BNP Paribas’s Sudan lawsuit is a warning for international banks | USAEMALL.com

Welcome back. In today’s newsletter we delve into a tale that takes us from war-ravaged western Sudan to the Swiss banking hub of Geneva, culminating in a New York courtroom drama. As an illustration of the tangled web of modern global finance it takes some beating. And the implications of this saga could reach further still.

BNP’s Sudan troubles are far from over

When BNP Paribas paid a mammoth $8.9bn penalty to US authorities in 2014, it might have looked like justice had been done on behalf of the victims of atrocities in Sudan’s western Darfur region.

The French bank — the EU’s biggest by assets — admitted deliberately violating US sanctions by facilitating billions of dollars’ worth of transactions for the government of Sudan (as well as Cuba and Iran).

The Khartoum government made heavy use of BNP’s services for several years until 2007 — including a period in which it allegedly pursued one of the worst ethnic cleansing campaigns of modern history, leading to an International Criminal Court arrest warrant against then-ruler Omar al-Bashir for crimes including genocide.

But while a chunk of the BNP payout went to a compensation fund for US victims of terrorism, not a cent of it went to the people who were targeted by the violence in Darfur.

At a courtroom in lower Manhattan, a trial has just got under way that may partly address this situation — and create new risks for other companies doing business with governments engaged in conflict.

‘More dollars meant more weapons’

The class action lawsuit has been brought against BNP Paribas on behalf of more than 20,000 people who fled the violence in Sudan and found refuge in the US. Their civil case argues that, by enabling Sudan to sell oil in the dollar-denominated international market, BNP was a crucial financial enabler of the atrocities. Roughly 300,000 people died during the violence that swept Darfur between 2003 and 2010, with millions more displaced, according to UN estimates.

“More dollars meant more weapons. And more weapons meant more killing and destruction,” Bobby DiCello, a lawyer for the plaintiffs, told the court. BNP, he alleged, had been “complicit, a co-conspirator in . . . violations of human rights”.

As part of its 2014 deal with US authorities, BNP admitted to a long-running and deliberate effort to evade the US ban on providing dollar-denominated banking services to Sudan.

It moved more than $6bn through the US financial system on behalf of sanctioned Sudanese entities, while providing financial guarantees to facilitate a quarter of all Sudanese exports, according to a “statement of facts” approved by the bank. BNP’s Geneva branch held about 50 per cent of Sudan’s foreign currency assets during the period in question.

‘Sudan did not need BNP’

But in the ongoing court hearing, the bank’s lawyers are arguing that — although the sanctions were intended partly to cut off funding for the government’s violence against its own citizens — BNP’s violation of the sanctions did not make it responsible for that violence.

BNP’s lawyer Dani James highlighted several major conflicts that have hit Sudan since independence in 1956 — including a disastrous civil war that is ravaging the country today — arguing that “Sudan has been plagued by violence since it became a country free from colonial rule”.

“Sudan did not need dollars to trade oil, and it did not need BNP to trade oil either. Sudan could and did trade oil in other currencies,” she told the court.

In short, while BNP does not deny that its banking services helped the Sudanese government finance itself, it argues that Khartoum would have found other ways to fund the violence had BNP not been there.

The wider picture

The case throws up questions of individual responsibility for collective wrongdoing that have fascinated moral philosophers from Plato to Derek Parfit. What matters in this instance is the more prosaic take of Swiss law, which will be used to assess civil liability in this trial, because BNP’s Geneva unit was at the centre of the Sudan transactions.

Over the next 10 weeks that have been scheduled for the trial, the jurors will need to decide whether BNP’s actions met the Swiss legal standard of being a “natural and adequate cause” of the harms suffered by the people of Darfur.

If BNP is found liable, compensatory damages could prove significant, even by the standards of a bank with a market capitalisation of €89bn. For context, the fund set up for US victims of terrorism provided for compensation payments of up to $20mn per person. An award of just $50,000 per person in this case would amount to more than $1bn.

An affirmative verdict in this trial would have few precedents. Perhaps the closest thing was a 2014 US finding of civil liability against Jordan’s Arab Bank over its provision of banking services to Hamas, though that was vacated on appeal for technical reasons. A civil case against Barclays and other banks, over their services for South Africa’s Apartheid-era government, was dismissed by US courts.

Since this case over Sudan was first filed in 2016, BNP has been fighting a legal battle arguing that it should not be heard in court. Just by ruling that the suit is serious enough to warrant a trial, the court in New York has sent an important signal to all banks and other companies doing business with governments involved in conflict.

The financial risks of such work could prove more grave than previously thought, if the door is to be opened to more civil lawsuits along similar lines. At a time when large-scale conflicts — with alleged war crimes and crimes against humanity — are raging in several parts of the world, this is worth taking seriously.

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