This post was originally published on January 22, 2010 on the website of the Center for Public Integrity and is reprinted on Sierra Voices with CPI’s permission.

Supreme Court Ruling May Open Door to Foreign State-Owned Corporate Political Spending

By Aaron Mehta and Josh Israel

Some legal observers fear the ruling would open up the floodgates for any corporation operating in the United States, no matter who owns them. J. Gerald Hebert, executive director and director of litigation at the non-partisan Campaign Legal Center, told the Center for Public Integrity that the existing prohibition on foreign involvement does not refer to foreign controlled domestic corporations. “With the corporate campaign expenditure ban now being declared unconstitutional, domestic corporations controlled by foreign governments or other foreign entities are free to spend money to elect or defeat federal candidates,” he believes.

While political observers have dissected much of yesterday’s 5-4 Supreme Court ruling in the Citizens United v. Federal Election Commission, one potentially huge (and probably unintended) consequence has gotten little notice: the impact the decision could have on foreign government spending on federal campaigns.

The ruling essentially gives corporations the same rights as individuals in their ability to spend freely on political advertising, even if those advertisements explicitly advocate the election or defeat of a federal candidate. This means that candidates who support, say, increased restrictions on tobacco products could find themselves up against the corporate treasury of say, a major American tobacco company. And even the fear of $10 million in attack ads blanketing the airways come re-election time may give sitting legislators pause before taking on moneyed industries.

But it’s one thing for U.S. firms to have their say. What about foreign companies that operate U.S. subsidiaries? Many of these, like American businesses, are owned by ordinary shareholders — but a host of others are owned, in whole or in part, by the foreign governments themselves.

One prominent examples is CITGO Petroleum Company — once the American-born Cities Services Company, but purchased in 1990 by the Venezuelan government-owned Petróleos de Venezuela S.A. The Citizens United ruling could conceivably allow Venezuelan President Hugo Chavez, who has sharply criticized both of the past two U.S. presidents, to spend government funds to defeat an American political candidate, just by having CITGO buy TV ads bashing his target.

And it’s not just Chavez. The Saudi government owns Houston’s Saudi Refining Company and half of Motiva Enterprises. Lenovo, which bought IBM’s PC assets in 2004, is partially owned by the Chinese government’s Chinese Academy of Sciences. And Singapore’s APL Limited operates several U.S. port operations. A weakening of the limit on corporate giving could mean China, Saudi Arabia, Singapore, and any other country that owns companies that operate in the U.S. could also have significant sway in American electioneering.

Federal election law has long prohibited any foreign national from directly or indirectly making “an independent expenditure, or disbursement for an electioneering communication.” And the Supreme Court’s ruling does not explicitly address the issue of foreign corporations. However, in his dissent in Citizens United, Justice John Paul Stevens cautioned that the decision “would appear to afford the same protection to multinational corporations controlled by foreigners as to individual Americans.”

Other observers are not so sure. Stephen Spaulding, a law fellow at Common Cause, believes that in the absence of any explicit Supreme Court comment on this area, the issue of foreign-owned corporations spending on federal campaigns is “still an open door question.” He adds, “it may very well be a new path in campaign finance litigation.”

The Federal Election Commission did not immediately respond to a request for comment. Even if the Supreme Court, the FEC, or Congress decide that the right of corporations to engage in electioneering does not apply to foreign-owned corporations, with significant foreign investment in even American-based companies, it could prove quite difficult to determine who may spend and who may not.

Marianne Lavelle contributed to this story.