First Circuit Invalidates Maine’s “5% Foreign-Ownership” Election-Spending Ban
Central Maine Power Co. v. Maine Commission on Governmental Ethics & Election Practices, No. 24-1265 (1st Cir. 2025)

1. Introduction

The United States Court of Appeals for the First Circuit has handed down a major campaign-finance decision in Central Maine Power Co. v. Maine Commission on Governmental Ethics & Election Practices. The panel—Judges Montecalvo, Howard, and Aframe—affirmed a district-court order preliminarily enjoining Maine’s newly adopted “Act to Prohibit Campaign Spending by Foreign Governments.” Although the initiative passed with 86 % popular support, the court concluded that significant portions of the Act likely violate the First Amendment.

At the heart of the controversy is a 5 % foreign-ownership trigger: whenever a foreign government (or entity majority-owned by a foreign government) owns as little as five percent of a U.S. company’s equity, that company is barred from making any contributions, independent expenditures, or other “public communications” concerning Maine candidates or ballot questions. The law also imposed due-diligence obligations on media outlets and carried both civil fines and Class C criminal penalties.

The plaintiffs—a coalition of two investor-owned utilities (Central Maine Power and Versant Power), their Canadian parent ENMAX, statewide press and broadcasting associations, and five individual voters—argued that the Act chills core political speech and is facially overbroad. The First Circuit agreed, setting an important precedent on the permissible scope of state regulation aimed at curbing perceived “foreign influence” in domestic elections.

2. Summary of the Judgment

• Affirmed: The district court properly issued a preliminary injunction blocking the Act in its entirety.
• Scrutiny Applied:
  • Restrictions on expenditures and other independent political speech are subject to strict scrutiny.
  • Restrictions on contributions are subject (at most) to exacting/“closely-drawn” scrutiny.
• State Interests: Maine may have a compelling interest in preventing actual foreign governmental participation or influence, but not in suppressing mere “appearances” of influence by domestic corporations.
• Tailoring:
  • The outright ban on spending by foreign governments themselves is likely constitutional.
  • The ban triggered by ≥ 5 % foreign ownership is over-inclusive and not narrowly tailored.
  • The ban based on undefined “direct or indirect participation” of a foreign government is likewise overbroad.
• Overbreadth: Because a “substantial number” of the Act’s applications are unconstitutional relative to its legitimate sweep, the statute is facially invalid at the preliminary-injunction stage.
• Severability Reserved: The district court did not abuse its discretion in postponing a severability analysis under Maine law.
• FECA Pre-emption: The panel declined to rely on, but did not disturb, the lower-court view that the Federal Election Campaign Act already occupies the field for federal elections.

3. Analysis

3.1 Precedents Cited & Their Influence

• Citizens United v. FEC, 558 U.S. 310 (2010) – Established that corporations have full First-Amendment speech rights and that restrictions on independent expenditures receive strict scrutiny. The panel leaned heavily on Citizens United to reject Maine’s request for a lower level of scrutiny.
• Buckley v. Valeo, 424 U.S. 1 (1976) and progeny – Provide the strict/exacting scrutiny framework distinguishing expenditures from contributions. Guided the court’s bifurcated scrutiny analysis.
• FEC v. Beaumont, 539 U.S. 146 (2003) – Clarified “closely-drawn” review for contribution limits; cited in evaluating the Act’s contribution ban.
• Bluman v. FEC, 800 F. Supp. 2d 281 (D.D.C. 2011), summarily aff’d 565 U.S. 1104 (2012) – Upheld federal prohibition on foreign nationals themselves making political contributions or expenditures. The First Circuit distinguished Bluman: Maine’s law reaches domestic corporations.
• Daggett v. Maine Commission, 205 F.3d 445 (1st Cir. 2000) and Sindicato Puertorriqueño de Trabajadores v. Fortuño, 699 F.3d 1 (1st Cir. 2012) – First-Circuit precedents explaining “exacting scrutiny” and reaffirming strict scrutiny when laws regulate how organizations decide to speak.
• Moody v. NetChoice, 603 U.S. 707 (2024) – Clarified the “substantial overbreadth” test for facial First-Amendment challenges; adopted by the panel.

