Terrorism victims can sue American banks over correspondent relationships with terrorist organizations

By Christine Duhaime | November 25th, 2012

The New York Court of Appeals ruled this week that the use of a New York bank account by a listed entity (an entity identified as a terrorist one) is sufficient to establish jurisdiction for American victims of the listed entity’s terrorist activities to claim compensation.

The bank in question is a Beirut bank with a Canadian office – the Lebanese Canadian Bank.

In 2009, several Canadian, American and Israeli citizens filed a lawsuit in New York against the Lebanese Canadian Bank SAL and American Express Bank Ltd. claiming that it supported terrorism by handling international financial transactions of the Shahid Foundation, a Hezbollah affiliate, through an account at the American Express Bank in New York.

American Express acted as the correspondent bank for the Lebanese Canadian Bank. Their lawsuit was dismissed by a lower court in 2010 for lack of jurisdiction. In order for a U.S. court to have jurisdiction over a foreign company, the company must have done business in the state, and any legal claims must stem from that business activity, according to New York law.

Now that the Court of Appeals has overturned that decision, the case will be remanded to the U.S. 2nd Circuit Court of Appeals for reinstatement.

The claimants were victims of the 2006 Hezbollah rocket attacks in Israel. They sued under the U.S. Anti-Terrorist Act, Israeli tort law and the Alien Tort Statute, a 1789 U.S. law that has been used by foreign victims to sue corporations for human rights abuses overseas.

In the Court of Appeals judgment, the Court held that: “repeated use of the correspondent account shows not only transaction of business, but an articulable nexus or substantial relationship between the transaction and the alleged breaches of statutory duties.”

The decision opens the door for similar lawsuits by victims of terrorism where the terrorist group in question used American or Canadian banks.

Hezbollah is listed as a Foreign Terrorist Organization by the U.S. Department of State.

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