in an account or fund, such as a |
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mutual fund, managed by one or more persons not employed by a state |
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governmental entity, in which the state governmental entity owns |
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shares or interests together with other investors not subject to |
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the provisions of this chapter. |
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(9) "Marginalized populations of Sudan" includes: |
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(A) the portion of the population in the Darfur |
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region that has been genocidally victimized; |
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(B) the portion of the population of southern |
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Sudan victimized by Sudan's North-South civil war; |
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(C) the Beja, Rashidiya, and other similarly |
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underserved groups of eastern Sudan; |
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(D) the Nubian and other similarly underserved |
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groups in Sudan's Abyei, Southern Blue Nile, and Nuba Mountain |
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regions; and |
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(E) the Amri, Hamadab, Manasir, and other |
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similarly underserved groups of northern Sudan. |
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(10) "Military equipment" means weapons, arms, |
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military supplies, and equipment that readily may be used for |
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military purposes, including radar systems or military-grade |
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transport vehicles or supplies or services sold or provided |
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directly or indirectly to any force actively participating in armed |
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conflict in Sudan. |
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(11) "Mineral extraction activities" includes |
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exploring, extracting, processing, transporting, or wholesale |
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selling or trading of elemental minerals or associated metal alloys |
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or oxides (ore), including gold, copper, chromium, chromite, |
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diamonds, iron, iron ore, silver, tungsten, uranium, and zinc, as |
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well as facilitating such activities, including by providing |
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supplies or services in support of such activities. |
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(12) "Oil-related activities" includes: |
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(A) owning rights to oil blocks; |
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(B) exporting, extracting, producing, refining, |
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processing, exploring for, transporting, selling, or trading of |
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oil; |
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(C) constructing, maintaining, or operating a |
|
pipeline, refinery, or other oil-field infrastructure; or |
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(D) facilitating such activities, including by |
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providing supplies or services in support of such activities, |
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except that the mere retail sale of gasoline and related consumer |
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products are not oil-related activities. |
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(13) "Power production activities" means any business |
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operation that involves a project commissioned by the National |
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Electricity Corporation of Sudan or another similar Government of |
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Sudan entity whose purpose is to facilitate power generation and |
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delivery, including establishing power-generating plants or |
|
hydroelectric dams, selling or installing components for the |
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project, and providing service contracts related to the |
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installation or maintenance of the project, as well as facilitating |
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such activities, including by providing supplies or services in |
|
support of such activities. |
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(14) "Scrutinized company" means a company that: |
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(A) engages in scrutinized business operations |
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described by Section 2264.002; or |
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(B) has been complicit in the Darfur genocide |
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during any preceding 20-month period. |
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(15) "Social development company" means a company |
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whose primary purpose in Sudan is to provide humanitarian goods or |
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services, including medicine or medical equipment, agricultural |
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supplies or infrastructure, educational opportunities, |
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journalism-related activities, information or information |
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materials, spiritual-related activities, services of a purely |
