Jordan’s King Abdullah has launched a massive military retaliation against ISIS for burning one of his pilots alive. Yet even as instability in the Middle East escalates, U.S. courts are undermining America’s moderate ally in Amman.
In January, Fitch Ratings downgraded Jordan-based Arab Bank’s long-term outlook to negative. “The ruling against Arab Bank in the U.S. in September 2014 is one more example of banks’ increasing exposure to litigation and other conduct risks,” the financial-services credit rating agency explained. “Uncertainty about the level of fines and potential related business restrictions is a significant current risk for banks generally, especially for those that have operations in higher-risk markets.”
The legal defeat that concerns Fitch was handed down by the Federal District Court in Brooklyn, which found Arab Bank responsible for transactions it processed from a Saudi charity that went to family members of Hamas suicide bombers who murdered 39 people in Israel.
The bank’s defense is that it has maintained compliance with reporting protocols established by the Patriot Act and the U.S. Treasury Department for foreign financial institutions, and that the U.S. government has not put the Saudi organization in question on the terror-sponsoring watch list, which Arab Bank consulted for every transaction. Israel cleared Arab Bank of any terrorist involvement five years ago.
The Linde et al. v. Arab Bank case, which has dragged on for a decade, threatens to enforce two new and unrealistic standards on international financial institutions. First, banks are expected to develop stricter requirements for what constitutes a terrorist organization than the U.S. State Department. Such determinations – which involve intelligence, security and diplomatic factors – clearly should be the responsibility of government agencies, not banks.
Second, the judge in New York ordered Arab Bank to hand over private individual account information to the plaintiffs in violation of Jordanian privacy law and sovereignty. In a brief for a motion requesting the Supreme Court to reverse the lower court’s decision, the Hashemite Kingdom defended its position by positing what Washington would do, “if the tables were turned, and, for example, Citibank were ordered by a Jordanian court to turn over U.S. customer names and bank account statements to private citizens in Jordan.”
If the September ruling stands, the camel’s nose of jackpot justice will have gotten under the global tent, making foreign policy everywhere subject to the hyper-litigiousness of the lawsuit-happy U.S. legal system and opening U.S. corporations to similar actions in foreign courts.
Although the high court declined to hear Arab Bank’s case, Chief Justice John Roberts warned in another decision against courts meddling in international relations by applying U.S. law to foreign corporations acting in foreign lands. “The presumption against extraterritoriality guards against our courts triggering such serious foreign-policy consequences, and instead defers such decisions, quite appropriately, to the political branches,” he wrote in 2013 in Kiobel v. Royal Dutch Petroleum Co.
This standoff threatens a setback in the fight against Islamic radicalism, because Arab Bank is the largest and most important financial institution in Jordan – a moderate Muslim state and reliable U.S. ally in the war on terror. The bank is responsible for as much as one-third of the capitalization of Amman’s stock market and is a primary acquirer of the nation’s debt. The judgment of the New York court makes the bank liable for billions of dollars in claims by hundreds of plaintiffs and opens the door for endless suits in U.S. courts that could cripple Arab Bank and the Jordanian economy.
Arab Bank is appealing the case. The Circuit Court should overturn the District Court’s decision to prevent U.S. courtrooms from inappropriately becoming the arbiter of every harm caused anywhere in the world. Congress also could step in to prevent the judiciary from unilaterally expanding its jurisdiction to foreign corporations acting abroad, but a Republican legislature challenging executive power seems unlikely to pick a simultaneous fight with the third branch of government.
The massacre of Charlie Hebdo journalists in Paris is a reminder that jihadists can take their fight to the streets of Western cities at any time. Trial lawyers looking to strike it rich shouldn’t be allowed to strike down one of America’s most important Muslim allies when having moderate friends in the Middle East is more important than ever.
Brett M. Decker is a former senior vice president (2004-2008) of the Export-Import Bank, which does business with Arab Bank. He currently is a doctoral candidate at the University of Southern California.
