The Libyan Arab Foreign Bank had two accounts of Bankers Trust Company, an American Corporation. The demand account was held in New York, while the interest-bearing account was opened in the London branch. The contractual agreement was that a peg balance of $500,000 would be maintained in the New York account and that all transactions should pass through New York. On January 8, 1986, the President of U.S. released an executive directive that led to non-payment of the plaintiff. The plaintiff raised the following claims: a $ 131M damages claim following the failure of the defendant to release the sum, breach of contract, failure to execute payment instruction prior to the executive order, breach of duty and frustration of the contract. The Queen’s Bench refused the defense and ruled in favor of Libya Arab Foreign Bank on its claims to recover deposits and interest owed.
Should prescriptive jurisdiction under public international law impose exchange restriction?
No. The bench decided that the contract between a bank and its clients should be guided by the laws of the place where the account was kept.
The bench looked into the U.S. Department of Treasury’s Libyan Sanctions Regulations of January 8 and 10, 1986, which were to implement Executive Orders 12543 and 12544. It determined that there was no infringement of the U.S. law since the account in question was opened in London.
This appears to be a conflict of jurisdiction. In other words, it exemplifies how international tenets may not always apply in all local contexts. It also, in a way, shows the separation of powers between judiciary and executive. This is seen in how an Executive Order was overturned by a judicial process, though not in the same country.