Bank’s Corporate Form Trumps Hezbollah Aid

MANHATTAN (CN) — A Lebanese bank may have helped Hezbollah violate international law during its 2006 war with Israel, but U.S. law shields corporations like it from liability for this conduct, the Second Circuit ruled Wednesday.
     Israel’s war in Lebanon a decade ago started after Hezbollah militants fired rockets across the countries’ shared border as a diversion for an ambush of three Israeli soldiers.
     The 34-day conflict claimed more than 1,000 Lebanese lives and those of 160 Israelis, and both sides declared victory after the United Nations Security Council approved a ceasefire.
     Two years later, dozens of Israeli and Canadian citizens filed suit in Manhattan Federal Court accusing the now-defunct Lebanese Canadian Bank of underwriting Hezbollah via international wire transfers on behalf of the Shahid Foundation, the group’s alleged financial arm. (Shahid is the Arabic word for “martyr.”)
     According to the lawsuit, the bank sent the transfers to a New York branch of an American Express Bank.
     Yaakov Licci, the lead plaintiff, was a minor when he lost his spleen while running to a bomb shelter, and he joined families with similar stories in seeking damages for wrongful death and injuries under the Alien Tort Statute.
     Since the families filed their lawsuit in 2008, Supreme Court and Second Circuit precedents made it far more difficult to sue foreign entities for conduct that occurred overseas.
     In the case of Kiobel v. Royal Dutch Petroleum, a Nigerian woman tried to sue the Netherlands-based oil giant for helping her country’s military regime torture environmental activists. Her lawsuit suffered a series of setbacks, starting with a Second Circuit ruling in 2010 immunizing corporations from liability for overseas atrocities.
     The Supreme Court upheld the dismissal on different grounds three years later, in a decision erecting new hurdles for would-be litigants turning to U.S. courts to address human-rights abuses abroad.
     Last year, U.S. District Judge George Daniels cited the Supreme Court’s Kiobel ruling in dismissing the lawsuit against the Beirut-based Lebanese Canadian Bank.
     On Wednesday, the Second Circuit found that Daniels reached the correct result, but for the wrong reasons.
     U.S. Circuit Judge Richard Wesley, on behalf of a unanimous three-judge panel, found that the families in this case meet the Supreme Court’s burden for jurisdiction.
     “Kiobel is not this case,” he wrote in a 34-page opinion. “Unlike the Kiobel plaintiffs, who only alleged extraterritorial conduct, plaintiffs allege, inter alia, that LCB used its correspondent banking account in New York to facilitate dozens of international wire transfers for the Shahid, an entity alleged to be an ‘integral part’ of Hezbollah.”
     The reason the case must be thrown out, Welsey added, is the Lebanese bank’s corporate structure.
     “Neither party disputes that LCB is a corporation,” he wrote.
     The Second Circuit’s rule protecting corporations for conduct overseas was controversial since its inception six years ago, when a dissenting judge warned it would open the floodgates to corporate misconduct.
     “The majority opinion deals a substantial blow to international law and its undertaking to protect fundamental human rights,” U.S. Circuit Judge Pierre Leval wrote at the time, predicting businesses could use it to commit genocide, operate torture prisons and profit from maritime piracy without fear of civil repercussions.
     The controversy continued earlier this year when a divided Second Circuit voted 4-3 to throw out a lawsuit accusing the Jordan-based Arab Bank of subsidizing suicide bombing attacks on Israeli civilians.
     For the dissenting judges, the Arab Bank case provided a chance to correct an old error, but the majority found the precedent was inescapable.
     Wednesday’s ruling holds the same principle applies to the Lebanese bank.
     “To the extent Plaintiffs submit that Kiobel I was wrongly decided, we reaffirm Arab Bank‘s conclusion — we are not free to consider that argument,” the opinion states.
     Attorneys for the bank and the families did not immediately respond to email requests for comment.

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