Missouri and Kansas don't allow companies with state contracts to boycott or divest from Israel
Missouri and Kansas are among at least 36 states that have anti-BDS (boycott, divest or sanction) measures that bar state contractors from refusing to do business in Israel, or otherwise boycotting or divesting from the country or its occupied territories. But the ACLU has sued over the laws, claiming they violate the First Amendment.
Inside every major contract Missouri signs with a business sits a clause about boycotting Israel.
All but the smallest companies have to agree not to participate in any movement that aims to boycott, divest from or sanction companies in Israel.
Missouri isn’t alone. At least 36 other stateshave anti-BDS (boycott, divest or sanction) measures that bar state contractors from refusing to do business in Israel, or otherwise boycotting or divesting from the country or its occupied territories.
As states started passing anti-BDS legislation in 2015, the laws drew protests from First Amendment advocates. They argued that boycotting is protected by the U.S. Constitution. In some court challenges, judges agreed. So states scaled back the reach of their anti-BDS laws.
After at least two years of efforts and scaling back its own law, Missouri passed its version of the legislation in 2020. Since then, a movement once restricted to boycotts of Israel has expanded to other environmental, social or governance (ESG) measures, as Missouri has pioneered, and other states look to follow a similar expansion.
The beginnings of anti-BDS legislation
The BDS movement was formed by the League of Arab States in themid-1940s. It barred trade with Israel and encouraged boycotting groups that still chose to do business with Israel.
In 1977, the U.S. Congress passed anti-boycott legislation that prohibited American citizens or businesses from refusing to do business with Israel at the request of other foreign governments.
Opponents of the BDS movement, like theAnti-Defamation League, say it is set out to delegitimize Israel’s right to statehood.
The movement lost momentum for a number of decades, but was revived in the United States in the early 2000s. In 2015, states began adopting anti-BDS laws. Illinois was the first state to pass anti-BDS legislation that barred taxpayer-funded pension funds from being invested in companies that boycott Israel. Congress has looked to follow the lead of states by introducing versions of its own, but they have yet to gain traction.
States have a business interest in Israel’s success. Israel’s influence as an ally and trading partner of the United States has grown, with an annual $50 billion exchanged between the two countries for goods and services.
Since 1996, Missouri businesses have received more than $58 million in foreign military financing to provide materials for the Israel Defense Forces, according to the Jewish Virtual Library. Those companies include Remington Arms and Evraz Oregon Steel Mills. Missouri and Israel also rely heavily on each other for chemical production for things like fertilizers.
A handful of states, including Kansas and Arkansas, have been sued by the ACLU or other First Amendment advocates. They argue that by prohibiting boycotts, states step on the constitutional rights set out in a 1982 U.S. Supreme Court ruling, NAACP v. Claiborne Hardware.
ACLU attorney Brian Hauss has led some First Amendment challenges to anti-BDS laws. He said that after lower courts issued temporary pauses on some state laws, they were revised by lawmakers so that those legal challenges no longer applied. Originally, many of the state laws barred individuals and companies from boycotting Israel in any way if they wanted to become a contractor of the state.
“After we won those victories, the states modified their laws,” Hauss said. To narrow the law, states then said that these limitations only apply to companies with over 10 employees and contracts over $100,000.
“There was a strategy on the part of those states to evade appellate review of those decisions,” Hauss said. “So that was effectively the end of the road for all of those cases.”
That’s what played out in Kansas in 2018.
The ACLU sued the state, arguing that its law infringes on First Amendment rights for individuals. Kansas lawmakers amended the law after the group represented a contractor with the state’s education department, who said she could not sign the boycott disclosure in good conscience.
A judge in the U.S. District Court for Kansas ruled in favor of the ACLU, offering a temporary halt to the law while it considered arguments of constitutionality further.
“While the Kansas Law may have been passed by the Legislature with flying colors, that showing merely would demonstrate that one state legislature had enacted a statute,” the judge wrote in his opinion. “Such a showing would not place the Kansas Law on the same level as an amendment to our Constitution — the very first amendment adopted by our founders and one ratified by three fourths of our states.”
After the judge issued the injunction, Kansas lawmakers revised the law.
The effects of anti-BDS legislation
It’s difficult to measure the impact of anti-BDS legislation, Hauss said. Because states looked to narrow the scope of their laws by keeping them limited to large-dollar contracts, that inherently puts more on the line for the companies who may wish to exercise this form of freedom of expression.
“It’s a lot harder in some respects for a company with a very, very large government contract on the line to walk away from the livelihood, not just at the company, but also their workers,” Hauss said.
There have been few examples of states terminating contracts with companies over their refusal to work with Israel. Most famously, the Illinois state pension overseers announced in 2021 that they would divest from Unilever, the parent company of Ben and Jerry’s, over its decision to stop selling their products in the West Bank.
Missouri also launched an inquiryinto investment firm Morningstar after it purchased a company with a product that suggested it would be dangerous to do business in the same area. An additional 18 states signed on to the inquiry, and the subsidiary of Morningstar changed its practices. The Missouri attorney general’s office said the investigation is ongoing.
But now, what started as a prohibition on boycotting Israel has morphed into a larger movement taking aim at other political or social causes which are broadly characterized as ESG scores, or ways of measuring environmental, social or governance impact.
“We predicted there’s no way this restriction is limited, ultimately, to boycotts of Israel,” Hauss said. “It will inevitably become a political football for any party in power that wants to suppress protest against whatever groups they deemed sufficient.”
A Texas pension fund, for example, switched investment firms after leaders at the firm publicly recognized a business interest in investing in climate change prevention efforts. In the eyes of some Texas officials who legislate around a booming oil industry, investing in climate change prevention was akin to divesting from those companies.
The move toward anti-ESG policies in state bank accounts and pensions is somewhat new. Missouri considered legislation in the 2023 session that looked to bar state pension funds from being managed by companies that promote ESG.
The legislation failed, but Secretary of State Jay Ashcroft took a new step for states looking to reign in ESG practices. He created a rule, which required no legislative review, that requires financial advisers to obtain written consent on transactions that may consider ESG-minded approaches to investing.