Petition for Writ of Certiorari — Union Bank of Switzerland v. United States

$1-836 PILED |

No. ....- aad #OV 21 1908

ie GLEN

IN THE ~d-- — >

Supreme Court of the United States

OCTOBER TERM, 1991

In re GRAND JURY PROCEEDINGS:

UNION BANK OF SWITZERLAND,

. Petitioner,

v.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

JOHN W. DICKEY

125 Broad Street

New York, New York 10004

(212) 558-4000

Counsel for Petitioner

Davip A. HEINER, JR.

ROBERT J. GIUFFRA, JR.

THOMAS J. WITT

SULLIVAN & CROMWELL

MARTIN R. RASKIN,

RASKIN & RASKIN, P.A.

Of Counsel

November 21, 1991

UNDER SEAL

i

Question Presented

In this case, a U.S. court has ordered that a foreign

bank, not subject to the in personam jurisdiction of the

United States courts, be directed by its parent to commit an

act — the disclosure of confidential bank account records —

that is a crime in the foreign state where the records are

located and in which the subsidiary bank is incorporated and

exclusively does business. The parent, a foreign bank that is

subject to jurisdiction ‘n the United States, has been held in

contempt of court for declining to direct its subsidiary to

commit the crime demanded by the Government. The

question presented for review, which has sharply divided the

Courts of Appeals, is:

When, if ever, is it proper for a U.S. court to wield

its contempt power to compel the disclosure of docu-

ments from within the territory of a foreign state

when governing foreign law forbids disclosure to any

third party?

ii

Rule 29.1 Statement

The subsidiaries and affiliates of petitioner Union Bank

of Switzerland, other than wholly-owned subsidiaries, are

listed below:

Argor-Heraeus AG, Mendrisio

Banca Internazionale Lombarda, Milan

Bank Cantrade Ltd.

Bank Rohner Ltd.

Banque Fédérale Société de Participation

et Financement

Cantrade Participation Ltd.

CS (Cantrade Securities) Investment, London

Financiére Fransad, Geneva

HypoSwiss Swiss Mortgage and Commercial Bank

Institut fir Automation, Zurich

Intrag Deutschland GmbH, Frankfurt am Main

Intrag International Bond Invest, Luxembourg

Intrag International S.A., Luxembourg

Intrag Ltd., Management of Investment Trusts

Klinik Hirslanden AG, Zurich

Kredit-und Handelsbank Lyss

Motor-Columbus AG, Baden

National Versicherung AG, Basle

PBZ Privatbank Zurich

Perutil, Panama

Saudi-Swiss Bank

Thesaurus Continental Securities Corporation

Zur Schanzenbricke AG

TABLE OF CONTENTS

Page

Ng eg bk o 6 6 0k ow 2 be 8 ee iv

Se bs os 5p 6 0s 6 2 8 we ee ee vii

ey fg ae G6 eb ew ok 8 1

EE |

Statutes and Regulations Involved ............ 2

EST OCT eee 2

Reasons for Granting the Writ .............. 9

I. This Case Presents a Question Upon Which

the Courts of Appeals Are Sharply Divided .. 9

II. The Conflict Between U.S. Discovery

Procedures aiid Foreign Privacy Laws Is

a Matter of Great Importance to the

Banking Community and the Business

Community Generally ............... 16

er 21

iv

TABLE OF AUTHORITIES

Cases

Doe v. United States, 487 U.S. 201 (1988)

In re Sealed Case, 825 F.2d 494 (D.C. Cir.),

cert. denied, 484 U.S. 963 (1987) ......

Societe Internationale pour Participations

Industrielles et Commerciales, S.A. v.

Rogers, 357 U.S. 197 (1958) .........

Société Nationale Industrielle Aérospatiale

v. United States District Court,

lie se

United States v. Bank of Nova Scotia,

691 F.2d 1384 (11th Cir. 1982),

cert. denied, 462 U.S. 1119 (1983) ......

United States v. Bank of Nova Scotia,

740 F.2d 817 (11th Cir. 1984),

cert. denied, 469 U.S. 1106 (1985) ......

United States v. Field, 532 F.2d 404

(Sth Cir.), cert. denied,

oR ee ee

United States v. First National Bank of

Chicago, 699 F.2d 341 (7th Cir. 1983)

Page(s)

18

14-15

Page(s)

Cases

United States v. R. Enterprises, Inc. ,

oe RE ee ee eee 16-17

United States v. Vetco, Inc.,

691 F.2d 1281 (9th Cir.), cert. denied,

oo 8 15

Statutes

y foe Te Seer ere 2

a ee eer 6

Rule 17(c), Federal Rules of Criminal

NE a ig re eer we ekg ees 2

Rule 41(b), Federal Rules of Appellate

I. eg crea ec meee ears eo 6 ae 7

Miscellaneous

Hague Convention on the Taking of Evidence

Abroad in Civil or Commercial Matters,

opened for signature, March 18, 1970,

23 U.S.T. 2555, T.I.A.S. No. 7444 ..... 17

Restatement (Third) of Foreign Relations

FR. 6 re er ar ye

16

vi

Page(s)

Miscellaneous

Restatement (Third) of Foreign Relations

Ce ee 19

Restatement (Third) of Foreign Relations

oe ar 19

Restatement (Third) of Foreign Relations

ee 19

Vii

INDEX TO APPENDIX

Order of the U.S. Court of Appeals for

the Eleventh Circuit, September 10,1991 .... Al

Denial of Suggestion of Rehearing

en banc, dated November 15, 1991 ........ A2

Order and Oral Opinion of the U.S. District

Court for the Southern District of Florida,

PE EO PO A a A3

Order of the U.S. District Court for the

Southern District of Florida, April3, 1991 .... A8

The Republic of Panama’s Law Number 18

—§ gr ee a ee All

Cabinet Decree Number 238 of July 2, 1970

(Banking Law of the Republic of Panama) .... Al5

Article 170 of the Criminal Code

I ts bee ie a ae | 6 6 wie 6-4 aS Al8

a er er ng og Al9

Restatement (Third) of Foreign

Relations Law § 441 (1987) ............. A21

Restatement (Third) of Foreign

Relations Law § 442 (1987) ............. A22

a =R

"4

‘

a Ny

IN THE

Supreme Court of the Anited States

OCTOBER TERM, 1991

NO. 91-

In re GRAND JURY PROCEEDINGS:

UNION BANK OF SWITZERLAND,

Petitioner,

Vv.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

Petitioner Union Bank of Switzerland (“UBS”)

respectfully prays that a writ of certiorari issue to review the

judgment of the United States Court of Appeals for the

Eleventh Circuit entered September 10, 1991.

Opinions Below

The Court of Appeals affirmed the order of the district

court without opinion (Al). The district court’s oral opinion

(AS) and order (A3), dated June 20, 1991, affirmed by the

Court of Appeals as having been entered “without error of

law,” and its order of April 3, 1991 (A8), are unreported.

Jurisdiction

The judgment of the Court of Appeals was dated and

entered September 10, 1991. A suggestion of rehearing en

2

banc was denied on November 15, 1991 (A2). This Court

has jurisdiction under 28 U.S.C. § 1254(1).

Statutes anc Regulations Involved

Rule 17(c) of the Federal Rules of Criminal Procedure

provides that subpoenas may be quashed if “oppressive or

unreasonable.” This case also involves certain statutes and

regulations of the Republic of Panama that forbid banks in

Panama from disclosing certain bank account records to any

third parties, except in accordance with Panamanian law.

