Insurer Case Against Saudi Arabia Tests Sovereign Immunity Raymond J Lehmann

Sixteen years to the day after a car bomb parked beneath Manhattan's World Trade Center marked the first attack by an al-Qaida operative on U.S. soil, insurers' subrogation claims against the Kingdom of Saudi Arabia for losses suffered in the attacks could set a major precedent for future readings of the Foreign Sovereign Immunities Act, according to Stephen Cozen, chairman of Philadelphia-based law firm Cozen O'Connor.

Cozen said the case -- recently referred by the Supreme Court to the U.S. Solicitor General for an advisory opinion -- would establish whether the 1976 law bars claims against an "agency or instrumentality" of a foreign state and whether U.S. courts have personal jurisdiction over foreign individuals alleged to have provided material support for a terrorist act within the United States.

On appeal from the 2nd U.S. Circuit Court of Appeals, the $10 billion Federal Insurance Co. et. al vs. the Kingdom of Saudi Arabia joins a consortium of insurers, World Trade Center tenants and others in a petition that charges the kingdom, royal family, Saudi High Commission and other charities with conspiracy, aiding and abetting, the provision of material support to al-Qaida and other torts related to the Feb. 26, 1993, attack.

"The people who are the most dangerous, and the people who are the most responsible for the proliferation of international terrorism, are not the guys who fly the planes into the buildings, but all the people who supply the money and the wherewithal to permit them to do that," Cozen said, adding that the U.S. government has in the past taken the position that FSIA protection doesn't go to government officials, and that personal jurisdiction can be extended to indirect players.

The case would also set precedent in determining whether the FSIA's "noncommercial torts" exception bars claims against a foreign state that has not officially been designated a state sponsor of terrorism.

"We want the civil justice system open to U.S. citizens who are injured in the U.S. by the tortuous conduct of third parties, regardless of whether that tortuous conduct is kidnapping, murder, what have you," Cozen said.

Attorneys for the kingdom accuse the petitioners of playing "fast and loose with the facts." They cite portions of the 9/11 Commission report finding "no evidence" of a close relationship between al-Qaida and ranking Saudi officials.

"Petitioners likewise take liberties when they characterize this suit as an action against those who 'deliberately channeled resources to al-Qaida...knowing that al-Qaida intended to use those resources to attack the United States and its citizens,'" the respondents wrote. "The complaints allege only that the princes made donations to established Islamic charities that, in turn, supposedly diverted funds to al-Qaida."

Cozen said he and fellow lead counsel Carter G. Phillips of Sidley Austin LLP -- a former deputy solicitor-general -- "both felt that our case was so overwhelming, but yet so important on so many levels, that the Supreme Court would likely refer the matter" to the solicitor-general. Cozen said he was unaware of any reason why the Obama administration would change past opinions on the subject.

"I read the Supreme Court's determination right now as positive...that it usually is an indication that your petition has substantial merit, and the solicitor-general is now going to have to solicit the views of the Justice Department, the State Department and the Treasury Department before, I expect, it consults with the White House over what position it should take," Cozen said.

Elena Kagan has been nominated by President Barack Obama to fill the position, becoming the first woman to do so, but she has not yet been confirmed by the U.S. Senate. Long-time Deputy Solicitor-General Edwin Kneedler currently is serving as acting solicitor-general.

He said he anticipates it will take 60 to 90 days for the Obama administration to formulate its position, and that it should be announced before the Supreme Court adjourns in May. If the court chooses to hear the case, it would be after the new term begins in October.

(By R.J. Lehmann, Washington bureau manager: raymond.lehmann@ambest.com)
Copyright © 2009 A.M. Best Company, Inc. Sixteen years to the day after a car bomb parked beneath Manhattan's World Trade Center marked the first attack by an al-Qaida operative on U.S.