Cross Border Banking
Banking regulation in country X requires banks to have a certain amount of capital if they are to continue in business, while banking regulation in country Y requires banks to have a greater amount of capital. A bank is incorporated in country X, but has a branch in country Y.
A, a resident of country X, sends money to country Y. The transfer is denominated in the currency of country Z and involves correspondent banks in country ZCountry Z takes proceedings against A for money laundering and seizes amounts in clearing accounts there.
Under legislation in country X, a company is entitled to find out the iden tity of the beneficial owners of its shares. It is an offence not to provide the information. A company invokes the provision and serves notices on a nominee, who names a specific bank, which carries on no business in country X and has no presence there. The bank refuses to give the information, on the ground that if it did so without the consent of its customer, it would be in breach of the law of its own country, country Y,
A bank in country X lends money to an entity, A, in country Y. Country Y declares a moratorium on its debts and those owed by entities within its borders.
As a result of the breach in its foreign relations with country Z, country Y freezes the assets of country Z and of its entities, held by country Y's nationals anywhere in the world. A bank with its head office in country Y refuses to repay deposits which an entity of country Z has in one of the bank's branches in country X. The entity sues the bank in country X.
The liquidator of a company incorporated in country X institutes proceed ings in country Y against various entities, alleging breach of the antitrust laws of country Y. Among those being sued is a bank, on the basis that it had withdrawn financial support from the company in circumstances in which a court of country Y (but not country X) might infer a conspiracy to put the company out of business. The bank seeks an anti-suit injunction in country X.
The bank has no relevant business in country Y.
A bank is incorporated in country Z with branches in many other countries, including countries X and Y. A regulatory body in country X orders the bank to produce records maintained at its branch in country Y, relating to the bank account of a customer. The bank declines to produce the documents, asserting that compliance with the order without the customer's consent, or an order of the courts of country Y, will violate the bank secrecy laws of that country.
These examples illustrate some of the legal problems arising because banking is carried out internationally. Clearly many are not new, nor are most confined to banking. What follows is an outline of how these problems have been handled.
Then an examination is made of the broader principles underlying the resolution of the harder cases. Comity, balancing, co-operation, and harmonization are considered. The breadth of the subject matter precludes an exhaustive treatment. Reference is made to principles of both domestic and international law.
.
