U.S. court revives case accusing RBS' NatWest of aiding Hamas

(Adds Arab Bank verdict, paragraph 5)

By Jonathan Stempel

NEW YORK, Sept 22 (Reuters) - A U.S. appeals court on Monday revived lawsuits against National Westminster Bank by about 200 victims of attacks in Israel attributed to Hamas who are seeking to hold the bank liable for handling transactions linked to the group.

The 2nd U.S. Circuit Court of Appeals in New York said a lower court judge erred in dismissing the two lawsuits against the Royal Bank of Scotland Group Plc unit over its dealings with Interpal, a London-based charity linked to Hamas.

Writing for a three-judge appeals court panel, Circuit Judge Pierre Leval said the U.S. Antiterrorism Act required a showing only that NatWest knew or was deliberately indifferent to whether Interpal provided material support to Hamas, "irrespective of whether Interpal's support aided terrorist activities of the terrorist organization."

The decision covers victims of attacks from 2002 to 2005 and could make it easier to pursue U.S. civil claims that banks turned a blind eye to client activity linked to terrorism.

It was released less than seven hours before a jury in Brooklyn said Jordanian bank Arab Bank Plc provided material support to Hamas, and must therefore compensate the victims of two dozen attacks allegedly carried out in Israel and the Palestinian territories by the Islamic militant group. Nearly 300 Americans who were either victims or related to victims of the attacks had sued Arab Bank. Damages will be determined later.

In the NatWest case, the plaintiffs sued because that bank had from 1994 to 2007 maintained accounts for Interpal, which claims to give humanitarian aid to people in Palestinian territories but which the United States and Israel have said funds terrorism by Hamas.

In August 2003, the U.S. Treasury Department designated Interpal a "specially designated global terrorist."

But in dismissing the lawsuits in March 2013, U.S. District Judge Dora Irizarry in Brooklyn found no showing that NatWest knew or deliberately ignored Interpal's role in funding Hamas.

She based this in part on a finding that British authorities, including the Bank of England, had "cleared Interpal of allegations of terror financing, expressly giving NatWest permission to maintain Interpal's accounts."

Leval said jurors might conclude from this finding that NatWest could have believed Interpal was not supporting a terrorist organization.

"However, in the face of contrary findings - in this case by the United States Treasury Department - such views of foreign governments could not support summary judgment" for NatWest, he said.

RBS (LSE: RBS.L - news) and its lawyer Jonathan Blackman did not respond to requests for comment.

"This is a clean win" for the plaintiffs, said Peter Raven-Hansen, a law professor at George Washington University who worked on their appeal. "It shows that a foreign government's view of whether a terrorist organization can have a good side and a bad side is irrelevant under the statute, when the United States has decided that terrorist organizations don't have good sides."

Gary Osen, who represents some plaintiffs, called the decision "a major victory for American terror victims."

The case is Weiss et al v. National Westminster Bank Plc, 2nd U.S. Circuit Court of Appeals, No. 13-1618. (Reporting by Jonathan Stempel in New York; Editing by Cynthia Osterman)