Officials with a wide variety of construction, transportation, energy and retail firms say that pending court cases and lack of congressional action in rescinding the law give them pause about taking part in the economic revival of a post-war Iraq.
Known as the Alien Tort Claims Act of 1789, the law was intended to allow foreign citizens to sue to recover property seized by pirates when they attempted to dispose of stolen booty in American ports.
With the end of piracy on the high seas, the law lay dormant for nearly two centuries.
Congresses never bothered to repeal it and, eventually, the federal government forgot about it.
A few years ago, though, anti-globalization groups revived it. They saw it as a vehicle for suing U.S. companies that do business in foreign nations accused of human rights abuses against terrorists and guerilla groups.
The Center for Constitutional Rights (CCR), an organization founded by radical anti-war activist William Kunstler in 1966, promoted it as a way to haul American corporations into federal courts and hold them responsible for alleged human rights abuses that occur in nations where they happen to do business.
The rub for American businesses: How do you participate in rebuilding a country like Iraq if anything you do using Iraqis in your work force might be interpreted by some federal judge here in America as a "human rights" violation?
U.S. and foreign companies well equipped to help rebuild Iraq's infrastructure are calculating the lawsuit risk. For example, companies that made the cruise missiles or the tanks or the planes whose weapons may have inadvertently killed Iraqi citizens could be hauled into court under the Alien Tort Claims Act.
It's not too far-fetched to suggest that a company could be forced to defend itself in a federal court for making the desert camouflage uniforms worn by coalition forces.
That's how open-ended ATCA is, according to current interpretation. Simply put, it requires American firms doing business overseas to meet amorphous "human rights" standards in which the wrongdoing of the country's government is attributed to them. It's a prime example of guilt by association.
The CCR's touting of the Alien Tort Claims Act as a prime means of harassing U.S. multinational companies already has succeeded on a number of fronts.
More than 100 U.S. businesses are being sued for their investments and business activities in South Africa during the apartheid era. Ironically, virtually all of them were signatories of the Sullivan Principles, which led to equal pay and equal conditions in the workplace for black South Africans, and is widely credited with hastening the arrival of majority rule.
The lawsuit, which seeks tens of billions of dollars in damages, is considered a major disincentive to the foreign investments a struggling South Africa needs so desperately these days.
And dozens of other U.S. companies are being hauled into U.S. courts under ATCA because they do business in countries whose governments often are engaged in brutal warfare against ruthless guerilla movements. Among them: Colombia, Burma, Indonesia, Nigeria, Sudan, Malaysia and Peru. Businesses in other countries, such as China, are likely the next targets.
Few foreign companies are willing to locate a plant or office in such a country, if they're likely to be sued because of an alleged human rights abuse by the host government. Indeed, many cases brought in U.S. courts under ATCA relate to the use of force against people who are actually breaking local laws -- even though such laws may be inconsistent with American concepts of justice.
The State Department last year issued a public statement warning that such lawsuits "could potentially disrupt" the fight against terrorism, as well as undermine a developing nation's economic stability by spooking foreign investors.
"The issue is vicarious liability," notes Daniel O'Flaherty, vice president of the New York-based National Foreign Trade Council, which represents U.S. exporters.
Personal injury lawyers filing claims on behalf of foreign nationals in U.S. courts make the argument that U.S. companies were there, paid taxes and profited from police protection. Ergo, they are vicariously liable. "We are concerned about the proliferation of lawsuits against U.S. companies for behavior over which they have no control," O'Flaherty said.
Thomas Niles, president of the U.S. Council of International Business, said the lawsuit against the American firms who did business in South Africa is "grossly unfair."
He points out that the U.S. government encouraged American companies to do business with South Africa ... to engage constructively and undermine apartheid within by signing the Sullivan Principles to provide equal treatment to black workers.
He's right. A new breed of voracious plaintiff's lawyers with little concern about human rights is seeking to grab huge settlements from American companies with ultra-deep pockets for acts they never committed.
The ATCA lawsuits are proliferating at a time when the United States is waging all-out war on the forces of terror and struggling to revitalize a sluggish economy. Now they may preclude companies from the great task of converting Iraq from a trickle-down thugocracy to a free-market democracy.
It's time Congress put an end to this latest quest for jackpot justice by doing something it should have done shortly after the turn of the 19th century: Rescind the Alien Tort Claims of Act of 1789. American businesses are not pirates.
Paul Rosenzweig is a senior fellow of the Center for Legal and Judicial Studies at The Heritage Foundation.
Distibuted nationally on the Knight-Ridder Tribune wire