3.2 Key Steps in the Court’s Reasoning

1. Facial Challenge Threshold. In a First-Amendment context, a statute may be struck down entirely if its unconstitutional applications “substantially outweigh” its constitutional ones. The panel agreed that most applications were unconstitutional.
2. Level of Scrutiny.
   • Contributions: Even under the more forgiving exacting scrutiny, the Act’s 5 % rule failed because it was not “closely drawn” to an important interest.
   • Expenditures & Independent Communications: Subject to strict scrutiny under Citizens United. Maine’s justifications—preventing “foreign influence” or its appearance—demanded narrow tailoring, which was lacking.
3. State Interests Examined. The court assumed, without definitively holding, that preventing actual foreign governmental control of election spending is compelling. It was more skeptical of Maine’s broader “appearance-based” rationale.
4. Tailoring Analysis.
   • Foreign governments themselves – Ban upheld; federal law leaves referenda unregulated; narrow fit.
   • ≥ 5 % rule – Overbroad: sweeps in companies 95 % owned by U.S. citizens; arbitrary threshold; chills domestic speech; scant evidence of influence.
   • “Direct or indirect participation” rule – Vague and potentially broader than statutory text, risking censorship of corporations merely receiving unsolicited foreign input.
5. Overbreadth & Inseverability (for now). Because §§ 3–5, 8–9 all hinge on § 2’s defective ban, “a substantial number” of real-world applications would violate the First Amendment. The full statute was enjoined pending fuller severability briefing.

3.3 Potential Impact of the Decision

• State Legislative Drafting: States seeking to police foreign electoral influence must avoid crude percentage-ownership thresholds. They will need fact-specific standards keyed to demonstrable control or direction by a foreign sovereign.
• Corporate Political Activity: The opinion reaffirms that U.S. corporations (even with multinational ownership) retain robust First-Amendment rights. Utilities and other heavily regulated firms may cite the case when challenging similar spending bans.
• Media-Platform “Due Diligence” Mandates: While the First Circuit did not definitively rule on § 7, its skepticism toward overbreadth foreshadows strict scrutiny of any obligation that chills publication of lawful political ads.
• Future Litigation Roadmap: The panel left the door open for Maine to salvage narrower pieces of the statute via severability. Expect focused disputes over (a) disclaimers for bona fide foreign-government speech and (b) tailored bans on wholly-owned foreign subsidiaries.
• National Conversation: The decision may influence congressional debates on updating the Federal Election Campaign Act’s foreign-national provisions and inform other circuits confronting similar ballot-initiative restrictions (e.g., Minnesota, Seattle, Alaska).

4. Complex Concepts Simplified

• Strict vs. Exacting Scrutiny
  • Strict scrutiny—the toughest test—requires the State to show (1) a compelling interest, and (2) a regulation narrowly tailored (least restrictive) to achieve it.
  • Exacting (a/k/a “closely drawn”) scrutiny—used mainly for contribution limits—still demands a “substantial relation” to a sufficiently important interest, but allows somewhat more leeway than strict scrutiny.
• Facial Overbreadth – A plaintiff may invalidate an entire statute when a “substantial number” of its applications would chill protected speech, even if some applications are permissible.
• Foreign Government-Influenced Entity – Maine used three triggers: (1) the foreign government itself; (2) any entity ≥ 5 % owned (directly or indirectly) by a foreign government; (3) any entity in which a foreign government “directly or indirectly participates” in political-spending decisions.
• Severability – Whether a court can surgically excise unconstitutional parts of a statute, leaving the rest intact, depends on state law and legislative intent.
• Pre-emption – Federal law (here, the FECA) can displace state regulation in federal elections. The First Circuit sidestepped but signaled agreement that Maine’s law cannot reach races for U.S. office.

5. Conclusion

Central Maine Power is now the leading First-Circuit authority on state efforts to curb foreign money in politics. The ruling clarifies four key points:

1. Domestic corporations, even if partially foreign-owned, enjoy full First-Amendment protections unless foreign governments actually control their political spending.
2. Bans triggered by low, arbitrary ownership percentages (e.g., 5 %) are not narrowly tailored and will fail under either strict or exacting scrutiny.
3. States bear the burden of assembling empirical evidence that foreign entities exercised actual influence—mere speculation or broad “appearance” rationales are inadequate.
4. When a defective provision is central to a regulatory scheme, courts may enjoin the entire statute until severability and narrowing constructions are thoroughly litigated.

The decision does not prohibit Maine—or any state—from addressing genuine threats of foreign electoral interference. What it does demand is precision: statutes must target the source of foreign control without gagging U.S. speakers. Going forward, lawmakers should favor disclosure, targeted prohibitions on wholly owned or controlled foreign entities, and enforcement tools focused on actual foreign participation rather than blanket numeric thresholds.

In short, the First Circuit has delivered a roadmap for constitutionally sound regulation while reaffirming the principle that “the best response to disfavored speech is more speech, not enforced silence.”