District Court Refuses to Let 9/11 Plaintiffs Have Afghan Central Bank Assets
March 16, 2023
The District Court for the Southern District of New York (Judge George Daniels) has denied the turnover motions filed by judgment creditors against assets of Da Afghanistan Bank (“DAB”) that are held at the Federal Reserve Bank of New York (“FRBNY”). Judge Daniels’ order and decision, issued on February 21, 2023, adopted the report and recommendations of Magistrate Judge Sarah Netburn. Judge Daniels’ thorough and careful opinion reaches the right result in this complex and important case. The constitutional reasoning is not entirely convincing, as described below, but the relevant statutes provide ample reason to deny the turnover motions.
As regular readers of TLB know, after the U.S. withdrawal of troops from Afghanistan in August 2021, the Taliban returned to power. The United States immediately froze DAB’s assets at the FRBNY. Doing so kept the assets out of the hands of the Taliban, which the United States does not recognize as the government of Afghanistan (indeed, no country recognizes the Taliban as the government of Afghanistan). Although half of the $7 billion in frozen DAB assets have been transferred to the Afghan Fund, a Swiss organization designed to aid the Afghan people, the other half is subject to ongoing litigation in the United States. Victims of terrorist attacks who hold judgments against the Taliban have sought to execute those judgments by filing turnover motions. Judge Daniels denied those motions.
The underlying judgments in this multidistrict litigation are held by victims of the 9/11 attacks, by insurance companies that made payments to victims of the 9/11 attacks, and by victims of a 2016 terrorist attack in Afghanistan. All are default judgments against the Taliban – not against Afghanistan or DAB. The litigation around the execution of those judgments is also proceeding on a default basis: None of the interested parties on the defense side (including the Taliban, Afghanistan, and the DAB) are parties to the litigation. In a case with complex legal issues and arguably important factual allegations about the control that the Taliban exercises over DAB, the default posture is unfortunate. Important amicus briefs were filed, however, including by the Center for Constitutional Rights (on behalf of Afghan civil society organizations), and by the Open Society Justice Initiative on behalf of Naseer A. Faiq, a representative of Afghanistan at the United Nations (whose service is opposed by Taliban). The judgment creditors have focused on the terrible devastation of the 9/11 and other terrorist attacks; the amicus briefs by contrast focus on the extreme poverty and financial instability in Afghanistan, conditions that might be partially alleviated if DAB assets are used for central banking purposes, rather than for the benefit of U.S. victims of terrorist attacks.
The President’s Recognition Power
An important issue in this litigation is whether the DAB is an “agency or instrumentality” of a “terrorist party” as those terms are used in the Terrorism Risk Insurance Act of 2002 (TRIA). For the enforcement of certain terrorism-related judgments, the TRIA removes the immunity to which foreign governments and their agencies would otherwise be entitled under the Foreign Sovereign Immunities Act.
The judgment creditors argue that the TRIA applies (meaning that DAB assets are not shieled by immunity) because DAB is an “agency or instrumentality” of the Taliban, which is a “terrorist party.” They argue that the Taliban exercises substantial control over DAB and that it is therefore an “agency or instrumentality” of the Taliban. There are several reasons to reject that argument, including that it would put the United States in violation of international law, that courts construe limitations on immunity narrowly, and that it would lead to the strange result that the DAB is an “agency and instrumentality” of both Afghanistan and the Taliban – a result not compelled by the text of the statute (which does not define “agency and instrumentality”) and one not contemplated when the statute was enacted.
The district court reasoned that:
The Constitution forbids this Court from determining what the Judgment Creditors require under TRIA: a finding that the Taliban regime is in control of DAB — an instrumentality of the government of Afghanistan — and that the Taliban thus acts as the government of Afghanistan. Promoting financial stability and managing foreign reserves are the quintessential public and government functions performed by central banks.
But it is not inconsistent with the President’s exclusive constitutional power over recognition for a court to find that the Taliban is in control of the DAB, or even for a court to find that the Taliban is acting as the government of Afghanistan by managing foreign reserves (or in other ways). As Justice Scalia wrote in Zivotofsky v. Kerry (dissenting on other grounds):
Recognition is a sovereign’s official acceptance of a status under international law. A sovereign might recognize a foreign entity as a state, a regime as the other state’s government, a place as part of the other state’s territory, rebel forces in the other state as a belligerent power, and so on. 2 M. Whiteman, Digest of International Law § 1 (1963) (hereinafter Whiteman).
Recognition is a decision to accept a particular status – in this case, the status of the Taliban as the government of Afghanistan. The United States is free under international law, and the President is free under the U.S. Constitution, to confer that status without regard to any particular facts on the ground. The United States does not recognize the Maduro regime as the government of Venezuela, although that regime controls much of the actual government, including the central bank (although not some of its assets invested outside the country).
It is true that the Supreme Court struck down a federal statute in Zivotofsky because it indirectly conflicted with the President’s power over recognition. The statute at issue involved a designation on passports, and the Court reasoned that “[a]lthough the statement required by [the statute] would not itself constitute a formal act of recognition, it is a mandate that the Executive contradict his prior recognition determination in an official document issued by the Secretary of State.” A finding that the Taliban controls DAB might also appear to conflict (indirectly) with the President’s decision not to recognize the Taliban as the government of Afghanistan. But as I noted in a discussion of the Magistrate Judge’s opinion:
The passport designation at issue in Zivotofsky was a political communication directed at foreign countries – and the purpose of the statute was to communicate something specific about recognition, Israel, and the contested territory of Jerusalem. The TRIA has no comparable purpose. Moreover, even in Zivotofsky, three Justices dissented vigorously on the grounds that recognition is a formal legal act and the statute has “nothing to do with recognition” because it “does not require the Secretary to make a formal declaration about Israel’s sovereignty over Jerusalem.”
If the issue of immunity under the TRIA and the FSIA turned on the control that the Taliban exercises over DAB, courts could make that statutory finding without infringing on the President’s recognition power. For the reasons mentioned above, I do not think that the statutory question in this case turns on that factual determination. But if it did, the finding would not contravene the President’s power.
To be sure, equating the Afghan government with the Taliban by using Afghan central bank assets to pay the private debts of the Taliban, is in tension as a policy matter – if not a constitutional one – with the President’s decision not to recognize the Taliban. That tension serves as another reason to require Congress to legislate in clearer terms before granting the creditors’ turnover motions.