Libyan Arab Foreign Bank v. Bankers Trust Co.

Bankers Trust Company (BT) (defendant) was a New York-based bank that maintained a London branch. The Libyan Arab Foreign Bank (Libyan Bank) (plaintiff) was affiliated with the Libyan government. As of January 8, 1986, the Libyan Bank had accounts with BT in both New York (NY) and London. The NY account was a demand account. BT made entries on the London account in London. BT NY was meant to transfer approximately $165.2 million to BT London shortly after 2:00 p.m. on January 7. BT NY also was supposed to make certain payments from the Libyan Bank’s account on January 8 and to transfer approximately $161 million to BT London shortly after 2:00 p.m. on January 8. BT NY did none of these things. BT NY’s decisions occurred against the backdrop of deteriorating relations between the United States (US) and Libya. On the afternoon of January 7, the president of the Federal Reserve Bank of NY (NY Fed) asked BT’s chairman to inform the NY Fed of any unusual transfers from Libya’s BT accounts. On the evening of January 7, the US prohibited any US person from extending credit to the Libyan government or any of its instrumentalities or controlled entities. On January 8 at 4:10 p.m., the US blocked all Libyan-government property or interest in property (and that of any Libyan-government-related entities) that were or would come into the US BT’s chairman learned of this order while on the phone with the US secretary of the Treasury, with whom the NY Fed chairman repeatedly urged BT’s chairman to speak before releasing any Libyan money. During this call, the Treasury secretary advised BT’s chairman that BT could not make transfers from the Libyan Bank’s accounts. In April 1986, the Libyan Bank instructed BT NY to transfer $291 million in cash to BT London. BT did not comply with this instruction, citing US sanctions against Libya making it unlawful for BT to do so. Nor did BT comply with the Libyan Bank’s similar July and December 1986 demands. The Libyan Bank sued BT for breach of contract.