The US Congress has rejected President Barack Obama’s veto of legislation, which allows relatives of the victims of the 11 September 2001 attacks in New York to sue the government of Saudi Arabia, a long-standing ally of America in the Arab world.

The overwhelming rejection was the first veto override of Obama’s eight-year presidency. The House of Representatives voted 348-76 against the veto, after the Senate rejected it 97-1, which means the Justice Against Sponsors of Terrorism Act (JASTA) becomes law.

Senators argue the families of the victims of 9/11 be allowed to pursue justice, even if it causes diplomatic challenges.

Obama had argued that JASTA could expose US companies, troops and officials to lawsuits, and alienate important allies at a time of global unrest.

Major US corporations with business interests in Saudi Arabia, including GE and Dow Chemical Company, have also opposed it, as did the EU and other US allies.

Secretary of Defence Ash Carter had urged lawmakers to sustain the veto, and CIA director John Brennan also issued a statement before the vote, saying the bill had “grave implications” for national security.

Bond delay

JASTA is a blow to Saudi Arabia, which had financed an extensive lobbying campaign against the legislation. Riyadh has denied responsibility for attacks on US soil and has strongly objected to the bill. The kingdom had reportedly said it might sell up to $750bn in US debt and other assets if it became law, according to earlier media reports.

JASTA could hamper the kingdom’s plans to tap the international debt market to raise at least $10bn from the sale of its debut bond as some international investors may balk at buying Saudi securities, according to US news agency Bloomberg, which cited unnamed people familiar with the matter.

Saudi Arabia, the biggest Opec producer and the largest Middle Eastern economy, relies heavily on the sale of oil for revenues and has tapped the local and international debt markets to bridge an estimated $87bn budget shortfall this year. It raised a $10bn loan earlier in the year and is looking to secure at least another $10bn through the international bond.

Saudi officials, however, have yet to make a decision on the timing of the bond and the amount they plan to raise, Finance Minister Ibrahim al-Assaf was cited as saying in a statement by Bloomberg.

In the local debt market, Saudi Arabia has sold a total of SR156.6bn ($41.6bn) since last year, of which SR70.5bn has come in the first half of this year. Total domestic currency issuances this year could reach SR100bn.