These statutes and regulations are reproduced in the

Appendix at pages All through A20.

STATEMENT OF THE CASE

This case presents a fundamental question: when, if

ever, may a U.S. court of law compel a foreign bank (or any

foreign entity) to produce documents from within a foreign

State in violation of the law of that foreign state? This

question is of great importance to the banking community,

both foreign and domestic, to the business community

generally, and to the United States and other nations,

particularly in view of the increasing frequency with which

U.S. government agencies are seeking to compel the

production of documentary and testimonial evidence from

abroad.

There is a sharp split in authority among the Courts of

Appeals on the question presented. In the Eleventh Circuit,

as confirmed in this case, proof that a grand jury subpoena

cannot lawfully be complied with is never a basis for

quashing the subpoena or excusing compliance therewith. The

Eleventh Circuit will not recognize any foreign law that poses

an obstacle to compliance with a U.S. grand jury subpoena.

The U.S. interest in enforcing the subpoena is deemed para-

mount as a matter of law — without regard to the facts of

any particular case, such as the legitimate interests of the

foreign state, the plight of the uninvolved holder of informa-

tion, the extent to which the grand jury truly needs the

subpoenaed information, or the availability of alternative,

non-confrontational means by which the information might be

collected without requiring a violation of foreign law.

The Court of Appeals for the District of Columbia

Circuit, however, has reversed a contempt order imposed

upon a foreign bank for declining to produce documents in

violation of foreign law, and broadly questioned “whether a

court may ever order action in violation of foreign laws.” In

re Sealed Case, 825 F.2d 494, 498 (D.C. Cir.), cert. denied,

484 U.S. 963 (1987) (emphasis added).' The Courts of

Appeals for the Fifth, Ninth and Seventh Circuits have also

rendered decisions on each side of the question presented.

Given the steady growth in transnational trade and

investment, the courts will increasingly be confronted with

the question of U.S. power to order the disclosure of

privileged information in violation of foreign law (and the

concomitant power of foreign states to order U.S. citizens to

violate U.S. laws in the United States). The question is

starkly and directly presented by this case and is ripe for

consideration by the Court. UBS respectfully submits that the

Court should take this opportunity to review the question

presented and provide guidance to the lower courts to ease

what the D.C. Circuit has aptly described as “the difficulties

and uncertainties that now pervade this area of the law.” Id.

at 499.

Background

The facts of this case are simple and undisputed.

On February 6, 1991, a subpoena issued by the United

States Attorney for the Southern District of Florida was

' The question presented by the instant petition was not raised by the

petition filed in In re Sealed Case, 825 F.2d 494.

4

served at the New York branch of UBS, the largest Swiss

bank, seeking “[aJll banking records” relating to certain bank

accounts in Switzerland and Panama. This case, however,

does not concern records of any bank account with UBS.

Rather, insofar as is relevant here, the subpoena demands

documents relating to accounts maintained with a different

bank, Union Bank of Switzerland (Panama), Inc. (“UBS

(Panama)”), a wholly-owned subsidiary of UBS. UBS

(Panama) is incorporated under the laws of Panama. /t is

undisputed that UBS (Panama) is not subject to the in

personam jurisdiction of the U.S. courts.

Upon receipt of the subpoena by UBS, counsel for UBS

promptly advised the Government that information regarding

accounts maintained with the bank in Switzerland or with its

subsidiary, UBS (Panama), in Panama could not be disclosed

because of bank confidentiality laws in those nations and that

persons and institutions who violate those laws are subject to

criminal and civil sanctions. At the same time, counsel

identified and described specific procedures by which the

Government could obtain the information it sought, whether

in Switzerland or in Panama, without requiring the commis-

sion of a crime.

The Government subsequently withdrew its subpoena to

the extent that it sought documents located in Switzerland. As

to the Panamanian account records, however, the Govern-

ment insisted upon UBS’s compliance with the subpoena,

without regard to the absence of U.S. jurisdiction over UBS

(Panama) and without regard to the strictures of Panamanian

law.

Neither UBS nor UBS (Panama) is a target or subject of

the grand jury investigation. Neither is claimed to be in any

way involved in the possible crimes under investigation or in

any other wrongdoing. UBS and UBS (Panama) wish to

produce the requested account records, and seek only to be

5

permitted to do so without being compelled to violate the

laws of any nation.

The Impossibility of Lawful

Compliance with the U.S. Subpoena

It is undisputed that UBS (Panama) cannot lawfully

disclose the records sought by the Government. Under

Panamanian law it is a crime to disclose a bank customer’s

account records to anyone outside of the bank absent the

customer’s consent. The crime is punishable by imprisonment

for up to two years, fines that could range up to nearly one-

quarter of the annual salary of any responsible person, and a

ban on employment in the banking profession for up to two

years. Unauthorized disclosure also violates civil laws

governing banks in Panama. These are not so-called

“blocking statutes,” directed at perceived overreaching by

U.S. courts and government agencies, but laws of general

applicability within Panama.”

A violation of Panama’s bank privacy laws is not

excused by the fact that the violation was ordered by a court

in a foreign nation. Indeed, Panamanian law specifically

provides that it is unlawful to produce documents upon

compulsion of foreign authorities. Moreover, it is undisputed

that there is no procedure under Panamanian law by which

UBS or UBS (Panama) could seek a “waiver” of these

prohibitory laws.

2 UBS (Panama)’s fear of criminal and civil sanctions in connection

with the Government’s demand is real and justified. UBS (Panama)

and two of its former officers are even now awaiting decision on

criminal charges lodged against them for alleged wrongful

disclosure of bank accounts records in violation of Panamanian law.

The complainants, two former customers of the bank, allege

(among other things) that UBS (Panama) sent information regarding

their accounts out of the bank to UBS in Switzerland. UBS

(Panama) is defending on the ground that the complainants

consented to the transmittal of their account information to UBS,

which makes the disclosure lawful.

6

Alternative, Lawful Discovery Procedures

It is undisputed that the Government could obtain the

records its seeks, without requiring the commission of any

crime, if it would permit UBS (Panama) to seek its custom-

er’s consent to disclosure, or if it would seek such consent

and, if necessary, compel the giving of such consent under

the procedure approved in another foreign bank records case,

Doe v. United States, 487 U.S. 201 (1988). Or, the Govern-

ment could make a request for mutual legal assistance from

the Panamanian legal authorities, as UBS proved it did,

successfully, in several recent cases, including cases like this

one where UBS (Panama) was an uninvolved holder of

records.’

The lower courts refused to give any consideration to

these alternative procedures by which the Government could

obtain the information it seeks, quickly and efficiently,

without creating a needless conflict between U.S. and foreign

law. The availability of such procedures was declared to be

irrelevant, as a matter of law (A6).

The Proceedings Below -

The district court summarily denied UBS’s motion to

quash the grand jury subpoena.‘ The court accepted the

Government’s argument that under the Eleventh Circuit’s

> On April 11, 1991, the United States and Panama formalized the

mutual legal assistance procedure that has long been available by

executing a Mutual Legal Assistance Treaty. The treaty provides a

procedure for the collection of evidence in one of the contracting

states (such as bank account records) for use in legal proceedings

in the other state, including grand jury proceedings. The treaty has

been formally ratified by the Republic of Panama, but the

Government has refused to make use of it.

* The jurisdiction of the district court was invoked under 28 U.S.C.

§ 1331.

