A Russian court postponed until at least October a ruling on whether American anti-racketeering law may be used in a lawsuit against the Bank of New York for the bank's role in a large money- laundering scandal in Russia in the late 1990s.

The trial was postponed after the bank's lawyers said an important American witness had become ill.

Using a novel legal theory on choice of law, trial lawyers from Miami - working for the Russian government on contingency fees - are seeking $22 billion in damages from the bank under U.S. anti- racketeering statutes, though they are asking a Russian court to hear the case.

At issue is the bank's 2005 admission that it improperly transferred $7.5 billion out of Russia in the late 1990s, when capital flight was a major problem undermining the country's economy. The bank paid a fine to the U.S. government to avoid prosecution, which the lawyers have cited as the basis for their damage claim for the Russian government.

The court has listened to testimony from American legal experts on the Racketeer Influenced and Corrupt Organizations act, known as RICO, to determine whether the court has jurisdiction to apply the law in Russia.

The RICO law has never been adjudicated by a foreign court, something the bank's lawyers have pointed out.

The case has drawn the attention of banking industry analysts, who are already keeping a wary eye on U.S. banks because of the liquidity and mortgage crisis in the United States.

On Monday and Tuesday of last week, Robert Blakey, the author of the RICO law that was approved by the U.S. Congress four decades ago, testified before the court on behalf of the customs officials. He argued that there was nothing preventing the Russian civil court, the Basmany Arbitrage court, from applying the law against Bank of New York.

Under his cross examination late last Tuesday, however, lawyers for the Russian Customs Committee said Blakey had fallen ill and asked to postpone the hearing. The Russian customs officials filed an oral petition to allow him to continue his testimony at a later date.

On Monday, the lawyers said Blakey was still ill, prompting another postponement, on health grounds. This led the court to postpone the case, which has already been winding through the court for a year.

Originally published by The New York Times Media Group.

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Story Source: International Herald Tribune