The rise in international litigation predicated on lawsuits filed under the Alien Tort Claims Act present significant risks for U.S. corporations that do business abroad. While the law was originally intended to protect US financial interests from piracy on the high seas, it was revived in the early 1980s to seek accountability for overseas human rights violations, such as extrajudicial killings. The early-1990s saw the first ATCA case filed against corporations, and now dozens of companies face such suits.
Rise in ATCA Lawsuits
According to the recent National Law Journal article Alien Tort Claims Act Cases Keep Coming, lawsuits brought under the ATCA have increased significantly. Last month, for example, a Los Angeles federal judge ruled that alien tort claims could be brought against London-based Rio Tinto PLC. In that lawsuit, it is alleged that Rio Tinto engaged in mining operations on the island of Bougainville in Papua New Guinea that incited a 10-year civil war, during which thousands of civilians died.
And as reported in Nathan Koppel’s article in the Wall Street Journal, Arcane Law Brings Conflicts From Overseas to U.S. Courts, earlier this year, a New York federal judge allowed claims to move forward alleging that several major multinational companies, including General Motors Corp. and Ford Motor Co., aided and abetted human-rights violations by providing goods and services to South Africa’s apartheid regime. To date, major corporations including Unocal, ChevronTexaco, Union Carbide, ExxonMobil, Gap, Coca-Cola, Del Monte, Citigroup, Ford and Nike have been sued under the ATCA for complicity in human rights violations.
According to some, these lawsuits are nothing more than MacGyver-inspired attempts to fashion together extraterritorial law out of paper clips and bubble gum found in arcane and long-forgotten legal principles. Thomas Niles, a former U.S. ambassador to Canada and Greece who is now the vice chairman of the United States Council for International Business, a pro-business group, says corporations are being used unfairly as a surrogate for foreign governments in these cases.
You can’t sue the government of Nigeria or South Africa because of sovereign immunity, so who are you going to sue? Companies, and they are sued essentially for being" in countries where human-rights violations occur.
Primary Risk Areas
While it is doubtful that the ATCA will stem the surge of U.S. investments internationally, the recent spate of cases brought under the ATCA highlight the need for corporations to better manage their risks overseas. Managing a corporation today presents a host of challenges not encountered in decades past. In particular, the areas posing the greatest risk are:
- Human Rights
- Labor and Employment
Any corporation involved in overseas sourcing, sales or production face a myriad of operational risks involving these three areas. Companies that have chosen to ignore these risks have paid an enormous price in financial and reputational penalties.
The risks to business reputation from allegations of human rights abuses in particular should force companies and directors to consider these issues seriously, irrespective of whether an ultimate finding of liability is likely.
Trend to Watch: Claims Filed Under the Alien Tort Claims Act Will Continue to Increase