Petition — Bank of Nova Scotia v. United States

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82-1531 MAR 25 1983

IN THE

Supreme Court of the United States

OCTOBER TERM, 1982

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IN RE:

GRAND JURY PROCEEDINGS

BANK OF NOVA SCOTIA,

Petitioner,

—_—V —

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

HENRY HARFIELD

Counsel of Record

SHEARMAN & STERLING

153 East 53rd Street

New York, New York 10022

(212) 483-1000

Of Counsel:

DANFORTH NEWCOMB

ROBERTA BENDER

March 11, 1983 Attorneys for Petitioner

Question Presented for Review

Shall the judicial power of the United States be exercised to

coerce a foreign national, who lawfully conducts business in

the United States, to act unlawfully in a third country, when

there has been no showing that the national interest requires

such exercise?

TABLE OF CONTENTS

PAGE

QUESTION PRESENTED FOR REVIEW ........... i

ST GPO UUMPCE Ds cc ccccncsocessvecesecesess iii

MEE MEE PURSE UULPURE EDs ccc tcccccscvecccvcavecs V

OPINION IN THE COURT BELOW................ l

re as esc ak oer hs 600604 os 50k s~ 2

STATUTES AND REGULATIONS INVOLVED....... 2

STATEMENT OF THE CASE ........cccccccvccccees 2

REASONS FOR GRANTING THE WRIT........... 4

1. The Importance of the Question............ 4

2. The Conflict with Applicable Decisions of this

POT Te TP OTT Toe TT TTT eer Terre 6

3. The Conflict of Decisions among the Circuit

NG 2h-a0 bo bale Mba eae ee teseseesseeees x

4. The Departure from the Accepted and Usual

Course of Judicial Proceedings............. 12

Ce cc cceu dances edaeseeeerencteveaseess 13

APPENDICES

Appendix A: Opinion of the United States Court of

Appeals for the Eleventh Circuit ....... la

Appendix B: Opinion of the United States District

Court for the Southern District of

DLL acs cadenbeaesee Ohdh a eGin ons Ib

Appendix C:

Appendix D:

Appendix E:

Appendix F:

Appendix G:

Appendix H:

Appendix I:

Judgment of the United States Court of

Appeals for the Eleventh Circuit .......

Order on Rehearing from the United

States Court of Appeals for the Eleventh

Cea uh nSe as akaee ken aenen aww es

U.S. Constitution Amendment V........

U.S. Civil Contempt Statute, !8 U.S.C.

Se CIPS 6 vckckesdpousueuieeiees

Section 10 of the Banks and Trust Com-

panies Regulation Act of 1965, Bahamian

Acts No 64, as amended by the Banks

and Trust Companies Regulation

(Amendment) Act 1980 ...............

Affidavit of Peter Graham ............

Rule 28.1 Listing of Parents, Subsidiaries

et PEIN 6 5554 DSR OSes ee henna

PAGE

TABLE OF AUTHORITIES

CONSTITUTIONAL PROVISIONS AND STATUTES

PAGE

A. United States

U.S. Constitution Amendment V...........6.00065 2

Ee Seis PPPEUEOIODS ecnnvetecstsenacesnues 12

Se EE sokdescincdcdechsrsusteses 2

Be ee REEETES bcccveccesesssevevceres 2

ee as F EPUOTED sccccctacvcevecabrcesevecs 3

B. Bahamian

Section 10 of the Banks and Trust Companies Regula-

tion Act of 1965, 1965 Bahamian Acts as amended by

the Banks and Trust Companies Regulation (Amend-

Sn Se 5206s aba ous de eer eh ae mew aisle 66a uin.e »

CASES

Arthur Andersen & Co. v. Finesilver, 546 F.2d 338 (10th

Cir. 1976), cert. denied, 429 U.S. 1096 (1977) ....... 11

Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398

Sante so eak Uhk se ewe eee veka sh eee bees oka es 6

First National City Bank v. Banco Nacional de Cuba,

NUT vac Gude dbo cu sele Vaneee Sede eae 6

In Re Grand Jury Proceedings. The Bank of Nova

Scotia v. United States of America, 691 ¥.2d 1384

ec cue cca dal nna s anew ek wankee eo l

In Re Grand Jury Proceedings (“Schofield 1”), 486 F.2d

nS <wcUcs een tuacrnearwetaes ue awe 10

PAGE

In Re Grand Jury Proceedings (“Schofield II”), 507 F.2d

963 (3rd Cir), cert. denied, 421 U.S. 1015 (1975) .... 10

In Re Grand Jury Proceedings. United States v. Field,

532 F.2d 404 (Sth Cir.), cert. denied, 429 U.S. 940

Dd haul wrehrdn ether eresresanehesan earn li

Republic of Iraq v. First National City Bank, 353 F.2d

47 (2d Cir. 1965), cert. denied, 382 U.S. 1027 (1966) 6

Societe Internationale Pour Participations Industrielles

et Commerciales, S.A. v. Rogers, 357 U.S. 197 (1958) 7, 8

United States v. First National Bank of Chicago (“Trip-

plett”), No. 80-2713 (7th Cir. Jan. 24, 1983)........ 9

United States v. First National City Bank (“Loveland”),

396 F.2d 897 (2nd Cir. 1968). .....ccccesvcvcves 10, 11, 13

United States v. First National City Bank (“Omar”), 379

ee 5 sna Ke hEKAS SRO dWAGeseNRahESCRO EE 6, 7,8

United States v. Vetco, Inc., 644 F.2d 1324 (9th Cir.),

cert. denied, 454 U.S. 1098 (1981)............0006- 11

Western Union Tel. Co. v. Pennsylvania, 368 U.S. 71

aU i esas ekwsebek wissedce0neseeneneeeus 7

OTHER AUTHORITIES

Restatement of Foreign Relations Law of the United

States (Revised), § 420 (Tent. Draft 3, 1980)....... 5, 9, 12

IN THE

Supreme Court of the United States

OCTOBER TERM, 1982

No. ___

IN RE:

GRAND JURY PROCEEDINGS

BANK OF NOVA SCOTIA,

Petitioner,

—V.—

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

Opinion of the Court Below

The opinion of the United States Court of Appeals for the

Eleventh Circuit appears at 691 F.2d 1384 (11th Cir. 1982) and

is reproduced as Appendix A. The opinions of the United

States District Court for the Southern District of Florida dated

June 11, July 6 and July 10, 1982, are unreported but are

reproduced as Appendix B. The judgment of the United States

Court of Appeals for the Eleventh Circuit is unreported, and is

reproduced as Appendix C.

Jurisdiction

The opinion of the United States Court of Appeals for the

Eleventh Circuit was entered on November 29, 1982. A peti-

tion and suggestion for rehearing en banc was denied on

January 6, 1983 (Appendix D). This petition was filed within

ninety days of that date. The Court has jurisdiction to review

the judgment of the Court of Appeals under 28 U.S.C.

§ 1254(1)(1976).

Statutes and Regulations Involved

This case involves the due process clause of the fifth amend-

ment to the United States Constitution, U.S. Const. amend.

V., which is reproduced in Appendix E. It also involves the

Civil Contempt Statute, 18 U.S.C. § 401 (1976), which is

reproduced in Appendix F. A statute which is also related to

this case is Section 10 of the Banks and Trust Companies

Regulation Act of 1965, 1965 Bahamian Acts No. 64, as

amended by the Banks and Trust Companies Regulation

(Amendment) Act 1980. It is reproduced in Appendix G.

Statement of the Case

This is a case in which a court in the United States has

exercised its discretion to penalize a citizen of Canada for its

refusal to violate the criminal laws in a third nation, without

any showing of the necessity or relevance of such an order to

any interests of the United States.

The Bank of Nova Scotia (the “Bank”) is a Canadian

chartered bank established 150 years ago with 1,027 Canadian

branches and over 200 branches, offices and agencies in 45

other countries. The U.S. Attorney’s Office for the Southern

District of Florida caused a subpoena duces tecum to be served

on the Bank’s Miami, Florida agency on September 23, 1981,

calling for the production of certain customer records located

at the Bank’s Nassau, Bahamas Branch.' The Bank declined to

produce the documents on the ground that Sections 10(1) and

(3) of the Bahamas Banks and Trust Companies Act, 1965, as

amended (“the Act”), prohibit disclosure of customer records

by an officer of the Nassau Branch without the consent of the

customer, save for three narrow exceptions that do not apply

here (Aff. of P. Graham 4, reproduced in Appendix H, infra

at 2h). Both the district court and the Eleventh Circuit’

recognized that the Bank would be subject to criminal penalties

in the Bahamas if it produced the documents. A violation of

the Act is punishable by up to two years’ imprisonment and a

fine of $15,000 (Bahamian).

In this matter, the Bank is a neutral source of information

and has not been accused of any wrongdoing. At no time has it

been a target of the investigation.

