Arab Bank Case Sets Limited Precedent

On Monday September 22, 2014, a jury in the US District Court of Brooklyn found that the Arab Bank is liable for financing terrorism. This is the first jury trial to find a bank liable for financing terrorism under the 1990 Anti-Terrorism Act (ATA). The Arab Bank contends that the case was riddled with errors that should be rectified upon appeal before the Second Circuit. The Central Bank of Jordan has come out in support of the Bank, whose earnings constitute a quarter of the country’s stock market portfolio.

The decision, dubbed as a “trial against Hamas,” has been welcomed by some Palestine advocates. They are hopeful that this means, Israeli or US banks can be sued for facilitating the expansion of illegal Israeli settlements in the West Bank. That, however, is just not possible for two reasons. First, US federal courts have demonstrated an unwillingness to challenge Israeli policies, preferring to punt those questions to the Executive Branch instead. Second, it is a legislative invention, namely the ATA, that has made this case possible. Together, executive shielding of Israeli actions from judicial review and legislative endorsement of suits against Arab defendants, makes similar suit challenging Israel’s settlement policies very unlikely.

The U.S. federal court system has consistently invoked the political question doctrine to shield individuals connected to the Israeli government. The doctrine prevents the U.S. federal court system from adjudicating an issue that the U.S. Constitution textually commits to another branch of government. Since the Constitution commits foreign relations to the executive and legislative branches, the judicial branch may reject a claim as in-actionable by invoking the political question doctrine.

In 2005, Palestinian bystanders injured and killed during an operation intended to kill a Hamas leader in the Gaza Strip brought a lawsuit under the Alien Tort Statute (ATS) against Abraham Dichter, the former director of Israel’s General Security Services responsible for the operation. The plaintiffs in Matar v. Dichter, 563 F.3d 9, 11 (2d Cir. 2009) claimed that the targeted killing was extrajudicial, prohibited by the Torture Victims Protection Act (TVPA), and actionable in U.S. courts under the ATS. The Second Circuit dismissed the case for raising a political question. It characterized Dichter’s military actions as part of Israel’s foreign policy and therefore non-justiciable. The Department of State (DOS) submitted a Statement of Interest to the Court urging it to not hear the case. Israel’s Ambassador to the US at the time also submitted a letter claiming that Dichter’s actions constitute official Israeli policy. These letters had considerable influence on the panel.

In Belhas v. Ya’alon, 515 F.3d 1279, 1282 (D.C. Cir. 2008), Lebanese citizens – who were injured and killed when Israel shelled a United Nations Interim Forces in Lebanon (UNIFIL) compound – sued Moshe Ya’alon, head of the Israeli Army Intelligence during the time of the shelling. The DC District Court dismissed the case for being barred by the Foreign Sovereign Immunities Act (FSIA), which prohibits suit against a foreign country in US courts.

The claims were never heard on their merits.


In contrast, Palestinians and Arabs, more broadly, have been successfully sued in US federal courts without hindrance. Aside from the 1984 case Tel Oren v. Arab Libyan Republic, 726 F.2d 774, 795 (D.C. Cir. 1984) Palestinian defendants have been found liable in Biton v. Palestinian Self-Gov’t Auth., 310 F. Supp. 2d 172 (D.D.C. 2004); Klinghoffer v. Lauro, 937 F.2d 44 (2d Cir. 1991); Almog v. Arab Bank, 471 F. Supp. 2d 257 (E.D.N.Y. 2007); Knox v. Palestine Liberation Org., 306 F.Supp. 2d 424 (S.D.N.Y. 2004); Ungar v. Palestine Liberation Org., 402 F.3d 274 (1st Cir. 2005) among others. Despite emerging from the same political context that US federal courts found constituted a political question in Matar and Belhas, federal courts did not dismiss the suits against Palestinian defendants on jurisdictional grounds. Also, because the US has not recognized Palestine as a state, the courts also found that the cases are not barred by the FSIA.

The distinction in the two sets of cases is explained by executive and legislative action.

Congress and previous US Administrations had codified Palestinians as terrorists as early as 1987 (22 U.S.C §5201(b) (1987)). More recently, Congress legislated the Palestinian Anti-Terrorism Act (Palestinian ATA). The bill deems the West Bank and the Gaza Strip as terrorist havens, prohibits funding to Palestinian entities located therein, and prohibits funding to the Palestinian Authority. In this instance, the executive and the legislature have already determined the status of Palestinian groups as terrorist ones relieving the judiciary of that determination.

Moreover, the 1990 ATA provides US nationals with civil remedies and criminal penalties for acts of international terrorism that cause death or injury to a claimant’s person, business, or property. Combined, the ATA and the codification of Palestinian entities as terrorist ones, rendered the political question irrelevant and guaranteed the success of suits alleging harm caused by “Palestinian terrorism.”

In Almog v. Arab Bank, PLC, 471 F. Supp. 2d 257, 295 (E.D.N.Y. 2007), the defendants raised the political question doctrine during oral arguments. Ironically, the court held that a politically charged context does not transform the issue into a nonjusticiable one; “[T]he doctrine is one of ‘political questions’ not of ‘political cases.’” That same context however, is what impeded claims against Israeli officials in both Matar & Belhas. Not because of the politically charged context but because the US executive preferred to shield Israel from suit.

Lawsuits against banks that transfer funds to settlements would likely be dismissed under the political question doctrine. While successive US Administrations have admonished settlements as undermining the peace process they have shielded Israel from external scrutiny. In February 2010, for example, the Obama Administration vetoed a UNSC resolution mirroring the US’s language and policy on Israeli settlements. The Administration explained that it preferred to resolve the issue politically. It would likely affirm that position within US federal courts as well by submitting a SOI as did the Bush Administration in Belhas and Matar. Finally, and significantly, the ATA would not govern the claims against settlement financiers or banks.

To resolve the issue of funding for settlements, advocates will have to mount a regulatory challenge within the IRS to contest the non-profit, or c3, status of the organizations that fundraise between $7-15 million USD annually in the form of tax-deductible donations.

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