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Attachment of New York Correspondent Accounts Limited

March 27, 2014

Provisional remedies are a powerful tool for creditors. In New York, two recent cases have limited a creditor’s ability to attach funds of a defendant at a foreign bank with a correspondent banking relationship with a New York bank.

The premise of the attachment is that a foreign defendant has an attachable property interest in its “share” of its bank funds maintained with its correspondent bank in New York. In Toisa Ltd v. PT Transamudra Usaha Sejahtera, 13 CV 1407 (Sept. 20, 2013), the court found that funds held “for the benefit” of third-party customers who used the correspondent account to transact foreign business in U.S. currency was not similar to having a property interest in the account, which an attachment requires. Therefore, the court ruled that the defendant did not have an attachable interest in a correspondent’s New York account.

Likewise, in Lauritzen Bulkers A/S v. JIT Int’l Corp Ltd, 13 CV 3982 (Aug. 9, 2013), the court denied an attachment analogizing the attempt to electronic fund transfer attachments, which had been barred  in Shipping Corp of India Ltd. v. Jaldhi Overseas Pte. Ltd., 585 F. 3d 59 (2d Cir. 2009).

Hence, New York courts have decided that “neither the originator who initiates payment nor the beneficiary who receives it holds title to the funds in the account at the correspondent bank.” Signol Resources, N.V. v. Pan Ocean Oil Corp., 234 A. 2d 103, 104 (1st Dept. 1996).

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