The Bank has done everything in its power under the

applicable laws to comply with the subpoena. It has sought but

has not obtained a waiver by its customer of the customer’s

rights under the Act. The Bank does not have standing under

Bahamian law to apply to a Bahamian court for an order

permitting the release of customer information. The Depart-

ment of Justice (the “Department”) does have standing to

apply for such an order (Aff. of P. Graham € 6,7, infra at

3h), and appears to have grounds for such an application based

on possible violations of United States narcotics laws (Aff. of

P. Graham { 8, infra at 3h). The Department has declined to

make any application to the Bahamian courts, and has also

failed to make any showing before the district court that the

I The documents relate to an individual and to two corporations. The

subpoena originally called for similar documents from the Bank’s

Antigua Branch. In the interest of avoiding unnecessary conflict, the

Bank investigated and found that no such documents exist. Accord-

ingly, that part of the subpoena is not in issue.

2 The jurisdiction of the courts below is based on 28 U.S.C. § 1345

(1976).

documents sought were at all relevant or necessary to the grand

jury’s investigation.*

The district court held the Bank in civil contempt, and the

Bank appealed that decision to the Eleventh Circuit. On

November 29, 1982, the Eleventh Circuit issued an opinion

affirming the district court’s order, and the Bank’s petition for

a rehearing and suggestion for a rehearing en banc was denied

on January 6, 1983.

Reasons for Granting Writ

This case raises an important question of federal law that

has not been, but should be, answered by this Court. The court

below answered the question in a manner which conflicts with

principles enunciated by this Court, by the other circuits and

by Congress.

1. The Importance of the Question.

This case requires a determination of the extent to which a

municipal court should require a person subject to its jurisdic-

tion to act in the territory of a foreign nation in violation of

the criminal laws of that foreign sovereign. The question

encompasses issues of constitutional magnitude as to the sig-

nificance of the domestic or foreign status of the party before

the Court, as to the denial of due process, and as to the

separation of powers as between the executive and judicial

branches of Government. The circuits are sharply divided on

the issues raised by this case. The conflict results in a disarray

that requires resolution by this Court if federal law is to be

declared by a single voice in a consistent manner.

The expeditious resolution of these issues is moreover a

matter of international significance. Indeed, the reporters’

3 The Government produced an affidavit in camera to the district

court on Janaury 13, 1982 regarding the relevance of the documents.

This affidavit was not considered by either the district court or the

Eleventh Circuit, and neither court made a finding of relevance or

materiality prior to enforcing the subpoena.

notes to the most recent Tentative Draft of the Restatement of

Foreign Relations Law of the United States observe:

No aspect of the extension of the American legal system

beyond the territorial frontiers of the United States has

given rise to so much friction as the request for docu-

ments associated with investigation and litigation in the

United States.

Restatement of Foreign Relations Law of the United States

(Revised), § 420, reporters’ notes at 18 n.1 (Tent. Draft 3,

1980.)

There is evidence to support those concerns. The validity of

discovery orders that require a non-citizen subject to the

jurisdiction of the United States to act abroad in violation of

the laws of its home or hust country has been and increasingly

is challenged by statutory and decisional law of the affected

nations. The integrity of United States law is called in question

by reason of the inconsistency between the extra-territorial

effect sought to be given United States judicial process and

denial by United States courts of the extraterritorial effect of

foreign laws and decrees. The disparate pronouncements of

circuit courts, which are discussed hereafter, provide an added

basis for the contention that the administration of justice in the

United States is predicated upon political expediency rather

than upon legal principle.

Related, and of no less importance, is the question of

whether the independence of the judicial branch is impaired.

That issue comes into sharp focus in this case for the following

reasons. The Department of Justice caused the issuance of the

subpoena in question on the ground that the grand jury

investigation would be aided in some unspecified manner by

production of documents located in the Bahamas. When the

petitioner declined to produce the documents on the ground

that compliance with the subpoena would violate Bahamian

criminal law, the controversy was referred to the courts below.

The courts below responded to the Department’s demands

without any examination or finding of the materiality or

relevance of the documents requested and thus, in effect,

abdicated their judicial function.

2. The Conflict with Applicable Decisions of this Court.

The decision of the panel below disregards principles de-

clared by this Court. Pursuant to the federal act of state

doctrine, this Court refrains from examining the acts of a

foreign state which take effect within the territory of that state.

This Court’s reluctance to question the act of a foreign

nation was made evident in Banco Nacional de Cuba vy.

Sabbatino, 376 U.S. 398 (1964). In that case, the Court

declined to examine the validity of the Cuban government’s

expropriation of property, because the operative act took place

entirely within another nation. The Court noted that the

doctrine has “ ‘constitutional’ underpinnings” and “arises out

of the basic relationships between branches of government

. . in the area of international relations.” /d. at 423.

Similarly, a court of the United States will not enforce acts

of a foreign government which take effect in this country, if

those acts are inconsistent with the laws or public policy of the

United States. See, e.g., First National City Bank v. Banco

Nacional de Cuba, 406 U.S. 759 (1972); ?epublic of Iraq v.

First National City Bank, 353 F.2d 47 (2d Cir. 1965), cert.

denied, 382 U.S. 1027 (1966). Those principles are offended by

an order that requires the Bank to produce records in the

Bahamas in violation of that nation’s bank privacy statute.*

As an adjunct of its recognition of territorial rights of

sovereignty, this Court has expressed extreme reluctance to

enter any order which would obligate a party to commit an act

in a foreign country in violation of the laws or public policies

of that nation. In United States v. First National City Bank

(“Omar”), 379 U.S. 378 (1965), the Court reversed an order of

the Second Circuit and reinstated an injunction which had

been entered by the district court, temporarily freezing an

4 The invasion of Bahamian sovereignty is not mitigated if the

documents are smuggled out of the Bahamas for production elsewhere.

;

account in a bank’s foreign branch. Writing for the majority,

Justice Douglas noted that, if its decision were in violation of

foreign law, the district court should review the advisability of

its order. He stated:

For overseas transactions are often caught in a web of

extraterritorial activities and foreign law beyond the ken

of our federal courts or their competence. We have,

however, no such involvement here, for there is no show-

ing that the mere “freezing” of the Montevideo accounts

pending service on Omar, would violate foreign law, cf.

Societe Internationale v. Rogers, 357 U.S. 197, 211, or

place respondent under any risk of double liability. Cf.

Western Union Co. v. Pennsylvania, 368 U.S. 71. The

District Court reserved power to enter any protective

order of that character.

Id. at 384. In this case, an order compelling the Bank to

produce documents in the Bahamas would place it in direct

contravention of foreign law. The Eleventh Circuit’s opinion

thus disregards the concerns expressed in Omar, and indeed

this case presents a violation of the due process rights of a

foreign national which was not before the Court in Omar.

This Court recognizes the importance of respecting foreign

privacy statutes, particularly in instances in which a party is

subject to conflicting regulations. In Societe Internationale

pour Participations Industrielles et Commerciales, S.A. v.

Rogers, 357 U.S. 197 (1958), the petitioner, a Swiss trading

company, brought suit for the return of property seized by the

Alien Property Custodian under Section 5 of the Trading with

the Enemy Act. The Court reversed an order of the district

court, which had ruled that, if the petitioner did not produce

certain documents in violation of the Swiss secrecy laws, its

complaint would be dismissed. Emphasizing the unfairness of

ordering a party to produce documents in violation of foreign

law, the Court stated:

It is hardly debatable that fear of criminal prosecution

constitutes a weighty excuse for nonproduction, and this

excuse is not weakened because the laws preventing com-

pliance are those of a foreign sovereign.

Id. at 211.

The Bank’s plight is more extreme than that faced by the

parties in Omar and Rogers. Unlike the Omar situation, in

which Justice Douglas found that there had been no showing

that compliance with the Court’s order would place the re-

spondent in violation of foreign law, an order directing the

Bank to produce documents in this case would place it in direct

violation of the criminal laws of another sovereign nation. In

Rogers, the Court declined to issue an order which would have

placed the petitioner in violation of Swiss bank privacy laws.

In that situation, although the bank was theoretically a party

seeking relief under the laws of the United States, the Court

pointed out that its position was ‘‘analogous to that of a

defendant,’’ for it was belatedly seeking the recovery of its

assets. 357 U.S. at 210.

In this case, the Bank seeks no relief or special privilege

under the laws of the United States. It seeks no more than to

continue lawfully to conduct business in those countries in

which it is licensed to do so, without subjection to orders by

one host country which would oblige it to violate the territorial

laws of another host country. That limited aspiration is justi-

fied under present federal law. This Court should decide

whether the law is to be changed.

