In recent years Rule B relief in New York has gained the reputation for being an effective and low cost means by which to obtain security for a maritime claim through the attachment of US Dollar electronic funds transfers ("EFTs") transiting the New York banking system.
The utility of the Rule B on EFTs has been on the wane but for a claimant who needed security with no obvious target, it has provided a lifeline.
However, on 16 October this year, the United States Court of Appeals for the Second Circuit issued its judgment in The Shipping Corporation of India Limited v. Jaldhi Overseas Pte Limited which has the effect of bringing to an end the Rule B attachment in its most common form.
The Court held that its earlier 2002 decision in Winter Storm Shipping v. TPL, which formed the legal basis for the attachment of EFTs, permissible under Rule B of the US Admiralty Code, was to be overruled. Indeed, because it concluded that it was going to have to overrule an earlier case which in legal terms had only recently been decided, the Court thought it wise to canvas the views of all the judges of the Court "in active service". In short, the Court concluded that Winter Storm was "erroneously decided and therefore should no longer be binding precedent in our Circuit".
The court gave two reasons why Winter Storm was wrongly decided:
Firstly, its reliance on Daccarett1, a case involving the attachment of proceeds of crime, to conclude that EFTs were attachable property, was wrong.
Secondly, public policy reasons. The "effects of Winter Storm on the federal courts and international banks in New York are too significant to let this error go uncorrected", simply to avoid overturning a recent precedent. Indeed, it is clear from the Court's judgment that it was heavily influenced by submissions that the volume of Rule B applications had reached such a level that, it concluded, New York's preeminence as a world financial centre and the role of the US Dollar as a reserve currency were both in jeopardy as a consequence.
For now (subject to appeal), the position appears to be as follows:
EFTs which are being remitted to the defendant/target of the Rule B are definitely off-limits. The Court concluded that these cannot be considered to be intangible property of the defendant. With regard to EFTs remitted by the defendant, so-called "orginator EFTs", this remains an open issue, at least until someone challenges the attachment of such EFTs. The case has actually...