HB1792.DOC

SECTION 1. The legislature finds that:

(1) In imposing sanctions on Iran, the United States Congress and the President determined that the illicit nuclear activities 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;

(2) On September 9, 2009, it was reported that American intelligence agencies concluded that Iran has 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";

(3) 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";

(4) On September 25, 2009, President Barack Obama, joined by Prime Minister Gordon Brown of Britain and President Nicolas Sarkozy of France, stated that Iran "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";

(5) 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 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");

(6) On July 1, 2010, President Barack Obama signed into law H.R. 2194, the "Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010" (Public Law 111-195), which expressly authorizes states and local governments to prevent investment in, including prohibiting entry into or renewing contracts with, companies operating in Iran's energy sector with investments that have the result of directly or indirectly supporting the efforts of Iran to achieve nuclear weapons capability;

(7) 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";

(8) 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;

(9) There are moral and reputational reasons for state and local governments not to 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;

(10) 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 not to invest in, or do business with, companies whose investments with Iran place those companies at risk from the impact of economic sanctions imposed upon Iran for sponsoring terrorism, committing egregious violations of human rights, and engaging in illicit nuclear weapons development;

(11) The human rights situation in Iran steadily deteriorated in 2009, as punctuated by transparently fraudulent elections and the brutal repression and murder, arbitrary arrests, and show trials of peaceful dissidents; and

(12) During the post-election 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.

Hawaii 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.

Concerns of the State of Hawaii regarding Iran are strictly the result of the actions of the government of Iran. The people of Hawaii have feelings of friendship for the people of Iran and hold the people of Iran, their culture, and their ancient and rich history in the highest esteem. The people of Hawaii regret that developments in recent decades have created impediments to that friendship.

The purpose of this Act is to effectively address the need for the state and local governments of Hawaii to respond to the policies of Iran in a uniform fashion by prohibiting contracts with persons engaged in investment activities in the energy sector of Iran in accordance with the authority granted under the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (Public Law 111-195).

SECTION 2. (a) As used in this section:

"Awarding body" means a state or county department, board, agency, authority, or officer, agent, or other authorized representative of a public entity awarding a contract for goods or services.

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

"Financial institution" means the term as used in section 14 of the Iran and Libya Sanctions Act of 1996 (Public Law 104-172; 50 U.S.C. 1701 note).

"Iran" includes the government of Iran and any governmental agency or instrumentality of Iran.

"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)); or

(3) Any successor, subunit, parent entity, or subsidiary of, or any entity under common ownership or control with, any entity described in paragraph (1) or (2).

(b) For purposes of this chapter, a person engages in investment activities in Iran if the person:

(1) Provides goods or services with a value of $20,000,000 or more in the energy sector of Iran, including a person 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

(2) Is a financial institution that extends $20,000,000 or more in credit to another person, for forty-five days or more, if that person uses the credit to provide goods or services in the energy sector in Iran and is identified pursuant to subsection (c) as a person engaging in investment activities in Iran.

(c) A person that, at the time of bid or proposal for a new contract or renewal of an existing contract, is identified by the chief procurement officer on a list as a person engaging in investment activities in Iran, shall be 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 with a value of $1,000,000 or more.

A person that, at the time of bid or proposal for a new contract or renewal of an existing contract, engages in investment activities in Iran shall be 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 with a value of $1,000,000 or more.

(d) By June 1, 2013, the chief procurement officer, using credible information available to the public, shall develop a list of persons that it determines engage in investment activities in Iran. The chief procurement officer shall update its list of identified persons every one hundred eighty days.

The chief procurement officer shall do all of the following before a person is included on the list:

(1) Provide ninety days written notice of its intent to include the person on the list. The notice shall inform the person that inclusion on the list would make the person ineligible to bid on, submit a proposal for, or enter into or renew, a contract for goods or services with a value of $1,000,000 or more with a public entity. The notice shall specify that the person, if it ceases its engagement in investment activities in Iran may become eligible for a future contract, or contract renewal, for goods or services with a value of $1,000,000 or more with a public entity upon removal from the list; and

(2) The chief procurement officer shall provide a person with an opportunity to comment in writing that it is not engaged in investment activities in Iran. If the person demonstrates to the chief procurement officer that the person is not engaged in investment activities in Iran, the person shall not be included on the list, and shall be eligible to enter into or renew a contract for goods or services with a value of $1,000,000 or more with a public entity, unless the person is otherwise ineligible to bid on a contract under subsection (h).

The chief procurement officer shall make every effort to avoid erroneously including a person on the list.

