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Professor Martin DaviesDirector, Tulane Maritime Law Center, New

Orleans

Bill HonanPartner, Holland + Knight, New York

Intertanko Tanker Chartering SeminarTokyo, 12 May 2009

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RequirementsMaritime claimDefendant “not found within the district”“Tangible or intangible property” of the

defendant found within the districtElectronic fund transfers (EFTs) through New

York banksOther property of the defendant (eg, a ship)

If all three requirements are satisfied, property can be attached up to the value of the claim

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TPI

Thailand

Oppsal Shipping

London

Winter Storm

Malta

SDNY

Plaintiff

Defendant

Bank of NY

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Winter Storm Shipping v TPI (2d Cir 2002)Maritime claim: claim for breach of a

charterpartyTPI (Thai) “not found within the district”

Not doing business in NYC or subject to serviceEFT was “tangible or intangible property” in

New York (very briefly)Rule B attachment properly made

NY state statute prohibiting attachment of funds in intermediary banks pre-empted (ie, overridden) by inconsistent federal law

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Winter Storm Shipping v TPI (2d Cir 2002)Fact that TPI-Oppsal EFT had no connection

with claim was irrelevantGreat commercial pressure: TPI owes Oppsal

money on a transaction completely unconnected with the claim by Winter Storm

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Winter Storm livesMany challenges, many attempts to get aroundRule B attachment of EFTs in New York City still

occurs many times every day, in claims having nothing to do with New York or the United States

Can proceed in the US and attach property under Rule B even if the merits of the claim are going to be decided by arbitration or litigation in another country9 USC § 8 specifically allows this re foreign

arbitrationRe foreign court clauses, depends on what the clause

says – “all disputes arising out of”, etc6

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Three requirements repeatedMaritime claimDefendant “not found within the district”“Tangible or intangible property” of the

defendant found within the district

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Maritime claimClaim falling within the court’s admiralty

jurisdictionNo statutory listMaritime contracts, maritime torts

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Maritime contractsThe test is “conceptual not spatial”Norfolk Southern Railway Company v. James N.

Kirby Pty, Ltd., 543 U.S. 14, 23-24(2004): “To ascertain whether a contract is a maritime

one, we cannot look to whether a ship or other vessel was involved in the dispute … Nor can we simply look to the place of the contract’s formation or performance. Instead, the answer depends upon ... the nature and character of the contract, and the true criterion is whether it has reference to maritime service or maritime transactions.”

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Maritime contracts (contd)“Preliminary contract” doctrine

Contract to do something in preparation for maritime activity is not a maritime contract

Charterparty is a maritime contract, so claim on a CP is a maritime claim, can lead to Rule B attachmentWinter Storm itself

Contract between owner or charterer and broker is not a maritime contract, so no Rule B attachmentShipping Financial Services Corp. v. Drakos, 140

F.3d 129 (2d Cir. 1998)

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Maritime contracts (contd)Some claims in relation to agency fall within

the admiralty jurisdiction (and so Rule B attachment available) and some do notDepends on what the agent is actually doing Exxon Corp. v. Central Gulf Lines, 500 U.S.

603 (1991)

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Maritime tortsHorribly complicated test, very unpredictable

outcomesNot just maritime locationLocation must be on navigable waters Does this kind of incident (the “general

features”, not this particular incident) have the potential to disrupt maritime commerce?

Does the activity in question (described at an “intermediate level of generality”) have a substantial relationship to a traditional maritime activity?

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“Not found within the district”Two-part test (Seawind Cia, S.A. v. Crescent Line, Inc.,

320 F.2d 580 (2d Cir. 1963)Can the defendant be found within the district in terms of

jurisdiction;Can it be found for service of process?

Foreign corporations can be subject to the jurisdiction of US courts even if they have no place of business in the USA“Doing business” basis of jurisdiction“Minimum contacts” test: “purposefully engaged” in

activities in the districtFor federal claims (including maritime claims), “minimum

contacts” with the USA as a whole are sufficient even if there are not enough with any one jurisdiction (FRCP 4(k)(2))

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“Not found within the district”Being “found within the district” has both

positive and negative featuresPositive (very positive!) feature is that your

property is not subject to Rule B attachmentNegative feature is that you cannot resist the

court’s juridiction Easier to enforce judgments or arbitral awards

against you But you can ask it not to exercise that

jurisdiction Forum selection clauses, forum non conveniens

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Property within the district“Tangible or intangible property”

Winter Storm: “What manner of thing can be neither tangible nor intangible and yet still be property?”

