The past six years witnessed the spawning of what one New York court termed a "cottage industry for Rule B attachments" of Electronic Fund Transfers (EFT). On March 19, 2009, however, the Second Circuit Court of Appeals, issued an opinion in STX Panocean (UK) Ltd v. Glory Wealth Shipping PTE Ltd, 2009 WL 704722, which is likely to cause a slow down of these attachments. By registering with the New York Secretary of State to do business in New York, and appointing an agent for the receipt of process, a foreign defendant can prevent the Rule B attachment.
Because of the international nature of maritime commerce and the transitory nature of maritime assets, a maritime asset, such as ship or cargo, can be seized, if it is found within the court's jurisdiction. Maritime attachments are considerably easier to obtain than other prejudgment attachments. The plaintiff simply asserts the maritime transaction, that the defendant can not be found within the court's jurisdiction, that the asset is within the court's jurisdiction and the order of attachment is granted. The defendant, whose asset has been attached is left to petition for a hearing to vacate the attachment.
If the attachment is upheld, the plaintiff thereby acquires jurisdiction up to the value of the seized asset, where there otherwise was no jurisdiction, and also secures the collection of any potential judgment so that a judgment creditor doesn't have to chase a judgment-debtor all around the world to satisfy the judgment.
The practice of attaching assets is centuries old, and ships cargoes and bank accounts have routinely been seized for many years. In 2002, however, the asset sought be seized was not a ship, cargo or bank account, but an Electronic Fund Transfer (EFT). When a check for U.S Dollars is deposited anywhere in the world, the depositary bank sends an instruction through an intermediary bank which is part of the Federal Reserve System. The EFT is routed through a Federal Reserve Bank located in New York. The instruction to transfer funds is called an "EFT." In Winter Storm Shipping Ltd v. TPI, 310 F.3d 263 (2d Cir 2003) an EFT was seized by the Court and deemed to be the property of a non-resident defendant, who had no other jurisdictional connection with New York. The check that the defendant issued in that case was not even related to the transaction in suit, but the mere fact that this defendant had issued a check for US Dollars, was considered by the court to be property of the defendant, located in New York and therefore subject to seizure. It also served to secure the plaintiff's arbitration proceeding which was pending in London. The Judge in Winter Storm Shipping aptly characterized the issue as an interplay of centuries old maritime procedures with modern banking practice. The Rule B attachment of EFT's was also utilized by U.S authorities to seize the EFT's of members of the Cali Drug cartel who deposited large sums of US Dollar funds in numerous European banks for transfer to Columbia. The EFT funds were seized at the intermediary banks by the authorities in New York using Rule B attachments.
New York became ground zero for this type of maritime seizure, much to the annoyance of the local banks and shipping interests seeking to avoid seizure. Rule B permits attachment only if the defendant can not be found within the district. Thus, shipping interests seeking to insulate themselves from Rule B attachments, soon began registering with the New York Department of State, pursuant to the New York Business Corporation Law ("BCL") § 1304, so that they could "conduct business' in New York State and also designate an agent upon whom process could be served.
In the case of STX Pan Ocean (UK) Ltd. v Glory Wealth Shipping, supra., the Second Circuit upheld the vacating of an EFT attachment, ruling that the defendant, who filed pursuant to the BCL and appointed an agent for the receipt of process could be "found within the district." The court held that the filing and appointment satisfied the two pronged test that the defendant was (1) subject to personal jurisdiction and (2) that the agent could be served with process. For several months, shipping companies with no other ties to New York, have been filing BCL certificates and appointing agents to immunize themselves from the Rule B attachments. The STX case appears to have vindicated their efforts.
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