98 N.Y.2d 238 (2002)

In international financial transactions, New York law applies when the essence of the contract involves exchanges pegged to the U.S. dollar, payments are to be made in U.S. dollars, and parties rely on New York’s experience in ensuring orderly dollar currency transactions.

Summary

Indosuez International Finance B.V. (IIF) sued National Reserve Bank (NRB) for breach of forward currency exchange agreements. The core issue was whether New York or Russian law governed these transactions after the Russian ruble’s collapse. The New York Court of Appeals held that New York law applied, emphasizing the dollar-denominated nature of the transactions, the presence of New York choice-of-law provisions in most agreements, and New York’s role as a global financial center. The court also found NRB bound by the agreements based on apparent authority and ratification, and affirmed personal jurisdiction over NRB in New York.

Facts

IIF and NRB entered into 14 forward currency exchange transactions. These agreements involved the future exchange of Russian rubles for U.S. dollars at a predetermined rate. Ten confirmations contained New York choice-of-law provisions, and payments were to be made in U.S. dollars. Six confirmations had New York forum selection clauses. In August 1998, Russia declared a moratorium on payments to non-residents, leading IIF to declare an “Early Termination Date” under the ISDA Master Agreement. NRB failed to make payments, resulting in a significant debt to IIF.

Procedural History

IIF sued NRB in New York Supreme Court. The Supreme Court granted partial summary judgment to IIF on liability, finding a breach under both New York and English law. The court also rejected NRB’s argument that the agreements were invalid under Russian law. The Appellate Division affirmed, holding that New York law applied based on the nature of the transactions and New York’s interest as a financial center. The New York Court of Appeals granted NRB leave to appeal.

Issue(s)

1. Whether New York or Russian law should govern the validity of the forward currency exchange transactions, specifically concerning the authority of NRB’s agent to bind the bank.
2. Whether New York courts have personal jurisdiction over NRB.
3. Whether New York courts have subject matter jurisdiction over the claims, considering Banking Law § 200-b.

Holding

1. Yes, New York law applies because the essence of the contracts involved exchanges pegged to the U.S. dollar, payments were to be made in U.S. dollars, and the parties relied on New York’s experience with dollar currency transactions.
2. Yes, New York has personal jurisdiction over NRB because NRB maintained a New York bank account, purposefully conducted business in New York, and some confirmations contained New York forum selection clauses.
3. Yes, New York courts have subject matter jurisdiction because Banking Law § 200-b extends to claims where a party chooses New York as the place of performance, even after contract formation.

Court’s Reasoning

The Court of Appeals determined that New York had the paramount interest in the enforceability of the transactions. The court emphasized that the contracts were “pegged to the value of the United States dollar” and that “the parties agreed that any payment was to be made in United States dollars.” Furthermore, the court noted that “the parties’ choice of New York law in 10 of the 14 confirmations and choice of the New York forum in at least six of the confirmations, reflects their reliance on this state’s experience with and ability to ensure orderly dollar currency transactions.” The court applied New York agency law, finding that NRB’s deputy chairperson had apparent authority and that NRB ratified the agreements. Regarding personal jurisdiction, the court found sufficient minimum contacts, citing NRB’s New York bank account and the designation of New York as the place of performance in several confirmations. The court also held that even confirmations lacking explicit forum selection were part of a global agreement incorporating New York jurisdiction clauses. Finally, the court interpreted Banking Law § 200-b to include situations where New York is chosen as the place of performance after contract formation, supporting subject matter jurisdiction. The court explicitly stated: “Subject matter jurisdiction under Banking Law § 200-b extends to claims where a party chooses New York for the place of performance even after the contract is formed.”