Bank of Credit and Commerce v. State Bank of Pakistan

• Decision Date: 01 August 2001
• Docket Number: DEFENDANT-COUNTER-CLAIMANT-THIRD-PARTY-PLAINTIFF-APPELLEE,Docket No. 99-7568,THIRD-PARTY,PLAINTIFF-COUNTER-DEFENDANT-APPELLANT
• Citation: 273 F.3d 241
• Parties: (2nd Cir. 2001) BANK OF CREDIT AND COMMERCE INTERNATIONAL (OVERSEAS) LIMITED,, BANK OF CREDIT AND COMMERCE INTERNATIONAL S.A.,DEFENDANT, v. STATE BANK OF PAKISTAN,
• Court: U.S. Court of Appeals — Second Circuit

Page 241

273 F.3d 241 (2nd Cir. 2001)

BANK OF CREDIT AND COMMERCE INTERNATIONAL (OVERSEAS) LIMITED, PLAINTIFF-COUNTER-DEFENDANT-APPELLANT, BANK OF CREDIT AND COMMERCE INTERNATIONAL S.A., THIRD-PARTY DEFENDANT, v. STATE BANK OF PAKISTAN, DEFENDANT-COUNTER-CLAIMANT-THIRD-PARTY-PLAINTIFF-APPELLEE.

Docket No. 99-7568

August Term, 2001

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: September 5, 2001

Decided: November 29, 2001

Appeal from a judgment of the United States District Court for the Southern District of New York (Sidney H. Stein, J.) dismissing a suit on forum non conveniens grounds. We vacate and remand so that the district court can consider changes in Pakistani law subsequent to its decision.

VACATE and REMAND.

[Copyrighted Material Omitted] Michael Nussbaum and Kathleen Grillo, Ropes & Gray, Washington, D.C., for Plaintiff-Counter-Defendant-Appellant.

David F. Williams (H. Peter Haveles, Jr., on the brief), Cadwalader, Wickersham & Taft, New York, N.Y., for Defendant-Counter-Claimant-Third-Party-Plaintiff-Appellee.

Before: Newman, Calabresi, and Sack, Circuit Judges.

Calabresi, Circuit Judge

Bank of Credit and Commerce International (Overseas) Ltd. ("BCCI Overseas") appeals the district court's dismissal, on forum non conveniens grounds, of its suit. BCCI Overseas argues that State Bank of Pakistan ("State Bank") did not show, and the district court did not properly find, that Pakistan is an adequate alternative forum. BCCI Overseas also contends that the district court improperly balanced the Gilbert factors in its forum non conveniens analysis.

After oral argument, BCCI Overseas filed a motion requesting that this court vacate the district court's decision and remand the case, thereby affording the district court an opportunity to take into account changes in Pakistani law that occurred subsequent to its decision. We consider both the appeal and the motion at this time.

BACKGROUND

BCCI Overseas is one of a group of closely affiliated international banks known together as "BCCI" or the "BCCI group." In 1991, the BCCI group collapsed in one of the largest bank failures in history. Bank regulators moved to seize BCCI's assets and bring the group of banks under court supervision. Appellant BCCI Overseas, incorporated in the Cayman Islands, was one of the banks closed by bank regulators.

On June 27, 1997, the court-appointed fiduciaries of BCCI Overseas brought this action in the Supreme Court of New York, New York County, seeking repayment with interest of an alleged $50 million loan made in May 1991 to State Bank, the central bank of Pakistan. State Bank removed the case to the United States District Court for the Southern District of New York pursuant to 28 U.S.C. §§ 1441(a) and (b). On May 22, 1998, State Bank moved to dismiss the case under the doctrine of forum non conveniens, arguing that Pakistan would be a more appropriate forum.

A war of experts ensued as to the adequacy of Pakistan as an alternative forum. Both BCCI Overseas and State Bank submitted declarations by experts in Pakistani law. BCCI's stated that this action would be barred in Pakistan by an unwaivable three-year statute of limitations, and that even if the case were allowed to proceed, the suit would be delayed as many as twenty-five years by the congestion in the Pakistani court system. State Bank replied with a declaration averring that a Pakistani statute known as the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act of 1997 ("Banking Act") would revive BCCI Overseas's claim by setting a new limitations date for the action. State Bank's expert also declared that the Banking Act would provide for the case to be processed in an expedited fashion in the Banking Court, and that even outside the Banking Court the case would likely be concluded in seven to ten years at the most.

BCCI Overseas responded with yet another expert declaration, asserting that the Banking Act would not revive BCCI Overseas's claim because the claim was already barred by the statute of limitations at the time of the enactment of the law. In addition, the declaration argued that the Banking Act would not apply to BCCI Overseas because BCCI Overseas is not a "banking company" as defined by the Act. This, the declaration contended, would be so because BCCI Overseas is not currently transacting the business of banking in Pakistan.¹ State Bank's expert had earlier stated that BCCI Overseas would qualify as a "banking company" under the Banking Act because BCCI Overseas was transacting the business of banking in Pakistan in June and July of 1991, when the loan contract was allegedly breached by State Bank. Both experts backed their opinions with textual analysis of the Banking Act itself. BCCI's expert also submitted case law in support of his construction of the Act.

