Clifford Chance

On May 22, 2019, in Kashef v. BNP Paribas S.A., 925 F.3d 53 (2d Cir. 2019), the US Court of Appeals for the Second Circuit ("Second Circuit") revived a lawsuit against French bank BNP Paribas seeking damages for alleged involvement in human rights violations committed by the government of South Sudan between 1997 and 2009.

The court rejected the bank's "act of state" defense, which prevents US courts from questioning the validity of official acts of foreign governments, holding that atrocities such as genocide cannot be "official acts" nor can courts deem valid a state's violations of jus cogens norms. The case will proceed to discovery and potentially to trial.

Context

In 2014, BNP Paribas pleaded guilty to multiple US federal and state criminal counts of conspiring to violate US sanctions against South Sudan and paid a US$9 billion fine, the largest criminal financial penalty ever at the time. On May 2, 2016, a group of Sudanese refugees filed a civil class action lawsuit in the US District Court for the Southern District of New York ("SDNY") asserting New York tort law claims based on BNP Paribas's alleged knowing involvement in the acts committed by the South Sudanese government between 1997 and 2009, including murder, mass rape, torture, and deliberate infection with HIV. On March 20, 2018, the SDNY dismissed the case on the grounds that the claims were barred by the act of state doctrine, finding that examination of the claims would impermissibly require the court to inquire into the official actions of the Sudanese government actions within its territorial boundaries, involving its own people.

The Second Circuit decision

The Second Circuit disagreed, holding that (1) the claims did not require the court to rule on the validity of the Sudanese government's acts; (2) the atrocities could not be considered "official act[s]" of the state; and (3) violations of jus cogens norms, such as genocide, cannot be deemed valid by courts.

The Second Circuit reasoned that, according to BNP Paribas's own concessions in its criminal plea and the stipulated facts in the civil lawsuit, the governmental acts in question were unquestionably illegal atrocities against civilians. Thus, the inquiry was only whether the acts occurred, and did not implicate the act of state doctrine.

Further, the act of state doctrine was inapplicable because the actions of the Sudanese government did not qualify as "official acts." To the contrary, according to the court, the acts "flagrantly" violated Sudanese law.

Finally, the Second Circuit held that the act of state doctrine never shields violations of universally binding ("jus cogens") norms of international law such as the norms against genocide, mass rape, and ethnic cleansing.

Implications

The Kashef decision contrasts with a 2018 decision of the US Court of Appeals for the District of Columba Circuit ("DC Circuit") in which BNP Paribas successfully argued that it could not be held liable for the Sudanese government's support of Al-Qaeda attacks on the US embassies in Tanzania and Kenya in the 1990s. In that case, the DC Circuit dismissed claims under the Anti-Terrorism Act ("ATA"), finding that BNP Paribas' actions did not proximately cause the bombings and that prior to 2016 no private cause of action existed against aiding and abetting international terrorism. By contrast, plaintiffs in Kashef likely will rely on BNP Paribas's acknowledged understanding of both the continuing human rights violations and the likely consequences of its support of the Sudanese regime to show causation.

In light of this development and the proliferation of sanctions under the current administration, banks should expect increased human rights litigation risk in the coming years. Although the suit could still be dismissed due to choice-of-law issues, or BNP Paribas could avoid a damaging judgment at trial, at least one potential defense to civil liability for indirect involvement in human rights violations abroad is now unavailable in New York federal court, a key jurisdiction. Compliance programs will need to reflect the financial and reputational risk by increased due diligence in high-risk parts of the world.