Article

Note: When Janata Bank, a bank owned by the government of Bangladesh (Issuer), failed to honor its LC in favor of Lalasis Trading PTE, Ltd., a textile company incorporated in Singapore (Beneficiary), Beneficiary sued and obtained judgment in Singapore. Beneficiary then sought recognition and enforcement of the foreign judgment against Issuer in the United States.

On its motion, the New York Supreme Court, New York County granted summary judgment for the Issuer and dismissed "for lack of subject matter jurisdiction." On appeal, the Supreme Court, Appellate Division affirmed.

Because Issuer was part of a sovereign state, the court considered applicable exceptions to the U.S. Foreign Sovereign Immunities Act, 28 USC §1602 et seq. While noting that the issuance of a letter of credit falls within the "commercial activity" exception, the court found that the issuance of the letter of credit itself did not have a sufficient "direct effect" in the US notwithstanding the use of a New York bank as an advising bank. It stated that "the fact that a New York branch of the advising bank may have been used for some tangential purpose does not create the necessary 'direct effect' in the United States" and thus did not qualify as an exception to Issuer's sovereign immunity. The court concluded that it did not have jurisdiction over the action.

Comment:

This decision illustrates the difficulty of obtaining enforcement of a foreign judgment. It is unclear whether there is an applicable treaty regarding the enforcement of judgments. If so, it may have overridden the Foreign Sovereign Immunities Act. In either event, this decision adds another unwelcome layer of difficulty to obtaining satisfaction from a sovereign entity in a commercial capacity.

[JEB/plc]

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