3. The Conflict of Decisions by the Circuit Courts.

The panel decision below is at odds with the prevailing law,

as articulated by several circuits, and thus presents a conflict

that should be resolved by this Court. The panel conceded that

there is a conflict among the circuits regarding the extent to

which a court may enforce a subpoena, even in domestic

situations, absent a showing by the C. «ernment of relevance

and materiality of the documents requested. (See n. 5, infra at

5a.) This conflict has, in fact, become further exacerbated

since the panel rendered its opinion.

iS ees rs Be

In United States v. First National Bank of Chicago (“Trip-

plett”), No. 80-2713 (7th Cir. Jan. 24, 1983), the Seventh

Circuit recently reversed a lower court ruling which had or-

dered the First National Bank of Chicago to produce certain

documents from its branch in Greece in violation of that

nation’s bank secrecy statute. The court applied the balancing

test of the Restatement (Second) of Foreign Relations in what

it described as a “sensitive balancing of the interests at stake.”

It noted:

We think it significant in weighing the hardship factor

that the Bank employees who would be exposed to

penalty and First Chicago, which would be ordering its

Greek employees to act unlawfully, are involved only as

neutral sources of information and not as taxpayers or

adverse parties in litigation.

Although the interest of the United States in collecting

taxes is of importance to the financial integrity of the

nation, the interest of Greece, served by its bank secrecy

law is also important, and so conceded by Government

counsel (factor (a)).

The court suggested a distinction of the Eleventh Circuit’s

opinion herein, noting among other things that the Bahamian

statute permits a customer waiver, and the Bahamian courts

have the discretion to permit disclosure upon proper applica-

tion. In fact, in this case, the Bank is also a neutral source of

information, rather than an adverse party to the litigation; it

has sought and not received a customer waiver, and the

Government has declined to apply to a Bahamian court for an

order of disclosure. Thus, the Bank has made a good faith

effort to comply with the subpoena and is in as difficult a

position as the defendant in Tripplett.

The court below has also departed from the standard

adopted by the Third Circuit. The Third Circuit has recognized

that grand jury subpoenas are essentially prosecutorial docu-

ments, and so requires the Government to demonstrate in all

cases that the items sought are both relevant and necessary to a

pending grand jury investigation. In In Re Grand Jury Pro-

ceedings (Schofield 1), 486 F.2d 85 (3d Cir. 1973), the court

commented:

[T]hey [grand jury subpoenas] are in fact a/most univer-

sally instrumentalities of the United States Attorney’s

office or of som. other investigative or prosecutorial

department of the executive branch. Grand jury sub-

poenas then, when they are brought before the federal

courts for enforcement, for all practical purposes are

exactly analogous to subpoenas issued by a federal ad-

ministrative agency on the authority of a statute, without

any prior judicial control.

id. at 90 (footnote omitted) (emphasis added). The Third

Circuit has concluded that grand jury subpoenas are not

entitled to automaiic enforcement, and stated that the Govern-

ment must show ‘‘in every case that each item sought was (1)

relevant to an investigation, (2) properly within the grand

jury’s jurisdiction, and (3) not sought primarily for another

purpose.’’ Jn re Grand Jury Proceedings (‘‘Schofield II’’), 507

F.2d 963, 966 (3rd Cir.) (emphasis in original), cert. denied,

421 U.S. 1015 (1975).

Similarly, the Second Circuit has recognized that grand jury

subpoenas are not entitied to automatic enforcement, particu-

larly in situations in which the production of documents would

place a party in violation of the laws of a foreign nation. In

United States v. First National City Bank (‘‘Loveland’’), 396

F.2d 897 (2d Cir. 1968), the court affirmed an order directing

the Bank to produce certain documents in Germany, in viola-

tion of civil law in that country. The court weighed the critical

importance of minimizing the potential conflict among nations

against the significance of the documents requested in that

action, stating:

It is not asking too much however, to expect that each

nation should make an effort to minimize the potential

conflict flowing from their joint concern with the pre-

scribed behavior. . . . Where, as here, the burden of

resolution ultimately falls upon the federal courts, the

difficulties are manifold because the courts must take care

not to impinge upon the prerogatives and responsibilities

of the political branches of the government in the ex-

tremely sensitive and delicate area of foreign affairs.

Id. at 901 (citations omitted).

No circuit, other than the court below, has imposed con-

tempt penalties on a third party witness for its failure to

produce documents in a foreign nation in violation of the

criminal laws of that nation. In /n Re Grand Jury Proceedings.

United States v. Field, 532 F.2d 404 (Sth Cir.), cert. denied,

429 U.S. 940 (1976), the bank officer from whom the informa-

tion was sought was physically within the jurisdiction of the

court, and the information sought consisted of his personal

testimony. Moreover, in those situations in which courts have

ordered the production of documents in violation of foreign

secrecy Statutes, there has been a finding of at least a minimum

of purposeful involvement of the subpoenaed pariy in the

activity which was the subject of investigation. In United

States v. Vetco, Inc., 644 F.2d 1324 (9th Cir.), cert. denied,

454 U.S. 1098 (1981), the court compelled the production of

records of a defendant’s foreign subsidiary where the defen-

dant was the subject of a domestic investigation. Accord,

Arthur Andersen & Co. v. Finesilver, 546 F.2d 338 (10th Cir.

1976), cert.denied, 429 U.S. 1096 (1977) (defendant was com-

pelled to produce records held by its foreign office where the

records were relevant to defendant's alleged violation of fed-

eral securities laws).

We are aware of no other circuit which compels a foreign

national, accused of no wrongdoing, to produce in violation of

foreign criminal law documents which are not shown to be

material or necessary to a pending investigation. The opinion

below, which affirmed the enforcement of a grand jury sub-

poena without any analysis of the importance of the docu-

ments sought or of the interests served by the foreign statute,

represents sO extreme a negation of principles declared by

other circuits that it requires review by this Court.

4. The Departure from the Accepted and Usual Course of

Judicial Proceedings.

The district court departed from the accepted and usual

course of judicial proceedings by imposing contempt penalities

on the petitioner in the circumstances of this case, and the

court of appeals exacerbated as well as sanctioned that depar-

ture so as to call for an exercise of this Court’s power of

supervision. This Court and Congress have long stated their

disapproval of extraterritorial adventures such as the one in

this case.

Congress has consistently avoided regulatory interference

with the internal affairs of foreign countries. For example, in

the Bank Holding Company Act, 12 U.S.C. § 1843(c)(9)(1980),

Congress exempted bank holding companies which are or-

ganized in foreign countries from regulation of their business

conducted outside the United States.

The courts have heretofore refrained from imposing con-

tempt sanctions on foreign nationals for refusal to violate their

obligations. The reporters’ notes to the Restatement state:

No case is known in which a foreign national has actually

been fined or imprisoned in the United States for failure

to comply with an order to produce documents located

abroad, though such sanctions have been threatened a

number of times with respect to both U.S. and foreign

nationals.

Restatement of Foreign Relations Law of the United States

(Revised) § 420, reporters’ notes at 26 n.7 (Tent. Revised Draft

No. 3, 1982).

In this case, a noncitizen of this country, which is subject to

process of our courts only because it lawfully conducts busi-

ness here, is victimized by a conflict of sovereigns. As Judge

Kaufman observed in Loveland, ‘‘{[A] court of one country

should make an effort to minimize possible conflict between its

orders and the law of a foreign state affected by its decision.”’

396 F.2d at 902. The district court and the court of appeals in

this case failed to make any such effort.

Conclusion

This petition for certiorari should be granted and, upon

review, the decisions of the court of appeals and the district

court should be reversed.

Dated: New York, New York

March 11, 1983

Respectfully submitted,

Henry Harfield,

Counsel of Record

Shearman & Sterling

153 E. 53rd Street

New York, New York 10022

(212) 483-1000

Of Counsel:

Danforth Newcomb

Roberta Bender

APPENDICES

APPENDIX A

OPINION OF THE

UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

IN RE GRAND JURY PROCEEDINGS

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

THE BANK OF NOVA SCOTIA,

Defendant-Appellant.

No. 82-5831.

United States Court of Appeals,

Eleventh Circuit.

Nov, 29, 1982.

King & Spalding, Griffin B. Bell, Charles Kirbo, James A.

Pardo, Jr., Atlanta, Ga., Steel, Hector, Davis, Burns &

Middleton, Talbot D’Alemberte, Thomas R. Julin, Palm

Beach, Fla., for defendant-appellant.

Glenn L. Archer, Jr., Michael L. Paup, Charles E.

Brookhart, Alan Hechtkope, Asst. Attys. Gen., Tax Div.,

Dept. of Justice, Washington, D.C., for plaintiff-appellee.

Appeal from the United States District Court for the

Southern District of Florida.

Before FAY and CLARK, Circuit Judges, and MORGAN,

Senior Circuit Judge.

LEWIS R. MORGAN, Senior Circuit Judge:

The Bank of Nova Scotia appeals from an order of the

United States District Court for the Southern District of

Florida holding the Bank of Nova Scotia in civil contempt for

failing to comply with an order of the court enforcing a grand

jury subpoena duces tecum. The Bank of Nova Scotia (the

Bank) presents three arguments against enforcing the sub-

poena, The Bank first contends that there were insufficient

grounds to enforce the subpoena. The Bank also contends that

enforcing the subpoena would violate due process. Finally, the

Bank argues that the subpoena should not be enforced as a

matter of comity between nations. We find the Bank’s conten-

tions to be without merit, and therefore we affirm the district

court.

