Originally published as a Proskauer Client Alert.
On October 23, 2014, the New York Court of Appeals held for the first time that, under New York law, the “separate entity” rule prevents a court from ordering a foreign bank operating branches in New York from restraining a judgment debtor’s assets held in foreign branches of the bank. Motorola Credit Corp. v. Standard Chartered Bank, No. 162 (N.Y. Oct. 23, 2014). Just over one month ago, and without reference to the separate entity rule, the Second Circuit articulated its own jurisdictional standard for determining whether foreign financial institutions may be subject to a court order freezing a customer’s non-U.S. assets or requiring the production of discovery located outside the U.S. Gucci Am., Inc. v. Bank of China, No. 11-cv-3934, F.3d, 2014 WL 4629049 (2d Cir. Sept. 17, 2014).
Both the Standard Chartered and Bank of China decisions establish frameworks for determining when a court may exercise authority over a foreign financial institution and require the institution to freeze non-U.S. assets or produce information relating to non-U.S. accounts. The district courts and New York trial courts can now be expected to further develop the law in this area by applying these standards in differing factual circumstances.