Case 7.1 Linde v. Arab Bank, PLCFootnote United States Court of Appeals, Second

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Case 7.1 Linde v. Arab Bank, PLCFootnote United States Court of Appeals, Second Circuit, 706 F.3d 92 (2013). Company Profile Background and Facts (Adam Berry/Bloomberg via Getty Images) Founded in 1930, Arab Bank is one of the largest financial institutions in the Middle East. Headquartered in Jordan, it serves clients in more than 500 branches in thirty countries, including branches in Australia, New York, and Switzerland. The bank is a major economic engine in Jordan and throughout the Middle East/Northern Africa, providing modern banking services and capital, and facilitating development and trade throughout the region. Background and Facts Victims of terrorist attacks that were committed in Israel between 1995 and 2004—during a period commonly referred to as the Second Intifada—filed a suit in a federal district court against Arab Bank, PLC, seeking damages under the Anti-Terrorism Act (ATA) and the Alien Tort Claims Act. According to plaintiffs, Arab Bank provided financial services and support to the terrorists. Over several years and despite multiple discovery orders, the bank failed to produce certain documents relevant to the case. As a result, the court issued an order imposing sanctions. Arab Bank appealed to the U.S. Court of Appeals for the Second Circuit, arguing that the order was an abuse of discretion. In the Words of the Court … Susan L. CARNEY, Circuit Judge: * * * * * * * The Bank argues that the documents are covered by foreign bank secrecy laws such that their disclosure would subject the Bank to criminal prosecution and other penalties in several foreign jurisdictions. The sanctions order takes the form of a jury instruction that would permit—but not require—the jury to infer from the Bank’s failure to produce these documents that the Bank provided financial services to designated foreign terrorist organizations, and did so knowingly. * * * * The District Court carefully explained its decision to impose this sanction. It noted that many of the documents that plaintiffs had already obtained tended to support the inference that Arab Bank knew that its services benefited terrorists. According to the District Court, these documents included * * * documents from Arab Bank’s Lebanon branch that suggested * * * Arab Bank officials approved the transfer of funds into an account at that branch despite the fact that the transfers listed known terrorists as beneficiaries. As a consequence of * * * Arab Bank’s non-disclosure, the court reasoned, plaintiffs would be “hard-pressed to show that * * * these transfers were not approved by mistake, but instead are representative of numerous other transfers to terrorists.” The permissive inference instruction will, according to the District Court, help to rectify this evidentiary imbalance. * * * * Arab Bank argues that the District Court’s decisions ordering production and imposing sanctions should be vacated because they offend international comity. This argument derives from the notion that the sanctions force foreign authorities either to waive enforcement of their bank secrecy laws or to enforce those laws, and in so doing create an allegedly devastating financial liability for the leading financial institution in their region. The Bank asserts, further, that international comity principles merit special weight here because the District Court’s decisions affect the United States’ interests in combating terrorism and pertain to a region of the world pivotal to United States foreign policy. * * * The [District] Court expressly noted that it had “considered the interests of the United States and the foreign jurisdictions whose foreign bank secrecy laws are at issue.” Additionally, international comity calls for more than an examination of only some of the interests of some foreign states. Rather, the concept of international comity requires a particularized analysis of the respective interests of the foreign nation and the requesting nation. In other words, the analysis invites a weighing of all of the relevant interests of all of the nations affected by the court’s decision. * * * The District Court recognized the legal conflict faced by Arab Bank and the comity interests implicated by the bank secrecy laws. But [the Court] also observed—and properly so—that Jordan and Lebanon have expressed a strong interest in deterring the financial support of terrorism, and that these interests have often outweighed the enforcement of bank secrecy laws, even in the view of the foreign states. Moreover, * * * the District Court took into account the United States’ interests in the effective prosecution of civil claims under the ATA [Anti-Terrorism Act]. This type of holistic, multi-factored analysis does not so obviously offend international comity. [Emphasis added.] Decision and Remedy The U.S. Court of Appeals for the Second Circuit affirmed the lower court’s decision and order. There is no abuse of discretion in concluding that the interest of other nations in enforcing bank secrecy laws are outweighed by the need to impede terrorism “as embodied in the tort remedies provided by U.S. civil law and the stated commitments of the foreign nations.”

Question: 1: What are the facts of the case?

2: What is the legal issue of the case?

3: How did the court decide on the issues?

4: What reasoning did the court use to substantiate their findings?

5: Do you agree or disagree with how the finding by the court in this matter? why?

Explanation / Answer

1. Facts of the case - The case relates to funding of terrorists by Arab Bank, one of the largest financial institutions in the Middle East. The victims of terrorist attacks in Israel, over a 10 year period, have filed a suit in a federal district court against Arab Bank, PLC, seeking damages under the Anti-Terrorism Act (ATA) and the Alien Tort Claims Act. The District Court has imposed sanctions on Arab bank and ordered the Bank to produce documents relevant to the case. The sanctions imposed interfere with Bank secrecy laws.

2. Legal issue - The legal issue here is District court's orders to Arab bank to produce certain confidential documents. These documents are covered by foreign bank secrecy laws and are against the concept of international comity. Sanctions in a way are doing away with bank secrecy laws.The disclosure of documents can open up the bank to criminal prosecution and other penalties in several foreign jurisdictions.

3. Court's decision on the issue - The court decided on the issue on the basis of documents that plaintiffs had already presented and keeping in mind the interests of United States and the foreign jurisdictions whose foreign bank secrecy laws are at issue. The documents supported the claim of plaintiffs that Arab Bank's services benefitted terrorists. The documents included approval documents for payments into accounts with listed known terrorists as beneficiaries. Further, the court imposed sanctions on Bank to present additional documents to prove its innocence. In the absence of disclosure from Arab Bank it will be difficult to prove that these transfers were not approved by mistake, but instead are representative of numerous other transfers to terrorists.

4. Reasoning - District court clearly laid out the reasons for its judgment:

5. Yes, I agree with the court's judgment. Court has substantial proof that Arab bank has funded terrorists over a long period. This can be only disproved by the presentation of documents by Arab Bank proving wrong plaintiff's claim, that the bank has funded terrorists. Terrorism is a global issue and each country in question Jordan, Lebanon and USA have taken steps to deter the funding of it. Hence, in such a scenario the need to enforce bank secrecy laws is outweighed by the need to fight terrorism.

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