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The Alien Tort Claims Act: Is Our Litigation

Tuesday, October 8, 2002 - 8:00pm

By John E. Howard
October 2002

Did you know that, under current U.S. law, foreigners could sue your company in U.S. courts — if you simply did business, paid taxes and complied with the laws of a foreign country in which those foreigners allege that an atrocity occurred?

Did you know that foreign nationals could sue your company if your products or resources were used in a U.S. military campaign against terrorists in those foreign nations?

Did you know that your company could be sued if it was present in a country where that country's government had engaged in actions to put an end to riots, rebellion or other disorders, whether or not you played any role in the disorders or the government's response?

Under the Alien Tort Claims Act of 1789 (ATCA), all of this is possible. Moreover, over 20 lawsuits have already been filed in federal court against U.S. companies in similar situations. While in most of these cases the outcomes are still pending and may swing either way, the need for defendant companies to engage counsel and otherwise prepare for potentially costly litigation began the moment the suits were filed. In this manner, U.S. companies lose even if they win!

What is the ATCA and how does it relate to international business? Back in 1789, as the Federalists were taking action to consolidate governance of our new nation, the first Congress took action it believed necessary to use federal courts to combat piracy on the high seas and help victims recover their stolen property, and for other purposes. The ATCA's complete text is brief and straightforward:

The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States. (28 USC 1350)

For nearly 200 years, this law remained on the books without being used. However, in 1980, a U.S. Court awarded over $10 million to the family of a Paraguayan human rights activist that had been tortured by a Paraguayan police inspector who had subsequently moved to the United States. (The $10 million was never collected.) And in 1995, a 2nd Circuit ruling in a suit against Bosnian Serb alleged war criminal Radovan Karadzic by his victims held that Mr. Karadzic need not be a government official to be sued under ATCA—a ruling that set the stage for the various lawsuits against companies that are pending today.

After the Karadzic case, some class action plaintiffs' lawyers realized that the ATCA would be a useful tool with which to pursue a myriad of complaints against U.S. firms operating in numerous countries where various violations of law are alleged to have occurred. What makes this especially problematic is the application of so-called "vicarious liability". Simply put, this means that a U.S. firm could be liable for the violations simply by virtue of the fact that it did business in, paid taxes to, and otherwise complied with the laws of the country in which the violations occurred. It doesn't matter if a company had absolutely nothing to do with the violations or any participants therein.

At present, there are over 20 suits pending under ATCA alleging that U.S. firms doing business in such countries as Colombia, Ecuador, Egypt, Guatemala, India, Indonesia, Myanmar (Burma), Nigeria, Peru, Saudi Arabia, South Africa, and Sudan are liable for actions in those countries — action whether or not they had any direct connection other than being present in those countries.

For years, U.S. business has sought to halt the proliferation of litigation-run-amok in the courts by restoring fairness, balance, efficiency and consistency to the U.S. civil justice system. But as serious as this problem is, it has generally been viewed as a "domestic" problem — with a small number of avaricious class-action lawyers using U.S. plaintiffs to pursue gargantuan remedies for domestic torts.

Expansion of this problem into the international arena via ATCA promises nothing but trouble for U.S. economic and foreign policy interests worldwide. This is why ATCA's misuse must be checked — and efforts to obtain its repeal must begin — now! U.S. national interests require that we not allow the continuing misapplication of this 18th century statute to 21st century problems by the latter day pirates of the plaintiffs' bar.

John E. Howard is Vice President of International Policy and programs at the U.S. Chamber of Commerce.