By Charlie Savage

The New York Times

Aug. 27, 2022

A federal judge said the Afghan central bank’s assets could not legally be used to pay off judgment debts owed by the Taliban to relatives of victims of the 2001 terrorist attacks.

WASHINGTON — A federal magistrate judge has recommended rejecting the effort by relatives of victims of the Sept. 11 attacks to seize $3.5 billion in frozen Afghan central bank funds to pay off judgment debts owed by the Taliban — in part because doing so, she said, would effectively recognize the Taliban as the legitimate government of Afghanistan.

“The Taliban’s victims have fought for years for justice, accountability and compensation,” the judge, Sarah Netburn, wrote. “They are entitled to no less. But the law limits what compensation the court may authorize.” Those limits, she added, placed the Afghanistan central bank’s assets beyond the court’s reach.

The 43-page report and recommendation by Judge Netburn, issued on Friday, is the latest twist in a case arising from the extraordinary circumstance of a country seized by a terrorist organization that is not recognized as its legitimate government. The case has raised novel legal issues that touch on matters of foreign policy, international finance, counterterrorism and domestic politics.

The $3.5 billion in question is part of about $7 billion in Afghan central bank funds that had been deposited at the Federal Reserve Bank of New York before the Taliban took control of the country last year. In February, President Biden froze the funds, reserving about half to be spent on helping the Afghan people while leaving the remaining $3.5 billion for the Sept. 11 victims’ families to go after in court.

The recommendation by Judge Netburn is not a final decision. A Federal District Court judge for the Southern District of New York, George B. Daniels, is supervising the litigation and has the authority to issue a ruling that disagrees with Judge Netburn’s legal analysis. And if he instead rules in accordance with her recommendation, the victims’ families could file an appeal.

Fiona Havlish, the named plaintiff in the lead group of Sept. 11 victims’ relatives who are trying to seize the funds, said that she respectfully disagreed with Judge Netburn’s conclusion that they were not entitled to the funds belonging to the Afghan central bank, known as Da Afghanistan Bank, or DAB.

“It is clear that the president wished to make these funds available to victims of terrorist attacks for which the Taliban was found liable, that the court has jurisdiction and that the Taliban controls DAB,” she said in a statement.

But Leila Murphy, a steering committee member for Sept. 11 Families for Peaceful Tomorrows, a group of victims’ relatives who oppose trying to seize the Afghan bank funds, praised Judge Netburn’s analysis.

“As the daughter of a 9/11 victim, it makes me sick to think that Afghan victims of atrocity are being deprived of necessary resources during a time of great need,” Ms. Murphy said in a statement. “I am relieved that the judge has taken a step toward the only legally and morally correct approach — making the entire $7 billion available to Afghans to deal with the economic crisis we helped to cause.”

It is not clear what would happen to the $3.5 billion if the efforts by the Sept. 11 victims’ relatives to seize it fail. The American government does not want to send money to Afghanistan if there is a risk it will fall into Taliban hands. It is therefore possible that some or all of the funds could simply remain frozen for years, awaiting a change of circumstances in Afghanistan.

The complex saga traces back to lawsuits filed years ago by family members of victims of the Sept. 11 attacks seeking billions of dollars from a range of defendants they held responsible for their losses, including Al Qaeda and the Taliban. When such defendants failed to show up in court, judges declared them liable by default.

But with no way to collect damages, the rulings seemed like symbolic gestures until last year, when the Taliban took control of Afghanistan. As part of the fallout, the New York Fed blocked access to an account for the Afghan central bank holding about $7 billion.

The Havlish plaintiffs — about 150 people, linked to 47 estates of the nearly 3,000 people killed — moved to seize some of that money to pay off the Taliban’s judgment debt to them.

Eventually, the Havlish plaintiffs struck a deal to divide up any recovered funds with several other groups of Sept. 11 plaintiffs and with insurance companies that had losses from the attacks. That deal would give the Havlish plaintiffs, who were first in line under New York law, a greater share in any proceeds than the plaintiffs in other groups.

That arrangement has been a matter of dispute among victims’ relatives. Some opposed the deal as unfair, on the argument that everyone should get the same amount. Others joined outside voices — including exiled Afghans — who urged the court to reject giving any of the money to Sept. 11 families, saying it belonged to the Afghan people and should be spent on helping them at a time of a humanitarian crisis and mass starvation caused by the collapse of the country’s economy.

Against that backdrop, Judge Netburn concluded that as a matter of law, none of the Sept. 11 victims’ relatives or the affected insurance companies were entitled to seize the frozen Afghan central bank funds. She laid out three independent legal rationales for why Judge Daniels should dismiss their requests.

First, she wrote, the court lacks jurisdiction over the Afghan central bank because it is an instrument of a foreign government and thus has sovereign immunity. While Congress has enacted a law that made a narrow exception to sovereign immunity allowing lawsuits against state sponsors of terrorism, Afghanistan has not been designated as such, and the Sept. 11 victims’ families did not sue the state of Afghanistan itself.

Second, she said, any ruling that the central bank’s assets can be used to pay off the Taliban’s judgment debts would amount to ruling that the Taliban are the legitimate government of Afghanistan. But Mr. Biden has not recognized the Taliban as Afghanistan’s government, and courts lack constitutional authority to do so on their own.

