BILL NUMBER: AB 1650 AMENDED BILL TEXT AMENDED IN SENATE JUNE 23, 2010 AMENDED IN ASSEMBLY APRIL 27, 2010 AMENDED IN ASSEMBLY APRIL 13, 2010 AMENDED IN ASSEMBLY FEBRUARY 23, 2010 INTRODUCED BY Assembly Members Feuer, Blumenfield, and Huffman (Coauthors: Assembly Members Anderson, Bass, Block, De Leon, Hill, Jones, Lieu, Miller, John A. Perez, Portantino, Silva, and Tran) (Coauthor:SenatorPavleyCoauthors: Senators Padilla, Pavley, and Price ) JANUARY 13, 2010 An act to add Chapter 2.7 (commencing with Section 2200) to Part 1 of Division 2 of the Public Contract Code, relating to public contracts. LEGISLATIVE COUNSEL'S DIGEST AB 1650, as amended, Feuer. Public contracts: state and local contract eligibility: energy sector investment activities in Iran. Existing law sets forth the requirements for the solicitation and evaluation of bids and the awarding of contracts by public entities. This bill would prohibit a person that is engaged in investment activities in the energy sector in Iran , as described, from bidding on or entering into or renewing a contract with a public entity for goods or services. The bill would require a prospective bidder for those contracts, that currently or within the previous 3 years has had business activities or other operations outside of the United States, to certify that it is not engaged in investment activities in the energy sector in Iran and would imposecivilpenalties, as specified, for a person that provides a false certification. This bill would require the awarding body of a public entity, if the awarding body determines that a person is a person that engages in investment activities in the energy sector in Iran, to provide written notice of its intentto notnot to enter into or renew a contract for goods or services with the person. This bill would require the awarding body to provide a person that is alleged to beengagingengaged in investment activities in the energy sector in Iran with an opportunity to demonstrate it is notinvolvedengaged inspecified investment activities in Iranthose activities . This bill would make legislativefindingfindings and declarations regarding a statewide concern. This bill would become operative only if federal law authorizes states to adopt and enforce contracting prohibitions of the type provided for in this bill, and would become inoperative upon the date that federal authorization ceases. Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Chapter 2.7 (commencing with Section 2200) is added to Part 1 of Division 2 of the Public Contract Code, to read: CHAPTER 2.7. IRAN CONTRACTING ACT OF 2010 2200. This chapter shall be known and may be cited as the Iran Contracting Act of 2010. 2201. The Legislature hereby finds and declares all of the following: (a) In imposing United States sanctions on Iran, Congress and the President have determined that the illicit nuclear activities of the Government of Iran, combined with its development of unconventional weapons and ballistic missiles, and its support of international terrorism, represent a serious threat to the security of the United States, Israel, and other United States allies in Europe, the Middle East, and around the world. (b) On September 9, 2009, it was reported that American intelligence agencies have concluded that Iran has already created enough nuclear fuel to develop a nuclear weapon, and United States Ambassador to the International Atomic Energy Agency Glyn Davies declared that Iran had achieved "possible breakout capacity." (c) On September 21, 2009, Iran sent a letter to the International Atomic Energy Agency acknowledging that it is considering a previously undeclared "new pilot fuel enrichment plan." (d) On Sept. 25, 2009, President Barack H. Obama, joined by Prime Minister Gordon Brown of Britain and President Nicolas Sarkozy of France, stated that the secret plant "represents a direct challenge to the basic foundation of the nonproliferation regime" and "deepens a growing concern that Iran is refusing to live up to those international responsibilities, including specifically revealing all nuclear-related activities. As the international community knows, this is not the first time that Iran has concealed information about its nuclear program." (e) The International Atomic Energy Agency has repeatedly called attention to Iran's unlawful nuclear activities, and, as a result, the United Nations Security Council has adopted a range of sanctions designed to encourage the Government of Iran to cease those activities and comply with its obligations under the Treaty on the Non-Proliferation of Nuclear Weapons (commonly known as the "Nuclear Non-Proliferation Treaty"). (f) It is anticipated that Congress will declare its intent that state and local governments be able to direct divestiture from, prevent investment in, and prohibit entry into or renewal of contracts with, companies operating in Iran's energy sector. Under bipartisan federal legislation advancing in the 111th Congress and cosponsored by more than one-third of the members of the United States Senate and more than half of the members of the House of Representatives, state and local governments would be expressly authorized to divest and otherwise disassociate themselves from companies with investments that have the