In a disappointing about-face, the federal government declared for the first time yesterday its support for expanding liability under the "Alien Tort Statute" (ATS) to permit civil lawsuits against corporations.   If the U.S. Supreme Court adopts the legal position now advanced by the U.S. Solicitor General in its  "friend of the court" brief, the global business community will face yet another wave of frivolous and expensive litigation.  And Americans will be left footing the bill, in the form of fewer jobs and higher costs.

When Congress passed the ATS in 1789, it did so to provide a federal forum for non-U.S. nationals to file a small number of international law claims, such as for assaults on ambassadors and for piracy on the high seas.  The ATS lay dormant for almost 200 years, but then plaintiffs’ lawyers “rediscovered” the ATS, and for the last 15 years have been suing nearly every major industry sector for their business activities throughout the world.

The Congress of 1789 certainly did not have in mind the class actions trial lawyers now bring against corporations for alleged violations of international law relating to their activities in other countries — lawsuits which are often filed with the goal of embarrassing companies into settling the lawsuits or withdrawing from conflict-ridden countries. Even mere allegations of human rights violations in an ATS lawsuit inflict great financial and reputational harm on business defendants. The specter of long and costly fights in the courts and in the court of public opinion gives plaintiffs significant leverage to extract substantial settlements from companies – even if the underlying claims are highly dubious.

The federal government's new legal position is at odds with a 2010 decision by a federal appellate court in New York that ruled that corporations may not be held liable for violations of international law — especially since no international court has ever extended liability to corporations (as opposed to the individuals actually responsible).  Moreover, the legal filing comes after the U.S. Chamber sent letters to  the White House, the Solicitor General, the Secretary of Commerce, the Secretary of the Treasury, the Secretary of State, and the Defense Department, each warning that corporate liability under the ATS will hurt the economy and impair foreign relations. 

So what’s the cost to Americans of the legal position now advanced by the U.S. Solicitor General? First of all, more ATS litigation will deter U.S. companies from doing business abroad, particularly in developing and post-conflict countries. That means fewer resources flowing into the United States, and fewer jobs.  If American businesses pull out of those regions, other countries with questionable human rights records are likely to fill that vacuum left by the departure of American companies.  Expanding liability under the ATS will also discourage foreign investment in the United States, if the price of doing business in the U.S. is exposure to expensive American-style litigation in U.S. courts for alleged events that happened in foreign countries.

Perhaps most egregious is that the United States can beg for the cooperation of businesses to help rebuild countries like Iraq and Afghanistan, and then, in the same breath, the government can turn its back on those same companies when they are sued for their business activities in support of the U.S. mission. 

It’s disappointing that the Administration would want to encourage these lawsuits against America’s jobs creators.  The federal government may be trying to be a “friend of the court” but it is no friend of American business.