October 7, 2016
A dispute over 9/11 responsibilities could have serious adverse implications for U.S. businesses at home and abroad.
Last week, Congress overrode a Presidential veto to pass the Justice Against the Sponsors of Terrorism Act (JASTA)—a law designed to allow U.S. nationals to sue a foreign state for injury occurring in the U.S. as a result of an act of international terrorism or a tort committed anywhere by an official or agent of a foreign state acting within the scope of employment. Additionally, it imposes civil liability on a person who conspires to commit or aids and abets an act of international terrorism. The law, primarily designed to allow victims of 9/11 to sue the Government of Saudi Arabia, applies more broadly.
The passage of the law and the potential ensuing litigations will further erode the already strained relations with Saudi Arabia, inflame relations in the Middle East, and complicate the ability to safeguard U.S. interests or operate businesses there.
As Congress lethargically ponders what’s next, the rest of the world is quickly responding to the new uncertainties of JASTA. The Saudi Government, arguing that the bill is a threat to its interests in the U.S., called on Congress to go back to the drawing board. Turkey described the bill as anti-Islamic and vowed to take the matter up with the international Organization of Islamic Cooperation. In Iraq, political groups are calling for citizens to sue the U.S. Government for the 2003 invasion. Western allies worry about their own liability in preventing their nationals from engaging in terrorist attacks on U.S. soil (France) about being forced to reveal secrets during legal proceedings (UK).
States are not the only ones who should be anxious about unintended consequences. Here are two ramifications for private entities to worry about:
- Adverse Implications for businesses operating overseas. The security of U.S. interests outside the U.S. is potentially compromised. Sovereign immunity is international customary law, but the U.S. is not subject to the jurisdiction of any international court, and the only recourse against the U.S. for violating this principle is through reciprocity. As the U.S. carves out an exception to statute, other states could pass their own exceptions. In doing so, it is not unimaginable that they would target U.S. national interests to include businessmen, their families and their property. These adverse implications are not circumscribed to areas hostile to the U.S. Because the statute does not clearly define what “aiding and abetting” mean, some Western allies are considering their own statutes.
- Adverse Implications for foreign direct investment. The statute provides for civil liabilities against foreign state owned assets in the U.S. An adverse ruling could result in the freezing of a foreign state’s assets and subsequent confiscation to indemnify the victims of a terrorist attack.
The potential risk to investments in the U.S. will undoubtedly have a bearing on the calculus of foreign sovereign funds to invest in the U.S.