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Are Foreign Sovereigns More Protected under U.S. Law than U.S. Citizens?




by:
Michael E. Elsner
Motley Rice - Mount Pleasant Office

 
May 7, 2014

Previously published on April 28, 2014

A troubling pattern is emerging in which the U.S. government stands for the rights of foreign sovereigns in opposition to its own citizens. The latest example is Republic of Argentina v. NML Capital Ltd. which was argued before the Supreme Court on Monday, April 21. Argentina defaulted on bonds that it sold in the U.S. to U.S. citizens. The bonds explicitly contained a waiver of its sovereign immunity. After trial and judgment against Argentina, the bond holders served discovery on U.S. banks to learn where Argentina keeps its assets so that the bond holders could execute their judgment.

The U.S. government’s position is that discovery of a foreign government’s assets can only be applied to commercial assets that may be specifically attached and identifiable. Meaning that somehow the bondholder, in advance of serving discovery, must know where such assets may be located and whether those assets are commercial and may be seized. Judging by the tone of some of the questions and responses during the recent oral argument, it appears that the Court very well may be headed down a path of insulating foreign sovereigns from discovery.

The potential breadth of this decision may impact U.S. citizens who are injured or the family members of persons killed in terrorist attacks carried out by various State sponsors of terrorism like Iran, Sudan and Syria, among others. Such attacks include the September 11th attacks, service members killed on the USS Cole, the U.S. Embassy bombings in Kenya and Tanzania, the marine barrack bombings in Lebanon, and countless others.

Are we seriously going to protect State sponsors of terrorism and financial institutions from discovery requests served on U.S. banks that chose to do business with rogue nations that are in violation of U.S. law?

The U.S. government will soon file another Supreme Court brief in Linde v. Arab Bank stating whether a foreign bank may refuse to produce the account records of specially designated terrorists on the grounds of foreign bank secrecy laws.

It is yet to be seen whether the U.S. government will continue to follow this disturbing pattern of permitting and, in fact, advocating for restrictions to U.S. discovery of the financial accounts of specially designated global terrorists and other foreign nations, including state sponsors of terrorism, or stand with those most greatly impacted by terrorist attacks.

The U.S. government should insist that the Federal Rules of Civil Procedure as applied everyday to all parties before Federal Courts, also apply to foreign sovereigns that default on their debt and, certainly, to those that fund terrorist groups such as Al Qaeda, Hezbolah and Hamas irrespective of whether those countries have foreign bank secrecy laws.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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Author
 
Michael E. Elsner
Practice Area
 
International Law
 
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