1. 1 Professor Martin Davies Director, Tulane Maritime Law Center, New Orleans Bill Honan Partner, Holland + Knight, New York Intertanko Tanker Chartering Seminar Tokyo, 12 May 2009

2. 2 Requirements Maritime claim Defendant “not found within the district” “Tangible or intangible property” of the defendant found within the district Electronic fund transfers (EFTs) through New York banks Other property of the defendant (eg, a ship) If all three requirements are satisfied, property can be attached up to the value of the claim 2

3. 3 Winter Storm Shipping v TPI (2d Cir 2002) TPI Thailand Oppsal Shipping London Winter Storm Malta SDNY Plaintiff Defendant Bank of NY

4. 4 Winter Storm Shipping v TPI (2d Cir 2002) Maritime claim: claim for breach of a charterparty TPI (Thai) “not found within the district” Not doing business in NYC or subject to service EFT was “tangible or intangible property” in New York (very briefly) Rule B attachment properly made NY state statute prohibiting attachment of funds in intermediary banks pre-empted (ie, overridden) by inconsistent federal law

5. 5 Winter Storm Shipping v TPI (2d Cir 2002) Fact that TPI-Oppsal EFT had no connection with claim was irrelevant Great commercial pressure: TPI owes Oppsal money on a transaction completely unconnected with the claim by Winter Storm 5

6. 6 Winter Storm lives Many challenges, many attempts to get around Rule B attachment of EFTs in New York City still occurs many times every day, in claims having nothing to do with New York or the United States Can proceed in the US and attach property under Rule B even if the merits of the claim are going to be decided by arbitration or litigation in another country 9 USC § 8 specifically allows this re foreign arbitration Re foreign court clauses, depends on what the clause says – “all disputes arising out of”, etc 6

7. 7 Three requirements repeated Maritime claim Defendant “not found within the district” “Tangible or intangible property” of the defendant found within the district 7

8. 8 Maritime claim Claim falling within the court’s admiralty jurisdiction No statutory list Maritime contracts, maritime torts 8

9. 9 Maritime contracts The test is “conceptual not spatial” Norfolk Southern Railway Company v. James N. Kirby Pty, Ltd., 543 U.S. 14, 23-24(2004): “To ascertain whether a contract is a maritime one, we cannot look to whether a ship or other vessel was involved in the dispute … Nor can we simply look to the place of the contract’s formation or performance. Instead, the answer depends upon... the nature and character of the contract, and the true criterion is whether it has reference to maritime service or maritime transactions.” 9

10. 10 Maritime contracts (contd) “Preliminary contract” doctrine Contract to do something in preparation for maritime activity is not a maritime contract Charterparty is a maritime contract, so claim on a CP is a maritime claim, can lead to Rule B attachment Winter Storm itself Contract between owner or charterer and broker is not a maritime contract, so no Rule B attachment Shipping Financial Services Corp. v. Drakos, 140 F.3d 129 (2d Cir. 1998) 10

11. 11 Maritime contracts (contd) Some claims in relation to agency fall within the admiralty jurisdiction (and so Rule B attachment available) and some do not Depends on what the agent is actually doing Exxon Corp. v. Central Gulf Lines, 500 U.S. 603 (1991) 11

12. 12 Maritime torts Horribly complicated test, very unpredictable outcomes Not just maritime location Location must be on navigable waters Does this kind of incident (the “general features”, not this particular incident) have the potential to disrupt maritime commerce? Does the activity in question (described at an “intermediate level of generality”) have a substantial relationship to a traditional maritime activity? 12

13. 13 “Not found within the district” Two-part test (Seawind Cia, S.A. v. Crescent Line, Inc., 320 F.2d 580 (2d Cir. 1963) Can the defendant be found within the district in terms of jurisdiction; Can it be found for service of process? Foreign corporations can be subject to the jurisdiction of US courts even if they have no place of business in the USA “Doing business” basis of jurisdiction “Minimum contacts” test: “purposefully engaged” in activities in the district For federal claims (including maritime claims), “minimum contacts” with the USA as a whole are sufficient even if there are not enough with any one jurisdiction (FRCP 4(k)(2)) 13

14. 14 “Not found within the district” Being “found within the district” has both positive and negative features Positive (very positive!) feature is that your property is not subject to Rule B attachment Negative feature is that you cannot resist the court’s juridiction Easier to enforce judgments or arbitral awards against you But you can ask it not to exercise that jurisdiction Forum selection clauses, forum non conveniens 14

