Today, few people remember Libya's involvement in the bombing of French airline Union des Transports Aériens (UTA) Flight 772, which exploded over the Sahara desert in 1989. Though it has been called "the forgotten flight" because most attention focused on Pan Am Flight 103, the explosion of UTA Flight 772 killed 170 people from 17 different countries. The family members of American victims seemingly gained some closure in January 2008 when U.S. district court judge Henry H. Kennedy awarded 44 relatives $6 billion in damages against Libya. But as the Washington Post recently reported, these family members now find that the U.S. government has terminated their judgments as part of an agreement it reached with Libyan leader Muammar Gaddafi.

Family members are justifiably outraged. Anne Carey, whose mother died on Flight 772, told the Post: "We fought this fight. We stood up to terrorists who took our loved ones and we did so in federal court." She added, "We felt we accomplished something. For it to be dismissed is beyond comprehension." The government's actions have undoubtedly reopened old wounds, and make it seem that the vindication the families gained through a hard-fought court victory was ephemeral and ultimately illusory. Yet two questions must be asked in the wake of these dismissals. First, are such dismissals the inevitable result of litigation against state sponsors of terror? And if so, is it a good idea to allow such lawsuits in American courts?

To most Americans, it must at first seem counterintuitive to suggest that there might not be a legal cause of action for acts as morally despicable as Libya's terrorist atrocities. But the "terrorism exception" to the Foreign Sovereign Immunities Act (FSIA), which allows lawsuits against countries designated state sponsors of terror by the U.S. secretary of state, was an unprecedented jurisdictional step when Congress passed it in 1996-and it remains an anomaly in international jurisprudence.

Sovereignty is one of the key characteristics of any nation-state, and stemming from the idea of sovereignty is the general principle that states are immune from the jurisdiction of other countries' courts. Sovereign immunity has never been unlimited in American law, but it was historically quite broad. Chief Justice John Marshall articulated the classic formulation in the 1812 case The Schooner Exchange v. M'Faddon, in which the Supreme Court denied two American citizens' claim to a French vessel seized in U.S. waters. Though the plaintiffs argued that France had earlier captured the boat from them on the high seas and converted it into a warship, the Supreme Court held that they had no right to sue in U.S. court. Justice Marshall wrote that the sovereign immunity precluding their claim was rooted in "perfect equality and absolute independence of sovereigns."

The U.S.'s understanding of sovereign immunity became somewhat narrower over time, in large part because it placed American companies at a disadvantage. If private U.S. businesses were amenable to suit in foreign courts while socialist countries' state trading companies could not be sued in America, U.S. firms might find themselves without recourse when contracts that they entered were breached. When Congress codified foreign sovereign immunity into statutory law with the FSIA in 1976, foreign states enjoyed immunity from suit unless the act that the plaintiff alleged fell into one of the Act's narrow exceptions. These exceptions included waivers of immunity, commercial activity affecting the U.S., expropriation, property claims, noncommercial torts occurring within the U.S., international agreements, and certain counterclaims. The FSIA did not permit suit against foreign states for acts of terrorism committed against U.S. nationals overseas.

This changed in 1996, when Congress passed the terrorism exception allowing foreign states designated state sponsors of terror by the U.S. secretary of state to be stripped of immunity for acts or material support of terrorism where the claimant or victim is a U.S. national. The terrorism exception was passed the year after the Oklahoma City bombing, which conjured the specter of a major state-sponsored terrorist attack on American soil. Other factors motivating the terrorism exception's passage were the dismissal of a lawsuit against Libya for the bombing of Pan Am Flight 103, and the murder of American college student Alisa Flatow by a Palestinian suicide bomber in Israel. But was the terrorism exception a worthy piece of legislation?

There is good reason to believe that it was not. Congress' two major goals in enacting it were to punish and deter state sponsors of terror, and to provide vindication and compensation to victims of terrorism and their families. In light of the government's recent dismissal of the Flight 772 victims' claims, the legislation does not seem to advance either goal.

The terrorism exception does not punish and deter state sponsors of terror because no state has paid an entered judgment. Though Gadaffi has agreed to turn over $1.5 billion that the U.S. government will distribute to family members of the victims of Libyan-sponsored terrorism, he would have paid compensation to normalize relations even in the absence of the terrorism exception. In 2004, for example, Libya agreed to pay France $170 million in compensation for the Flight 772 bombing as part of the process of reestablishing relations with France. Indeed, it seems that the reason Libya has paid attention to terrorism exception litigation-presenting a defense in court, while other countries sued under the exception have not-is because Gadaffi had already ceased his sponsorship of terror, and wanted to reestablish relations with the U.S. The countries that we really intend to deter, like Iran, do not display similar interest in the litigation against them.

Nor, in light of the recent dismissals, does the terrorism exception fulfill the goals of vindication and compensation. Vindication is supposed to be achieved by giving victims their "day in court," and by using the legal system to condemn the acts of terrorist states. But since no defendant state has paid a judgment, the terrorism exception fails to vindicate victims through the essential step of punishment. Worse, the Flight 772 families saw the judgments that they worked hard to obtain simply thrown away as the U.S. moved toward normalizing relations with Libya.

