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BANK OF CREDIT AND COMM. v. STATE BANK OF PAKISTAN

April 15, 1999

BANK OF CREDIT AND COMMERCE INTERNATIONAL (OVERSEAS) LIMITED, PLAINTIFF,
v.
STATE BANK OF PAKISTAN, DEFENDANT.



The opinion of the court was delivered by: Stein, District Judge.

  OPINION

The State Bank of Pakistan has moved to dismiss this action between a Cayman Islands bank and the central bank of Pakistan for breach of a loan agreement on the grounds of forum non conveniens. That motion is granted because Pakistan is an adequate alternate forum for this dispute and because the convenience of the parties and the ends of justice are best served by having the dispute heard in the courts of Pakistan.

I. Background

Plaintiff Bank of Credit and Commerce International (Overseas) Limited ("BCCI Overseas") is incorporated under the laws of the Cayman Islands and does business internationally. It is one of a group of international banks ("BCCI group") whose parent is Bank of Credit and Commerce International Holdings, S.A. State Bank of Pakistan ("State Bank") is the central bank of Pakistan, an instrumentality of the government of Pakistan, and is headquartered in Karachi, Pakistan.

The basic facts of this action are uncontested. On May 30, 1991 BCCI Overseas transferred $50 million from its account at the American Express Bank in New York to State Bank's account at the Federal Reserve Bank in New York. There was no written agreement between BCCI Overseas and State Bank that documented the exact nature of this transaction. The terms of the transfer were negotiated via telephone, facsimile, and letter by State Bank representatives in Pakistan and BCCI Overseas officials located in Pakistan, Abu Dhabi, and Luxembourg.

BCCI Overseas claims that the transaction was a loan due on July 28, 1991 that State Bank has yet to repay. State Bank claims that transfer was a deposit rather than a loan, and that it was merely one in a series of back to back transactions that were executed between State Bank and the BCCI group starting in October 1990. State Bank asserts that it had reached an agreement with BCCI group officials pursuant to which BCCI Overseas' deposit of $50 million in State Bank's account at the Federal Reserve Bank would be offset by State Bank's deposit of the same amount with BCCI S.A. (another bank in the BCCI group). State Bank alleges that these transactions were effectuated to improve Pakistan's foreign exchange position by increasing its overseas dollar deposits.

On July 5, 1991 banking regulators in several countries took over the operations of the BCCI Group. When both BCCI Overseas and BCCI S.A. were taken over by banking regulators, State Bank claims that it merely exercised its right of set-off between these related entities and applied the $50 million debt owed to it by BCCI S.A. against the $50 million it owed to BCCI Overseas.

The liquidation of BCCI Overseas is being supervised by the Grand Court of the Cayman Islands. Cayman Island liquidators brought this action in the name of BCCI Overseas alleging that State bank breached what they claim to be a loan agreement with BCCI Overseas. The action, in which BCCI Overseas alleges one common law claim for breach of contract, was initially commenced in New York State Supreme Court in June of 1997,*fn1 and was subsequently removed by State Bank to this Court, whereupon State Bank moved to dismiss this action pursuant to the equitable doctrine of forum non conveniens. State Bank claims that Pakistan is a more appropriate forum for the litigation of this dispute.

II. Jurisdiction and Venue

State Bank constitutes a "foreign state" pursuant to the Foreign Sovereign Immunities Act ("FSIA") because it is an "agency or instrumentality of a foreign state." 28 U.S.C. § 1603 (a) & (b). This Court has subject matter jurisdiction over this dispute between a foreign entity and a "foreign state" pursuant to 28 U.S.C. § 1330. See Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 490-91, 103 S.Ct. 1962, 1969-70, 76 L.Ed.2d 81 (1983). Removal of the action to this Court was appropriate pursuant to 28 U.S.C. § 1441(d) which allows for the removal of "any civil action brought in a State court against a foreign state" to the district "embracing the place where such action is pending."

Pursuant to the FSIA, this Court cannot exercise jurisdiction over State Bank unless the case falls within one of the exceptions to the statute's sovereign immunity provision. See 28 U.S.C. § 1604. A foreign state loses its immunity by implication if it is substantially involved in the litigation and files a responsive pleading without asserting a sovereign immunity defense. See 28 U.S.C. § 1605(a)(1); Drexel Burnham Lambert Group, Inc. v. Committee of Receivers for Galadari, 12 F.3d 317, 325 (2d Cir. 1993); Shapiro v. Republic of Bolivia, 930 F.2d 1013, 1017 (2d Cir. 1991). State Bank filed a notice of removal which asserted that this Court had jurisdiction over this dispute pursuant to the FSIA, an answer which listed ten affirmative defenses, and this motion to dismiss without once raising the defense of sovereign immunity; based upon this conduct, State Bank has, pursuant to 28 U.S.C. § 1605(a)(1), waived any sovereign immunity defense. Accordingly, the Court has jurisdiction over this action, and venue is proper in this district.

III. Discussion

Whether an action should be dismissed based upon forum non conveniens is a discretionary determination. See Piper Aircraft Company v. Reyno, 454 U.S. 235, 247, 102 S.Ct. 252, 266, 70 L.Ed.2d 419 (1981); Alfadda v. Fenn, 159 F.3d 41, 45 (2d Cir. 1998). The calculus of that decision involves two steps: 1) determining whether there is an adequate alternate forum for the dispute, and 2) balancing the public and private interests factors outlined by the Supreme Court in Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508-09, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947), to determine "whether the convenience of the parties and the ends of justice would best be served by dismissing the action." Murray v. British Broadcasting Corp., 81 F.3d 287, 292-93 (2d Cir. 1996). See Alfadda, 159 F.3d at 45. Although the plaintiff's choice of forum is normally accorded substantial deference, a foreign plaintiff's choice of forum is given less deference than that of a domestic plaintiff. See Piper Aircraft, 454 U.S. at 256, 102 S.Ct. at 266; Murray, 81 F.3d at 290.

A. Adequate Alternate Forum

An alternate forum will be considered adequate if: 1) the defendants are subject to service of process there and 2) the forum permits a satisfactory remedy. See Piper, 454 U.S. at 254 n. 22, 102 S.Ct. at 265 n. 22; Alfadda, 159 F.3d at 45. The party seeking dismissal — here State Bank — has the burden of proving that an adequate alternate forum exists. See Borden, Inc. v. Meiji Milk Products Co., Ltd., 919 F.2d 822, 828 (2d Cir. 1990). Because State Bank is subject to service of process in Pakistan, BCCI Overseas' argument that Pakistan is an inadequate alternate forum focuses on the fact that a satisfactory remedy is unavailable ...


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