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clerical or reporting nature, food, clothing, or general consumer |
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goods that are unrelated to oil-related activities, mineral |
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extraction activities, or power production activities. |
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(16) "Substantial action" means adopting, |
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publicizing, and implementing a formal plan to cease scrutinized |
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business operations within one year and to refrain from any such new |
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business operations, undertaking significant humanitarian efforts |
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on behalf of one or more marginalized populations of Sudan, or, |
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through engagement with the Government of Sudan, materially |
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improving conditions for the genocidally victimized population in |
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Darfur. |
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Sec. 2264.002. SCRUTINIZED BUSINESS OPERATIONS. A company |
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engages in scrutinized business operations if: |
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(1) the company has business operations that involve |
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contracts with or providing supplies or services to the Government |
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of Sudan, a company in which the Government of Sudan has any direct |
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or indirect equity share, a Government of Sudan-commissioned |
|
consortium or project, or a company involved in a Government of |
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Sudan-commissioned consortium or project, and: |
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(A) more than 10 percent of the company's |
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revenues or assets linked to Sudan involve oil-related activities |
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or mineral extraction activities, less than 75 percent of the |
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company's revenues or assets linked to Sudan involve contracts with |
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or provision of oil-related or mineral extracting products or |
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services to the regional government of southern Sudan or a project |
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or consortium created exclusively by that regional government, and |
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the company has failed to take substantial action; or |
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(B) more than 10 percent of the company's |
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revenues or assets linked to Sudan involve power production |
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activities, less than 75 percent of the company's power production |
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activities include projects whose intent is to provide power or |
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electricity to the marginalized populations of Sudan, and the |
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company has failed to take substantial action; or |
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(2) the company supplies military equipment within |
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Sudan, unless: |
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(A) the company clearly shows that the military |
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equipment cannot be used to facilitate offensive military actions |
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in Sudan; or |
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(B) the company implements rigorous and |
|
verifiable safeguards to prevent use of that equipment by forces |
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actively participating in armed conflict, including: |
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(i) using post-sale tracking of such |
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equipment by the company; |
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(ii) certification from a reputable and |
|
objective third party that such equipment is not being used by a |
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party participating in armed conflict in Sudan; or |
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(iii) selling such equipment solely to the |
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regional government of southern Sudan or any internationally |
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recognized peacekeeping force or humanitarian organization. |
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Sec. 2264.003. SOCIAL DEVELOPMENT COMPANY. |
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Notwithstanding any other law, a social development company that is |
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not complicit in the Darfur genocide may not be considered a |
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scrutinized company. |
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Sec. 2264.004. EXCEPTION. Notwithstanding any other law, a |
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company that the United States government affirmatively declares to |
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be excluded from its federal sanctions regime relating to Sudan is |
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not subject to divestment or investment prohibition under this |
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chapter. |
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Sec. 2264.005. OTHER LEGAL OBLIGATIONS. With respect to |
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actions taken in compliance with this chapter, including all good |