The district court granted the motion to dismiss on the basis of forum non conveniens. It did this subject to the following three conditions: (1) State Bank's agreement in writing to waive any statute of limitations defense that might be available to it in the Pakistani courts; (2) the Pakistani courts not refusing to hear the case on statute of limitations grounds; and (3) State Bank's agreement in writing to allow BCCI Overseas to remove any judgment received in a Pakistani Court out of Pakistan. See Bank of Credit & Commerce Int'l (Overseas) Ltd. v. State Bank of Pakistan, 46 F. Supp. 2d 231, 240 (S.D.N.Y. 1999). Subsequently, State Bank filed a "stipulation" in which it agreed to the first and third conditions. BCCI Overseas appealed the dismissal.

On September 4, 2001, the day before appellate oral-argument in this case, counsel for State Bank filed a letter stating that earlier that day, he had received notice from his client that Pakistan had promulgated a new "Banking Act" on August 30, 2001, entitled the "Financial Institutions (Recovery of Finances) Ordinance, 2001" ("2001 Ordinance"), which repealed and, with certain modifications, re-enacted the Banking Act of 1997. State Bank's counsel noted that at least one of the modifications of the statute related to the application of statutes of limitations. Under the new law, the Banking Court apparently may entertain a case already barred by limitations if the plaintiff satisfies the court that it had sufficient cause for not filing the case within the statutory limitations period.²

After oral argument BCCI Overseas filed a motion requesting that this court vacate the district court's decision and remand the case in light of this change in the law. BCCI Overseas maintains that at least three changes made in the 2001 Ordinance are relevant to the district court's forum non conveniens analysis: (1) the change in the law's provision relating to statutes of limitations; (2) the replacement of the terms "customers" and "finances" by "borrower" and "loan," with the result, according to BCCI Overseas, that the new law does not apply to BCCI Overseas, State Bank, or to the transaction at issue;³ and (3) the replacement of the concept of "interest" with the concept of "cost of funds" to the financial institution, which BCCI Overseas contends bars it from recovering any interest in connection with its claim. BCCI Overseas submits that the district court, not the court of appeals, should in the first instance undertake the task of evaluating the impact of these intervening changes in Pakistani law on the issue of forum non conveniens, and therefore that a remand to the district court is appropriate.

State Bank counters that this court is fully capable of analyzing the impact of the new law, and State Bank's expert disputes BCCI Overseas's interpretation of that law. State Bank also reaffirms its consent to the addition of a condition (first suggested by this court during oral argument) that would require Pakistani courts to accept jurisdiction of BCCI Overseas's claim under the 2001 Ordinance. But State Bank argues that, if this court does add such a condition, it should also require BCCI Overseas to bring its claims in Pakistan within a reasonable period of time.

DISCUSSION

I.

We review forum non conveniens dismissals for abuse of discretion. See Piper Aircraft Co. v. Reyno, 454 U.S. 235, 247-49 (1981); Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 99 (2d Cir. 2000). Appellate review of forum non conveniens dismissals has been held to be "severely cabined." Alfadda v. Fenn, 159 F.3d 41, 45 (2d Cir. 1998); see also Capital Currency Exch., N.V. v. Nat'l Westminster Bank, PLC, 155 F.3d 603, 609 (2d Cir. 1998), cert. denied, 526 U.S. 1067 (1999) ("[T]he decision lies wholly within the broad discretion of the district court and should be reversed only if that discretion has been clearly abused." (quoting Peregrine Myanmar Ltd. v. Segal, 89 F.3d 41, 46 (2d Cir. 1996))). However, "the reviewing power [in forum non conveniens cases] must encompass the right to determine whether the district court came to an erroneous legal conclusion or a clearly erroneous factual conclusion." DiRienzo v. Philip Servs. Corp., 232 F.3d 49, 57 (2d Cir. 2000) (citations omitted).

The first step in a forum non conveniens analysis is for the court to establish the existence of an adequate alternative forum. See DiRienzo, 232 F.3d at 56; Alfadda, 159 F.3d at 45. An alternative forum is generally adequate if: "(1) the defendants are subject to service of process there; and (2) the forum permits `litigation of the subject matter of the dispute.'" Alfadda, 159 F.3d at 45 (quoting Piper Aircraft, 454 U.S. at 254 n.22). It follows that an adequate forum does not exist if a statute of limitations bars the bringing of the case in that forum. See Crimson Semiconductor, Inc. v. Electronum, 629 F. Supp. 903, 908-09 (S.D.N.Y. 1986); see also Mercier v. Sheraton Int'l, Inc., 935 F.2d 419, 426 n.8 (1st Cir. 1991); Kontoulas v. A.H. Robins Co., 745 F.2d 312, 316 (4th Cir. 1984).

After concluding that an adequate alternative forum...