by Gary Clyde Hufbauer, Peterson Institute for International Economics
View full document [pdf]
In April 2009, the Federal District Court for the Southern District of New York allowed a lawsuit to proceed against US companies that had done business with apartheid South Africa for abetting human-rights violations. In a previous ruling, the Second Circuit Court of Appeals held that firms could be found liable under the Alien Tort Statue (ATS) of 1789 if they were aware that their business activities may have substantially assisted the government's abusive practices, even if the firms did not intend to facilitate this abuse.
The ATS allows alien plaintiffs to bring lawsuits against individuals or companies that are subject to US jurisdiction for violations of "the law of nations" or US treaties. While treaties constitute a defined body of law, the law of nations does not, and plaintiffs and human-rights groups in recent years have sought to elastically expand the definition of "the law of nations" from its meaning when the statue was enacted to include a broader range of abuses. In 2004, the US Supreme Court adopted a relatively restricted interpretation of the law of nations, but it failed to enunciate clear guidelines for lower courts on what constitutes an actionable violation under the ATS. Thus US and foreign firms remain at risk for ATS suits, such as the current apartheid suit.
Gary Clyde Hufbauer briefly surveys the history of the Alien Tort Statute and considers the potential consequences of extensive ATS litigation. He finds that US and foreign firms that do business with countries accounting for half the world's economy, including China, India, Russia, and Brazil, are at risk under the ATS. Widespread litigation has the potential to disrupt tens of thousands of US jobs related to exports and foreign direct investment. Further, ATS litigation would interfere with US foreign policy and harm relations with foreign states. Hufbauer finds little reason to believe that ATS suits will result in serious improvement in human-rights conditions abroad. In order to avert a wave of ATS litigation, he recommends that multinational corporations devise a code of conduct to protect themselves from ATS suits. Finally, he urges Congress to enumerate violations of the law of nations that create causes of action under the ATS, thus clarifying the law, and to confer exclusive jurisdiction for ATS suits on the DC District Court and the US Federal Circuit, enabling clear and consistent policy in this sensitive area.