“The Constitution vests the president with the sole power to recognize foreign governments,” Judge Netburn wrote. “Courts may not extend such recognition either directly or by implication. Yet such recognition would be inescapably implied if this court found that the DAB is being controlled and used by the Taliban such that the Taliban may use DAB’s assets (ultimately the assets of the sovereign state of Afghanistan) to pay its legal bills.”

Finally, she wrote, even if both of those arguments were wrong, under the law, the bank must count as an “agency” of the Taliban, which she said means it must have willingly worked with the group. But the Taliban have seized control of the bank — and imposed their own leaders atop it — by force.

“The court must determine whether a bank robber can transform an unwilling bank into his agency or instrumentality,” she wrote. “The answer must be no.”

Al Jazeera

27 August 2022

By Jonathan Landay

Reuters

August 22, 2022

WASHINGTON, Aug 22 (Reuters) – U.S. President Joe Biden’s administration will press ahead with talks on releasing billions of dollars in Afghanistan’s foreign-held assets despite the late al Qaeda leader’s presence in Kabul and foot-dragging by the Taliban and Afghan central bank, according to three sources with knowledge of the situation.

The decision to pursue the initiative to help stabilize Afghanistan’s collapsed economy underscores growing concern in Washington over a humanitarian crisis as the United Nations warns that nearly half the country’s 40 million people face “acute hunger” as winter approaches.

At the core of the U.S.-led effort, as Reuters reported last month, is a plan to transfer billions in foreign-held Afghan central bank assets into a proposed Swiss-based trust fund. Disbursements would be made with the help of an international board and bypass the Taliban, many of whose leaders are under U.S. and U.N. sanctions.

The Islamist extremists presented a counterproposal in talks in Doha in late June.

U.S. State Department and Treasury officials told independent analysts at an Aug. 11 briefing – 12 days after a CIA drone strike killed al Qaeda leader Zawahiri on a balcony of his Kabul safehouse – they will pursue the talks despite frustration with the pace, two sources said on condition of anonymity.

The Taliban and Afghan central bank – known by the initials DAB – are not acting swiftly, a U.S. official said, according to one source. “The Taliban sit on their hands and it’s infuriating.”

The State Department declined to comment on the briefing.

A knowledgeable U.S. source who requested anonymity confirmed the briefing’s substance.

“The strike did not change the U.S. government’s commitment to setting up the international trust fund” and it is “working with the same speed and alacrity as before the strike,” said the U.S. source.

The Taliban-run foreign and information ministries and DAB did not immediately respond to requests for comment.

U.S. officials also have discussed the trust fund plan with Switzerland and other parties.

Afghanistan’s economic and humanitarian crises deepened when Washington and other donors halted aid that funded 70% of the government budget following the Taliban’s seizure of Kabul on Aug. 15, 2021, as the last U.S.-led foreign troops departed after 20 years of war.

Washington also stopped flying in hard currency, effectively paralyzing Afghanistan’s banking system, and froze $7 billion in Afghan assets in the U.S. Federal Reserve Bank of New York. In February, Biden ordered half the sum set aside “for the benefit of the Afghan people.”

Other countries hold some $2 billion of Afghan reserves.

Initially, the $3.5 billion Biden sequestered would be released into the proposed trust fund and potentially could be used to pay Afghanistan’s World Bank arrears and for printing Afghanis, the national currency, and passports, both in short supply.

The other $3.5 billion is being contested in lawsuits against the Taliban stemming from the Sept. 11, 2001, attacks on the United States, but courts could decide to release those funds too.

The assets also eventually could go to recapitalizing DAB, bolstering its ability to regulate the Afghani’s value, fight inflation, and provide hard currency for imports.

But after Zawahiri was killed, the State Department excluded recapitalizing DAB as “a near-term option,” saying that by harboring the al Qaeda leader in breach of the 2020 U.S. troop pullout deal, the Taliban had fueled concerns “regarding diversion of funds to terrorist groups.”

CENTRAL BANK MILITANTS

Two sources quoted the U.S. officials as telling the briefing that proceeding with the talks has become more difficult because of Taliban resistance to several internationally backed demands.

One calls for replacing the two senior militants heading DAB – one is under U.S. and U.N. sanctions – with experienced professionals to help build confidence that the bank was insulated from Taliban interference.

The Taliban and DAB also have not formally agreed to installing independent anti-money laundering monitors at the bank although they have consented in principle, the officials said, according to the sources.

The officials, the sources said, presented examples of what they described as Taliban and DAB intransigence.

They included refusing to cooperate with a U.N.-administered scheme to funnel badly needed international aid funds held by the World Bank to humanitarian agencies in Kabul.

The officials also told the briefing that Washington in March asked other governments to encourage private banks to restore “correspondent” relationships with Afghanistan by which international transactions are facilitated, the sources said.

There “wasn’t a whole lot of appetite” for the outreach made through U.S. embassies in diplomatic notes called demarches, a U.S. official said, according to one source.

That was partly due to the absence of independent anti-money laundering monitors at DAB, the official said, according to the sources.

Reporting by Jonathan Landay in Washington. Additional reporting by Charlotte Greenfield in Islamabad; Editing by Mary Milliken and Daniel Wallis