Economy, Business And Markets

CBI Assets at Deutsche Boerse Come Under US Assault

CBI Assets at Deutsche Boerse Come Under US Assault
CBI Assets at Deutsche Boerse Come Under US Assault

German exchange operator Deutsche Boerse faces a renewed legal battle in the United States over dealings by its Clearstream subsidiary with the Central Bank of Iran (CBI), US court documents show.

Hundreds of US plaintiffs are seeking access to $1.7 billion in assets belonging to Iran’s central bank, and held by Clearstream, owned by Deutsche Boerse, in Luxembourg, Reuters reported, citing the documents.

The potential tug of war may test the reach of US law in Europe. “This could be a precedent,” said Stephane Ober, who heads the Luxembourg office of law firm Simmons&Simmons.

The plaintiffs are the families of US soldiers who were killed or wounded in the bombing of the marine barracks in Beirut, Lebanon in 1983. A US court ordered Iran to pay $2.65 billion in compensation to the families, who have often hurled baseless charges against Tehran over the attack.

Iran has denied any involvement in the bombing.

In a similar case in late 2013, Clearstream agreed to transfer to the plaintiffs $1.8 billion of CBI’s funds held in a Clearstream account at lender Citigroup in the United States.

The plaintiffs hope they can use US law to force Clearstream in Luxembourg to do the same.

Patrick Rocco, a lawyer for the plaintiffs, said the US Congress made clear when it passed the Terrorism Risk Insurance Act (TRIA) that the law should apply also to assets blocked outside the United States if there was a US connection.

“It was meant to have extraterritorial reach,” Rocco said at a hearing on the case in the New York in September, according to a transcript seen by Reuters on Tuesday.

 Immune in Luxembourg

Gaining access to the Luxembourg-held funds, which were frozen in 2012 as part of European sanctions, will require the plaintiffs to demonstrate a connection to the United States, Simmons&Simmons’ Ober said.

Lawyers have argued that Clearstream has an office in New York and that the Iranian assets are denominated in dollars, with proceeds from the assets arriving in a Clearstream account at lender JP Morgan Chase in New York.

But Clearstream argues that the case should be dismissed, saying the funds in the New York account belonged exclusively to Clearstream and that the US court has no jurisdiction in Luxembourg, the company’s lawyers said in a court statement.

“The sovereign assets targeted by Plaintiffs are in Luxembourg ... and thus are categorically immune from execution under US law,” Clearstream’s lawyers wrote.

Deutsche Boerse and Clearstream declined further comment, Reuters said.

It is now up to US District Judge Katherine Forrest to decide whether to allow the case to proceed.

Legal analysts said they expected the case to last years, a prediction that could disappoint Deutsche Boerse, which had hoped to consign its tussles with US authorities to the past.

In early 2014, the company agreed to a $152 million settlement with the Office of Foreign Assets Control (OFAC), the Treasury office enforcing US sanctions on Iran.

A few months after reaching that agreement, the US Attorney for the Southern District of New York launched a new investigation into the sanctions affair.

Sources close to the company said it had not yet set aside reserves for the latest cases.