Navigating the U.S. Legal System, If You are a USG Contractor (or Sub) Outside the U.S.

Compass Rose

Compass Rose (Photo credit: mwcarruthers)

Many companies that are located outside the United States, and that are contractors and subcontractors on United States Government (USG) projects, are unaware of the legal systems and rights that can apply to their contracts and interactions.  Working on project for the U.S. government does not necessarily mean, if problems come up, you can sue the U.S. government. Your complaint may instead be against the prime contractor company with whom you have a contract. There are a variety of factors that determine who you can sue, where and how, when your work is connected to the U.S. government or a U.S. company working overseas. This article gives a high-level overview of law and areas of the U.S. legal system that could apply to your matters.

Types of Law

Generally speaking, there are four types of law that could apply to issues encountered by a USG contractor or subcontractor located outside the U.S.:

(1) Federal (National) and State Statutory/Regulatory Law

(2) State Contract Law

(3) State Tort Law

(4) Your Local (Non-U.S.) Law

Statutory and regulatory law involve laws or rules that are “on the books,” so to speak, written by the U.S. Federal Government or by States within the U.S.  A principal example is the Federal Acquisition Regulation (FAR), which are regulations written by the U.S. Federal Government, that applies to a huge range of issues involving the acquisition and contracting process between the USG and its contractors.  Many disputes between the USG and primary contractors are governed by FAR’s rules and procedures.  Other statutes and regulations could apply to a contracting dispute, however, depending on the circumstances and the contractor or subcontractor involved with the USG project.

Also, some types of statutes involve “whistleblowing” (reporting to the government or other appropriate sources) about conduct that harms someone (you or someone else).  For example, the False Claims Act is a statute of the U.S. Federal government that protects the USG from fraud.  The False Claims Act has a provision (called the “qui tam” provision) that allows non-USG parties, including a contractor or subcontractor, to report wrongdoing and defrauding of the USG. The person who reports the violation is called a “whistleblower.”  If the report leads to the USG recovering its wrongly taken money, the whistleblower can recover a percentage of the money, typically within the range of 15-25%.  Some awards under statutes and regulations– including under FAR, the False Claims Act, or other statutes and regulations– can be substantial.

State contract law involves a body of law of a particular State within the U.S., such as Texas, California, or New York, etc. developed over time by that State’s courts having heard contract disputes, and articulating rules within those contracting-dispute decisions.  For example, if your company is a subcontractor located outside the U.S., your contract with the prime USG contractor may say that any legal issues that arise will be handled under the contract law of a particular State within the U.S.

State tort law also involves a body of law of a particular State, developed by that State’s courts’ decisions, but the decisions and rules concern “torts” (injuries or harms wrongfully caused by parties), rather than contracts.  Examples of torts include fraud, causing physical injury (negligently or intentionally), product liability, and many other types of harmful acts.  A given State’s tort law may apply to your situation, particularly if your contract specifies that that State law applies to your issues and disputes.

Your Local (non-U.S.) law may apply to your situation, depending on the circumstances and your country’s laws and legal system. Typically, one or more of the areas of law above will apply to a USG contractor or subcontractor situation, depending on your contract defining or triggering a particular area of law to apply.  In addition, sometimes a contractor’s work being implemented outside the U.S., despite the project being connected to the USG, may involve your local, non-U.S. law.

An attorney can help you identify which law or laws above may apply to your particular situation,  and what potential rights and options may be advisable.

Types of Legal Forums

Generally speaking, there are four types of legal forums (places) which could hear or decide issues involving a USG contractor or subcontractor located outside the U.S.:

(1) U.S. or State Agency Forum

(2) U.S. Federal Court

(3) U.S. State Court

(4) Local (Non-U.S.) Forum

An agency forum is an area within a government agency that is designated to hear legal disputes of a particular kind. For example, the Armed Services Board of Contract Appeals (ASBCA) is an agency forum of the U.S. Federal government that hears and decides certain disputes arising between a primary contractor and the USG, and specifically prime/USG contract disputes involving the Department of Defense, including the Departments of the Army, Navy and Air Force (i.e. U.S. military), the National Aeronautics and Space Administration (NASA), and the Central Intelligence Agency (CIA).  Other agencies of the Federal or State governments could be the forum for a given dispute, depending on the parties and issues involved.

A Federal Court is the forum for many types of legal disputes involving contractors and USG projects.  For example, a U.S. Federal Court will hear appeals of ASBCA agency decisions, if a losing party appeals an ASBCA decision.  Some types of disputes are taken directly (initially) to a Federal Court, depending on the nature of the dispute, the parties, and the law involved.

A State Court is the forum for some legal disputes involving USG projects– particularly for prime/subcontractor disputes.  For example, a subcontractor located outside the U.S. (e.g. Iraq or Afghanistan) that has a contract with a prime contractor to the USG may complain about a breach of contract, or may believe the prime contractor has injured it in some manner, such as by operating an unsafe work site.  If the contract between the prime and subcontractor states that a given State’s laws apply to the parties’ interactions or disputes, such as California or Texas, then it is likely that a legal action for breach or wrongdoing would need to be brought to a court in that given State.

A local (non-U.S.) forum may also be an available or necessary place to bring legal disputes relating to a USG project, depending on the circumstances and your local law.

An attorney can help you identify which forum or forums are potentially available or advisable places to bring a legal action for a given dispute.

Conclusion

We hope this article’s overview of the U.S. legal system is helpful to companies that are located outside the U.S., and that are contracted or subcontracted for USG projects.  If you have any questions about what types of laws or forums may be involved with your matters, please feel free to contact blog author Attorney Vonda Vandaveer at vonda@vkvlaw.com.  There is no charge for an initial phone consultation.

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