1, FACTS

The Bank of Nova Scotia is a Canadian chartered bank with

branches and agencies in forty-five countries, including the

United States and the Bahamas. A federal grand jury conduct-

ing a tax and narcotics investigation issued a subpoena duces

tecum to the Bank calling for the production of certain records

maintained at the Bank’s main branch or any of its branch

offices in Nassau, Bahamas and Antigua, Lesser Antilles,

relating to the bank accounts of a customer of the Bank.' The

subpoena was served on the Bank’s Miami, Florida agency on

September 23, 1981. The Bank declined to produce the docu-

ments asserting that compliance with the subpoena without the

customer’s consent or an order of the Bahamian courts would

violate Bahamian bank secrecy laws.’

l The Bank investigated and found no documents which were re-

quested located at its Antigua branch, Accordingly, that part of the subpoena

is NOt in issue,

2 Banks and Trust Companies Regulations Act of 1965, 1965 Bah.

Acts No, 64, as amended by the Banks and Trust Companies Regulation

(Amendment) Act, 1980, 1980 Bah. Acts No. 3, and Section 19 of the Banks

Act, II Bah. Rev. Laws, c. 96 (1965), as amended by the Banks Amendment

A hearing was held on the government's motion to compel

the Bank to comply with the subpoena on January 13, 1982. At

the hearing conflicting evidence was presented as to the degree

Act 1980, 1980 Bah, Acts No, . Both Section 16 and Section 19 are

identical, Section 10 of the Bank and Trust Companies Regulation Act as

amended provides:

Preservation of secrecy

10,—-(1) No person who has acquired information in his capacity as—

(a) director, officer, employee or agent of any licensee or former

licensee;

(b) counsel and attorney, consultant or auditor of the Central Bank

of The Bahamas, established under section 3 of the Central Bank of

The Bahamas Act 1974, or as an employee or agent of such counsel

and attorney, consultant or auditor;

or liquidator of any licensee or former licensee or as an employee or

agent of such counsel and attorney, consultant, auditor, accountant,

receiver or liquidator;

(d) auditor of any customer of any licensee or former licensee or as

an employee or agent of such auditor;

(e) the Inspector under the provisions of this Act,

shall, without the express or implied consent of the customer con-

cerned, disclose to any person any such information relating to the

identity, assets, liabilities, transactions, accounts of a customer of a

licensee or relating to any application by any person under the

provisions of this Act, as the case may be, except—

(i) for the purpose of the performance of his duties or

the exercise of his functions under this Act, if any; or

(ii) for the purpose of the performance of his duties

within the scope of his employment; or

(iii) when a licensee is lawfully required to make disclo-

sure by any court of competent jurisdiction within The

Bahamas, or under the provisions of any law of The

Bahamas,

—(2) Nothing contained in this section shall—

(a) prejudice or derogate from the rights and duties subsisting at

common law between a licensee and its customer; or

(b) prevent a licensee from providing upon a legitimate business

request in the normal course of business a general credit rating with

respect to a customer.

—(3) Every person who contravenes the provisions of subsection

(1) of this section shall be guilty of an offense against this Act and

shall be liable on summary conviction to a fine not exceeding fifteen

of control the Miami agency held over documents held by the

Nassau branch. The government presented evidence that ail

banking transactions for accounts in the Bahamian branch

could be handled by the Miami agency. The Bank presented

evidence that the Miami agency is a one-way conduit for

customer communication with the Nassau branch. The Bank

also presented an affidavit showing that compliance with the

subpoena could expose the Bank to prosecution under the

Bahamian bank secrecy law. The affidavit also showed that the

government could obtain an order of judicial assistance from

the Supreme Court of the Bahamas allowing disclosure if the

subject of the grand jury investigation is a crime under Baha-

mian law and not solely criminal under United States tax laws.

The government did not make a showing that the documents

sought are relevant and necessary to the grand jury’s investiga-

tion.

After the district court entered an order compelling the Bank

to comply with the subpoena, the Bank’s Miami agent ap-

peared before the grand jury and formally declined to produce

the documents called for by the subpoena. The district court

held the Bank in civil contempt and the Bank brings this

appeal.

thousand dollars or to a term of imprisonment not exceeding two

years of to both such fine and imprisonment.

The government argues the Bank would not be successfully prosecuted by

Bahamian authorities if it complied with the subpoena. In this regard it

argues that because Section 10(2)(a) expressly preserves the common law

relationship between bank and customers, the Bank is authorized to disclose

the requested information. See Tournier v. National Provincial and Union

Bank of England, {1924] 1 K.B. 461 (Banker may disclose banking informa-

tion concerning a customer where the banker is compelled by law to disclose

information); Barclay’s Bank International, Ltd. v. McKinney, No. 474

(Bah. S.Ct. Feb. 16, 1979). Although the determination of foreign law is

reviewable on appeal, F.R.Civ.P. 44.1, we shall assume for purposes of this

appeal that the Bank will be subject to criminal sanctions in the Bahamas.

3 At a January 13, 1982 hearing the government submitted an in

camera affidavit regarding the relevance of the documents sought. This

document was not considered by the court below. We conclude it is unneces-

sary to view the document. See Part II, infra.

Il. RELEVANCE OF THE DOCUMENTS

The Bank urges this court to follow the Third Circuit's

holdings in Jn re Grand Jury Proceedings, 486 F.2d 85 (Scho-

field 1) (3rd Cir. 1973), and Jn re Grand Jury Proceedings, 507

F.2d 963 (Schofield Il) (3rd Cir. 1975), cert. denied, 421 U.S.

1015, 95 S.Ct. 2424, 44 L.Ed.2d 685 (1975), and require the

government to show that the documents sought are relevant to

an investigation properly within the grand jury’s jurisdiction

and not sought primarily for another purpose. The government

does not dispute that the district court enforced the subpoena

without making a finding that the documents sought were

relevant or necessary for the grand jury’s investigation. Rather,

the government argues this case is controlled by /n re Grand

Jury Proceedings. United States v. McLean, 565 F.2d 318 (Sth

Cir. 1977), and In re Grand Jury Proceedings. United States v.

Guerrero, 567 F.2d 281 (Sth Cir. 1978),* where the Fifth Circuit

declined to follow the Schofield rule absent some showing of

harassment or prosecutorial misuse of the system. The bank

argues that the Schofield rule, however, should be applied to

cases such as this where foreign relations are implicated and

where alternative methods are available to obtain the requested

information that do not require the Bank to violate foreign

law.

{1] The guidelines established by the Third Circuit in Scho-

field are not mandated by the Constitution; the Third Circuit

imposed the requirements under that court’s inherent supervi-

sory power. Schofield, 486 F.2d at 89; McLean, 565 F.2d at

320. We decline to impose any undue restrictions upon the

grand jury investigative process pursuant to this court’s super-

visory power.’

4 The Eleventh Circuit, in the en banc decision of Bonner v. City of

Prichard, 661 F.2d 1206 (1ith Cir. 1981), adopted as precedent the decisions

of the Former Fifth Circuit decided prior to October 1, 1981.

5 Other circuits have declined to adopt such a rule. See, e.g., In re

Pantojas, 628 F.2d 701 (1st Cir. 1980); In re Liberatore, 574 F.2d 78 (2d Cir.

1978). See also /n re Special Grand Jury No. 81-1 (Harvey), 676 F.2d 1005

(4th Cir. 1981) (reserving question of whether preliminary showing must be

made in every case).

It is unnecessary to repeat here the vital role the grand jury

plays in our system of jurisprudence. See, /n re Grand Jury

Proceedings. United States v. Field, 532 F.2d 404, 407-09 (Sth

Cir. 1976), cert. denied, 429 U.S. 940, 97 S.Ct. 354, 50

L.Ed.2d 309 (1976). As stated by the court in McLean:

Any holding that would saddle a grand jury with mini-

trials and preliminary showings would assuredly impede

its investigation and frustrate the public’s interest in the

fair and expeditious administration of the criminal laws.

United States v. Dionisio, 410 U.S. 1, 17, 93 S.Ct. 764,

773, 35 L.Ed.2d 67 (1973).

In re Grand Jury Proceedings. United States v. McLean, 565

F.2d at 320.

[2] While it is true courts should not impinge upon the

political prerogatives of the government in the sensitive area of

foreign relations, Chicago and Southern Air Lines v. Water-

man Steamship Corp., 333 U.S. 103, 111, 68 S.Ct. 431, 436, 92

L.Ed. 568 (1948), accepting the Bank’s position would be a

greater interference with foreign relations than the procedures

employed here. In essence, the Bank would require the govern-

ment to choose between impeding the grand jury’s investiga-

tion and petitioning the Supreme Couri of the Bahamas for an

order of disclosure.

