Globalization, Globalization, Liberalization, and Sustainable Human Development

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Vishipco Line et al v. Chase Manhattan Bank, N.A.
United States Court of Appeals, Second Circuit
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• Chase operated a branch in Saigon from 1966 to
  April 24, 1975
• Cham owned a 200 million piastre CD issued by
  Chases Saigon branch
• Chase had accounts in the names of the 10
  plaintiffs totaling 138,974,671 piastre

Facts
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• April 24, 1975 Chase closed the branch without
  notice to anyone and delivered financial
  documents and keys to the French Embassy
• May 1 the communist government issued a
  communique confiscating everything including banks

Facts
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• The French Embassy turns over the records to the
  new government
• Tran Dinh Truong Nguyen Thi Cham shareholders
  in Vishipco fled from Saigon to the US
• Truong Cham demanded that Chase repay their
  deposit.
• Chase refused

Facts
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• Chase was sued for breach of contract seeking
  dollar value restitution for the deposits they
  had in the Saigon branch and the value of the CD
• US District Court for the Southern District of
  New York dismissed the suit
• The 10 plaintiff appealed the decision

Facts
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Legal Issues

• Is Chase liable to for the money Vishipco et al
  deposited in its Saigon branch?

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Hear Ye! Hear Ye!

• Vishipco won. Chase was deemed liable and to
  repay the plaintiff the value in dollars.
• The decision of the lower court was reversed and
  remanded for a determination of applicable
  exchange rate to be utilized to value the piastre

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D. NATIONAL MONETARY SYSTEMS

• Branch Banking (cont.)
• Conflicts Between Host and Home Country
  Regulations.
• As to deposits There is no internationally
  recognized rule for deciding whether a branch
  must comply with the home or host state
  regulations.
• Suggested rule A branch bank should only be
  subject to the rules and regulations of the host
  country, regardless of the directives given by
  the home country to the parent bank.

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Rational

• Law of New York (forum state) should apply
  Chases parent is in New York
• Under New York law Chase breached the contract

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Harris v. Balk Rule

• The power to enforce payment of a debt depends on
  jurisdiction over the debt - situs
• Since Chases branch was neither open nor
  operating at the time of confiscation and was
  abandoned before, the decree had no effect on its
  debt

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Sokoloff v. National City Bank of New York

• When considered with relation to the parent
  bank, foreign branches are not independent
  agencies they are what their name imports,
  merely branches and are subject to the
  supervision and control of the parent
  bank..Ultimate liability for a debt of a branch
  would rest upon the parent bank

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Rational

• Banks who accepts deposits at a foreign branch
  becomes a debtor not a bailee.
• If operations has to cease, then depositors
  should be informed and allowed to withdraw their
  deposits
• If situation prevents this action then the parent
  company is liable

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Relevancy

• If deposit is with a branch of a bank then the
  parent is liable so one should investigate the
  banks that they are giving their money
  assurance of safety
• While local banks may offer more attractive
  rates, with a less that cordial change of
  government, act of state doctrine could cause
  you to loose you deposit

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Relevancy

• As a bank going overseas, be cognizant that
  depending on the form you choose the liability
  will be different branch as opposed to separate
  entity.

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Subsequent Events

• The lower court conducted a hearing and
  discovered that on April 24, 1975 the piastre had
  no value in New York and held that Vishipco could
  recover no damage
• Vishipco appealed again and on February 4, 1985
  the US Court of Appeals for Second Circuit
  reversed and remanded for further proceedings
  indicating how an exchange rate could be found

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Facts
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Facts