Foreign banks that have U.S. offices or U.S. correspondent accounts may, in certain cases, be compelled to produce documents located abroad by subpoenas from U.S. government agencies or civil litigants. In this article, the authors describe the various avenues for such discovery, focusing first on grand jury subpoenas to two Chinese banks and next on the government's recently expanded authority to issue Patriot Act subpoenas. They then turn to civil subpoenas under the Federal Rules of Civil Procedure in a case involving extraterritorial discovery from a U.S. bank subsidiary of a foreign banking organization. They close discussing another avenue for such discovery under 28 U.S.C. Section 1782.

By Jeffrey Alberts and Dustin N. Nofziger*

Recent judicial decisions have clarified, and in some cases modified, the avenues that government agencies and civil litigants can take within the U.S. judicial system to obtain bank documents that are located outside of the U.S ("extraterritorial discovery"). In addition, the recently enacted National Defense Authorization Act for Fiscal Year 2021 ("NDAA")1 substantially expands the authority of the Secretary of the Treasury and the Attorney General to issue Patriot Act subpoenas to foreign banks with U.S. correspondent accounts. Foreign banking organizations should be aware of the following legal mechanisms for compelling extraterritorial discovery, as well as the limitations that courts recently have placed or may place on them:

  1. Foreign banks that have U.S. offices often have consented, as part of an application to the Board of Governors of the Federal Reserve, to the personal jurisdiction of the U.S. federal courts with respect to the enforcement of federal grand jury subpoenas seeking documents relating to investigations arising under the Bank Secrecy Act.
  2. The NDAA substantially expands the authority of the Secretary of the Treasury and the Attorney General to issue Patriot Act subpoenas to foreign banks with U.S. correspondent accounts by authorizing them to request "any" records relating to a foreign bank's U.S. correspondent account or otherwise relating to "any" accounts at the foreign bank that are the subject of a U.S. criminal, BSA, or other investigation.
  3. U.S. subsidiaries of foreign banks may be compelled under the Federal Rules of Civil Procedure to produce documents located abroad to civil litigants in U.S. proceedings where the U.S. subsidiary is a "mere department" of the foreign bank.
  4. "Foreign banks may be compelled under 28 U.S.C. § 1782 to produce documents located abroad for use in foreign proceedings, provided that a U.S. federal court has personal jurisdiction over the bank or subsidiary, and provided that the discovery material sought "proximately resulted" from the foreign bank or subsidiary's contacts with the U.S. that gave rise to personal jurisdiction."

GENERAL JURISDICTONAL PRINCIPLES

The backdrop for all compelled extraterritorial discovery is the U.S. Constitution. In order for a subpoena to be enforced by a U.S. court against the recipient of the subpoena, the U.S. Constitution requires the court to have "personal jurisdiction" over the recipient. The U.S. Constitution's personal jurisdiction requirement protects individual liberty by requiring that "the maintenance of the suit . . . not offend 'traditional notions of fair play and substantial justice.'"2

A court can have general or specific personal jurisdiction over a foreign bank due to the foreign bank's contacts with the U.S., and it may also have personal jurisdiction by virtue of the foreign bank's consent. A court may assert "all purpose" or general personal jurisdiction over a foreign bank or a foreign bank's subsidiary to hear any and all claims against it when its affiliations with a U.S. forum are so "continuous and systematic" as to render it essentially at home in the forum.3 A federal district court may have general personal jurisdiction, for example, over a foreign banking organization's U.S. subsidiary due to that entity's continuous and systematic contacts with the forum. But it will not have general personal jurisdiction over a foreign bank due merely to the fact that the foreign bank has a U.S. branch in the forum.4 A court may assert "case-linked" or specific jurisdiction, in contrast, over issues that relate to or arise out of a foreign bank's contacts with a U.S. forum.5 Finally, because the personal jurisdiction requirement protects individual liberty, it can be waived by a foreign bank.6 As discussed below, this may be the case, for example, when a foreign bank executes an agreement with the Federal Reserve Board to submit to the jurisdiction of the U.S. federal courts with respect to matters arising under U.S. banking law.

GRAND JURY SUBPOENAS

Background

Federal prosecutors have broad discretion to issue subpoenas on behalf of federal grand juries, and a grand jury itself typically does not approve a grand jury subpoena before it is issued.7 While a federal grand jury subpoena is issued under the authority of a federal court, that court has no prior control over the issuance of the subpoena and typically does not become involved unless the recipient challenges the subpoena.8 Grand jury subpoenas are governed by Rule 17 of the Federal Rules of Criminal Procedure. Under Rule 17, subpoenas in federal proceedings may be served anywhere within the United States.9

Footnotes

* JEFFREY ALBERTS is a partner at Pryor Cashman LLP. He is co-chair of the firm's Financial Institutions Group and chair of the firm's White Collar Defense & Investigations Practice. DUSTIN N. NOFZIGER is a counsel in the firm's Financial Institutions Group. Their e-mail addresses are jalberts@pryorcashman.com and dnofziger@pryorcashman.com.

1 William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, H.R. 6395, 116th Cong. § 6308 (2020) (enacted).

2 Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702–03 (1982) (citation omitted).

3 Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011) (citation omitted).

4 Gucci Am., Inc. v. Weixing Li, 768 F.3d 122, 134-55 (2d Cir. 2014) (Bank of China's branch offices in forum did not establish general personal jurisdiction). On remand, the district court found that it had specific personal jurisdiction over Bank of China with respect to the non-party Rule 45 subpoenas. Gucci Am., Inc. v. Weixing Li, 135 F. Supp. 3d 87, 104 (S.D.N.Y. 2015).

5 Daimler AG v. Bauman, 571 U.S. 117, 127 (2014).

6 Ins. Corp. of Ireland, 456 U.S. at 703.

7 Doe v. DiGenova, 779 F.2d 74, 80 (D.C. Cir. 1985) ("Nor does the grand jury necessarily approve or even have knowledge of a subpoena prior to its issuance.").

8 Id.

9 Fed. R. Crim. P. 17(e)(1).

Originally Published by The Review of Banking & Financial Services

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