HomeChannelsFeaturedStanChart wins case against Motorola unit over Dubai account

StanChart wins case against Motorola unit over Dubai account

standard chartered bankIn a victory for international banks, New York’s top court has ruled that a Motorola subsidiary cannot freeze $30 million held by a “fugitive” Turkish family in a Dubai bank.

In 2003, U.S. District Judge Jed Rakoff in Manhattan found that the Uzan family had dipped into loans that Motorola Credit Corp had made more than a decade ago to Turkish mobile phone company Telsim, which the family controlled at the time. He ruled that the Uzans owed the company $2.1 billion, and in 2006 added $1 billion in punitive damages.

Motorola attempted to seize $30 million held by the Uzans in a Dubai branch of Standard Chartered Bank. Even though Rakoff called the Uzans “fugitives,” he ruled last year that such action was precluded by a 1916 rule that treats individual bank branches as separate legal entities, meaning a New York court order does not apply to a foreign branch.

A federal appeals court asked the New York Court of Appeals to decide if Rakoff was right.

Standard Chartered urged the court to uphold the rule, saying it relieved banks of the burden of being forced to track global assets and comply with the laws of various countries, which may conflict.

The court on Thursday agreed 5-2.

“We believe that abolition of the separate entity rule would result in serious consequences in the realm of international banking to the detriment of New York’s preeminence in global financial affairs,” Judge Victoria Graffeo wrote.

Standard Chartered praised the ruling in a statement, saying it recognized “that banks should not be placed in the untenable position of attempting to comply with the contradictory directions of multiple sovereign nations.”

Attorneys for Motorola did not immediately return requests for comment.

Dissenting on Thursday, Judge Sheila Abdus-Salaam said the separate entity rule was “outmoded,” and the decision a “monumental roadblock” to enforcing the $3 billion judgment against the Uzans.

“Today’s holding permits banks doing business in New York to shield customer accounts held in branches outside of this country … and allows even the most egregious and flagrant judgment debtors to make a mockery of our courts’ duly entered judgments,” she wrote.-Reuters


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