7

Bank of Nova Scotia decisions,’ proof of prohibitory foreign

law can never prevent enforcement of a grand jury subpoena.

Thus the district court did not analyze the facts of this case

in light of the comity factors set forth in the Restatement

(Third) of Foreign Relations Law § 442 (1987), such as the

availability of alternative, non-confrontational discovery

procedures, or address the several important factual

distinctions that UBS identified between this case and the

Bank of Nova Scotia cases. (See page 11, n.8 infra.)

UBS promptly advised the Government, with regret, that

it remained unable lawfully to produce the documents

demanded by the grand jury subpoena.

The court then summarily held UBS in contempt of court

and imposed a contempt sanction of $10,000 per day for

every day that the bank records of UBS (Panama) are not

produced.® Judge Nesbitt declared:

“The Nova Scotia case in the Eleventh Circuit teaches

the enforcement of grand jury subpoenas and the

issuance of contempt are appropriate if the subpoenaed

party must violate the bank secrecy laws of another

country and that you simply have to choose between two

masters. You have to choose between the United States,

to be obedient to our laws or be obedient to Panamanian

laws.

° United States v. Bank of Nova Scotia, 740 F.2d 817 (11th Cir.

1984), cert. denied, 469 U.S. 1106 (1985) (“Bank of Nova Scotia

II”) and United States v. Bank of Nova Scotia, 691 F.2d 1384 (11th

Cir. 1982), cert. denied, 462 U.S. 1119 (1983) (“Bank of Nova

Scotia I”).

° The contempt sanctions were stayed pending appeal. As of the date

of this petition, UBS’s motion before the Eleventh Circuit for a

Fed. R. App. P. 41(b) stay of mandate is pending. If the motion is

denied, UBS will immediately make an application to this Court for

a stay of mandate pending disposition of this petition.

8

It is clearly laid out in Nova Scotia. It is clearly the

law of the Eleventh Circuit... .

The Eleventh Circuit has put all these issues in my

opinion to rest. The government does not have to pursue

alternative procedures to obtain these documents. The

fact that you have made every effort is not enough

according to case decisions. You must make every

reasonable effort. And every reasonable effort includes

having to choose between Panamanian law and United

States law.

The law is as straight as an arrow on this

subject . . . . [T]he one impediment to compliance is

that you will have to violate Panamanian law. And that

is not sufficient under Nova Scotia to relieve you from

compliance with the court order.”

(A6-A7.)

The Eleventh Circuit issued a per curiam affirmance,

without opinion (Fay and Johnson, Circuit Judges, and

Merhige, District Judge, sitting by designation), thus

endorsing the position urged by the Government, and adopted

by the district courts, that the Bank of Nova Scotia decisions

establish an absolute rule of law that grand jury subpoenas

are always enforceable as against proof that foreign law

forbids disclosure.

REASONS FOR GRANTING THE WRIT

I.

This Case Presents a Question Upon Which

the Courts of Appeals Are Sharply Divided.

In the past ten years, U.S. courts have increasingly been

called upon to adjudicate the difficult issues presented by

demands that persons or entities subject to U.S. jurisdiction

produce evidence located overseas in violation of foreign law.

In the absence of any authoritative guidance from statutory

law, federal civil or criminal procedural rules, or this Court,

the lower courts have rendered decisions that are hopelessly

in conflict with one another. Even if the question is

considered only in the relatively narrow context of demands

by U.S. investigative agencies for evidence located overseas

(as opposed to civil discovery by private plaintiffs), a sharp

split in authority now exists between the decisions of the

Fifth, Ninth and Eleventh Circuits, on the one hand, and the

decisions of the Seventh and District of Columbia Circuits,

on the other.

The Eleventh Circuit now applies an absolute rule: proof

of prohibitory foreign law is never a basis for a court to

decline to enforce a grand jury subpoena. In United States v.

Bank of Nova Scotia, 691 F.2d 1384 (11th Cir. 1982), cert.

denied, 462 U.S. 1119 (1983), the court affirmed an order

enforcing a grand jury subpoena that demanded that a

Canadian bank produce bank account records located at the

bank’s branch in the Bahamas. Although Bahamian law

prohibited disclosure of the account records, the bank was

held in contempt of court for failing to disclose the records.

The court recognized that “international friction has been

provoked by enforcement of subpoenas such as the one in

question,” id. at 1388, but rejected the bank’s argument that

considerations of international comity precluded enforcement

eesti

10

of the subpoena. With no more than a bow toward the prin-

ciples of comity, the court declared, without analysis, that the

U.S. interest in enforcement of its tax laws “outweighed” the

Bahamian interest in the observance of its banking privacy

laws. Id. at 1391. The court deemed it “unfortunate” that the

bank “suffers from differing legal commands of separate

sovereigns,” but opined that conflicts between U.S. grand

jury procedures and foreign law provide «9 occasion for the

United States to moderate the exercise of its enforcement

jurisdiction. Id. at 1391.

The Eleventh Circuit reaffirmed its position two years

later in United States v. Bank of Nova Scotia, 740 F.2d 817

(11th Cir. 1984), cert. denied, 469 U.S. 1106 (1985), where

the bank appealed from a contempt fine of $1,825,000

imposed for its failure to produce documents in violation of

foreign law in response to a second subpoena served upon it.

The court again rejected the bank’s comity and fairness

arguments, reasoning that because the bank had “voluntarily

elected” to do business in the United States, it must be

deemed to have accepted “the incidental risk” that it would

be compelled to commit crimes in foreign states at the behest

of the United States. Jd. at 828. If unwilling to accept that

risk, the court suggested, banks (and presumably other

foreign businesses) simply should not do business in the

United States. Id.

UBS argued in the courts below that the Bank of Nova

Scotia cases should be construed as requiring a balancing

test, under which conflicts between U.S. grand jury

procedures and the substantive law of foreign states would be

considered on a case by case basis in light of a variety of

factors, such as the scope and effect of the particular foreign

law involved, the availability of alternative procedures by

which the documents could be produced without violating

foreign law, the subpoenaed party’s good faith in attempting

to effect disclosure, whether it is the target of the

investigation, or merely a neutral source of information, the

11

nationality of the persons or entities who would be required

to violate foreign law, and the Government’s need for the

particular documents sought by the subpoena.’ On the

undisputed facts of this case, these factors point conclusively

toward quashing the subpoena served upon UBS, or excusing

the bank’s inability to comply with it. Nevertheless, the

courts below refused to consider the facts or engage in any

comity analysis whatsoever. Rather, as the Government

urged, the district court declared the Bank of Nova Scotia

cases to be “dispositive” and Eleventh Circuit law to be “as

straight as an arrow on this subject.” (A8, A6.)

The Eleventh Circuit’s per curiam affirmance, without

requiring that the district court make any finding of fact on

the availability of alternative procedures or any other matter,

confirms that the Circuit does not subscribe to any analysis

that would require a sensitive balancing of competing n-tional

interests."

’ In view of comity considerations, § 442 of the Restatement (Third)

of Foreign Relations Law (1987) provides that factors such as these

should be considered before any foreign discovery order is issued,

whether or not foreign law presents any impediment to compliance.

Where, as here, disclosure is prohibited under governing foreign

law, § 442(2)(b) flatly provides that courts “should not ordinarily

impose sanctions of contempt, dismissal or default.” In Bank of

Nova Scotia II, the Eleventh Circuit rejected § 442 as being

advanced only in a tentative draft of the revised Restatement and

supposedly not reflecting “the current law of the United States.”