The chief procurement officer may assess a fee upon persons that use the list to comply with the provisions of this Act, in order to pay for the costs of creating and maintaining the list. The chief procurement officer shall provide the list free of charge to any public entity and to the legislature upon request.

A person that has a contract with the Hawaii employer-union health benefits trust fund, the employees' retirement system of the State of Hawaii, or both, shall not be deemed a person that engages in investment activities in Iran on the basis of those investments.

(e) Notwithstanding any provision of this Act to the contrary, a public entity may permit a person engaged in investment activities in Iran, on a case-by-case basis, to be eligible for, or to bid on, submit a proposal for, or enter into or renew, a contract for goods or services with a value of $1,000,000 or more with a public entity if:

(1) All of the following occur:

(A) The investment activities in Iran were made before July 1, 2011;

(B) The investment activities in Iran have not been expanded or renewed after July 1, 2011;

(C) The awarding body determines that it is in the best interest of the state or county entity to contract with the person. For purposes of state contracts for goods or services with a value of $1,000,000 or more, "awarding body" means the chief procurement officer. For purposes of county contracts for goods or services with a value of $1,000,000 or more, "awarding body" means the procurement officer of the county entity awarding the contract; and

(D) The person has adopted, publicized, and is implementing a formal plan to cease the investment activities in Iran and to refrain from engaging in any new investments in Iran; or

(2) One of the following occurs:

(A) For a contract for goods or services with a value of $1,000,000 or more with a county entity, the county entity makes a public finding that, absent an exemption, the county entity otherwise would be unable to obtain the goods or services for which the contract is offered; or

(B) For a contract for goods or services with a value of $1,000,000 or more with a state agency the governor makes a public finding that absent an exemption, the state agency otherwise would be unable to obtain the goods or services for which the contract is offered.

(f) Notwithstanding any provision of this Act to the contrary, a public entity shall permit a financial institution to be eligible for, or to bid on, submit a proposal for, or enter into or renew, a contract for goods or services with a value of $1,000,000 or more with a public entity if the person using the credit to provide goods or services in the energy sector of Iran is a person permitted to submit a bid or proposal to the public entity pursuant to subsection (e).

(g) 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 with a value of $1,000,000 or more to certify, at the time the bid is submitted or the contract is renewed, that the person is not identified pursuant to subsection (c) as a person engaging in investment activities in Iran. A state agency shall submit the certification information to the chief procurement officer.

A public entity shall not require a person that submits a bid or proposal to, or otherwise proposes to enter into a contract with, the public entity with respect to a contract for goods or services with a value of $1,000,000 or more to certify that the person is not identified pursuant to subsection (c) as a person engaging in investment activities in Iran if the person has been permitted to submit a bid or proposal to the public entity pursuant to subsection (d) or (f).

(h) If the county entity, or the chief procurement officer, as applicable, determines that the person has submitted a false certification under subsection (g), and the person fails to demonstrate to the county entity or the chief procurement officer that the person has ceased its engagement in the investment activities in Iran within ninety days after the determination of a false certification, the person shall be subject to:

(1) A civil penalty in an amount that is equal to the greater of $250,000 or twice the amount of the contract for which the false certification was made; provided that only one civil penalty may be imposed with respect to one or more certifications made to any public entity that are false as a result of a particular investment;

(2) Termination of an existing contract with the awarding body at the option of the awarding body or the chief procurement officer; and

(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.

(i) A county entity or the chief procurement officer, as applicable, shall report to the attorney general the name of any person that the county entity or the chief procurement officer, determines has submitted a false certification under subsection (h) together with any information on false certification, and the attorney general shall determine whether to bring a civil action against the person to enforce the penalty described in subsection (h).

(j) If, in a civil action, the court determines that the person submitted a false certification under subsection (g), the person shall pay all reasonable costs and fees incurred in the 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.

Only one civil action against a person to collect the penalty described in subsection (h) may be brought for a false certification on a contract.

A civil action to collect the penalties described in subsection (h) shall commence within three years from the date the certification is made.

(k) An unsuccessful bidder in any procurement under chapter 103D or 103F, Hawaii Revised Statutes, or any other person other than the awarding body, shall have no right to protest the award of a contract or contract renewal on the basis of a false certification.

(l) This Act shall not create or authorize a private right of action or enforcement of the penalties provided for in this Act.

SECTION 3. If any provision of this Act, or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Act, which can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 4. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 5. This Act shall take effect on July 1, 2012; provided that this Act shall be repealed on the date that the applicable federal law ceases to authorize the states to adopt and enforce the contracting prohibitions of the type provided for in this Act.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1792
TWENTY-SIXTH LEGISLATURE, 2012
STATE OF HAWAII