GNEHM: When trial lawyers do foreign policy

How a lawsuit against Jordan’s top bank would undermine a U.S. ally

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Actions have consequences, and sometimes those consequences are both unanticipated and potentially disastrous. This may be the case as the result of a recent federal court ruling that could have profound repercussions. Jordan is one of America’s few Middle Eastern friends and allies. Now only the Supreme Court can prevent the disaster.

The problem the court would have to grapple with arises from a ruling in a decade-old mass tort case awaiting trial in New York. The case is Arab Bank v. Linde, which stems from the mass tort charge that the Jordanian bank “knowingly and purposefully” maintained accounts and processed transactions for organizations and individual affiliated with terrorists in the Middle East. On June 26, the justices will meet to pick appeals to hear in the coming term. They should put Arab Bank v. Linde at the top of their list.

To those familiar with the situation, the charges are far-fetched and unlikely to stand up in a fair trial. The bank was and remains a leader among Middle Eastern financial institutions (including Israeli banks) in keeping terrorist organizations out of its branches. Many of the organizations with which Arab Bank is accused of dealing received financial support from the U.S. government. In fact, the suit looks suspiciously just like the kind of trial-lawyer-driven filing that has tarnished the American legal system’s reputation around the world.

The problem for the bank is that any mass tort action involves mass discovery. In discovery, those sued are typically asked to deliver every document they have that might have an impact on the case. In this instance, these documents would include tens of thousands of personal bank records protected under the bank privacy laws of Jordan, Lebanon and the Palestinian territories, as well as of France, Britain and other nations. Like many national privacy laws around the world, those statutes are long-standing and strict. Violators go to prison.

The Brooklyn-based judge hearing the case has said the bank must produce the documents anyway. When it could not deliver, she banned the bank’s lawyers from presenting evidence of the bank’s innocence in the upcoming trial and telling the jury why the documents couldn’t be produced. She said jury instructions would advise that jurors could infer from the bank’s silence that the bank was guilty as charged. Put another way, the court vowed to conduct a show trial. This is the ruling the Supreme Court is being asked to review.

Jordan’s Arab Bank is not some fly-by-night operation, but the largest Jordanian financial institution. Crippling it or destroying its ability to operate by punishing its need to comply with Jordanian law would be more than unfair — it would be a major diplomatic catastrophe.

Arab Bank has 30 branches in the region, making it one of the largest and most respected banks in the Middle East. To get an idea of its national importance, imagine that Jordan were the United States. Arab Bank would rank as something like Citibank, JPMorgan, Bank of America, Goldman Sachs and Morgan Stanley, combined.

If this bank is forced to go through a serious crisis, the impact on Jordan’s economy will be bigger than that of the 2009 financial crisis on the United States. One of the bank’s principal customers is the Jordanian government and a principal stockholder is the pension fund for Jordanian government employees. Destabilizing this institution would destabilize Jordan itself — a vital ally against terrorism and for Israeli-Palestinian peace.

It is little wonder that the kingdom of Jordan — which, with Israel, is our closest friend in the region — is outraged at the judge’s ruling.

Last year, the justices asked the U.S. solicitor general whether he thought they should hear the case. This is where the government tripped up. In May, while affirming that the trial judge’s order could have disastrous implications for our foreign relations, the solicitor general recommended that the court not take the case because the errors could be fixed in an appeal after trial. If the court follows this recommendation, the New York judge’s ruling will stand, with terrible consequences not only for the bank, but for the Jordanian government.

If appeals such as this one before trial (called writs of mandamus) are to succeed, petitioners need to demonstrate that they indisputably deserve relief and that after the trial will be too late. Here relief is clearly deserved. A fair trial, given the judge’s stated intentions, is not even a theoretical possibility.

More importantly, as Jordan says in its unprecedented brief, a massive verdict against the bank that would by itself do “severe economic harm to Arab Bank … could precipitate political instability in the region [and] disrupt the mutual efforts of the Kingdom and the United States to broker peace in the Middle East and resolve the Palestinian-Israeli conflict.” Even so, the solicitor general said that the trial court’s decision could be “evaluated on appeal .”

That assessment is totally divorced from reality and completely ignores U.S. national interests. It is in the interests of both the United States and Israel that Jordan remain an economically and politically stable partner. American trial lawyers and private lawsuits must not be allowed to trump U.S. global interests. The Supreme Court should not let this disaster develop any further.

Edward Gnehm is a former U.S. ambassador to Jordan (2001-2004) and a consultant to Arab Bank.

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