THE SHIPPING CORPORATION OF INDIA LTD V JALDHI OVERSEAS PTE LTD

United States Court of Appeal for the 2nd Circuit, Feinberg, Winter and Cabranes, Circuit Judges, 16 October 2009

Admiralty - Banks - Attachment of electronic fund transfers - Electronic fund transfers not subject to Rule B attachment - Rule B of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions of the Federal Rules of Civil Procedure

By this leading judgment, the US Court of Appeal overruled its 2002 judgment in Winter Storm Shipping Ltd v TPI 310 F.3d 263, 278 (2d Cir 2002). The underlying dispute, which was not subject to consideration by New York courts, was over hire allegedly due under a time charterparty. An attachment had been issued and vacated in respect of electronic funds transfers passing through New York banks as intermediaries between the claimant's and the defendant's banks, where the defendant was either originator or beneficiary of those transfers. This was the appeal of that decision. The Court of Appeal held, overruling the decision in Winter Storm, that electronic fund transfers being processed by an intermediary bank were not subject to attachment under Rule B. Among the reasons cited by the court were: (i) that electronic fund transfers were not attachable property; and (ii) the workload of New York banks. With regard to the property issue, the court reasoned that for Rule B attachments, unlike forfeitures, the question of the defendant's ownership of the property at the moment of attachment was key because Rule B attachments were a quasi in rem remedy. This was a principled basis on which transfers could be subject to forfeiture but not attachment. The court did not feel compelled to conclude that under federal law a fund transfer was the defendant's property for the purposes for Rule B. The court concluded that there was no federal law on the matter and state law clearly prohibited attachments of electronic fund transfers, so that electronic fund transfers being transferred to New York banks were not subject to Rule B attachment.