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faith determinations regarding companies as required by this |
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chapter, a state governmental entity is exempt from any conflicting |
|
statutory or common law obligations, including any obligations with |
|
respect to choice of asset managers, investment funds, or |
|
investments for the state governmental entity's securities |
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portfolios. |
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[Sections 2264.006-2264.050 reserved for expansion] |
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SUBCHAPTER B. DUTIES REGARDING INVESTMENTS |
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Sec. 2264.051. LIST OF SCRUTINIZED COMPANIES. (a) In this |
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section, "system" means the Employees Retirement System of Texas. |
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(b) The system shall maintain a list of all scrutinized |
|
companies. In preparing the list of scrutinized companies, the |
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system shall: |
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(1) review and rely, as appropriate in the system's |
|
judgment, on publicly available information regarding companies |
|
with business operations in Sudan, including information provided |
|
by nonprofit organizations, research firms, international |
|
organizations, and governmental entities; |
|
(2) contact asset managers under contract with the |
|
system or another state governmental entity that invests in |
|
companies with business operations in Sudan; and |
|
(3) contact other institutional investors that have |
|
divested from or engaged with companies that have business |
|
operations in Sudan. |
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(c) The system shall update the scrutinized companies list |
|
on a quarterly basis based on evolving information from, among |
|
other sources, those listed in Subsection (b). |
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(d) Not later than the 30th day after the date the list of |
|
scrutinized companies is created or updated, the system shall file |
|
the list of scrutinized companies with the presiding officer of |
|
each house of the legislature and the attorney general. |
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Sec. 2264.052. IDENTIFICATION OF INVESTMENT IN SCRUTINIZED |
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COMPANIES. Each state governmental entity shall immediately |
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identify the companies on the list of scrutinized companies in |
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which the state governmental entity owns direct or indirect |
|
holdings. |
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Sec. 2264.053. NOTICE TO SCRUTINIZED COMPANY ENGAGED IN |
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INACTIVE BUSINESS OPERATIONS. For each company identified under |
|
Section 2264.052 that is engaged in only inactive scrutinized |
|
business operations, the state governmental entity shall send a |
|
written notice informing the company of this chapter and |
|
encouraging the company to continue to refrain from initiating |
|
active business operations in Sudan until it is able to avoid being |
|
considered a scrutinized company. The state governmental entity |
|
shall continue such correspondence on a semiannual basis. |
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Sec. 2264.054. ACTIONS RELATING TO SCRUTINIZED COMPANY |
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ENGAGED IN ACTIVE BUSINESS OPERATIONS. (a) For each company |
|
identified under Section 2264.052 that is engaged in active |
|
scrutinized business operations, the state governmental entity |
|
shall send a written notice informing the company of its |
|
scrutinized company status and warning the company that it may |
|
become subject to divestment by the state governmental entity. |
|
(b) The notice shall offer the company the opportunity to |
|
clarify its Sudan-related activities and shall encourage the |
|
company, not later than the 90th day after the date the company |
|
receives notice under this section, to either cease its scrutinized |
|
business operations or convert such operations to inactive business |
|
operations in order to avoid qualifying for divestment by the state |
|
governmental entity. |
|
(c) If, during the time provided by Subsection (b), the |
|
company ceases scrutinized business operations, the state |
|
governmental entity shall remove the company from the scrutinized |
|
companies list and this chapter will no longer apply to the company |
|
unless it resumes scrutinized business operations. |
|
(d) If, during the time provided by Subsection (b), the |
|
company converts its scrutinized active business operations to |
|
inactive business operations, the company is subject to all |
|
provisions of this chapter relating to inactive business |
|
operations. |
|
(e) If, after the time provided by Subsection (b) expires, |
|
the company continues to have scrutinized active business |
|
operations, the state governmental entity shall sell, redeem, |
|
divest, or withdraw all publicly traded securities of the company, |
|
except securities described by Section 2264.057, according to the |
|
timetable provided by Section 2264.056. |
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Sec. 2264.055. ACTIONS RELATING TO SCRUTINIZED COMPANY |
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COMPLICIT IN GENOCIDE. (a) For each company identified under |
|
Section 2264.052 that has been complicit, the state governmental |
|
entity shall send a written notice informing the company of its |
|
scrutinized company status and warning the company that it may |
|
become subject to divestment by the state governmental entity. |
|
(b) The notice shall require the scrutinized company to |
|
refrain from taking any further action that would make it |
|
complicit. |
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(c) If, after receiving the notice under Subsection (a), the |
|
scrutinized company takes additional action that makes the company |