For the latter proposition, the court cited only its own precedents.

Section 442 has now been adopted by the American Law Institute,

is supported by many cases, and has been cited with approval by

this Court. Société Nationale Industrielle Aérospatiale v. United

States District Court, 482 U.S. 522, 544 n.28 (1987).

The circumstances here present a far more compelling case for an

exercise of judicial restraint than did the Bank of Nova Scotia

cases. In this case, unlike in the Bank of Nova Scotia cases, (i) the

bank required to produce documents, a subsidiary of UBS, does not

do business in the United States and is not subject to the in

(continued...)

a

12

The U.S. Courts of Appeals for the District of Columbia

and the Seventh Circuits have squarely rejected the absolute

rule applied by the Eleventh Circuit. In In re Sealed Case,

825 F.2d 494, Judges Wald, Bork and Mikva unanimously

reversed a contempt order imposed upon a foreign bank for

declining to produce documents in violation of foreign law.

The facts were the same as in the Bank of Nova Scotia cases:

a bank with branches in the United States and abroad was

subpoenaed by a U.S. grand jury to produce documents

located in a foreign country whose laws prohibited disclosure.

The D.C. Circuit began by citing the Bank of Nova

Scotia cases and cases contrary thereto, and stated that

“[t]he federal courts have disagreed about whether a

court may order a person to take specific actions on

the soil of a foreign sovereign in violation of its laws

and about what sanctions the court may levy against

a person who refuses to comply with such an order.”

Id. at 497 (citations omitted).

The court rejected the proposition that U.S. courts

should “simply . . . enter contempt orders in all such cases,

no matter how extreme, in utter disregard of comity

principles.” Id. at 499. To the contrary, the court said that

*(.. continued)

personam jurisdiction of U.S. courts, (ii) production of the

documents demanded would require the commission of crimes in

the foreign state in which the bank is organized, headquartered and

does business exclusively, (iii) simple, quick, inexpensive and

lawful alternative means, successfully used by the United States in

other cases, including cases involving the UBS subsidiary in

Panama, are available by which the information desired could be

obtained without creating any confrontation between legal systems,

(iv) the relevant Panamanian bank confidentiality laws admit of no

exception, other than by order of a Panamanian authority as

specified in the Panamanian law, and thus express a strong state

interest in prohibiting disclosure, and (v) the good faith of UBS and

its Panamanian subsidiary is unquestioned.

13

“it causes us considerable discomfort to think that a court of

law should order a violation of law, particularly on the

territory of the sovereign whose law is in question.” Jd. at

498. In concluding that the contempt order against the bank

should be reversed, the court stated:

“Most important to our decision is the fact that these

sanctions represent an attempt by an American court

to compei a foreign person to violate the laws of a

different foreign sovereign on that sovereign’s own

territory. In addition, the bank, against whom the

order is directed, is not itself the focus of the criminal

investigation in this case but is a third party that has

not been accused of any wrongdoing.”

Id. These are precisely the facts regarding UBS and UBS

(Panama) in this case, upon which the Eleventh Circuit has

held UBS in contempt of court.” The D.C. Circuit also

° The D.C. Circuit purported to distinguish the Eleventh Circuit

cases on the ground that in Bank of Nova Scotia II “the contemnor

had not acted in good faith, but had undertaken an ‘extensive

pattern of delay’ in the erroneous belief that foreign law barred

production of the documents in question,” id. at 498 quoting Bank

of Nova Scotia II, 740 F.2d at 826 (emphasis in original), and that

in Bank of Nova Scotia I, “there was considerable room for doubt

whether enforcement of the order would require violation of

foreign laws on foreign soil.” Jd. at 498. In fact, both Bank of

Nova Scotia cases concerned actual conflicts between U.S. grand

jury subpoenas and foreign laws that prohibited disclosure. In Bank

of Nova Scotia II, the bank’s “erroneous” belief related only to

Bahamian law; the Eleventh Circuit’s discussion of comity

principles related to Cayman Islands law, which indeed prohibited

disclosure during a period of time when the bank accordingly

declined to comply with the subpoena. 740 F.2d at 821, 826. In

Bank of Nova Scotia I, the court expressly assumed “that the Bank

will be subject to criminal sanctions in the Bahamas” if it complied

with the subpoena. 691 F.2d at 1386 n.2. In any event, the

“distinctions” that the D.C. Circuit posited between the case before

it and the Bank of Nova Scotia cases are wholly inapplicable in this

case in which UBS has been held in contempt: here it is undisputed

(continued...)

| EE ooo

14

found it relevant that “[t]he government may find alternative

means to obtain additional information from or through the

bank.” Id. at 499. In this case, as noted, the availability of

alternative procedures was dismissed as irrelevant.

In short, the D.C. Circuit acknowledged what should be

self-evident on any principled analysis: that in a conflict

between sovereigns, the U.S. interest in enforcement of its

laws cannot always be paramount. “Though we recognize

that the grand jury’s investigation may nonetheless be

hampered, perhaps significantly, we are unable to uphold the

contempt order against the bank.” Jd. at 499. The D.C.

Circuit’s analysis is squarely rooted in fundamental notions

of territoriality and respect for foreign sovereignty, and an

understanding of the dilemma faced by disinterested witnesses

caught between the irreconcilable commands of different

sovereigns.

Along with the D.C. Circuit, the Seventh Circuit has

rendered a decision clearly contrary to the Eleventh Circuit’s

decisions in the Bank of Nova Scotia cases and the instant

case. In United States v. First National Bank of Chicago, 699

F.2d 341 (7th Cir. 1983), the Seventh Circuit reversed an

order granting enforcement of an IRS summons for the

production of bank account records in violation of foreign

law. The court held that it was “an abuse of discretion to

enter an unqualified order compelling production, particularly

where there is no indication of the rationale of the decision.”

Id. at 345.

The Seventh Circuit emphasized that it was “aware that

the Eleventh Circuit has reached a different result in a case

involving a bank which was apparently a neutral source of

information, as here.” Jd. at 346-47. The court purported to

9(...continued)

that production of the requested account records is prohibited by

Panamanian law, and the good faith of UBS is unquestioned.

15

distinguish Bank of Nova Scotia I on the ground that the

Eleventh Circuit “had the benefit of findings by the district

court, including a finding that the bank had not made a good

faith effort to comply with the subpoena.” Jd. at 347. UBS’s

good faith in this case is undisputed.

Moreover, in conflict with the Eleventh Circuit, the

Seventh Circuit thought that the “extent and nature of [the]

hardship” imposed on the bank “bears great weight.” Jd. at

345. The court also found it significant that “the critical act

of initially conveying the information would take place [in a

foreign state].” Id. The Eleventh Circuit has specifically

rejected placing any emphasis upon “the situs of the

evidence.” Bank of Nova Scotia II, 740 F.2d at 828 and

n.17. Finally, the Seventh Circuit found that “[t]hose acting

in [the foreign country] would be exposed to criminal

liability, not merely a fine, but imprisonment.” Jd. The same

would be true in this case if UBS were forced to comply with

the subpoena here.