This court is cognizant that international friction has been

provoked by enforcement of subpoenas such as the one in

question. See, Restatement (Revised) of Foreign Relations Law

of the United States § 420, Reporter’s Note 1. See generally,

Rio Tinto Zinc Corp. v. Westinghouse Electric Corp., (1978)

A.C. 547, 616, 629-31, 639-40, 650 (H.L.) (criticizing the

United States for claims of “jurisdiction over foreigners in

respect to acts done outside the jurisdiction of that country”).

But as recognized in United States v. First National City Bank,

379 U.S. 378, 384-85, 85 S.Ct. 528, 531-32, 13 L.Ed.2d 365

(1965), the various federal courts remain open to the legislative

and executive branches of our government if matters such as

this prove to have international repercussions. See, e.g., Con-

vention on Double Taxation of Income, September 27, 1951.

United States-Switzerland, 2 U.S.T. 1751, T.1.A.S. No. 2316

(Swiss-US Tax Treaty providing for exchange of information

for, inter alia, the prevention of fraud).

Ill. DUE PROCESS

[3] The Bank contends that compliance with the subpoena

would require it to violate the Bahamian bank secrecy law and

therefore enforcing the subpoena and imposing contempt sanc-

tions for noncompliance violates due process under Societe

Internationale Power Participations Industriells v. Rogers, 357

U.S. 197, 78 S.Ct. 1087, 2 L.Ed.2d 1255 (1958). The Bank

argues that once it has shown Bahamian law bars production

of the documents and that it is a disinterested custodian of the

documents due process prohibits enforcement of the subpoena.

We disagree.

The Bank attempts to fashion a due process defense to the

contempt proceedings because of its lack of purposeful in-

volvement or responsibility in the subject matter before the

court. In essence, the Bank asserts it is fundamentally unfair to

require a “mere stakeholder” to incur criminal liability in the

Bahamas. The Bank’s position does not withstand analysis.

In Societe Internationale a Swiss holding company brought

an action to recover assets seized under the Trading with the

Enemy Act. The district court had ordered production of

certain banking records of a Swiss bank pursuant to the

government’s discovery request. The holding company failed

to comply with the court’s order, after good faith efforts were

made to comply, on the grounds that compliance would violate

Swiss penal laws. The district court then dismissed the suit with

prejudice due to noncompliance with the production order. In

reversing the district court, the Supreme Court did not erect an

absolute bar to sanctions being imposed for noncompliance

with summons or subpoenas whenever compliance is prohi-

bited by foreign law. Societe Internationale, 357 U.S. at

105-06, 78 S.Ct. 1092-93; United States v. Vetco, Inc., 644 F.2d

1324, 1329 (9th Cir. 1981), cert. denied, _.. U.S. ____, 102

S.Ct. 671 (1981). Societe Internationale held only that the

sanction of outright dismissal of that plaintiff’s complaint

could not be imposed where that plaintiff had acted in good

faith, was unable to comply because of foreign law, and was

entitled to a hearing on the merits in order for the Trading with

the Enemy Act to withstand constitutional challenge. Societe

Internationale, 352 U.S. at 211-12, 78 S.Ct. at 1095-96. Com-

pare, National Hockey League v. Metropolitan Hockey Club,

Inc., 427 U.S. 639, 96 S.Ct. 2778, 49 L.Ed.2d 747 (1976), and

Roadway Express, Inc. v. Piper, 447 U.S. 752, 767 n. 14, 100

S.Ct. 2455, 2464 n. 14, 65 L.Ed.2d 488 n. 14, (1980) (empha-

sizing bad faith vs. inability to comply dichotomy). See United

States v. Vetco, 644 F.2d at 1329-30. The Court left the district

court free to impose other sanctions. Societe Internationale,

357 U.S. at 213, 78 S.Ct. at 1096. Societe Internationale does

not stand for the proposition that a lawfully issued grand jury

subpoena may be resisted on constitutional grounds where

compliance would violate foreign criminal law. See, e.g.,

United States v. Vetco, Inc., 644 F.2d at 1329; Ohio v. Arthur

Andersen & Co., 570 F.2d 1370 (10th Cir. 1978), cert. denied,

439 U.S. 833, 99 S.Ct. 114, 58 L.Ed.2d 129 (1979); SEC v.

Banca Della Suizzera Italiance, 92 F.R.D. 111 (S.D.N.Y. 1981).

The Bank has failed to bring itself within the holding of

Societe Internationale. The district court found the Bank had

not made a good faith effort to comply with the subpoena in

its order of June 11, 1982. Record at 140. The Bahamian

government has not acted to prevent the Bank from complying

with the subpoena. Finally, the Bank is not being denied a

constitutionally required forum to recover confiscated assets.”

6 It is difficult to fashion due process protections recognizing the

differential argued by the Bank, i.e., stakeholder vs. participant. If fairness

is the key, as is asserted here, then it seems hardly offensive to “traditional

notions of fair play and substantial justice,” Milliken v, Meyer, 311 U.S. 457,

463, 61 S.Ct. 339, 343, 85 L.Ed. 278 (1940), to exempt entities who do

business in the United States and thereby voluntarily bring themselves within

the jurisdiction of our courts and legislatures from the burdens of United

States law.

IV. COMITY

[4] The Bank’s final contention is that comity between

nations precludes enforcement of the subpoena. The Bank

argues that the district court improperly analyzed this case

under the balancing test of the Restatement (Second) of For-

eign Relations Law of the United States § 40 (1965) adopted in

In re Grand Jury Proceedings. United States v. Field, 532 F.2d

404 (Sth Cir. 1976), cert. denied, 429 U.S. 940, 97 S.Ct. 354, 50

L.Ed.2d 309 (1976).’ The district court concluded that because

compliance with the subpoena may cause the Bank to violate

Bahamian penal laws, it was appropriate to follow the balanc-

ing test adopted in Field. Because we conclude this case is

controlled by Field, we affirm the court below.

In Field contempt penalties were upheld against a nonresi-

dent alien who, having been subpoenaed to testify before a

grand jury while present in the United States, refused to

answer questions before the grand jury, despite the witness’

assertion that the very act of testifying would subject him to

criminal penalties in his country of residence. /d. at 405. The

grand jury was investigating the use of foreign banks in

evading tax enforcement. Field was an officer of a bank

located in the Grand Cayman Islands, British West Indies, and

was subpoenaed to testify about matters concerning his bank

7 Section 40 reads:

Limitations on Exercise of Enforcement Jurisdiction

Where two states have jurisdiction to prescribe and enforce rules of

law and the rules they may prescribe require inconsistent conduct

upon the part of a person, each state is required by international

law to consider, in good faith, moderating the exercise of its

enforcement jurisdiction, in the light of such factors as

(a) vital national interests of each of the states,

(b) the extent and the nature of the hardship that inconsistent

enforcement actions would impose upon the person,

territory of the other state,

(d) the nationality of the person, and

(e) the extent to which enforcement by action of either state can

reasonably be expected to achieve compliance with the rule pre-

scribed by that state.

10a

and its clients. /d. at 405-06. After balancing the competing

interests of the United States and the Cayman Islands under

the Restatement approach, the court affirmed the district

court’s imposition of contempt sanctions against Field. /d. at

407-09.

The situation before us is similar to that in Fie/d in all

material respects. The Bank has been subpoenaed while subject

to the jurisdiction of our courts and has been required to

disclose information before a grand jury even though the very

fact of disclosure may subject the Bank to criminal sanctions

by a foreign sovereign.

The Bank attempts to distinguish Field from the case before

us on four grounds. The Bank first asserts that the Bank itself

is not under investigation by the grand jury, unlike the situa-

tion in Field. See United States v. Payner, 447 U.S. 727, 100

S.Ct. 2439, 65 L.Ed.2d 468 (1980) (Castle Bank and Trust

Company of Nassau, Bahamas under investigation in 1972 as

part of narcotics investigation known as “Operation Trade

Winds”). A careful reading of Field reveals that the fact that

Castle Bank and Trust Company was under investigation did

not affect the court’s analysis. That court was concerned with

the proliferation of foreign secret bank accounts utilized by

Americans to evade income taxes and conceal crimes. /n re

Grand Jury Proceedings. United States v. Field, 523 F.2d at

407-08. The instant subpoena calls for the production of

certain records relating to bank accounts of a United States

citizen pursuant to a tax and narcotics investigation.

Second, the Bank argues this case is distinguishable from

Field because documentary evidence is requested here rather

than testimonial evidence as in Field. The distinction, while

real, is immaterial. The case before us concerns the relations

among nations; whether the subpoena will be enforced is a

matter of international comity. Jd. at 407. Comity is “a

nation’s expression of understanding which demonstrates due

regard both to international duty and convenience and to the

rights of persons protected by its own laws.” Somportex

Limited v. Philadelphia Chewing Gum Corp., 453 F.2d 435

(3rd Cir. 1971), cert. denied, 405 U.S. 1017, 92 S.Ct. 1294, 31

lla

L.Ed.2d 479 (1972). Whether the requested information is

testimonial or documentary, the effect on the competing state

interests will be the same. The deference accorded the Baha-

mian interest is not to be diminished by the form of the

requested information.

