From False Claims Act exposure and Defense Federal Acquisition Regulation Supplement (DFARS—a supplement to the Federal Acquisition Regulations (FAR)),compliance to export controls and human rights claims, defense companies face the threat of litigation from myriad sources. For investors, rigorous diligence and ongoing risk monitoring are critical to preserving value in an increasingly contested legal environment.
Summary
The litigation risk profile of businesses in the defense supply chain is complex.
In the U.S., the False Claims Act is a major driver of disputes, which are often triggered by contractual ambiguities rather than intentional fraud.
DFARS regulations impose extensive compliance requirements, making thorough regulatory diligence essential for investors.
Intellectual property disputes and shifting geopolitical factors, such as U.S. export controls, introduce additional risks, as do human rights-related lawsuits
Companies in the defense value chain are exposed to the threat of litigation from many angles.
For U.S. defense contractors and their suppliers, the False Claims Act is one of the primary drivers of litigation. The act permits the federal government to recover triple the value of any false claim and also has a provision that allows private whistleblowers to initiate cases and share in recoveries. In 2025 alone, the government recovered USD5 billion in False Claims fines.
What makes the False Claims Act particularly challenging for investors is that...
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