Like the Eleventh Circuit, the Fifth and Ninth Circuits

have affirmed orders requiring the production of records in

violation of foreign law. In United States v. Vetco, Inc. , 691

F.2d 1281 (9th Cir.), cert. denied, 454 U.S. 1098 (1981), the

Ninth Circuit affirmed an order imposing sanctions upon a

witness for declining to produce business records on the basis

of Swiss law. Similarly, in United States v. Field, 532 F.2d

404 (Sth Cir.), cert. denied, 429 U.S. 940 (1976), the Fifth

Circuit affirmed a civil contempt order imposed upon a

foreign citizen for refusing to divulge to a grand jury

information that was protected under foreign law. The Fifth

Circuit ruled that the importance of the grand jury’s role in

“investigating possible criminal violations” in the United -

States outweighed “the fact that the district court’s order will

subject [the witness] to criminal prosecution in his country of

residence.” Id. at 407.

————_-

16

Il.

The Conflict Between U.S. Discovery

Procedures and Foreign Privacy Laws Is a

Matter of Great Importance

to the Banking Community and the

Business Community Generally.

The Eleventh Circuit’s rule imposes a heavy burden

upon any firm that wishes to do business in the United States

and any other country. For a foreign business, the price of

admission to the United States is an assumption of the risk

that it will be compelled to commit a crime in its home state

if called upon to do so by a U.S. prosecutor (or other

Government agent) pursuing some investigation in the United

States. The Eleventh Circuit’s rule can only breed disrespect

for the rule of law (and for the U.S. courts) by its insistence

that respected, law-abiding international businesses commit

criminal acts in foreign states at the behest of the United

States. The rule is particularly pernicious because it deprives

the subpoenaed party of any opportunity to contest the

purported bases of the U.S. court’s exercise of extraterritorial

jurisdiction to compel an act by a foreign national, in a

foreign land, in violation of foreign law. The comity factors

set forth in Restatement (Third) § 442 and applied by other

courts are dismissed as irrelevant.'°

'° The unfairness to the subpoenaed party is compounded by the fact

that it will likely be excluded from the proceedings on its motion

to quash by the Government’s invocation of grand jury secrecy. In

this case, the Government made repeated submissions and applica-

tions to the district court ex parte and in camera, thereby depriving

UBS of its right to litigate this case effectively. The district court

made no effort to accommodate the competing interests of grand

jury secrecy and our adversarial system of justice, as mandated by

this Court’s recent decision on a motion to quash a grand jury

subpoena in United States v. R. Enterprises, Inc., 111 S. Ct. 722

(1991). In R. Enterprises, Inc., the Court overruled the Eleventh

(continued...)

ee

17

We respectfully suggest that the question presented here

rivals or exceeds in importance the significant question

presented in another foreign discovery case, Société Nationale

Industrielle Aérospatiale v. United States District Court, 482

U.S. 522 (1987). In Aérospatiale, the Court considered the

extent to which U.S. courts must employ the alternative

procedures set forth in the Hague Convention on the Taking

of Evidence Abroad in Civil or Commercial Matters, opened

for signature, March 18, 1970, 23 U.S.T. 2555, T.LA.S.

No. 7444, in lieu of the Federal Rules of Civil Procedure,

when seeking evidence from a foreign national w*> is a party

to a U.S. lawsuit. All of the Justices agreed that respect for

the sovereignty of foreign nations, as embodied in the

principles of comity, prevents any automatic application of

U.S. discovery laws to obtain evidence located outside of the

United States — even from a party to a U.S. lawsuit and even

if the documents are not privileged under foreign law. Rather,

the Court held that comity requires a “particularized

analysis” in every case “of the particular facts, sovereign

interests, and likelihood that resort to [Hague Convention]

procedures will prove effective.” 482 U.S. at 543-44

(footnote omitted). The Court specifically admonished the

lower courts to “take care to demonstrate due respect for any

special problem confronted by the foreign litigant on account

'°(.. .continued)

Circuit rule applied in the Bank of Nova Scotia cases, see Bank of

Nova Scotia I, 691 F.2d at 1387-88, and held that the relevance of

subpoenaed documents must be established if — as here — the

Government’s need for the documents is challenged. The Court

specifically stated that district courts should “craft appropriate

© as to balance the government interest in grand jury

souabes with the chiliaashtn aiuiee tend "06 Walliada Gocilimer

showing... . to carry its burden of persuasion” on a motion to

quash. R. Enterprises, Inc., 111 S. Ct. at 728. The lower courts

refused to require any such procedure be employed here, despite

the burden upon UBS and the imposition on international comity

entailed by the Government’s subpoena.

18

of its nationality or the location of its operations . . . .” Jd.

at 546."' See also Societe Internationale pour Participations

Industrielles et Commerciales, S.A. v. Rogers, 357 U.S. 197,

211 (1958) (“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

compliance are those of a foreign sovereign.”).

This case presents a far more pointed and difficult

question of comity and sovereignty in the context of foreign

discovery orders. Here the courts below have ordered docu-

ments produced in direct violation of governing foreign law

and have done so without any consideration of alternative,

non-confrontational procedures, without any finding as to the

extent of the Government’s need for the documents it seeks

and without regard to the impossible position in which the

order places UBS (Panama), a disinterested third-party

witness that is not even subject to the in personam jurisdic-

tion of the U.S. courts, much less a party to a U.S. lawsuit.

Building upon its comity analysis in Aérospatiale, the Court

should review the decision of the court below and reject the

absolute rule applied by the Eleventh Circuit.

The Eleventh Circuit has abdicated the courts’ oversight

function as to the grand jury subpoena process. Judicial

power may be projected outside the territorial confines of the

United States solely at the discretion of the U.S. Attorney’s

office, pursuing its immediate interest in one investigation or

another. And, given the nationwide serv'ce of process en-

joyed by grand jury subpoenas, this unfettered discretion

bestowed upon the U.S. Attorney’s office affects multi-

'' Ip a separate opinion by Justice Blackmun, concurring in part and

d ssenting in part, four Justices decried the “United States courts’

precccupation with their own power to issue discovery orders” and

the “parochial views that too often have characterized [foreign

discovery] decisions to date.” 482 U.S. at 553 n.4, 568 (Black-

mun, J.).

19

national businesses throughout the United States, without

regard to conflicting rules in other circuits. From the per-

spective of multinational enterprises and foreign sovereigns,

the Eleventh Circuit rule is, in effect, the law of the United

States.

The suggestion by the Eleventh Circuit and other courts

that multinational entities must be seen to have accepted the

risk of directly conflicting legal obligations is no answer at

all. By definition, an entity subjected to two conflicting legal

rules cannot comply with both of them. One rule or the other

must be violated. A system of law that contemplates that the

courts of one sovereign may use their power over nationals

of another to override the laws of the other (or of a third

sovereign) is contrary to the very notion of the rule of law.

The position advanced by these courts is the law of the

jungle: the nation that wiclds the biggest club, be it contempt

power or some other coercive authority, will get its way, and

at the expense of the innocent private business or individual

who, perversely, is directed to commit crimes against one

sovereign or be punished by another.

The Eleventh Circuit and other courts have suggested

that businesses simply confine their operations to one nation

if unwilling to commit crimes in one state at the command of

another. (See pages 9-10 supra.) This is not a real-world

solution to the problems posed by the aggressive assertion of

U.S. jurisdiction over foreign territory, foreign acts and

foreign nationals. Nor is it the province of U.S. courts to

regulate, by the imposition of their powerful and harsh

contempt powers, whether foreign enterprises may do busi-

ness in the United States or, for that matter, whether U.S.

enterprises may do business abroad.

