BNP Paribas confronts its past over Sudan sanctions breach

In a New York courtroom last month, Entesar Kashef told a jury how she hid under a bed at her home in Sudan as men in army gear shot her family members. Later, she testified that she was arrested, beaten and raped. 

Lawyers for Kashef, 41, and two other Sudanese plaintiffs said their torment was connected to the work of BNP Paribas, one of Europe’s largest banks. The French lender enabled Sudanese dictator Omar al-Bashir’s regime to carry out billions of dollars in transactions in the 2000s, in a criminal breach of US sanctions designed to hamper the regime. 

Jurors found it should pay the trio $20.5mn. News of the shock verdict wiped several billion dollars from the bank’s stock market valuation in one day, and bolstered plaintiffs’ lawyers who said the bank could now be on the hook for tens of billions of dollars.

The trio were among an estimated 23,000 people who have been recognised by a US judge as a certified “class” of refugees and asylum seekers who left Sudan and may be entitled to make claims against the bank.

In the days since, BNP has been fighting back. The bank argued that breaching sanctions, to which it pleaded guilty more than a decade ago, did not mean it had caused the harm Kashef and others suffered.

The bank has said it “does not have any pressure” to settle and will try to get the “clearly wrong” decision overturned. Its response has included publicly feuding with the plaintiffs’ lawyers and making statements that have sowed confusion about the case. 

The reaction is a sign of how much is at stake in a battle about companies’ responsibility for human rights abuses by the regimes that they act for, when the companies themselves do not directly inflict harm. 

“This case will trigger corporations that do business with foreign governments to assess what they’re doing and assess their potential liability,” Beth Stephens, a professor at Rutgers Law School, told the Financial Times.

The case has dredged up one of the darkest moments in BNP’s recent history. In 2014, it struck a plea deal with the US Department of Justice, agreeing to pay $9bn in penalties. 

It admitted funnelling $6.4bn through the US financial system on behalf of Sudanese entities, concealing sanctioned organisations’ involvement by using a network of “satellite banks” and structuring payments in “highly complicated ways, with no legitimate business purpose”.

Compliance officers had raised concerns internally about the bank’s work involving Sudan. 

At the time, the DoJ said for years the bank had “failed to provide the government with meaningful materials” and that this delay “significantly impacted the government’s ability to bring charges against responsible individuals, Sudanese sanctioned entities, and the satellite banks”.

The fiasco prompted an expression of regret from the bank’s chief executive Jean-Laurent Bonnafé, the resignation of its chair and its chief operating officer, and the departure of 13 other executives at the request of US regulators.

The same conduct — facilitating dollar transactions that benefited Bashir’s regime — was central to the New York civil case brought by Kashef and others. It was designed as a so-called bellwether case, a test of how a jury would respond to the evidence based on a small sample of plaintiffs. 

It is not clear what the verdict might ultimately mean for the rest of the class. It does not automatically entitle them to payments.

Such trials are often used to press parties into settlement discussions, and the judge has said the case lends itself to settlement. But if the bank, which said it had made no provisions in its third quarter to cover the cost of the case, does not play ball, the next steps will be complicated. 

No decision has been made about whether or how other members of the class might get their day in court. One option is a follow-on trial with another handful of plaintiffs. A hearing is scheduled for January to consider the options.

Alongside that, the bank has said it will appeal. It has a long list of grievances, including that the judge applied an evidentiary standard that made it too easy for jurors to find in the plaintiffs’ favour.

It said the plaintiffs should have to prove the bank’s “conscious assistance and knowledge as to specific illicit acts committed against each plaintiff”.

It has questioned whether the US judge, Alvin Hellerstein, correctly interpreted the Swiss law under which the trial was held. It said it was barred from introducing “important evidence” to the jury showing its transactions complied with European and Swiss law.

Outside of the courtroom, the bank’s public statements about the case have led to confusion among analysts and a war of words with the victorious plaintiffs’ lawyers. 

Its finance chief Lars Machenil told analysts the ruling concerned “only three plaintiffs and it does not set a precedent for similar cases”, and said the case “has nothing to do with the 2014 criminal proceedings”. In a statement, the bank said it processed “normal banking transactions” in Sudan. 

That prompted plaintiffs’ lawyers to write to the bank’s lawyer, Gibson Dunn partner Barry Berke, to say it was “astonishing” to describe criminal conduct that violated US sanctions as “normal”.

Plaintiffs’ lawyers had shown the jury a 1997 message from a Sudanese bank, shortly after the US imposed sanctions, in which BNP employees were “kindly requested” not to mention the African bank’s involvement in some US dollar transactions “in consideration to the recent American embargo”. 

Berke retorted that plaintiffs’ lawyers were “desperate to pressure BNP into settlement” and that the banking transactions were “the same types of financial transactions that banks process across the world every day in every country”.

He said there was a “distinction” between violating US sanctions and violating the Swiss law under which the US case was tried.

Some of bank’s comments have left analysts confused.

“BNP seems to believe that a class action isn’t possible, but it has not really made a compelling argument why not,” Johann Scholtz, a senior equity analyst at Morningstar, told the FT.

“It also views the number of potential plaintiffs as completely unfounded, but once again they do not offer much in the way of why they think that is the case.”

The trial and its fallout have prompted questions about why the bank did not reach a settlement with Sudan’s refugees before it reached trial. Stephens, from Rutgers, said corporations sometimes overestimated their position in such cases.

“It could be that the bank just didn’t believe it could lose,” she said.