result of directly or indirectly supporting the efforts of the Government of Iran to achieve a nuclear weapons capability. (g) On October 7, 2008, then-Senator Obama stated, "Iran right now imports gasoline, even though it's an oil producer, because its oil infrastructure has broken down. If we can prevent them from importing the gasoline that they need and the refined petroleum products, that starts changing their cost-benefit analysis. That starts putting the squeeze on them." (h) The serious and urgent nature of the threat from Iran demands that states, local governments, educational institutions, and private institutions work together with the federal government and American allies to do everything possible diplomatically, politically, and economically to prevent Iran from acquiring a nuclear weapons capability. (i) There are moral and reputational reasons for this state and local governments to not engage in business with foreign companies that have business activities benefiting foreign states, such as Iran, that commit egregious violations of human rights, proliferate nuclear weapons capabilities, and support terrorism. (j) It is the responsibility of the state to decide how, where, and by whom its financial resources should be invested. It also is the prerogative of the state to not invest in, or do business with, companies whose investments with Iran place those companies at risk from the impact of economic sanctions imposed upon the Government of Iran for sponsoring terrorism, committing egregious violations of human rights, and engaging in illicit nuclear weapons development. (k) The human rights situation in Iran has steadily deteriorated in 2009, as punctuated by transparently fraudulent elections and the brutal repression and murder, arbitrary arrests, and show trials of peaceful dissidents. (l) During the postelection protests in June 2009, the Iranian government imposed widespread and unjustifiable restrictions on telecommunications services, denying the citizens of Iran their rights and liberties to free speech. (m) On October 14, 2007, Governor Arnold Schwarzenegger stated his intention to support "efforts to further prevent terrorism" when signing Assembly Bill 221, which prohibits the state's pension funds from investing in companies with active business in Iran. (n) This state currently honors contracts with foreign companies that may be at financial risk due to business ties with foreign states, such as Iran, that are involved in the proliferation of weapons of mass destruction, commit human rights violations, and support terrorism. (o) The concerns of the State of California regarding Iran are strictly the result of the actions of the Government of Iran. (p) The people of the State of California declare all of the following: (1) We have feelings of friendship for the people of Iran. (2) We regret that developments in recent decades have created impediments to that friendship. (3) We hold the people of Iran, their culture, and their ancient and rich history in the highest esteem. (q) In order to effectively address the need for the governments of this state to respond to the policies of Iran in a uniform fashion, prohibiting contracts with personsdoing businessengaged in investment activities in the energy sector in Iran must be accomplished on a statewide basis, and, therefore, the subject is a matter of statewide concern rather than a municipal affair. 2202. As used in this chapter, the following definitions apply: (a) "Awarding body" means a department, board, agency, authority, or officer, agent, or other authorized representative of the public entity awarding a contract for goods or services. (b) "Energy sector" means activities to develop petroleum or natural gas resources or nuclear power. (c) "Financial institution" means the term as used in Section 14 (5) of the Iran Sanctions Act of 1996 (Public Law 104-172; 50 U.S.C. 1701 note). (d) "Iran" includes any agency or instrumentality of Iran. (e) "Person" means any of the following: (1) A natural person, corporation, company, limited liability company, business association, partnership, society, trust, or any other nongovernmental entity, organization, or group. (2) 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)). (3) Any successor, subunit, parent company, or subsidiary of, or company under common ownership or control with, any entity described in paragraph (1) or (2).(f) A2202.5. For purposes of this chapter, a person engages in"investmentinvestment activities in the energy sector inIran"Iran if any of the following is true:(1)(a) The person has an investment of twenty million dollars ($20,000,000) or more in the energy sector in Iran.(2)(b) The person provides oil or liquified natural gas tankers, or products used to construct or maintain pipelines used to transport oil or liquified natural gas, for the energy sector in Iran.(3)(c) The person is a financial institution that extends twenty million dollars ($20,000,000) or more in credit to another person, for 45 days or more, if that person will use the credit to invest in the energy sector in Iran. 2203. A person that engages in investment activities in the energy sector in Iran is ineligible to, and shall not, bid on, submit a proposal for, or enter into or renew , a contract with a public entity for goods or services. 