A Failed Attempt to Satisfy Judgments Against the Taliban with Afghani Assets

By: Milo Hammer, Staff Editor

The Taliban’s return to power and retaking of Kabul in late 2021, and its exercise of de facto control of Afghanistan, has led to novel questions of law in the District Court for the Southern District of New York: Can judgment holders execute their judgments held against terrorist organizations on sovereign assets of a nation which that terrorist organization has taken over by force? Magistrate Judge Netburn has answered the question in the negative, but various jurisdictional, interpretive, and constitutional issues have come to the forefront in the course of litigation, which await final dispensation by District Court Judge Daniels.

A New Reality for Afghanistan

In the wake of the September 11th, 2001 terrorist attacks families of victims of the attacks, along with many creditors, sought compensatory and punitive damages against various nations alleged to have supported Al-Qaeda in the attacks, as well as against the Taliban. Over the two decades since the attacks, litigation arising out of these claims has been a consistent presence on the docket of many federal courts, with the Southern District of New York being the most common venue. Many of these claims have resulted in successful judgments often with the defendants, whether it be Iran, the Taliban, or others, defaulting as a result of failing to appear.

However, despite successfully obtaining judgments the 9/11 plaintiffs, as they are often referred to, have rarely been able to execute these judgments due to the minimal assets available for execution in the United States. This unavailability of assets has been particularly acute in the case of the Taliban as they don’t hold assets in American banks and were operating largely in the shadows after the U.S. invasion displaced them in 2002.

In August 2021, the Taliban took control of Kabul and destroyed the Islamic Republic of Afghanistan, asserting control over most elements of the national government. Though the United States and much of the world have not recognized the Taliban as the legitimate government of Afghanistan, Secretary Blinken has acknowledged the Taliban to be the de facto government. Notably, this control -allegedly- includes the Taliban’s appointment of loyalists to key leadership positions in Da Afghanistan Bank (DAB), the country’s central bank, as well as setting monetary policy through DAB. Therefore, when the Taliban entered Kabul in August 2021, the U.S. Treasury Department blocked $7 billion in assets of the DAB held in the Federal Reserve Bank of New York (FRBNY).

Six months after the Taliban took control of the country and the United States froze the DAB assets, President Biden promulgated Executive Order 14,064, in which he announced a plan to transfer $3.5 billion of the DAB assets to a separate entity (recently reported to be stationed in Switzerland), which will hold and utilize the assets “for the benefit of the people of Afghanistan.” This order explicitly left the other $3.5 billion to be retained in the FRBNY so that litigation seeking to execute judgments on these assets could play out in federal courts.

Motions for Turnover of DAB Assets

In the months that followed the Taliban’s return to power in Afghanistan many 9/11 plaintiffs who held judgments of billions of dollars against the Taliban sought writs of execution targeting the DAB funds held frozen at the FRBNY. After U.S. Marshals served these writs, the plaintiffs filed motions for the turnover of the assets with Magistrate Judge Netburn and Judge Daniels of SDNY. The plaintiffs filed these motions pursuant to the Terrorism Risk Insurance Act of 2002 (TRIA), an amendment to the Foreign Sovereign Immunities Act (FSIA). The FSIA provides the exclusive basis for bringing civil suits against foreign sovereign assets in federal court, and TRIA more specifically provides judgment holders, whose underlying judgment is against a terrorist party, the opportunity to execute their judgments against terrorist party assets. Those holding judgments against a “foreign state designated as a state sponsor of terrorism” have commonly invoked TRIA by executing their judgments on foreign sovereign assets, as has been the case with Iranian assets frozen in the United States.

However, the 9/11 plaintiffs seek to invoke TRIA in a novel context: executing judgments held against a terrorist party (the Taliban) on the sovereign assets of a state, which is controlled by the terrorist party but is itself not a state sponsor of terrorism. Neither the Taliban nor Afghanistan appeared to oppose the motion, though the United States submitted a statement of interest in the matter. The U.S. Statement of Interest did not assert a position as to how it believed the Court should ultimately resolve the motion, only expounding on several of the legal issues while recognizing “a compelling interest in permitting victims of terrorism to obtain compensation to the greatest degree permitted under the law.”

Magistrate Judge Netburn, in submitting her Report & Recommendation to Judge Daniels, recommended denying the motions for turnover on three grounds that overlap analytically but are legally distinct. First, the Court lacks jurisdiction over the DAB assets held in the FRBNY since the plaintiffs hold judgments against the Taliban, not Afghanistan, and TRIA is an execution statute which only provides jurisdiction where the underlying judgment is held against a sovereign. Second, the President’s Constitutional recognition powers, as affirmed in Zivotofsky v. Kerry, precludes the Court from recognizing the Taliban as the government of Afghanistan, as it would need to do to authorize the dispersal of funds to pay out judgments on the Taliban’s behalf. And third, under TRIA, the DAB assets are not “blocked assets of any agency or instrumentality of that terrorist party,” given that the Taliban’s seizure of DAB by force precludes a finding of consent necessary to be deemed an “agency or instrumentality.”

The Future of the Legal Claims and Doctrine

For now, the judgment holders seem to be without a path to execute their judgments on the DAB assets. Still, there are a number of ways that the judgment holders may be able to execute their judgments against the DAB assets. First, Judge Daniels has yet to approve the Report & Recommendation, and the sensitive foreign affairs nature of the issue could lead to an appeal in the Second Circuit. For Judge Daniels, and potentially the Second Circuit, the finding that TRIA cannot be invoked, since DAB was seized by force and thus not an “agency or instrumentality,” could be influenced by a recent Eleventh Circuit decision in which the Court held that in the context of TRIA, an “instrumentality” need not have knowledge of its role as such and may be passive. Without a knowledge requirement to be an “instrumentality,” TRIA could potentially apply in this case and remove one of the barriers the plaintiffs face. Additionally, in the last half-century, Congress has maintained a consistent role in amending FSIA to expand pathways to liability and the execution of judgments. Thus, it is not inconceivable that in the near future, Congress could amend TRIA such that the 9/11 plaintiffs would no longer face the jurisdictional obstacle they encountered under current law. However, it is improbable that the 9/11 plaintiffs could overcome the Constitutional recognition issue which bars judicial recognition of the Taliban’s right to sovereign Afghani assets. As this litigation moves forward, and as the prevalence of unrecognized groups claiming status as sovereign increases, this tenant of foreign relations law, that makes the ownership rights of sovereign assets located in the United States dependent on executive recognition, will play an increasingly important role for federal courts.

Milo Hammer is a second-year student at Columbia Law School and a Staff member of the Columbia Journal of Transnational Law. He graduated from the University of Southern California in 2020.

Henry BloxenheimDecember 4, 2022