New York Courts’ Long-Arm Jurisdiction

The Harvard
Corporate Governance Blog has a post
discussing a recent judgment that confers significant long-arm jurisdiction to
the New York Courts. Here is the summary:
November 20, 2012, the New York Court of Appeals issued an opinion that is of
substantial importance to international banks and financial institutions that
maintain and use correspondent banking accounts in New York. In Licci v.
Lebanese Canadian Bank, SAL (N.Y. Nov. 20, 2012), the Court of Appeals held
that a non-U.S. bank’s maintenance and use of such an account to effect
“dozens” of wire transfers, worth millions of dollars, on behalf of a non-U.S.
client was sufficient to form the basis for personal jurisdiction under the New
York State long-arm statute, N.Y. C.P.L.R. § 302(a)(1). Due to the prevalence
of U.S. dollar-denominated financial transactions, many non-U.S. banks maintain
and use correspondent accounts in New York. As a result, the Licci decision has
the potential to increase plaintiffs’ ability to establish personal
jurisdiction over non-U.S. financial intuitions in state and federal courts in
New York.

This development may be of
particular interest to Indian banks without any direct presence in New York,
but who may be dealing through correspondent banks within that state. They
could potentially be exposed to actions before a New York court.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

1 comment

  • Off-hand (for in-depth deliberation by international law experts):

    The NY Court's opinion does bear out the potentials for aggrieved parties to invoking the long-arm jurisdiction of the US courts, in the US. That prima facie has opened up 'Pandora's box' , and, to say the least, typically entails far reaching consequences of international magnitude. Provided, though, in any given case, the type or nature of the transactions of a non-US entity squarely fits into the specific parameters referred to.

    But the nagging point of doubt of great concern, -which is likely to be raised by such entities, if and faced with any such dispute- is, whether any national court (e.g. in the US as herein) would be judicially right, if the principles or thus far followed practice of international law / jurisprudence, in unilaterally assuming such a long-arm jurisdiction; thereby, ignoring or by-passing the inherent jurisdictional powers of the other nation (to which the entity belongs).

    As is recalled, in some of the tax cases (for instance, in India, in a series of cases of a recent origin, like Vodafone) a similar kind of doubt has been brought up but continues to be debated.

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