Third, the Bank argues this case is distinguishable from

Field because the instant subpoena calls for information lo-

cated in the Bahamas instead of the United States. This

argument is without merit for two reasons. First, the disclosure

to the grand jury will occur in this country. See United States v.

Vetco, Inc., 644 F.2d at 1332. Second, the affront to the

Bahamas occurs no matter where the information is originally

located; the interest of the Bahamas in preserving the secrecy

of these records is impinged by the fact of disclosure itself.

Finally, the Bank contends the government “could avoid

rather than provoke disrespect for the sovereignty of a friendly

nation” by pursuing the alternative of applying for an order of

judicial assistance permitting disclosure from the Supreme

Court of the Bahamas. Brief of Appellant at 18. See United

States v. Vetco, Inc., 644 F.2d at 1332; United States v. First

National City Bank, 396 F.2d 897 (2d Cir. 1968); Restatement

(Revised) of Foreign Relations Law of the United States § 420

(Tent. Draft No. 3, 1982). Applying for judicial assistance,

however, is not a substantially equivalent means for obtaining

production because of the cost in time and money and the

uncertain likelihood of success in obtaining the order. Accord-

ing to the affidavit from a member of the Honorable Society

of Lincoln’s Inn, England, and of the Bahamas Bar, the

Supreme Court of the Bahamas does not have power to order

disclosure if the subject of the investigation is criminal only

under the tax laws of the United States. Therefore, it is not

clear to any degree of certainty that the Bahamian court would

order disclosure of all the requested documents.”

8 The Bank conceded at oral argument that if the grand jury is

conducting a tax investigation the documents could not be obtained through

the judicial assistance procedure.

12a

The judicial assistance procedure does not afford due defer-

ence to the United States’ interests. In essence, the Bank asks

the court to require our government to ask the courts of the

Bahamas to be allowed to do something lawful under United

States law. We conclude such a procedure to be contrary to the

interests of our nation and outweigh the interests of the

Bahamas.

In Field the vital role of a grand jury’s investigative function

to our system of jurisprudence and the crucial importance of

the collection of revenue to the “financial integrity of the

republic” outweighed the Cayman Islands’ interest in protect-

ing the right of privacy incorporated into its bank secrecy laws.

In re Grand Jury Proceedings. United States v, Field, 532 F.2d

at 407-08. The United States’ interest in the case before us has

not been diminished since Field was decided. The Bank asserts

the Bahamas’ interest in the right of privacy; this interest is

similarly outweighed. A Bahamian court would be able to

order production of these documents. Banks and Trust Com-

panies Regulation Act, 1965 Bah. Acts No. 64, § 10(I)(iii), as

amended 1980 Bah. Acts No. 3. In addition, numerous offi-

cials, employees, attorneys, and agents of the Bank of Nova

Scotia or the Central Bank of the Bahamas may disclose

information regarding the account in the performance of their

various functions under the Bank Act. /d. § 10(1)(a-e). It is

incongruous to suggest that a United States court afford

greater protection to the customer’s right of privacy than

would a Bahamian court simply because this is a foreign

tribunal. /n re Grand Jury Proceedings. United States v. Field,

535 F.2d at 408. A statute that is “hardly a blanket guarantee

of privacy” does not present a Bahamian interest sufficient to

outweigh the United States’ interest in collecting revenues and

insuring an unimpeded and efficacious grand jury process. See

United States v. Payner, 447 U.S. 727, 731, 100 S.Ct. 2439,

2444, 65 L.Ed.2d 468 n.4 (1980) (predecessor statute identical

in relevant parts held not to create a reasonable expectation of

privacy).

l3a

V. CONCLUSION

Absent direction from the Legislative and Executive branch-

es of our federal government, we are not willing to emasculate

the grand jury process whenever a foreign nation attempts to

block our criminal justice process. It is unfortunate the Bank

of Nova Scotia suffers from differing legal commands of

separate sovereigns, but as we stated in Field:

In a world where commercial transactions are interna-

tional in scope, conflicts are inevitable. Courts and legis-

latures should take every reasonable precaution to avoid

placing individuals in the situation [the Bank] finds

{it}self. Yet, this court simply cannot acquiesce in the

proposition that United States criminal investigations

must be thwarted whenever there is conflict with the

interest of other states.

In re Grand Jury Proceedings, United States v. Field, 535 F.2d

at 410.

For the reasons stated above, the judgment entered by the

district court is

AFFIRMED.

APPENDIX B

OPINION OF THE

UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF FLORIDA

IN RE: GRAND JURY PROCEEDINGS

UNITED STATES OF AMERICA

—vVs.—

BANK OF NOVA SCOTIA

CASE NO. GRAND JURY 81-FL-1

JUNE 11, 1982

On September 23, 1981 a Federal Grand Jury Subpoena

duces tecum was served on the Florida agency of the Bank of

Nova Scotia, a branch of that bank which operates in Miami,

Florida. The subpoena called for the production of certain

records maintained at the main branch or any of the branch

offices of the Bank of Nova Scotia in Nassau, Bahamas, in

Antigua, Lesser Antilles, relating to bank accounts of Robert

Twist, Sr., Lesser Antilles Trading Company, Ltd. and/or

Latco Development Corporation d/c/b/a Ambassador Jet.

The basic position of the bank is that compliance with the

subpoena will subject the bank to criminal liability in the

Bahamas. Papers filed by the bank state that there are no

records which were requested that are being held by its Antigua

branch. Thus this order will only be concerned with Bahamian

records.

Section 10 of the Banks and Trust Companies Regulation

Act of 1965, 1965 Bahamian Acts No. 64, as amended by the

Banks and Trust Companies Regulation (Amendment) Act

1980 provides in pertinent part:

(1) No person who has acquired information in his capac-

ity as

(a) director, officer, employee or agent of any licensee

or former licensee. . . shall, without the express

or implied consent of the customer concerned,

disclose to any person any such information relat-

ing to the identity, assets, liabilities, transactions,

accounts of a customer of a licensee or relating to

any application by any person under the provi-

sions of this act, as the case may be, except

(i) for the purpose of the performance of his

duties or the exercise of his functions under

this act, if any; or

(ii) for the purpose of the performance of his

duties within the scope of his employment; or

(iii) when a licensee is lawfully required to make

disclosure by any court of competent jurisdic-

tion within the Bahamas, or under the provi-

sions of any law of the Bahamas.

(2) Nothing contained in this section shall

(a) prejudice or derogate from the rights and duties

subsisting in common law between the licensee and

his customers; or

(b) prevent the licensee from providing upon a legiti-

mate business request in the normal course of

business a general credit rating with respect to a

customer.

(3) Every person who contravenes the provisions of sub-

section (1) of this section shall be guilty of an offense

against this act and shall be liable on summary convic-

tion to a fine not exceeding $15,000 or to a term of

imprisonment not exceeding two years or to both such

fine and imprisonment.

Inasmuch as compliance with the subpoena may cause the

Bank of Nova Scotia to be subject to criminal charges, this

Court finds it appropriate to follow the balancing test set forth

in Sections 39 and 40 of the Restatement (Second) of the

Foreign Relations Law of the United States. United States v.

Field, 532 F.2d 404 (Sth Cir. 1976). Under this test there are

five factors for consideration. These are:

(a) The vital interests of each of the states

(b) The extent and the nature of the hardship that incon-

sistent enforcement actions would impose upon the

person

place in the territory of the other state

(d) The nationality of the person

(e) The extent to which enforcement by action of either

state can reasonably be expected to achieve compliance

with the rule prescribed by that state.

The Court finds in weighing the various factors that this

subpoena should be enforced.

As to the first factor, it seems apparent that the interest of

the United States in enforcing the subpoena in order to further

the investigatory function of the grand jury is greater than the

Bahamian interest in secrecy. The Bahamian Secrecy Statute

does not provide a total prohibition of disclosure for there are

a number of exceptions including disclosure ordered by a

Bahamian court. It would be anomalous to give the target of

this investigation, an American citizen, greater protection of

his Bahamian banking records than he could expect in his

United States bank accounts. United States v. Payner, 447 U.S.

727, 732 n.4 (1980). Since under the Bahamian Act a court of

the Bahamas could order disclosure in connection with an

investigation conducted in the Bahamas, the bank’s customer’s

right of privacy should not receive greater protection merely

because a foreign tribunal is conducting the investigation.

As to the second factor, inconsistent enforcement action may

impose some hardship on the bank. However, the bank has not

made a good faith effort to either obtain the consent of the

customer, apply to the court of the Bahamas for an order

requiring disclosure or to seek a waiver from the Bahamian

government. At this time the Court cannot find with certainty

whether the hardship would be actual or merely theoretical but

it does appear that the bank has failed to make a good faith

effort to comply with the subpoena. United States v. Vetco,

644 F.2d 1324 (9th Cir. 1981).

The third and fourth factors are the extent to which the

required conduct is to take place in the territory of the other

state and the nationality of the person. While the records must

be gathered in the Bahamian branch and sent to the Florida

branch of the Bank of Nova Scotia, the actual disclosure will

be made in the United States rather than in the Bahamas. The

Court does not find the Government’s argument with regard to

the nationality of the bank convincing. Neither does it find it

to be a significant factor in the circumstances of this case.

