The ATS Clarification Act Can Protect Human Rights and Level the Playing Field for U.S. Businesses
June 1, 2022
As previously reported on TLB, Senators Durbin (D-IL) and Brown (D-OH) recently introduced the Alien Tort Statute Clarification Act (ATSCA), which, if passed, will clarify the extraterritorial reach of the Alien Tort Statute (ATS) and expand the statute’s jurisdiction to cover all defendants “present in” the United States. The ATS is one of our nation’s oldest—and, for a time, most overlooked—laws. This one sentence statute gives foreign victims of international human rights violations (including genocide, crimes against humanity, torture, slavery, war crimes, forced labor, and state-sponsored sexual violence) the opportunity to seek justice by filing a civil lawsuit in U.S. courts. Unfortunately, the promise of the ATS has been eroded by recent Supreme Court decisions that narrowly limited who can be sued and for what. The ATSCA corrects these decisions by implementing a jurisdictional standard that is coextensive with U.S. due process guarantees and by restoring the ATS’s applicability to human rights abuses committed abroad.
Holding perpetrators of human rights abuses accountable for violations of international law is reason enough to support amending the ATS. The ATSCA would allow victims of atrocities abroad to bring civil claims against persons—corporations as well as individuals—that commit, aid and abet, or order the abuse. But an amendment to expand the ATS extraterritorially should be supported for another reason as well: it is excellent for the U.S. economy.
Companies That Violate International Law Stifle Fair Competition
Most Fortune 500 companies invest heavily in Corporate Social Responsibility programs to attract and retain employees, improve consumer brand perception, and increase investor confidence. Yet, there is evidence that the more financially successful and prominent a corporation becomes, the more likely it is to engage in illegal behavior. Many multinational corporations exploit vulnerable workers and foreign instability to lower their production costs. As a result, companies that follow the law—often those that are smaller and have fewer employees and less capital—are at a competitive disadvantage to those willing to violate international (and often foreign domestic) laws.
In the United States, 99.9 percent of businesses are considered “small,” with fewer than 500 employees (although 81 percent of these businesses have no employees at all). Small American companies are crucial for a robust and innovative domestic economy: they provide nearly half of all private sector jobs, create 65 percent of net new jobs, and make up 97.5 percent of U.S. exporters. But without huge sums of capital and scaled operations, it is often difficult for small businesses to form and maintain relationships with suppliers in other countries and to withstand global market shocks (like the COVID-19 pandemic). This struggle to compete becomes even more challenging when the largest companies—which do have the capital, scale, and market influence to access and succeed in the globalized economy—do not follow international law.
Commission of or complicity in human rights violations and international crimes by multinational companies—often a means to maximize profit by exploiting supply chains that rely on illegal practices—is well-documented and widespread in various industries. Food corporations source products from supply chains rife with forced labor and other labor rights violations. Major fashion companies outsource manufacturing to foreign factories where forced labor is notoriously prevalent. Dozens of industry giants have been implicated in benefitting from the Chinese government’s ongoing genocide against Uyghurs by utilizing Uyghur forced labor in the production of textiles and electronics; some of these companies even resisted exiting this market after the United States formally labeled the situation a genocide. Multinational corporations have also allegedly used their extensive resources and influence to fund foreign terrorist organizations, collude with local authorities to execute individuals who challenge unethical business practices, and support the kidnapping and torture of workers by military dictatorships. The list, unfortunately, goes on and on.
The ATSCA’s findings make clear that there should be accountability under the statute for aiding and abetting human rights violations directly and through supply chains. This morally abhorrent behavior by multinational corporations is reason enough to support an amendment clarifying the ATS’s extraterritorial reach. But these practices also encourage global volatility and create contrived advantages, such as artificially low production costs, that distort market prices and push law-abiding (and often smaller) businesses out of the market. By contrast, private sector support for the rule of law helps create a global economic environment that is stable, predictable, and transparent: “Where these factors are present,” Myron Brilliant of the U.S. Chamber of Commerce noted in 2013, “investment thrives, economies grow, jobs are created, and prosperity follows. Where they are absent, corruption thrives, ambiguity reigns, investment dollars flee, and tax revenues plummet.”
Leveling the Playing Field
Critics of expanding ATS jurisdiction argue that accountability for international violations will disadvantage U.S. companies compared to companies in countries that provide full immunity for international crimes and human rights abuses. But other countries are increasingly holding their own companies to account for human rights violations abroad. Moreover, this argument ignores the fact that law-abiding U.S. businesses are currently disadvantaged by unfair competition from other U.S. businesses. Healthy competition among U.S. companies—a fair game for those businesses that do not commit human rights atrocities—is good for competitiveness both at home and in foreign markets.
Both smaller companies and some multinationals have publicly stated that a fair playing field is needed in the global marketplace. In 2020, eighteen small and mid-size chocolate companies (seventeen of which are U.S.-based) advocated for their right to fair competition as amici for the plaintiffs in Nestle USA v. Doe (2021), a Supreme Court case brought under the ATS challenging the forced labor practices of two dominant cocoa and chocolate companies:
Amici pay higher prices for the cocoa they purchase, reflecting the actual cost of production, and they invest in robust transparency and due diligence to ensure compliance with international human rights law and standards. These costs are internalized and passed on to consumers, making it difficult for them to compete in the market with companies that source cheap cocoa produced with forced child labor.
Even companies engaged in serious supply chain abuses acknowledge that this situation is unfair. In 2019, several large cocoa and chocolate companies with documented reliance on illegal child labor throughout their supply chains admitted that accountability for human rights in global supply chains was necessary to “create a level playing field and consistency for companies, … address adverse impacts on human rights, … [and] benefit producer countries by reinforcing their efforts to improve governance.” Despite this admission—and other public commitments to address known abuses in their supply chains—these same companies have failed to eradicate violations of international and local laws from their global operations. This failure means these companies continue to have a competitive advantage over companies that ensure their supply chains comply with domestic and international human rights norms.
Expanded ATS liability will incentivize companies to ensure the goods they source are produced legally. With the ATSCA, Congress can protect human rights and level the market playing field at the same time. Extraterritorial accountability under the ATS is imperative to address human rights violations financed, facilitated, and perpetrated by companies in the name of profit. Allowing the United States to function as a safe harbor for corporate (as well as individual) human rights abusers is harmful to our economic, social, and—above all—moral interests.
The ATSCA provides Congress an opportunity to more effectively address modern human rights violations, many of which occur within increasingly complex global supply chains and which amplify the disadvantages small U.S. businesses face at home and abroad. The proposed amendment, if passed, would provide greater redress to victims while also leveling the playing field to promote a domestic and global economy built on fair competition. By clarifying that the ATS applies extraterritorially, Congress will take a meaningful and timely step toward ending the impunity currently enjoyed by many corporations for international human rights violations.