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Limit Set on Reach over International Banking Transaction through New York Bank

07/11/2014

There are numerous international banks with offices in New York or that do business in New York. Recently in Mashreqbank PSC v. Ahmed Hamad A1 Gosaibi & Bros., 2014 N.Y. Lexis 705 (N.Y. April 8, 2014), the Court of Appeals clarified the reach of jurisdiction in New York when a foreign national moves money through a bank in New York as a part of a fraudulent transaction. There, the Court of Appeals dismissed an action arising from an international swap transaction when the only connection to New York was a deposit in a New York bank. The court ruled that the action could not proceed on forum non conveniens grounds. No party was a resident of New York. No relevant conduct occurred beyond the fund transfer in New York. There were no important New York witnesses or New York documents. “New York’s interest in its banking system is not a trump to be played whenever a party to such a transaction seeks to use our courts for a lawsuit with little or no apparent contact with New York.”

Thus, parties cannot obtain jurisdiction in New York merely by the small passing of funds through New York banks. Rather, there will need to be a specific connection with New York and more than a tertiary role in the international banking system.

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