Monday, December 8, 2014


The Union of Arab Banks (UAB), in an Amicus Curae brief, filed in support of Arab Bank's motions to overturn the liability verdict, has raised a well-founded fear that, due to their strict bank secrecy laws, other Middle Eastern banks will also soon find themselves facing potentially huge jury verdicts for damages, with little chances of success on appeal.

Quoting verbatim from the UAB brief:

The UAB has a critical interest in this litigation, because its members are vulnerable to the same impossible legal dilemma that Arab bank experienced, when it was sanctioned, because foreign       customer privacy laws foreclosed its compliance with plaintiffs' discovery requests.

As this is the first civil case where claims have gone to trial against a bank under the Anti-Terrorism Act (ATA) [citation omitted], the UAB is highly concerned that this case provides a playbook for private plaintiffs to manufacture discovery sanctions against foreign banks, and exploit tax causal standards to secure potentially catastrophic jury verdicts, based on speculation and innuendo.

Equally alarming is the possibility that Arab Bank may have no recourse to challenge the judgment on appeal, as a result of the potential collateral consequences of any damages award."

If this court were to confirm the finding of liability, there would be a serious risk that, in the absence of immediate appellate review, Arab Bank could suffer dire injury far beyond any specific damages award. By labeling the defendant a supporter of terrorism, subject to potentially enormous liability, the Court's order would cause corresponding banks, and depositors alike, to consider ceasing their business with the bank.  Memorandum of Union of Arab Banks, as Amicus Curae, in support of Arab Bank,  PLC, at 1-2*.   

What the UAB is stating is, their members' strict bank secrecy laws, which the banks will choose not to violate, in court proceedings, will result in possibly fatal damage awards, in connection with cases brought under the Anti-Terrorism Act. If a bank providing financial assistance to terrorist organizations with international sanctions is sued under the Anti-Terrorist Act, in the US, it will lose, and may be forced out of business, due to its new, pariah, status, in the financial community.

The UABs stated fear is well placed, but it ignores the possibility that member banks may indeed be guilty of providing material support to terrorist organizations.. Since bank secrecy in the Middle East will not be going away anytime soon, we should expect to see a serious increase in American private civil suits, targeting banks in the Middle East, for ATA violations, as dirty money is a major profit center for a number of banks in the region, and that includes funds being moved for Hamas, Hezbollah, IRGC, and the various branches of Al-Qaeda. The landmark Arab Bank case could provide an effective weapon against banks who work with designated terrorist organizations. Perhaps the trial bar, acting for clients injured through terrorism, can do what regulators and the Department of Justice are unable to accomplish: shut down the banks that facilitate terrorism by bankrupting them through large judgments.

* 04-CV-2799 (BMC)(VVP).

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