Remember Sabena, the ill-fated Belgian airline that declared bankruptcy in 2001? Well, to quote Ford Madox Ford, this is the saddest story I have ever heard.

One of the things that Sabena did, other than fly people back and forth to Brussels, was to provide repair and technical services to other airlines. One of those was Sudan Airways, which originated a wire transfer of $360,500 to pay Sabena. One day before the wire transfer, on November 3, 1997, President Clinton blocked the assets of the government of Sudan, including those of Sudan Airways. So when the wire from Sudan Airway’s bank hit Bankers Trust in New York on November 4 on its way to Sabena’s bank in Belgium, Banker’s Trust blocked the transfer and put the funds in a blocked account where they sat for more than a decade.

In 2009 Sabena requested that OFAC unblock the funds. In 2012, OFAC issued a license to Banker’s Trust (by then Deutsche Bank) to release the funds. The receivers for Sabena were doing a happy dance over getting the license from OFAC when their celebration was abruptly cut short. Deutsche Bank relied on the license Sabena obtained and sent the funds not to Sabena’s bank but to Sudan Airways bank. It’s something like renting a hall and a band for a party and then not being allowed to attend but rather forced to watch through the windows as your guests eat all your food and drink all your champagne.

So the receivers for Sabena decided to get even: they sued Deutsche Bank for not sending the money to them. But poor Sabena just can’t get a break. On July 14, a New York appeals court dismissed the Sabena complaint and upheld the return of the unblocked funds to Sudan Airways.

To get there, the appeals court relied on Article 4A of the Uniform Commercial Code that governs fund transfers. Specifically the court relied on two provisions. First, it relied on section 4A-212, which says that an intermediary bank, like Bankers Trust, has no liability to the beneficiary of the funds transfer. Second, it relied on section 4A-402 which requires the intermediary bank to return to the sender any uncompleted funds transfer. Once the funds were blocked, then the transfer order was cancelled under section 4A-211(d) five days after the intermediary bank received a transfer request and did not execute it. And once cancelled, then section 4A-402(d) requires the funds to go back to the sender.

The moral of the story is this: intended recipients of blocked fund transfers should not waste their time trying to get an unblocking license.

 

Copyright © 2016 Clif Burns. All Rights Reserved. 
(No republication, syndication or use permitted without my consent.)