Courts that have ordered foreign nationals to commit

crimes on foreign soil have failed to give heed to the twin

guideposts to resolving conflicts of jurisdiction: territoriality

and nationality. See Restatement (Third) of Foreign Relations

20

Law §§ 402, 403, 441 (1987). If foreign states were to adopt

the views advocated by the Government in this case, U.S.

enterprises with overseas operations could be held hostage to

demands by foreign states that the enterprises violate U.S.

law in the United States. As the D.C. Circuit said in In re

Sealed Case, 825 F.2d at 498-99:

“We have little doubt . . . that our government and

our people would be affronted if a foreign court

tried to compel someone to violate our laws within

our borders. The legal expression of this

widespread sentiment is found in basic principles of

international comity.”

Principles of comity require that the courts of each state

make every effort to achieve a reasonable accommodation

between conflicting laws. The Eleventh Circuit rule, a

stubborn insistence that grand jury subpoenas, once issued,

be enforced in every case, without regard to conflicting

foreign laws, flouts this fundamental principle of comity

between nations and simple good sense.

21

CONCLUSION

For the reasons stated, a writ of certiorari should issue

to review the judgment of the United States Court of Appeals

for the Eleventh Circuit.

Respectfully submitted,

omg ed . Ma

OHN W. DICKEY

125 Broad Street

New York, New York 1

(212) 558-4000

Counsel for Petitioner

Union Bank of Switzerland

DAVID A. HEINER, JR.

ROBERT J. GIUFFRA, JR.

THOMAS J. WITT

SULLIVAN & CROMWELL

MARTIN R. RASKIN

RASKIN & RASKIN, P.A.

Of Counsel

November 21, 1991

APPENDIX

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 91-5522

D. C. Docket No. FGJ 90-2

IN RE: FEDERAL GRAND JURY PROCEEDINGS,

90-2 (MIA), MATTER OF GRAND JURY SUBPOENA

TO UNION BANK OF SWITZERLAND.

UNION BANK OF SWITZERLAND,

Movant-Appellant.

Appeal from the United States District Court

for the Southern District of Florida

(September 10, 1991)

Before FAY and JOHNSON, Circuit Judges, and MEKHIGE*,

Senior District Judge.

PER CURIAM: AFFIRMED. See 11th Circuit Rule 36-1.

“Costs taxed against movant-appellant.”

* Honorable Robert R. Merhige, Jr., Senior U.S. District Judge

for the Fastern District of Virginia, sitting by Designation.

Judgment Entered: September 10, 1991

For the Court: Miguel J. Cortez, Clerk

By:

y Deputy Clerk

ISSUED AS MANDATE: September 10, 1991 -

Al

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 91-5522

IN RE: FEDERAL GRAND JURY PROCEEDINGS, 90-2 (MIA)

MATTER OF GRAND JURY SUBPOENA

TO UNION BANK OF SWITZERLAND.

UNION BANK OF SWITZERLAND,

Movant-Appellant.

Appeal from the United States District Court

for the Southern District of Florida

ON PETITION(S) FOR REHEARING AND SUGGESTION(S) FOR

REHEARING EN BANC

Before FAY and JOHNSON, Circuit Judges, and MERHIGE*,

Senior District Judge.

PER CURIAM:

(/) The Petition(s) for Rehearing are DENIED and no member

of this panel nor other 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 35-5), the Suggestion(s) of Rehearing En Banc are

DENIED.

ENTERED FOR THE COURT:

UNITED STATES CIRCUIT JUDGE

*Honorable Robert R. Merhige, Jr., Senior U.S. District Judge

for the Eastern District of Virginia, sitting by designation.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

CASE No. FGJ 90-2(M!A)

IN RE UNITED STATES

GRAND JURY PROCEEDINGS:

GRAND JURY SUBPOENA TO

UNION BANK OF SWITZERLAND

ORDER

On the Motion of the Government filed in this matter on

the 15th day of May, 1991, to compel enforcement of a

compulsion order and to Show Cause, and pursuant to the

hearing held on June 20, 1991, attended by all parties, it is

hereby ORDERED that Union Bank of Switzerland is in

contempt of this Court for refusing to comply with the

compulsion order of this Court, entered on April 3, 1991, and

reinstated on April 16, 1991, requiring the production of certain

records pursuant to a Grand Jury subpoena duces tecwm. Union

Bank of Switzerland shall pay sanctions in the amount of Ten

Thousand Dollars per day for every day said documents are not

produced subsequent to the expiration of any stay.

It is also ORDERED and ADJUDGED that Union Bank of

Switzerland’s motion for stay of this Conternpt Order is hereby

DENIED.

It is further ORDERED that this Order is STAYED until

5:00 P.M., June 25, 1991, to permit Union Bank of Switzerland

to file a motion for stay with the United States Court of Appeals

for the Eleventh Circuit. The record of the above hearing and

this Order is hereby Ordered SEALED.

A3

DONE AND ORDERED in chambers at Miami, Florida

this 20th day of June, 1991.

LENORE C. NESBITT

UNITED STATES DISTRICT JUDGE

cc: Martin Raskin, Esq.

John Dickey, Esq.

Mark D. Seltzer, AUSA

A4

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF FLORIDA

IN RE: )

) GRAND Jury 90-2 (MIA)

GRAND JURY PROCEEDING BEFORE ) (NgssrTT, D.J.)

Transcript of proceedings before The Honorable

LENORE C. NESBITT, United States District

Judge, in Miami, Dade County, Florida, on Thursday,

June 20, 1991, in the above-styled matter.

Appearances of counsel:

For the Government: Mr. Mark Seltzer

Mr. James Springer

For the Respondent: Mr. Martin R. Raskin

Mr. John W. Dickey

Mr. David A. Heiner, Jr.

Linda E. Fincannon

Official Court Reporter

340 U.S. Courthouse

301 North Miami Avenue

Miami, Florida 33128

305-374-6658

THE COURT: The Nova Scotia case in the Eleventh

Circuit teaches the enforcement of grand jury subpoenaes and

the issuance of contempt are appropriate if the subpoenaed

party must violate the bank secrecy laws of another country

and that you simply have to choose between two masters.

You have to choose between the United States, to be obedient

to our laws or be obedient to Panamanian laws.

It is clearly laid out in Nova Scotia. It is clearly the law

of the Eleventh Circuit. It is true you are not a target such as

in the In Re Sealed case, but you are a bank conducting

business here in the United States and you are subject to the

laws of the United States.

The Eleventh Circuit has put all these issues in my

opinion to rest. The government does not have to pursue

alternative procedures to obtain these documents. The fact

that you have made every effort is not enough according to

case decisions. You must make every reasonable effort. And

every reasonable effort includes having to choose between

Panamanian law and United States law.

So I don’t see any good reason based upon the case law

and, quite frankly, having been into this area in the last few

days in another proceeding I see no reason why Judge

Spellman’s order should not be enforced.

The fact that you are not a target is a factor but it is not

the only factor the court must consider. So the Eleventh

Circuit case decisions I am afraid are not in your favor.

THE COURT: The law is as straight as an arrow on

this subject which is unless there has been a prima facie

showing of contempt, and there has been in this case, been

a prior order entered and you haven’t complied, you say you

are unable to comply because of the violation of foreign

A6

secrecy laws, but the case decisions are legion that the all

reasonable effort standard is a very high standard. It doesn’t

just mean substantial. It doesn’t just mean diligent. It doesn’t

just mean in good faith. It means every singie effort that you

can make to comply and the one impediment to compliance

is that you will have to violate Panamanian law. And that is

not sufficient under Nova Scotia to relieve you from

compliance with the court order.

