Attaching Proceeds of Letters of Credit - Part 2 Chapter 7 - The Practice of International Litigation - 2nd Edition
Lawrence W. Newman has been a partner in the New York office of Baker & McKenzie since 1971, when, together with the late Professor Henry deVries, he founded the litigation department in that office. He is the author/editor of 4 works on international litigation/arbitration.
Michael Burrows, Formerly, Of Counsel, Baker & McKenzie, New York.
In previous chapters we have dealt with various aspects of the attachment of assets in the international context. In this chapter we take up the subject of the extent to which attachments may be effectively enforced with respect to payments being made under international letters of credit.
As our earlier chapters pointed out, the ability to attach a defendant’s assets, either prior to or following the rendering of a judgment, is extremely important in international litigation. Many foreign defendants, especially in maritime actions, will often turn out to be judgment proof, even in their own countries. Having placed their assets in the names of other persons or in what is sometimes an elaborate network of corporations and holding companies, which are often beyond the reach of American courts, such defendants pose special problems for a plaintiff’s counsel. It is therefore likely that unless assets are attached at the outset of the litigation, any judgment which is rendered will be, as a practical matter, a nullity.
In the search for attachable assets, one is frequently led to payments due to the defendant under international letters of credit. These payments will be paid in the United States, or pass through American banks on their way to the defendant’s foreign bank account. An attachment of such funds as they move through this country will provide a U.S. plaintiff with both an unbiased jurisdiction in which to try its case and security for its claim. Certain recent federal and state cases in New York, however, have raised questions as to the right of plaintiffs to effect attachments where letters of credit are involved. In this chapter we review those cases.