Appeals Court Blocks One Terror Suit, But May Allow Others

All Banking Law, All in One Place. Bloomberg Law: Banking is the comprehensive research solution that powers your practice with access to integrated banking-related legal news, analysis,...

By Chris Bruce

Dec. 8 — The U.S. Court of Appeals for the Second Circuit Dec. 8 blocked a lawsuit by non-U.S. citizens against a Jordanian bank accused of helping suicide bombers, but said other companies might have to face similar suits in the future.

The ruling shields Arab Bank Plc, Jordan's largest lender with branches around the world, including one in New York, from claims under the Alien Tort Statute (ATS), an anti-terrorism law that only allows claims by non-U.S. citizens.

The court reaffirmed a prior ruling dubbed “Kiobel I” that said the Alien Tort Statute does not allow claims against corporate entities, but said a 2013 U.S. Supreme Court ruling “appears to suggest that the ATS allows for some degree of corporate liability.”

The ruling signals that the Second Circuit may change its stance on that question, and that corporations could face claims under the statute.

“We will leave it to either an en banc sitting of this Court or an eventual Supreme Court review to overrule Kiobel I if, indeed, it is no longer viable,” Judge Robert D. Sack said for a three-judge panel.

What About Clearing?

Among other points, the decision puts off for now a decision on what the court called a “difficult and sensitive issue” — how to treat the clearing of foreign dollar-denominated payments through Arab Bank's New York branch.

According to the court, there is a presumption against application of the ATS within the U.S. But grappling with the clearing question — the only nexus between the alleged terrorist activities and the U.S. — would force a decision on extraterritorial application, even though it was not the main focus in the district court or on appeal.

According to the Institute of International Bankers (IIB), more than $1 trillion in foreign dollar payments are cleared through New York each day. In a July 2014 brief, the IIB urged the Second Circuit not to allow clearing operations to serve as a basis for ATS claims.

Doing so would expand the scope of the ATS and expose foreign banks to lawsuits “whenever their provision of ordinary banking services abroad bore any attenuated link to related dollar-clearing operations here in the United States,” said the brief by lawyers H. Rodgin Cohen, Akash M. Toprani, Brent J. McIntosh and Jeffrey B. Wall of Sullivan & Cromwell.

Attacks Spark Claims

The ATS, which only allows suits by “aliens,” or non-U.S. citizens, differs from the Anti-Terrorism Act (ATA), which gives courts jurisdiction only for lawsuits by U.S. nationals.

The suit at issue in the Dec. 8 ruling arose in the wake of attacks in Israel, the West Bank and the Gaza Strip between January 1995 and July 2005.

The plaintiffs alleged that Arab Bank helped terrorist organizations and their proxies raise funds for the attacks and to make payments to the families of suicide bombers. They claimed Arab Bank used its New York branch in those efforts.

Arab Bank did not immediately respond to a request for comment Dec. 8.

The case is separate from a 2014 trial under the Anti-Terrorism Act that also involved Arab Bank. There, a federal jury in New York said Arab Bank helped Hamas militants carry out attacks in Israel, marking the first trial against a bank on civil claims of violating the ATA (184 BBD, 9/23/14).

To contact the reporter on this story: Chris Bruce in Washington at cbruce@bna.com

To contact the editor responsible for this story: Seth Stern at sstern@bna.com