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11 Law & Pol'y Int'l Bus. 903 (1979)
Liability of U.S. Banks for Deposits Placed in Their Foreign Branches

handle is hein.journals/geojintl11 and id is 921 raw text is: LIABILITY OF U.S. BANKS FOR DEPOSITS PLACED IN THEIR FOREIGN BRANCHES PATRICK HEININGER* In recent years there has been a marked increase in the volume of foreign branch banking conducted by U.S. banks. Foreign branches can provide depositors with benefits not offered by the domestic banking market. In addition to enjoying the convenience of obtaining banking services abroad to support international business operations, depositors normally earn higher interest rates in the relatively unregulated offshore currency markets. Placing a deposit in a foreign branch of a U.S. bank has important consequences, however, since the overseas depositor may be at the mercy of conditions in or acts and laws of the host state that result in the loss of the depositor's rights or the loss of assets by the foreign branch. When such losses occur, the depositor may have to turn to the home office to recover deposits placed in the foreign branch. But recovery may not be possible. The plaintiff in such a case will be exposed to a barrage of defenses and issues involving jurisdiction, choice of law, and the effect that will be given to the acts of recognized or unrecognized governments. The banks in turn will be interested in guarding against the potential liability that might occur as a result of such events as expropriation, nationalization, war and regula- tions motivated by economic conditions. In this article, the author provides an in-depth exposition and analysis of the factors that determine the liability of a home office for deposits placed in foreign branches. The article makes clear that there are no easy answers to this question. Only through a detailed analysis of the facts and the principles discussed below can the extent of liability be assessed. Finally, he concludes that these principles are not well suited to determining the rights and obligations of banks and their depositors when a foreign branch is compelled to cease operations and suggests a new approach for further analysis. * Senior Counsel, International Bank for Reconstruction and Development (World Bank). Formerly on the Faculty of Law, University of Nairobi, Kenya, 1971-1973, and previously engaged in private practice in New York City. J.D., L.L.M., Georgetown University Law Center. The views expressed in this article are those of the author and do not necessarily reflect the views of the World Bank. The author would like to express his gratitude to Nancy E. Lindsay, who assisted in the research for this article.

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