The New York State Department of Financial Services ("NYDFS") required Commerzbank to terminate the employment of a Germany-based employee on the basis that he played "a central role" in the breaching of US sanctions.
Commerzbank has a subsidiary in New York City, but the employee in question had never worked there. The NYDFS had audited the bank's transactions and found that Commerzbank had carried out US-dollar clearing transactions on behalf of foreign financial institutions (e.g., in Iran and Sudan) which the authority regarded as being in violation of US economic sanction rules.
In a settlement between Commerzbank and the NYDFS ("Consent Order") of 2015, Commerzbank committed to pay a US$1.45 billion penalty, install a monitoring system for banking law violations and terminate the employment relationships of four employees who "played a central role" in these incriminated transactions. The plaintiff was one of those.
In the employment litigation, it remained unclear whether the employee had violated his contractual duties or whether he had acted in line with the bank's policies and the instructions of his superior. The German labour court would not endorse a termination "based on pressure" from the US authority. German law acknowledges that under strict preconditions, the termination of an employee "based on pressure" may be justified because important customers or fellow employees so demand. The court, however, ruled that this is not comparable as: (i) the New York branch had committed the act (i.e., not the employer) and (ii) the deterrent effect was intended by a foreign authority, which is not subject to German law.
The facts of this case are narrow, but the decision generated considerable attention in the German media. So far, German labour courts have refused to apply non-German laws on employment relationships. In light of increasing globalisation, and with many regulatory and sanctions laws having reach far beyond domestic borders, there may be other cases like this in the future.
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