Relying on the terrorism exception for compensation to victims has also proven problematic. Although no defendant state has paid a judgment, a limited class of plaintiffs who successfully sued Iran and Cuba under the exception were compensated by the Justice for Victims of Terrorism Act of 2000 (JVTA). Though the U.S. distributed $400 million to claimants against Iran as Iran's creditor, there is no reason to believe that the Islamic republic will ever recompense the U.S. This raises a basic fairness question about expecting American taxpayers to pay for such large awards.

The JVTA's compensation to plaintiffs who sued Cuba raised even more issues. In 2001, the U.S. approved the transfer of nearly $97 million to plaintiffs who had sued Cuban on behalf of members of a humanitarian organization whose civilian aircraft were shot down by the Cuban air force. The money that they received came from long-distance telephone fees that AT&T paid to the Cuban carrier to access its system between the mid-1960s and 1994. This angered other citizens with claims against Cuba, because it reduced the pool of available assets. Stuart Eizenstat, who was then the deputy secretary of the Treasury, testified in 1999 that the U.S. Foreign Claims Settlement Commission had certified 5,911 claims by U.S. nationals against Cuba, totaling about $6 billion. Eizenstat said that the JVTA benefited one small group of Americans over a far larger group: "Those with judgments in court since the FSIA amendments of 1996 would benefit over others, many of whom have waited decades to be compensated by Cuba and Iran for both the loss of property and the loss of the lives of their loved ones." Terrorism exception plaintiffs were given first priority from a finite pool of assets, while others with claims against Cuba could only watch the pool dry up.

There are costs to the terrorism exception as well, including the risk of reciprocal legislation targeting the U.S. for its foreign policy. The Departments of Justice and State expressed this concern when the legislation was being considered back in the 1990s. The terrorism exception also engenders hostility against the U.S. As Anne-Marie Slaughter and David Bosco wrote in Foreign Affairs in 2000, the "increased involvement of U.S. courts in foreign affairs" comes at a time when the U.S. refuses to participate in the International Criminal Court. They note that lawsuits under the terrorism exception "suggest that the world's sole superpower is arming itself with superpower courts. This picture understandably may threaten those uncomfortable with U.S. hegemony."

The terrorism exception creates obstacles to normalizing relations with countries that have been sued under it. If a country with which the U.S. is considering normalizing relations faces a prohibitive amount of judgments, payment may not be feasible. In this way, the terrorism exception may have a deterrent effect opposite from what Congress intended. The prospect of being sued under the exception is unlikely to deter major sponsors from funding terrorist groups while they are committed to doing so. Rather than deterring those states, the looming judgments may actually deter defendant states from normalizing relations with the U.S.

Of course, when the U.S. wanted to normalize relations with Libya, it simply waived the judgments that plaintiffs had won in court. But it is not clear that the U.S. government ultimately has the power to do so. American jurisprudence historically gave the executive broad power to settle the legal claims of U.S. nationals against foreign governments, in large part due to a "treaty exception" denying U.S. courts jurisdiction over claims arising from treaties that the U.S. entered with foreign states. But this principle was called into question in the 1981 Supreme Court decision Dames & Moore v. Regan, which bears a striking resemblance to the present dismissals of judgments against Libya. Dames & Moore arose after President Reagan issued an executive order suspending legal claims against Iran in order to establish the Iran-United States Claims Tribunal. An American business argued that President Reagan's actions amounted to a taking of its property without just compensation, in violation of the Fifth Amendment of the U.S. Constitution. Though Dames & Moore was resolved in the government's favor because the claim was not ripe, the Supreme Court elliptically suggested that the treaty exception would not pose a jurisdictional obstacle "to the extent petitioner believes it has suffered an unconstitutional taking by the suspension of the claims." It is unclear if the treaty exception will similarly be found inapplicable in the future, but we may soon find out. Given the outrage expressed by Flight 772 family members, there is a strong chance that they will also bring takings claims against the U.S. government for dismissing their judgments.

But perhaps the biggest problem with the terrorism exception is institutional: it transfers responsibility for foreign policymaking from the political branches, which are competent to consider matters of foreign policy, to the courts, which are not. The terrorism exception involves the courts in U.S. foreign policy in two ways. First, they are asked to provide punitive damages to successful plaintiffs at a level sufficient to deter states from sponsoring terrorism in the future. Thus one observer, writing in the UCLA Journal of International Law and Foreign Affairs, referred to judgments under the exception as "numerous mini-foreign policy initiatives ongoing at the same time." Second, as I just explained, the executive may lack control over these judgments once entered. There is a danger in transferring the power to make foreign policy into the hands of the branch of government least competent to do so.

State sponsorship of terrorism is unacceptable, a moral outrage that demands a response. But should that response come in the form of lawsuits in U.S. courts? If suits continue under the terrorism exception, this won't be the last time that we see the U.S. government terminate judgments that its own citizens obtained against foreign sponsors of terrorism.