Opinion ID: 629223
Heading Depth: 1
Heading Rank: 3

Heading: Right of Local Self-Government

Text: 17 We now turn to the central question in this case: whether the Insular Areas Act conflicts with the self-governance provisions of the Covenant. The relevant sections of the Covenant provide as follows: Section 101 18 The Northern Mariana Islands upon termination of the Trusteeship Agreement will become a self-governing commonwealth to be known as the Commonwealth of the Northern Mariana Islands, in political union with and under the sovereignty of the United States of America. Section 102 19 The relations between the Northern Mariana Islands and the United States will be governed by this Covenant which, together with those provisions of the Constitution, treaties and laws of the United States applicable to the Northern Mariana Islands, will be the supreme law of the Northern Mariana Islands. Section 103 20 The people of the Northern Mariana Islands will have the right of local self-government and will govern themselves with respect to internal affairs in accordance with a Constitution of their own adoption. Section 105 21 The United States may enact legislation in accordance with its constitutional process which will be applicable to the Northern Mariana Islands, but if such legislation cannot also be made applicable to the several States the Northern Mariana Islands must be specifically named therein for it to become effective in the Northern Mariana Islands. In order to respect the right of self-government guaranteed by this Covenant the United States agrees to limit the exercise of that authority so that the fundamental provisions of this Covenant, namely Articles I, II and III and Sections 501 and 805, may be modified only with the consent of the Government of the United States and the Government of the Northern Mariana Islands. 22 The Governor contends that a federal audit of Commonwealth finances intrudes upon the Commonwealth's right of local self-government reserved under Section 103 of the Covenant. He argues further that because of this alleged conflict between the Insular Areas Act and Section 103, the enactment of Sec. 1681b exceeds the scope of congressional lawmaking authority permitted by Section 105 of the Covenant. We disagree. 23 At the outset, we emphasize that the authority of the United States towards the CNMI arises solely under the Covenant. Hillblom v. United States, 896 F.2d 426, 429 (9th Cir.1990). The Covenant has created a unique relationship between the United States and the CNMI, and its provisions alone define the boundaries of those relations. Commonwealth of the Northern Mariana Islands v. Atalig, 723 F.2d 682, 687 (9th Cir.1984). For this reason, we find unpersuasive the Inspector General's reliance on the Territorial Clause, U.S. Const. art. IV, Sec. 3, cl. 2, as support for enforcement of the federal audit. He argues that because the CNMI is governed through Congress' power under the Territorial Clause, Congress has plenary legislative authority over the CNMI. See Simms v. Simms, 175 U.S. 162, 168, 20 S.Ct. 58, 60, 44 L.Ed. 115 (1899) (explaining that under the Territorial Clause, Congress has the entire dominion and sovereignty, national and local, Federal and state, and has full legislative power over all subjects upon which the legislature of a state might legislate within the state). The applicability of the Territorial Clause to the CNMI, however, is not dispositive of this dispute. Even if the Territorial Clause provides the constitutional basis for Congress' legislative authority in the Commonwealth, it is solely by the Covenant that we measure the limits of Congress' legislative power. 24 Congress' legislative authority over the Commonwealth derives from Section 105. The first sentence of Section 105 provides that the United States may legislate with respect to the CNMI, but if such legislation cannot also be made applicable to the several States the Northern Mariana Islands must be specifically named therein for it to become effective in the Northern Mariana Islands. That Congress has the power to pass legislation with respect to the CNMI that it would not pass with respect to the states is plain. Having recognized that the potential scope of power over the CNMI would be greater than that over the states, Section 105 requires that Congress specifically identify the CNMI in cases where such legislation is not equally applicable to the states. As the Marianas Political Status Commission (MPSC) explained in its contemporaneous analysis of the Covenant, this requirement is to ensure that Congress will exercise its legislative powers purposefully, after taking into account the particular circumstances existing in the Northern Marianas. Marianas Political Status Commission, Section-by-Section Analysis of the Covenant to Establish a Commonwealth of the Northern Mariana Islands 15 (1975). The United States took a similar view: the purpose of this provision is to prevent any inadvertent interference by Congress with the internal affairs of the Northern Mariana Islands to a greater extent than with those of the several States. Department of Interior, Section-by-Section Analysis of the Covenant, reprinted in To Approve The Covenant to Establish a Commonwealth of the Northern Mariana Islands, and for Other Purposes: Hearing Before the Subcomm. on Territorial and Insular Affairs of the House Comm. on Interior and Insular Affairs, 94th Cong., 1st Sess. 385 (1975). In light of these concerns, we interpret the first sentence of Section 105 to mean that the United States must have an identifiable federal interest that will be served by the relevant legislation. 25 At the center of this dispute, however, is the second sentence of Section 105 limiting the United States' legislative authority so that the fundamental provisions of this Covenant ... may be modified only with the consent of the Government of the United States and the Government of the Northern Mariana Islands. The Governor asks us to read this provision, in conjunction with the self-government provision of Section 103, as carving out an area of local affairs immune from federal legislation. We decline to adopt such an expansive interpretation of the Section 105's mutual consent provision. Particularly when viewed against the backdrop of Section 101 establishing the sovereignty of the United States and Section 102 making the Covenant and all federal laws applicable to the CNMI the supreme law of the CNMI, the Governor's position is untenable. The mutual consent provision states that Congress may not override or alter the fundamental provisions of the Covenant, among them the right of self-government guaranteed by Section 103. This does not mean that Congress may not pass any legislation affecting the internal affairs of the CNMI. 26 To give due consideration to the interests of the United States and the interests of the Commonwealth as reflected in Section 105, we think it appropriate to balance the federal interest to be served by the legislation at issue against the degree of intrusion into the internal affairs of the CNMI. Performing that balance here, we find that the Insular Areas Act satisfies Section 105. 27 There is no question that the United States has a substantial federal interest in monitoring the CNMI's collection of taxes. To date, the United States has provided the CNMI with over $420 million in direct assistance in accordance with Sections 701 and 702 of the Covenant. Moreover, to help the CNMI raise funds, the United States agreed not to collect any federal income tax on income earned by island residents in the Commonwealth. Instead, Section 601 enables the local government to collect what would otherwise be federal taxes as a local income tax. The United States therefore has a significant interest in ensuring that federal funds are being used properly and in determining the efficacy of the CNMI's revenue collection to assess future amounts of assistance. 28 The other consideration in our analysis is the degree of intrusion into the internal affairs of the CNMI. Although the Governor would like to characterize this case as one involving unwarranted federal interference with the CNMI's internal fiscal affairs, the fact is that the financial assistance provided by the United States inextricably links federal and CNMI interests. This financial support was deemed to be such an integral part of the relationship and so essential to the economic development of the CNMI that it was embodied in the Covenant itself rather than in separate legislation. See Articles VI, VII. In view of the fact that a substantial portion of the CNMI budget is comprised of direct and indirect federal financial assistance, we cannot say that a federal audit impermissibly intrudes on the internal affairs of the CNMI. 29 We therefore affirm the district court's enforcement of the administrative subpoena pursuant to the Insular Areas Act.