2204. A public entity shall require a person that submits a bid or proposal to, or otherwise proposes to enter into or renew a contract with, a public entity with respect to a contract for goods or services, that currently or within the previous three years has had business activities or other operations outside of the United States, to certify that the person does not engage in investment activities in the energy sector in Iran. 2205. (a) If the awarding body determines that a person has submitted a false certification under Section 2204, the person shall be subject to all of the following: (1) Pursuant to an action under subdivision (b), a civil penalty in an amount that is equal to the greater of two hundred fifty thousand dollars ($250,000) or twice the amount of the contract for which the false certification was made. (2) Termination of an existing contract with the awarding body at the option of the awarding body. (3) Ineligibility to bid on a contract for a period of three years from the date of the determination that the person submitted the false certification. (b) The awarding body shall report to the Attorney General the name of the person that the awarding body determines has submitted a false certification under Section 2204, together with its information as to the false certification, and the Attorney General shall determine whether to bring a civil action against the person to collect the penalty described in paragraph (1) of subdivision (a). The awarding body of a local public entity may also report to the city attorney, county counsel, or district attorney the name of the person that the awarding body determines has submitted a false certification under Section 2204, together with its information as to the false certification, and the city attorney, county counsel, or district attorney may determine whether to bring a civil action against the person to collect the penalty described in paragraph (1) of subdivision (a). If it is determined in that action that the person submitted a false certification, the person shall pay all reasonable costs and fees incurred in a civil action, including costs incurred by the awarding body for investigations that led to the finding of the false certification and all reasonable costs and fees incurred by the Attorney General, city attorney, county counsel, or district attorney. 2206. (a) If the awarding body, using credible information available to the public, determines that a person that has an existing contract with the awarding body, or has submitted a pending bid or contract proposal to, or otherwise proposes to enter into a contract with, the awarding body, engages in investment activities in the energy sector in Iran, the awarding body shall provide 90 days' written notice of its intent to not enter into or renew a contract for goods or services with the person. The notice shall specify that the person, if it ceases its engagement in investment activities in the energy sector in Iran, may become eligible for a future contract , or contract renewal, for goods or services with the awarding body. (b) The awarding body shall provide a person with an opportunity to demonstrate to the awarding body that it is not engaged in investment activities in the energy sector in Iran. If the awarding body determines that the person is not engaged in investment activities in the energy sector in Iran, the person shall be eligible to enter into or renew a contract for goods or services with the awarding body. (c) This section shall not apply in the case of a person subject to Section 2205. (d) This section shall apply to contracts entered into, or renewed, on and after the date that is 90 days after the operative date of this chapter. 2207. The Legislature shall submit to the Attorney General of the United States a written notice describing this chapter within 30 days after the operative date of this chapter. 2208. (a) If any one or more provisions, sections, subdivisions, sentences, clauses, phrases, or words of this act or the application thereof to any person or circumstance is found to be invalid, illegal, unenforceable, or unconstitutional, the same is hereby declared to be severable and the balance of this act shall remain effective and functional notwithstanding such invalidity, illegality, unenforceability, or unconstitutionality. (b) The Legislature hereby declares that it would have passed this act, and each provision, section, subdivision, sentence, clause, phrase, or word thereof, irrespective of the fact that any one or more provisions, sections, subdivisions, sentences, clauses, phrases, or words are declared invalid, illegal, unenforceable, or unconstitutional. SEC. 2. (a) Section 1 of this act shall become operative only if federal legislation authorizing states to adopt and enforce contracting prohibitions of the type provided for in that section is enacted and, in that event, shall become operative on the later of January 1, 2011, or the operative date of the authorizing federal legislation. (b) Section 1 of this act shall become inoperative upon the date that federal law ceases to authorize the states to adopt and enforce the contracting prohibitions of the type provided for in that section.