The court said that the White House has negotiated executive agreements with Germany, Austria and France aimed at resolving controversies surrounding Holocaust-era insurance policies that rely on voluntary settlement funds and disclosure of policy information.

However, the court said, HVIRA takes a different approach by threatening to revoke the license of any insurance company that does not follow the law's disclosure requirements.

This undercuts the White House's diplomatic discretion, the court said in an opinion written by Justice David Souter.

In a dissent, Justice Ruth Bader Ginsburg argued that HVIRA responds to the long-frustrated efforts of Holocaust victims and their descendents to collect unpaid insurance proceeds.

The federal government, she wrote has become more active in this area recently, undertaking foreign policy initiatives aimed at resolving these claims.

While the federal approach differs from California's approach, Justice Ginsburg wrote, no executive agreement or other formal expression of foreign policy disapproves of state laws like HVIRA.

Absent such a statement, she said, the California law should stand.

The Washington-based American Insurance Association, which challenged HVIRA, praised the Supreme Court majority's decision.

"We are gratified by the Supreme Court's decision," said Craig Berrington, senior vice president and general counsel with AIA.

"As both the Clinton and Bush administrations made clear during this long litigation process, the issues remaining from the Holocaust are matters for the United States government, not individual states," he said.

In the case of American Insurance Association v. Garamendi, AIA, joined by several American and European insurers, challenged the constitutionality of HVIRA, arguing that it violates the authority of the president to conduct foreign policy.

A federal district court ruled in favor of AIA, stating that HVIRA violates the due process rights of insurance companies. The district court said that HVIRA mandates license suspension for non-performance of what may be impossible tasks without allowing for a meaningful hearing.

But the 9th Circuit Court of Appeals reversed, stating that due process does not require states to grant insurers the opportunity to raise an impossibility excuse for noncompliance with the law.

In reversing the 9th Circuit's decision, the Supreme Court outlined the various efforts of the federal government to resolve Holocaust-era claims and contrasted them to California's approach.

"The basic fact is that California seeks to use an iron fist where the President has consistently chosen kid gloves," the court said. While there are powerful arguments that the iron fist works better, the court said, that is beside the point. It is not the court's business to judge the wisdom of federal government policy, the court said.

The question, the court said, is whether the state law conflicts with the federal approach. In this case, the court said, the evidence is more than sufficient to demonstrate that HVIRA stands in the way of the president's diplomatic objectives.

Justice Ginsburg, however, said that allowing HVIRA to stand would not compromise the ability of the President to speak with one voice for the nation.

She said that the President has not taken a clear stand on this issue and courts should not presume to preempt state laws on foreign policy grounds when they rely not on legislative or executive text, but only on inference and implication.