American victims of terror attacks inside Israel failed to state a claim against a bank under the Anti-Terrorism Act for violations of currency restrictions designed to isolate Iran and prevent money from flowing to Hamas and Hizbollah, the U.S. Court of Appeals for the Second Circuit ruled last week.

Upholding a lower court, the Second Circuit said UBS AG cannot be sued for damages from rocket attacks and bombings launched on Israel from 1997 to 2006 by Hamas and Hizbollah under the act, (ATS), 18 U.S.C. §2331 et seq. UBS AG was fined $100 million in 2004 by the Federal Reserve for transferring currency to Iran, and the plaintiffs in Rothstein v. UBS AG, 11-0211, claimed there was a sufficient causal connection between the transfers of funds and the attacks.

Southern District of New York Judge Jed Rakoff had dismissed the case based on a lack of standing and failure to state a claim under the act. On Thursday, Judges Amalya Kearse, Raymond Lohier and Christopher Droney disagreed with Rakoff on the standing issue, with Kearse writing that the complaint successfully alleged that "plaintiffs’ injuries in bombings and rocket attacks conducted by Hizbollah and Hamas were fairly traceable to UBS’s provision of U.S. currency to Iran."

But "fairly traceable" was not the same thing as "proximate cause" the court said. "We are not persuaded that Congress intended to permit recovery under §2333 on a showing of less than proximate cause or that the Complaint contains plausible allegations that UBS’s transfers of U.S. Currency to Iran proximately caused plaintiffs’ injuries," Kearse said.