Commentary

Abuse of 18th Century Law Threatens U.S. Economic and Security Interests

By Daniel Griswold
January 25, 2003

Through an obscure loophole in U.S. law, the United States is being turned into the world’s catchall civil claims court to the detriment of the U.S. economy and U.S. interests abroad.

The loophole is the Alien Tort Claims Act (ATCA), passed by the first Congress in 1789. The act gives federal district courts sole jurisdiction over civil actions brought by non-U.S. residents for torts, or wrongful acts, “committed in violation of the law of nations or a treaty of the United States.”

The law was originally intended merely to clarify jurisdiction in cases involving such matters as piracy and the actions of diplomats. It was never intended to be used against Americans engaged in commerce abroad. But in the last two decades, critics of global capitalism have turned the law against U.S. corporations doing business in countries whose governments have been accused of human rights and environmental abuses.

By latest count, two dozen cases have been filed since 1980 seeking damages from American-based corporations accused of being “vicariously liable” for the alleged actions of government agents in countries where they operate.

For example, in Doe et al. v. Unocal Corporation et al., the American energy company stands accused of benefiting from forced relocations and other human-rights abuses by the government of Burma during construction of a pipeline. In Bowoto et al. v. Chevron, et al., another American energy company has been sued for allegedly assisting in human rights abuses by the Nigerian military. Yet another group of suits targets more than 100 western multinational companies, including IBM, General Motors, Ford, and Westinghouse, that operated in South Africa during apartheid.

Misuse of the Alien Tort Claims Act constitutes bad law, bad economics, and bad foreign policy. The law was never intended to confer a new private right of action to aliens. Yet under the law as some courts have interpreted it, foreigners allegedly harmed by other foreigners on foreign soil can sue for damages in U.S. courts. In most cases, the defendant companies have violated no laws, either our own or the laws of the foreign country. Yet they are being sued because of nothing more than guilt by association.

The unjust wielding of the ATCA threatens to damage the U.S. economy and the often-underdeveloped economies of the host countries. If those cases move forward and ultimately result in damages, it could put a chill on profitable foreign investment, jeopardizing jobs and investment capital in the United States while retarding development in poor countries. Hundreds of millions of poor people around the world will find it more difficult to escape poverty.

Abuse of the ATCA is complicating U.S. foreign policy at a time when the United States needs to win friends and influence nations in the war against terrorism. Suits filed under the ATCA breed resentment abroad that the U.S. legal system is attempting to interfere in the internal affairs of other nations. In one case involving Indonesia and Exxon Mobil Corporation, the U.S. State Department warned in a July 2002 friend-of-the-court letter that, “U.S. counter-terrorism initiatives could be imperiled in numerous ways if Indonesia and its officials curtailed cooperation in response to perceived disrespect for its sovereign interests.”

American interest would be further jeopardized if the lawsuits lead to worsening economic conditions and instability in countries the United States is trying to cultivate as allies. As the State Department noted in the Indonesia case, “increasing opportunities for U.S. business abroad is an important aspect of U.S. foreign policy.”

Congress and President Bush should act quickly to close this legal loophole that threatens to cripple the ability of U.S. corporations to further our nation’s economic and foreign policy interests by investing profitably abroad. Congress should pass legislation that would clarify that the Alien Tort Claims Act is only about jurisdiction of U.S. courts and not about creating a whole new private right of action. The Bush administration, through the State Department, should make clear to Congress and the courts that these cases do not serve America’s interest in the world. And as a final backstop, the U.S. Supreme Court should re-affirm the original intention of Congress when it first enacted the law more than two centuries ago.

Opponents of global trade and investment should not be allowed to abuse the legal system at the expense of our national interest.

Daniel T. Griswold is associate director of the Center for Trade Policy Studies at the Cato Institute.