From time to time, business interests argue that allowing lawsuits against corporations under the Alien Tort Statute (ATS), (1) and other human rights litigation is bad for business: that it harms international trade and investment that is necessary to pull people out of poverty and build open societies. Most recently, this argument appeared in an amicus brief submitted to the Supreme Court by the U.S. Chamber of Commerce in Kiobel v. Royal Dutch Petroleum Co., (2) in which the Court is considering whether corporations can be sued at all under the ATS. (3) But is ATS litigation really bad for business? Does it target or discourage investment behavior that, as a matter of policy, should be encouraged?
This question can, in my view, be broken down to two discrete inquiries, one normative and one empirical. The normative question is whether we wish to deter international investment that abets the most serious human rights abuses, for that is what ATS litigation targets. The empirical question is whether corporations are economically rational actors; if they are, the ATS will deter only the investment that we wish to discourage. I submit that the answer to both questions is yes, therefore the ATS is not bad for business in any meaningful way.
Before delving into these questions, however, it is worth noting Judge Posner's comments in Flomo v. Firestone Natural Rubber Co. (4) Observing that an amicus (in that case, as in Kiobel, the Chamber of Commerce) had argued that ATS suits were "bad for business," Judge Posner stated that this argument "may seem both irrelevant and obvious; it is irrelevant, but not obvious." (5) Posner is certainly correct that this discussion is irrelevant to whether corporations should be subjected to liability under the ATS, which should be determined according to the law. Thus, what follows below--an analysis of how obvious it is that the ATS is bad for business--should not matter at all to the Supreme Court's ultimate decision in Kiobel.
I. AIDING AND ABETTING HUMAN RIGHTS ABUSES: DESTRUCTIVE, NOT CONSTRUCTIVE, ENGAGEMENT
The first important inquiry is whether, as a matter of policy, we wish to be promoting trade and investment that aids and abets egregious human rights abuses. In this context, I am using "aid and abet" in a very specific legal sense: the generally agreed-upon standard is knowingly providing substantial assistance to a specific human rights abuse. (6) Some courts have even adopted a purposeful assistance standard-wrongly in my view--but if that is the prevailing standard, it makes the "bad for business" argument all the more difficult.
The classic example of knowingly aiding and abetting is selling a handgun to a man who states his intention to kill his wife. There seems to be general agreement that such conduct should be discouraged, and it can lead to civil, and possibly criminal, liability. This example also illustrates the difference between "knowing" and "purposeful" abetring: the handgun dealer almost certainly has no intent to harm the man's wife (i.e., his conduct is not purposeful), but knows that he is likely assisting in that result (i.e., his conduct is knowing).
Conduct that is parallel to this example is alleged in numerous ATS cases against corporations. Often, corporations are accused of voluntarily providing assistance such as trucks, helicopters, arms, or other support to military, paramilitary, or other groups with the knowledge that those groups intend to--or are highly likely to--commit abuses such as crimes against humanity, torture, extrajudicial killings, and war crimes. In a typical case, these abuses are committed for the overall purpose of securing the corporation's operations, but that is not a requirement for liability.
It is important to note that no ATS case has been allowed to proceed on a theory that a corporation is liable simply for investing in a country with a poor human fights record or for paying ordinary taxes to a repressive government (and few, if any, such cases have been filed). …