The Nicene Creed: “all things, seen or unseen”Can garnish debts owing to the defendant

Direct the debtor to pay you, not the defendantCan attach ships owned by the defendant, whether

or not they have anything to do with the claimCan attach defendant’s money in the jurisdiction

Even if it is only there for a split second, provided the court’s order is operational for that split second

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Property within the districtEFTs are property within the district, even though

in the hands of an intermediary bankWhose property? The sending party or the

intended beneficiary?In Winter Storm itself, defendant was the sending

partyHow can an EFT be property of both?Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd,

460 F.3d 434, 436 (2d Cir. 2006): “Under the law of this circuit, EFTs to or from a party are

attachable by a court as they pass through banks located in that court's jurisdiction.”

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Inward-bound EFTsOnly one district court has held that inward-

bound EFTs are not attachableSeamar Shipping Corp. v. Kremikovtzi Trade Ltd, 461

F.Supp.2d 222 (S.D.N.Y. 2006)

Others say that they are – any property interest is sufficient to render the asset attachable, and the intended beneficiary has some interestDominion Bulk Int’l S.A. v. Naviera Panoceanica, S.A.,

2007 AMC 186 (S.D.N.Y. 2006)HBC Hamburg Bulk Carriers G.m.b.H. & Co. K.G. v.

Proteinas y Oleicas S.A. de C.V., 2005 AMC 1586 (S.D.N.Y. 2005)

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Sample Bank Attachment Notice--------Original Message-----------From: janelyn.a.johnston@us.hsbc.com [mailto:janelyn.a.johnston@us.hsbc.com]Sent: Tuesday, May 05, 2009 2:06 PM To: Nolan, Christopher (NYC - X73307Cc: Legal.Paper.Processing@us.hsbc.com Subject: Visa Comtrade 09 852Janelyn A. JohnstonOperations RepresentativeLegal Department1 HSBC Center 12th FloorBuffalo, New York 14203Phone (716) 841-4501 Fax (212) 382-7593janelyn.a.johnston@us.hsbc.comChris,Here is the information on the wire for Visa Comtrade..Remitter: Visa Comtrade Ag Address; Zug, SwitzerlandBene; Inchcape Shipping Services Pte Ltd No AddressAmount : $18,987.64Date; 2/6/09,The other lawyers/ law firms are Neal Mitchell @ Blank Rome & Enmanuel Suarez @ Cardillo &

Corbett..If you need any other information, please feel free to Email or call me..Have A Good Day!!Janie

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Common Forms of Security

1. P&I Club LOU2. Bank Guarantee3. Letter of Credit4. Escrow Agreement

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Supplemental Rule E(7)Security on Counterclaim

(a) When a person who has given security for damages in the original action asserts a counterclaim that arises from the transaction or occurrence that is the subject of the original action, a plaintiff for whose benefit the security has been given must give security for damages demanded in the counterclaim unless the court for cause shown, directs otherwise. Proceedings on the original claim must be stayed until this security is given unless the court directs otherwise.

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Practice Tip

If you are representing the claimant (i.e., the party seeking the Rule B attachment), you must ask, at the outset, if the defendant has, or could have, a counterclaim.

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Supplemental Rule E(4)f

When property is arrested or attached, any person claiming an interest in it shall be entitled to a prompt hearing at which the plaintiff shall be required to show why the arrest or attachment should not be vacated or other relief granted consistent with these rules.

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Challenges By Defendant: What Won’t Work

The Plaintiff’s claim has no merit.The Defendant is creditworthy and has

sufficient cash or other liquid assets to pay the plaintiff’s claim.

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Challenges by Defendant:What Might Work

Plaintiff’s claim is not a maritime claim.Defendant can be found within the district.Funds do not belong to the Defendant.Plaintiff has failed to commence an action on

the underlying claim.

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Challenges: What Will Work

Registering the Defendant with the New York State authorities to conduct business in New York and appointing an agent for service of process is sufficient for the Defendant to be considered present within the district for Rule B purposes.

STX Panocean v. Glory Wealth Shipping,2009 U.S. App. LEXIS 5751, March 19, 2009

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Disadvantages in Registering

It costs money to register.It is effective only in New York State.The Defendant then is subject to jurisdiction

in New York for all purposes.

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What Else Have Defendants Done?

Re-routed its payments through another entity.

Used subterfuge to the sender and/or the receiver where possible.

On new transactions, used currencies other than

U.S. $ as the payment medium.