So I am going to ratify and approve Judge Spellman’s

order of April 3rd and April 16th directing you to comply

with the grand jury subpoenaes previously issued in this case

and to produce the subject documents.

If you fail to comply, you are to pay a fine in the

amount of $10,000 a day for every day the documents are not

produced. I am going to enforce that order at this particular

time.

A7

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

CASE No. FGJ 90-2

IN RE UNITED STATES

GRAND JURY PROCEEDINGS:

GRAND JURY SUBPOENA TO

UNION BANK OF SWITZERLAND

/

ORDER DENYING MOTION TO QUASH

GRAND JURY SUBPOENA

THIS CAUSE comes before the Court upon Union Bank

of Switzerland’s (“UBS”) Motion to Quash a Grand Jury

Subpoena.

UBS, a Swiss bank, moves for an Order quashing a

subpoena served upon its New York branch. The subpoena

requires UBS to obtain and disclose to a Miami federal grand

jury records of UBS (Panama), a subsidiary of UBS,

incorporated under the laws of the Republic of Panama and

located there.

Movant argues that it lacks possession, custody or

control of the documents of UBS (Panama). Furthermore,

Movant contends that issuance of an order compelling

production of bank records of UBS (Panama) would violate

International law and Principles of Comity. The Undersigned

is not persuaded by Movant’s arguments.

Rather, this Court believes that the holding of the United

States Court of Appeals for the Eleventh Circuit in United

States v. Bank of Nova Scotia is dispositive of the present

Motion. United States v. Bank of Nova Scotia, 691 F.2d 1384

A8

(11th Cir. 1982), cert. denied, 462 U.S. 1119 (1983). In

Bank of Nova Scotia, the Eleventh Circuit stated:

Absent direction from the Legislative and

Executive branches 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 international in scope, conflicts are

inevitable. Courts and legislatures 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.

United States v. Bank of Nova Scotia, 691 F.2d 1384, 1391

(11th Cir. 1982), cert. denied, 462 U.S. 1119 (1983).

Accordingly, upon careful review of the record, it is hereby

ORDERED AND ADJUDGED that the Motion is

DENIED. UBS must comply with the Grand Jury Subpoena

giving rise to the instant Motion and produce the subject

documents within twenty days of the date of this Order. If

UBS fails to so comply, the Undersigned will order Movant

to pay sanctions in the amount of ten thousand dollars per

day for every day said documents are not produced.

A9

DONE AND ORDERED in Chambers at Miami,

Florida this 3rd day of April, 1991.

Eugene P. Spellman

United States District Judge

cc: all counsel of record

Al0

LAW NUMBER 18

(of January 28th, 1959)

Whereby regulations are enacted on coded bank accounts.

THE NATIONAL ASSEMBLY OF PANAMA

Decrees:

Article 1) — Banking enterprises and other credit

institutions legally established in the territory of the Republic

may operate coded current or deposit accounts, which shall

be governed by the pertinent provisions of the Code of

Commerce, as amended by the within Law.

Article 2) — The coded banking account is a contract

whereby a person, whether natural or juridical maintains on

deposit with a bank cash, or securities or a credit, and such

bank agrees to meet the orders of payment of said depositor

up to the amounts of cash delivery of securities that he may

have deposited, or the credit granted to him, and to observe

strict secrecy as to the existence of the account, its balance

and the identity of the depositor.

The interests which under the provisions of a bank

account contract may be earned by the depositor are an

integral part of the account for all legal purposes.

Article 3) — It is not necessary that the name of the

drawer appear on the checks and payment orders drawn

against coded current bank accounts or on orders for delivery

of securities. The bank shall be required to pay such checks

and orders of payment provided that the usual signature

previously furnished by the committent and the number

assigned to the account appear thereon.

All

Article 4) — Managers, officers and other employees of

banking institutions, whether national or foreign, who reveal

or disclose to persons alien to the institutions and to the

handling of these accounts any information with reference to

the existence, balance or identity of the commitent of a coded

bank account shall be punished with imprisonment of from

thirty (30) days to six (6) months, fines of from one thousand

(B/.1,000.00) to ten thousand balboas (B/.10,000.00), or

both.

Article 5) — The information on coded current bank

accounts referred to in the preceding article may be revealed

by managers and other employees of banking institutions to

investigating officers, judges and magistrates who hear

criminal proceedings, and who shall hold the information in

strict reserve in the event that such information is not

conductive to clarifying the punishable facts under

investigation.

In the cases in which public functionaries, whether of a

judicial or administrative category, other than those

mentioned in this article, request from banking institutions

any information or the attachment or embargo of coded bank

accounts, including probate proceedings, the bank shall not

furnish the information, nor withhold the funds or securities

deposited in coded accounts, and shall reply to the request

stating that it is not possible to furnish any information, even

in the cases where there exist the account or the funds or

securities covered by the request.

Article 6) — The managers, officers and other

functionaries of banking enterprises handling coded current

bank accounts shall be subject to the penaities provided for

in Article 4 of the within law, even in the cases in which

they disclose information on said accounts to officials or

employees of the Legislative Organ, the Executive Organ, the

Ministry of Finance and Treasury, the Independent Agencies

Al2

of the State, the Office of the Comptroller General of the

Republic, or the Judicial Organ, other than in the exceptions

relative to criminal proceedings stipulated in the preceding

article.

Article 7) — The provisions of Article 17 of Law 101 of

1941, as amended by Law 47 of 1954, shall not apply to

coded bank accounts.

Article 8) — Banking institutions which by law are

required to report to the Department of Internal Revenue of

the Ministry of Finance and Treasury on the amounts of

interest paid to depositors of coded accounts, shall do so

globally, that is, without specifying the amount paid to each

depositor.

Article 9) — In the event of the demise of one of the

persons authorized to draw against a joint account, the

survivors may continue drawing against same.

Paragraph: A joint account is that against which more

than one person may draw.

Article 10 — The power to withdraw funds from coded

accounts does not cease upon the demise of the grantor of

such power.

Article 11 — All provisions contrary to the within Law

hereby repealed.

Al3

Article 12 — This Law shall become effective upon its

publication in the Official Gazette.

Issued in Panama, on the twenty-sixth day of the month

of January, one thousand nine hundred and fifty nine.

The President,

(Sgd.) ELIGIO CRESPO V.

The Secretary General

(Sgd.) FRANCISCO BRAVO

REPUBLIC OF PANAMA. NATIONAL EXECUTIVE

ORGAN. —

Presidential Palace. Panama, January 28th, 1959. Be it

Executed and Published.

(Sgd.) ERNESTO DE LA GUARDIA Jr.

The Minister of Finance and Treasury,

(Sgd.) FERNANDO ELETA A.

Al4

Translation

CABINET DECREE NO. 238 (BANKING LAW OF

THE REPUBLIC OF PANAMA)

ARTICLE 26: The Commission shall revoke the license of

any bank for any of the following reasons:

1) It has ceased to engage in banking business; or

2) It does not begin operations within the six (6)

months following the issuance of the license. The

Commission may also, by a resolution adopted by a majority

vote of five (5) commissioners, revoke said license when a

bank does not comply with any of the provisions of this

Cabinet Decree. Before revoking the license, the Commission

shall serve notice on the Bank advising its intention to

revoke, giving it the pertinent reasons to do so, and the Bank

shall have a term of twenty-one (21) calendar days, beginning

on the day it was served notice, to explain the reasons why

it considers that its license should not be revoked, attaching

to such explanation the evidence available before the action,

which it deems applicable. Once said term expires, the

pertinent decision shall be issued by the Commission by

means of a resolution.