|
complicit, the state governmental entity shall sell, redeem, |
|
divest, or withdraw all publicly traded securities of the company, |
|
except securities described by Section 2264.057, according to the |
|
timetable provided by Section 2264.056. |
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Sec. 2264.056. DIVESTMENT OF ASSETS. (a) A state |
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governmental entity required to sell, redeem, divest, or withdraw |
|
all publicly traded securities of a scrutinized company shall |
|
comply with the following schedule: |
|
(1) at least 50 percent of those assets shall be |
|
removed from the state governmental entity's assets under |
|
management not later than the 270th day after the date the company |
|
receives notice under Section 2264.054 or 2264.055 or Subsection |
|
(b); and |
|
(2) 100 percent of those assets shall be removed from |
|
the state governmental entity's assets under management not later |
|
than the 450th day after the date the company receives notice under |
|
Section 2264.054 or 2264.055 or Subsection (b). |
|
(b) If a company that ceased scrutinized active business |
|
operations after receiving notice under Section 2264.054 resumes |
|
scrutinized active business operations, the state governmental |
|
entity shall send a written notice to the company informing it that |
|
the state governmental entity will sell, redeem, divest, or |
|
withdraw all publicly traded securities of the scrutinized company |
|
according to the schedule in Subsection (a). |
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Sec. 2264.057. INVESTMENTS EXEMPTED FROM DIVESTMENT. A |
|
state governmental entity is not required to divest from any |
|
indirect holdings in actively managed investment funds or private |
|
equity funds. The state governmental entity shall submit letters |
|
to the managers of investment funds containing scrutinized |
|
companies with scrutinized active business operations requesting |
|
that they consider removing those companies from the fund or create |
|
a similar actively managed fund with indirect holdings devoid of |
|
scrutinized companies. If the manager creates a similar fund, the |
|
state governmental entity shall replace all applicable investments |
|
with investments in the similar fund in an expedited time frame |
|
consistent with prudent investing standards. |
|
Sec. 2264.058. AUTHORIZED INVESTMENT IN COMPANIES WITH |
|
SCRUTINIZED ACTIVE BUSINESS OPERATIONS. (a) A state governmental |
|
entity may cease divesting from or may reinvest in a scrutinized |
|
company if clear and convincing evidence shows that the value for |
|
all assets under management by the state governmental entity |
|
becomes equal to or less than 99.5 percent of the hypothetical value |
|
of all assets under management by the state governmental entity had |
|
the state governmental entity not divested from any scrutinized |
|
company under Section 2264.055. |
|
(b) A state governmental entity may invest in a scrutinized |
|
company as provided by this section only to the extent necessary to |
|
ensure that the value of the assets managed by the state |
|
governmental entity does not fall below the value described by |
|
Subsection (a). |
|
(c) Before a state governmental entity may invest in a |
|
scrutinized company under this section, the state governmental |
|
entity must provide a written report to the presiding officer of |
|
each house of the legislature and the attorney general setting |
|
forth the reason and justification, supported by clear and |
|
convincing evidence, for its decisions to cease divestment, to |
|
reinvest, or to remain invested in a company engaged in scrutinized |
|
active business operations. |
|
(d) The state governmental entity shall update the report |
|
required by Subsection (c) semiannually, as applicable. |
|
(e) This section does not apply to reinvestment in a company |
|
that has ceased to have scrutinized active business operations. |
|
Sec. 2264.059. PROHIBITED INVESTMENTS. Except as provided |
|
by Sections 2264.004 and 2264.058, a state governmental entity may |
|
not acquire securities of a company on the list of scrutinized |
|
companies that has active scrutinized business operations. |
|
[Sections 2264.060-2264.100 reserved for expansion] |
|
SUBCHAPTER C. EXPIRATION; REPORT; ENFORCEMENT |
|
Sec. 2264.101. EXPIRATION OF CHAPTER. This chapter expires |
|
on the earliest of: |
|
(1) the date on which the United States Congress or the |
|
president of the United States declares that the Darfur genocide |
|
has been halted for at least 12 months; |
|
(2) the date on which the United States revokes its |
|
sanctions against the Government of Sudan; or |
|
(3) the date on which the United States Congress or the |
|
president of the United States, through legislation or executive |
|
order, declares that mandatory divestment of the type provided for |
|
in this chapter interferes with the conduct of United States |
|
foreign policy. |
|
Sec. 2264.102. REPORT. Not later than December 31 of each |
|
year, each state governmental entity shall file a publicly |
|
available report with the presiding officer of each house of the |
|
legislature, the attorney general, and the United States |
|
presidential special envoy to Sudan that: |
|
(1) summarizes the correspondence with scrutinized |
|
companies under Subchapter B; |
|
(2) identifies all investments sold, redeemed, |
|
divested, or withdrawn in compliance with Section 2264.056; |
|
(3) identifies all prohibited investments under |
|
Section 2264.059; and |
|
(4) summarizes any changes made under Section |
|
2264.057. |
|
Sec. 2264.103. ENFORCEMENT. The attorney general may bring |
|
any action necessary to enforce this chapter. |
|
SECTION 3. Not later than the 90th day after the effective |
|
date of this Act, the Employees Retirement System of Texas shall |
|
prepare the list of scrutinized companies required by Section |
|
2264.051, Government Code, as added by this Act. |
|
SECTION 4. This Act takes effect immediately if it receives |
|
a vote of two-thirds of all the members elected to each house, as |
|
provided by Section 39, Article III, Texas Constitution. If this |
|
Act does not receive the vote necessary for immediate effect, this |
|
Act takes effect September 1, 2007. |