The case of the day is Wultz v. Bank of China Ltd. (S.D.N.Y. 2013). We first considered this case in November 2012. Here was my description of the facts from the prior post:
In 2006, Daniel Wultz was killed, and Yekutiel Wultz injured, in a suicide bombing in Tel Aviv. Members of the Wultz family sued the Bank of China, alleging that the bank had violated the Antiterrorism Act, 18 USC § 2333, and that it was guilty of negligence etc.
In the earlier decision, the judge ordered the bank to produce documents under the FRCP rather than requiring resort to the Hague Evidence Convention, notwithstanding the bank’s invocation of China’s bank secrecy laws. The only exception the judge established was for “confidential regulatory documents created by the Chinese government whose production is clearly prohibited under Chinese law.” The judge’s order, however, “had little effect.” As the judge noted, “it eventually became clear that BOC was refusing to produce the requested Chinese documents not only based on the bank secrecy laws [ellipsis] but also based on other laws, including laws primarily concerned with combating money laundering and other illegal financial transactions.”
The judge conducted another hearing and issued another order finding that the bank would not be required to produce communications from the bank to the Chinese government “whose disclosure is specifically and categorically prohibited under” Chinese anti-money laundering laws and similar laws. But she invited further briefing.
The Bank offered expert opinion testimony to prove that under China’s state secrets law and its anti-money laundering legislation, it was forbidden to disclose the documents. The judge had concerns about the testimony on the grounds that it was “for the most part not based on empirical evidence of how the laws he discusses have (or have not) been implemented,” but instead “on interpretations of the general, abstract language of Chinese laws and regulations, supplemented by his own considerations of policy.” Nevertheless, the judge found that on balance, it was more likely than not that Chinese law did forbid the Bank from producing the documents, pointing in particular to Article 15(2) of the anti-money laundering law, which provides:
Financial institutions and their staff shall keep confidential [ellipsis] suspicious transaction reports, their cooperation with the PBOC in the investigation of suspicious transactions[,] and other information related to anti-money laundering activities, which shall not be provided to clients or others in violation of regulations.
Thus the question was whether, under Aérospatiale, production of the documents should be compelled even though it would be illegal under Chinese law. The judge considered that if the documents are not produced, there might be no other way for the plaintiffs to prove that the BOC had notice that some of its accounts were being used to fund the terrorist organizations that were responsible for the terrorist attack. On the other hand, China has an interest in enforcement of its anti-money laundering laws, which are aimed in part at depriving terrorist organizations of funding. And requiring production of documents that China considers to be state secrets could offend China’s sovereignty. The judge also considered that the BOC had tried to avoid its discovery obligations in bad faith, since it had failed to comply with earlier discovery orders and taken bad-faith interpretations of those earlier orders.
Weighing the factors, and “recogniz[ing] the seriousness” of her decision, the judge granted the motion to compel in part. In particular, it compelled production of communications from the Chinese government to the BOC relating to the accounts and the account-holder in question, and it compelled production of documents concerning anti-money laundering problems at the Bank’s Guangdong branch and at the head office for a certain period of time.
The judge went out of her way to indicate that the result would have been the same wherever in the world the bank was located, and that in similar circumstances foreign courts could expect the aid of US courts in obtaining such records from US banks. It remains to be seen whether China will be mollified by such sentiments.
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