As to the last factor, enforcement of the subpoena will help

to insure compliance with the Grand Jury’s goals of investigat-

ing criminal matters. While enforcement in some respects

ameliorates the privacy interests which the Bahamian statute

attempts to protect, the stated exceptions to the non-disclosure

provisions of the statute indicate that enforcement is not an

unreasonable diversion from these concerns.

It is

ORDERED and ADJUDGED that the subpoena issued to the

Miami branch office of the Bank of Nova Scotia shall be

enforced.

DONE and ORDERED in Chambers this 11th day of June,

1982.

James C. Paine /s/

UNITED STATES DISTRICT JUDGE

cc: Richard D. Humphrey

Veda Carney, Esq.

Thomas R. Julin

ORDER OF THE

UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF FLORIDA

IN RE: GRAND JURY PROCEEDINGS

UNITED STATES OF AMERICA,

Plaintiff,

—Vvs.—

THE BANK OF NOVA SCOTIA,

Defendant.

CASE NO 81-1

July 6, 1982

ORDER GRANTING MOTION TO HOLD THE BANK OF

NOVA SCOTIA IN CONTEMPT

This cause came before the Court on the Government’s

motion to hold The Bank of Nova Scotia in contempt for

refusing to comply with the June 11, 1982 order of this Court

enforcing a federal grand jury subpoena. The Court having

considered the evidence submitted at the hearing on this

motion as well as the memorandum of law and oral arguments

of counsel for the parties, it is

ADJUDGED that THE BANK OF NOVA SCOTIA is in

contempt of this Court because of its failure to produce

records subpoenaed from its Bahamian branch before the

federal grand jury in Fort Lauderdale, Florida. It is further,

ORDERED that The Bank be brought before the Court on

five days notice following completion of all proceedings seek-

ing review of this Court’s action in this case and at that time

the Court will impose a civil penalty on The Bank until

compliance with the subpoena and the order of this Court.

DONE and ORDERED in Chambers at Dade County, Florida,

this 6th day of July, 1982.

James C. Paine /s/

UNITED STATES DISTRICT JUDGE

cc: Richard Humphrey, Esq.

Veta M. Carney, Esq.

Talbot D’Alemberte, Esq.

OPINION OF THE

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

IN RE: GRAND JURY PROCEEDINGS

UNITED STATES OF AMERICA

—

BANK OF NOVA SCOTIA

CASE NO. GRAND JURY 81-FL-1

JULY 10, 1982

It has come to the attention of the court that its order of

July 6, 1982, is defective in that it is not a final, appealable

order. Although the court is not willing to grant the govern-

ment’s motion to amend order in full and jail the local agent of

the Bank of Nova Scotia merely to expedite an appeal, the

court is desirous that its order be final so that it may be

appealed as soon as possible. The contempt involved is that of

the Bank of Nova Scotia as an entity, not that of its local

agent.

This court finds as a matter of fact that:

1. This court enforced a grand jury subpoena duces

tecum.

2. The bank as a corporate body decided through its

officers and agents to make the documents requested

unavailable to the person it designated as custodian of

records.

3. The bank’s Miami agent appeared before the grand

jury on June 30, 1982, and declined on behalf of the bank

to produce the documents.

This court finds as a matter of law that the Bank of Nova

Scotia has resisted its lawful process and order by refusing to

comply with the June 11, 1982, order enforcing a federal grand

jury subpoena.

In accord with 18 U.S.C. § 401, this court finds the Bank of

Nova Scotia in civil contempt and imposes a sentence of

$500.00 per day, beginning three days from the date this order

is signed and continuing until the day prior to the date on

which the Bank of Nova Scotia complies with the order of

June 11, 1982, or continuing until the date this grand jury

expires, whichever may be sooner.

DONE and ORDERED this i0th day of July, 1982, at West

Palm Beach, Florida.

___ James C. Paine /s/

JAMES C. PAINE

UNITED STATES DISTRICT JUDGE

cc: Richard Humphrey

Veta M. Carney

Talbot D’Alemberte

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 82-5831

January 25, 1983

IN RE: GRAND JURY PROCEEDINGS

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

—versus—

THE BANK OF NOVA SCOTIA,

Defendant-Appellant.

—_

Appeal from the United States District Court for the

Southern District of Florida.

Before FAY and CLARK, Circuit Judges, and MORGAN,

Senior Circuit Judge.

JUDGMENT

This cause came on to be heard on the transcript of the

record from the United States District Court for the Southern

District of Florida, and was argued by counsel;

ON CONSIDERATION WHEREOF, it is now here ordered and

adjudged by this Court that the order of the District Court

appealed from, in this cause be, and the same is hereby,

AFFIRMED;

It is further ordered that defendant-appellant pay to plain-

tiff-appellee, the costs on appeal to be taxed by the Clerk of

this Court.

November 29, 1982

ISSUED AS MANDATE: JANUARY 25, 1983

APPENDIX D

TO ALL PARTIES BELOW:

No. 82-5831

IN RE: GRAND JURY PROCEEDINGS

U.S.A. vs. BANK

District Court No. MISC 81-00001

This is to advise that an order has this day been entered

denying the petition( ) for rehearing.

| The Court having been polled at the request of one of

the members of the Court and a majority of the Circuit

Judges who are in regular active service not having

voted in favor of it (Rule 35, Federal Rules of Appel-

late Procedure: Circuit Rule 26), the petition( ) for

rehearing en banc has also been denied.

K) No member of the panel nor Judge in regular active

service on the Court having requested that the Court be

polled on rehearing en banc (Rwe 35, Federal Rules of

Appellate Procedure: Eleventh Circuit Rule 26), the

petition( ) for rehearing en banc has also been denied.

See Rule 41, F.R.A.P., and Eleventh Circuit Rule 27 for

issuance and stay of the mandate.

Very truly yours,

NORMAN E. ZOLLER, Clerk

By: Kemura L. Smith /s/

Deputy Clerk

CC: Mr. James A. Pardo

Mr. Glenn L. Archer, Jr.

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 82-5831

in al

IN RE: GRAND JURY PROCEEDINGS

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

—Vversus—

THE BANK OF NOVA SCOTIA,

Defendant-Appellant.

Appeal from the United States District Court for the

Southern District of Florida.

ON PETITION FOR REHEARING AND SUGGESTION

FOR REHEARING EN BANC (Opinion November 29, 1982,

ik? See Se

(January 6, 1983)

Before FAY and CLARK, Circuit Judges and MORGAN, Senior

Circuit Judge.

PER CURIAM:

(X) The Petition for Rehearing is DENIED and no member of

this panel nor Judge in regular active service on the Court

having requested that the Court be polled on rehearing en banc

(Rule 35, Federal Rules of Appellate Procedure; Eleventh

Circuit Rule 26), the suggestion for Rehearing En Banc is

DENIED.

( ) The Petition for Rehearing is DENIED and the Court

having been polled at the request of one of the members of the

Court and a majority of the Circuit Judges who are in regular

active service not having voted in favor of it (Rule 35, Federal

Rules of Appellate Procedure; Local Eleventh Circuit Rule 26),

the suggestion for Rehearing En Banc is also DENIED.

( ) A member of the Court in active service having requested

a poll on the reconsideration of this cause en banc, and a

majority of the judges in active service not having voted in

favor it it, rehearing en banc is DENIED.

ENTERED FOR THE COURT:

Peter Fay /s/

United States Circuit Judge

APPENDIX E

U. S. CONSTITUTION AMENDMENT V

No person shall be held to answer for a capital, or otherwise

infamous crime, unless on a presentment or indictment of a

Grand Jury, except in cases arising in the land or naval forces,

or in the Militia, when in actual service in time of War or

public danger; nor shall any person be subject for the same

offence to be twice put in jeopardy of life or limb; nor shall be

compelled in any criminal case to be a witness against himself,

nor be deprived of life, liberty, or property, without due

process of law; nor shall private property be taken for public

use, without just compensation.

APPENDIX F

18 U.S.C. § 401

§ 401. Power of court

A court of the United States shall have power to punish by

fine or imprisonment, at its discretion, such contempt of its

authority, and none other, as—

(1) Misbehavior of any person in its presence or so near

thereto as to obstruct the administration of justice;

(2) Misbehavior of any of its officers in their official trans-

actions;

(3) Disobedience or resistance to its lawful writ, process,

order, rule, decree, or command. June 25, 1948, c. 645, 62

Stat. 701.

APPENDIX G

BAHAMIAN ACT

No. 3 of 1980

An Act to amend the Banks and Trust Companies Regulation

Act, 1965.