ARTICLE 65: When requested in writing, every bank shall

be obliged to show the inspector, authorized by the

Commission for such a purpose, the accounting books,

minutes, cash currency securities owned by the bank,

documents and vouchers, as well as all the reports and

documents relative to its operations.

Nevertheless, in order to protect the interest of the

bank’s clients and the confidentiality that its operations

require, the examination by the Commission’s Inspectors may

not include any type of deposit accounts, nor the securities in

custody, nor the safety deposit boxes, nor the documents

Al5

derived from credit transactions, which clients maintain with

the bank, unless there is a judicial order issued in accordance

with Article 89 of the Code of Commerce.

ARTICLE 74: The Commission is forbidden to conduct or

order investigations concerning the private affairs of any

bank’s clients. The violation of this stipulation shall be

sanctioned in accordance with the provisions of Article 101

of this Cabinet Decree.

Paragraph: The Commission may not publish any

information acquired pursuant to this Cabinet Decree, unless

it has previously obtained the consent in writing of the bank

or client concerned.

ARTICLE 83: The Commission, by means of a motivated

resolution approved by the vote of five (5) of its members,

may intervene a bank, taking possession of its assets and

assuming its administration in accordance with the provisions

of Article 85, in any of the following cases:

a) If its capital or capital reserve has suffered loss or

lacks solidity; :

b) If it conducts its operation in an illegal, negligent or

fraudulent manner;

c) If it cannot continue its operations soundly;

d) If once requested, it refuses to show the accounting

records for operations carried out, or has in some way

hindered the inspection of the bank;

e) Ifthe assets of the bank are not sufficient to satisfy

the total of its liabilities;

f) Ifthe Commission deems it convenient, because the

voluntary liquidation has been unduly delayed.

ARTICLE 101: Any person who furnishes information in

violation of this Cabinet Decree, or who violates any of the

provisions established in it for which no specific punishment

Al6

is provided for shall be subject to a fine from B/.500.00 to

B/.1.000.00, imposed by the Commission, without prejudice

to the applicable criminal and civil liabilities.

Panama, November 8, 1989

THE ABOVE IS A TRUE TRANSLATION OF ITS ORIGINAL IN

THE SPANISH LANGUAGE.

Kora B. de Anas

Al7

Translation

CRIMINAL CODE OF THE REPUBLIC OF PANAMA

ARTICLE 170: Anyone who, by virtue of his trade,

employment, profession or art, has access to confidential

information, the publication of which may be harmful, and

who further reveals such information without the consent of

the interested party or without such revelation being

necessary to safeguard interests of a higher nature, shall be

subject to.a term of imprisonment ranging from 10 months to

2 years, or a 30 to a 150 day fine, and shall be unable to

hold such employment for up to a period of 2 years.

Panama, November 8, 1989

THE ABOVE IS A TRUE TRANSLATION OF ITS ORIGINAL IN

THE SPANISH LANGUAGE.

Kora B. de Arias

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Pain

Translation

CODE OF COMMERCE OF THE REPUBLIC OF PANAMA

ARTICLE 89: Inviolability of the Confidentiality of Books,

Records and Documents (Exceptions)

No order can be issued to deliver, disclose or inspect the

books, letters and other documents or papers of merchants or

brokers, except in cases of probate, bankruptcy, or

liquidation actions.

Except for these cases, the inspection of ledgers,

accounting books and pertinent documents can only be

ordered when requested by a party to a lawsuit with a

legitimate interest or responsibility in the matter at issue.

The examination will be made at the offices of the

merchant or broker, in his presence or in the presence of his

attorney-in-fact, and it will be limited to the copy of the

entries or papers which have relation with matter at issue.

If the books were located outside the jurisdiction of the

Judge who orders the exhibitory action, such action will be

executed at the place where these books are, and in no case

will the transfer of said books be ordered to the place of the

trial.

When a merchant keeps auxiliary ledgers, he can be

compelled to exhibit them in the same manner and in the

same cases as hereinbefore mentioned.

No authority is empowered to compel a merchant to

provide copies or reproductions of his books (or part of

them), correspondence or any other documents he may

possess. When deemed appropriate to obtain some infor-

mation in this regard, an exhibitory action will be ordered.

Any merchant that furnishes a copy or reproduction of the

contents of its books, correspondence or other documents, in

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compliance with an order issued by an authority extraneous

to that of the Republic of Panama, so that the aforesaid

copies, reproductions, correspondence or documents are

utilized in litigation overseas, shall be penalized with a fine

no greater than One Hundred Balboas (B/.100.00).

Panama, November 8, 1989

THE ABOVE IS A TRUE TRANSLATION OF ITS ORIGINAL IN

THE SPANISH LANGUAGE.

Kora B. de Arias

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RESTATEMENT (THIRD) OF FOREIGN RELATIONS

§ 441.

(1)

(2)

Law § 441

Foreign State Compulsion

In general, a state may not require a person

(a) to do an act in another state that is prohibited

by the law of that state or by the law of the

state of which he is a national; or

(b) to refrain from doing an act in another state

that is required by the law of that state or by

the law of the state of which he is a national.

In general, a state may require a person of foreign

ionality

(a) to do an act in that state even if it is prohibited

by the law of the state of which he is a

national; or

(b) to refrain from doing an act in that state even

if it is required by the law of the state of which

he is a national.

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RESTATEMENT (THIRD) OF FOREIGN RELATIONS

Law § 442

§ 442. Requests for Disclosure: Law of the United States

(1) (a)

(b)

(c)

A court or agency in the United States, when

authorized by statute or rule of court, may

order a person subject to its jurisdiction to

produce documents, objects, or other

information relevant to an action or

investigation, even if the information or the

person in possession of the information is

outside the United States.

Failure to comply with an order to produce

information may subject the person to whom

the order is directed to sanctions, including

finding of contempt, dismissal of a claim or

defense, or default judgment, or may lead to a

determination that the facts to which the order

was addressed are as asserted by the opposing

party.

In deciding whether to issue an order directing

production of information located abroad, and

in framing such an order, a court or agency in

the United States should take into account the

importance to the investigation or litigation of

the documents or other information requested;

the degree of specificity of the request;

whether the information originated in the

United States; the availability of alternative

means of securing the information; and the

extent to which noncompliance with the request

would undermine important interests of the

United States, or compliance with the request

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would undermine important interests of the

state where the information is located.

(2) If disclosure of information located outside the

United States is prohibited by a law, regulation, or

order of a court or other authority of the state in

which the information or prospective witness is

located, or of the state of which a prospective

witness is a national,

(a)

(b)

(c)

a court or agency in the United States may

require the person to whom the order is

directed to make a good faith effort to secure

permission from the foreign authorities to make

the information available;

a court or agency should not ordinarily impose

sanctions of contempt, dismissal, or default on

a party that has failed to comply with the order

for production, except in cases of deliberate

concealment or removal of information or of

failure to make a good faith effort in

accordance with paragraph (a);

a court or agency may, in appropriate cases,

make findings of fact adverse to a party that

has failed to comply with the order for

production, even if that party has made a good

faith effort to secure permission from the

foreign authorities to make the information

available and that effort has been unsuccessful.

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