15. 15 Property within the district “Tangible or intangible property” Winter Storm: “What manner of thing can be neither tangible nor intangible and yet still be property?” The Nicene Creed: “all things, seen or unseen” Can garnish debts owing to the defendant Direct the debtor to pay you, not the defendant Can attach ships owned by the defendant, whether or not they have anything to do with the claim Can attach defendant’s money in the jurisdiction Even if it is only there for a split second, provided the court’s order is operational for that split second 15

16. 16 Property within the district EFTs are property within the district, even though in the hands of an intermediary bank Whose property? The sending party or the intended beneficiary? In Winter Storm itself, defendant was the sending party How can an EFT be property of both? Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd, 460 F.3d 434, 436 (2d Cir. 2006): “Under the law of this circuit, EFTs to or from a party are attachable by a court as they pass through banks located in that court's jurisdiction.” 16

17. 17 Inward-bound EFTs Only one district court has held that inward-bound EFTs are not attachable Seamar Shipping Corp. v. Kremikovtzi Trade Ltd, 461 F.Supp.2d 222 (S.D.N.Y. 2006) Others say that they are – any property interest is sufficient to render the asset attachable, and the intended beneficiary has some interest Dominion Bulk Int’l S.A. v. Naviera Panoceanica, S.A., 2007 AMC 186 (S.D.N.Y. 2006) HBC Hamburg Bulk Carriers G.m.b.H. & Co. K.G. v. Proteinas y Oleicas S.A. de C.V., 2005 AMC 1586 (S.D.N.Y. 2005) 17

18. 18 Sample Bank Attachment Notice --------Original Message----------- From: janelyn.a.johnston@us.hsbc.com [mailto:janelyn.a.johnston@us.hsbc.com]janelyn.a.johnston@us.hsbc.com[mailto:janelyn.a.johnston@us.hsbc.com] Sent: Tuesday, May 05, 2009 2:06 PM To: Nolan, Christopher (NYC - X73307 Cc: Legal.Paper.Processing@us.hsbc.comLegal.Paper.Processing@us.hsbc.com Subject: Visa Comtrade 09 852 Janelyn A. Johnston Operations Representative Legal Department 1 HSBC Center 12th Floor Buffalo, New York 14203 Phone (716) 841-4501 Fax (212) 382-7593 janelyn.a.johnston@us.hsbc.com Chris, Here is the information on the wire for Visa Comtrade.. Remitter: Visa Comtrade Ag Address; Zug, Switzerland Bene; Inchcape Shipping Services Pte Ltd No Address Amount : $18,987.64 Date; 2/6/09, The other lawyers/ law firms are Neal Mitchell @ Blank Rome & Enmanuel Suarez @ Cardillo & Corbett.. If you need any other information, please feel free to Email or call me.. Have A Good Day!! Janie

19. 19 Common Forms of Security 1. P&I Club LOU 2. Bank Guarantee 3. Letter of Credit 4. Escrow Agreement

20. 20 Supplemental Rule E(7) Security on Counterclaim (a) When a person who has given security for damages in the original action asserts a counterclaim that arises from the transaction or occurrence that is the subject of the original action, a plaintiff for whose benefit the security has been given must give security for damages demanded in the counterclaim unless the court for cause shown, directs otherwise. Proceedings on the original claim must be stayed until this security is given unless the court directs otherwise.

21. 21 Practice Tip If you are representing the claimant (i.e., the party seeking the Rule B attachment), you must ask, at the outset, if the defendant has, or could have, a counterclaim.

22. 22 Supplemental Rule E(4)f When property is arrested or attached, any person claiming an interest in it shall be entitled to a prompt hearing at which the plaintiff shall be required to show why the arrest or attachment should not be vacated or other relief granted consistent with these rules.

23. 23 Challenges By Defendant: What Won’t Work The Plaintiff’s claim has no merit. The Defendant is creditworthy and has sufficient cash or other liquid assets to pay the plaintiff’s claim.

24. 24 Challenges by Defendant: What Might Work Plaintiff’s claim is not a maritime claim. Defendant can be found within the district. Funds do not belong to the Defendant. Plaintiff has failed to commence an action on the underlying claim.

25. 25 Challenges: What Will Work Registering the Defendant with the New York State authorities to conduct business in New York and appointing an agent for service of process is sufficient for the Defendant to be considered present within the district for Rule B purposes. STX Panocean v. Glory Wealth Shipping,2009 U.S. App. LEXIS 5751, March 19, 2009

26. 26 Disadvantages in Registering It costs money to register. It is effective only in New York State. The Defendant then is subject to jurisdiction in New York for all purposes.

27. 27 What Else Have Defendants Done? Re-routed its payments through another entity. Used subterfuge to the sender and/or the receiver where possible. On new transactions, used currencies other than U.S. $ as the payment medium.