(Assented to: 24th March, 1980)

(Commencement: 24th March, 1980)

Enacted by the Parliament of The Bahamas.

1. This Act may be cited as the Banks and Trust Companies

Regulation (Amendment) Act, 1980.

2. Section 10 of the Banks and Trust Companies Regulation

Act, 1965 is repealed and the following section substituted—

10. —(1) No person who has acquired information in

his capacity as—

(a)

(b)

(c)

(d)

director, officer, employee or agent of any li-

censee or former licensee;

counsel and attorney, consultant or auditor of

the Central Bank of The Bahamas, established

under section 3 of the Central Bank of The

Bahamas Act, 1974, or as an employee or agent

of such counsel and attorney, consultant or audi-

tor;

counsel and attorney, consultant, auditor, ac-

countant, receiver or liquidator of any licensee or

former licensee or as an employee or agent of

such counsel and attorney, consultant, auditor,

accountant, receiver or liquidator;

auditor of any customer of any licensee or for-

mer licensee or as an employee or agent of such

auditor;

(e) the Inspector under the provisions of this Act,

shall, without the express or implied consent of the

customer concerned, disclose to any person any such

information relating to the identity, assets, liabilities,

transactions, accounts of a customer of a licensee or

relating to any application by any person under the

provisions of this Act, as the case may be, except—

(i) for the purpose of the performance of his

duties or the exercise of his functions under

this Act, if any; or

(ii) for the purpose of the performance of his

duties within the scope of his employment;

(iii) when a licensee is lawfully required to

make disclosure by any court of competent

jurisdiction within The Bahamas, or under

the provisions of any law of The Bahamas.

(2) Nothing contained in this section shall—

(a) prejudice or derogate from the rights and duties

subsisting at common law between a licensee and

its customer; or

(b) prevent a licensee from providing upon a legiti-

mate business request in the normal course of

business a general credit rating with respect to a

customer.

(3) Every person who contravenes the provisions of

subsection (1) of this section shall be guilty of an offence

against this Act and shall be liable on summary conviction

to a fine not exceeding fifteen thousand dollars or to a

term of imprisonment not exceeding two years or to both

such fine and imprisonment.

APPENDIX H

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

81-1 (Ft. L.)

In Re: Grand Jury Proceedings

UNITED STATES

—Against—

BANK OF NOVA SCOTIA

COMMONWEALTH OF THE BAHAMAS

New Providence

Affidavit

PETER D. GRAHAM, being sworn says:

1. | am a partner in the firm of Graham, Thompson and

Co. of Nassau, Bahamas and | make this Affidavit in opposi-

tion to the motion by the United States Department of Justice

(the “Department”) for an order compelling the Bank of Nova

Scotia (the “Bank”) to comply with a Grand Jury subpoena

served on September 23, 1981. The subpoena requires produc-

tion of customer records maintained at the Bank’s branch in

Nassau, Bahamas. As explained below, the Branch’s officers

will be subject to criminal prosecution in the Bahamas should

the Branch produce records required by the subpoena. How-

ever, the Department—and not the Bank—can avoid such

liability to the Bank by application to the Bahamian court for

an order directing production of the records.

BACKGROUND

2. I obtained my Law Degree (LL.B.) from the University

of London, England and was called to the Bar of England and

Wales in 1949. I am a member of The Honorable Society of

Lincoln’s Inn, England and a member of The Bahamas Bar. I

was a member of the Bahamas Parliament from 1956 through

1972 and served as Minister of Housing and Labor in the

Bahamas Government from 1964 through 1967. I am fully

qualified to practice, and have practiced in all the courts of law

of the Commonwealth of The Bahamas.

3. For purposes of this Affidavit, | have reviewed (1) The

Grand Jury Subpoena served September 23, 1981 and (2) the

papers submitted in support of the motion by the Department

to compel compliance with the subpoena.

THE ACT

4. The Bank’s Nassau branch is licensed to do business in

the Bahamas by the Government of the Commonwealth of The

Bahamas and is subject to the Banks and Trust Companies

Regulation Act of 1965 as amended (the “Act”), a copy of

which is attached as Exhibit A. Section 10(1) of the Act

prohibits disclosure of customer records by an officer of the

Branch without consent of the customer, save for three limited

exceptions:

(1) For the purpose of the performance of his duties or

the exercise of his functions under this Act, if any, or

(11) For the purpose of the performance of his duties

within the scope of his employment, or

(111) When a licensee is lawfully required to make

disclosure by any court of competent jurisdiction within

the Bahamas, or under the provisions of any law of the

Bahamas.

Section 10(3) of the Act provides that contravention of Section

10(1) is a criminal offense punishable by up to two years

imprisonment or a fine of up to $15,000.00 or to both such

fine and imprisonment. The Act articulates a fundamental

policy of the Bahamas, and the 1980 amendment emphasizes

the importance of that policy.

5. Production of records required by the subpoena will

expose the Branch’s officers to prosecution under the Act

unless one of the three narrow exceptions of Section 10(2) are

met. However, from my review of the papers submitted in

support of the Department’s motion, no exception appears to

be met.

6. Although the Department claims that the Bank may

apply to a Bahamian court for an order permitting it to comply

with the subpoena, I am aware of no statutory or common law

basis for such an application. Such an application would

defeat the purpose of the Act.

7. On the other hand, the Department may apply for such

an order of judicial assistance permitting disclosure. Pursuant

to Section 10(1)(E)(111) of the Act, the Department may apply

to the Supreme Court of The Bahamas for an order permitting

disclosure of the documents requested. While the Bahamas

subscribes to the Anglo-American doctrine that one country

will not enforce the fiscal laws of another, the Supreme Court

of The Bahamas has the power to order such disclosure where

the c1.sninal activity which is the subject of investigation by the

Department is both criminal under Bahamian law, and is not

criminal merely under the tax laws of the United States.

8. It appears from the papers submitted in support of the

Department’s motion that the Department’s investigation is, in

part, related to possible criminal violation of the narcotics laws

of the United States, and if that is correct, it would appear that

the Department may have grounds for application to the

Bahamian Supreme Court for an order permitting the disclo-

sure of bank records relevant to such criminal activity.

9. On the basis of my experience as a member of the

Bahamas Parliament and a Minister of the Bahamas Govern-

ment, I would regard it as a serious affront to and invasion of

the sovereignty of the Bahamas if, granted the availability of

judicial assistance in the Bahamas, a foreign court were never-

theless to order a Bahamian resident to violate the laws of the

Bahamas to suit the convenience of foreign government offi-

cials.

SWORN to before me the

12th day of January, 1982

Peter D. Graham /s/

Notary Public

the Commonwealth of the Bahamas

APPENDIX |

Rule 28.1. Listing of Parents, Subsidiaries and Affiliates.

BNS International (Hong Kong) Limited

BNS International (Ireland) Limited

The Bank of N.T. Butterfield & Son Limited

The Bank of Nova Scotia Asia Limited

The Bank of Nova Scotia Channel Islands Limited

The Bank of Nova Scotia Trust Company Channel Islands

Limited

The Bank of Nova Scotia International Limited

The Bank of Nova Scotia International (Curacao) N.V.

Bank of Nova Scotia Properties Inc.

Bernard Sunley Building Limited

BNS International (Panama) S.A.

BNS International (United Kingdom) Limited

The Bank of Nova Scotia Jamaica Limited

The Bank of Nova Scotia Trust Company Jamaica Limited

The Bank of Nova Scotia N.V.

The Bank of Nova Scotia Trinidad & Tobago Limited

The Bank of Nova Scotia Trust Company of the West Indies

Limited

The Bank of Nova Scotia Trust Company (Bahamas) Limited

The Bank of Nova Scotia Trust Company (Caribbean) Limited

The Bank of Nova Scotia Trust Company (Cayman) Limited

The Bank of Nova Scotia Trust Company of New York

The Bank of Nova Scotia Trust Company (United Kingdom)

Limited

Brunswick Square Limited

Chargex Limited

Empire Realty (Cayman) Limited

Export Finance Corporation of Canada Limited

Maduro & Curiel’s Bank N.V.

MHA Property Ltd.

MHB Property Ltd.

MHE Property Ltd.

MHF Property Ltd.

MHG Property Ltd.

MHH Property Ltd.

MHI Property Ltd.

MH5J Property Ltd.

MHK Property Ltd.

MHM Property Ltd.

The Nova Scotia Corporation

Schroder, Darling and Company Holdings Limited

Schroder, Darling and Company Limited

Scotia Centre Limited

Scotia Factors Limited

Scotia Leasing Limited

Scotia Mortgage Corporation

Scotia Realty Limited

Scotia-Toronto Dominion Leasing Limited

Scotia Ventures Limited

Scotiabank de Puerto Rico

Scotiafund Financial Services Ltd.

Singapore Gold Clearing House Private Limited

Vancouver Center Development Limited

The West India Company of Merchant Bankers Limited

Windsor Developments Limited

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.