NEW YORK — Dec. 28, 2004 — In a case of first impression impacting…

NEW YORK — Dec. 28, 2004 — In a case of first impression impacting the
international banking community, a five-judge New York state appeals court
unanimously ruled that funds wired from London through New York to Moscow,
but blocked in New York for more than 10 years by the U.S. Treasury
Department, cannot be attached and held in New York after the Treasury
Department lifts its blocking.

The international law firm of Chadbourne & Parke LLP represented Norilsk
Nickel, the winning party in the appeal.

In 1993, Genex, a Serbian construction company, wired $2.5 million to
Norilsk Nickel, Russia’s largest mining company, to pay a debt owed to
Norilsk Nickel. The dollar transaction had to clear through New York, but
when the monies reached a New York bank, they were blocked and frozen in a
“call account” in accordance with Treasury’s Office of Foreign Assets
Control (“OFAC”) regulations then in effect. These regulations prohibited
the transfer of monies for the benefit of Serbian entities and others during
the war in the former Yugoslavia.

In 2003, with the war over, Treasury lifted the blocking, but another
company, Monter, sued Genex and attached the $2.5 million, keeping those
funds in New York. Deciding this case of first impression, the appeals
court ruled that the monies could not be detained in New York after the
Treasury Department lifted its block.

In the Dec. 21 ruling from the Appellate Division, First Department, Justice
James M. Catterson said it was clear that title to the money passed from
Genex to the banks conducting the wire transfers in 1993, but federal law
blocked the movement of the funds until 2003. “When the hostilities in
Yugoslavia ended, and the federal government had no further reason to block
Genex’s use of the funds, federal law unblocked the funds,” the judge wrote.
Justice Catterson also stated that Monter’s attachment was “wrongful.”

“The (law) then required that the funds be transferred to the rightful
owner. Thus, federal and state law did not conflict at all; they simply
addressed different issues.”

The Appellate Division also ruled that the New York bank and Norilsk Nickel
were entitled to attorneys’ fees incurred in connection with the matter, to
be paid by Monter, reasoning that payment by Monter would be “just.”

Kenneth A. Caruso, an international litigation partner at Chadbourne, who
argued the case for Norilsk Nickel said, “This decision is important to the
international banking community, other companies and wealthy individuals who
use international wire transfers. It confirms that money cannot be
restrained after a wire transfer is in motion. And, it helps clarify the
rules that will apply in a situation like this, which is likely to occur
with increasing frequency as the Treasury Department becomes more active in
policing the international funds transfer system.”

“This decision also should ease the litigation burden on the international
banking community by inhibiting wrongful attachment lawsuits, in part
through the award of attorneys’ fees.” Mr. Caruso added.

About Chadbourne & Parke LLP

Chadbourne & Parke LLP, an international law firm headquartered in New York
City, provides a full range of legal services, including mergers and
acquisitions, securities, project finance, corporate finance, energy,
telecommunications, commercial and products liability litigation, securities
litigation and regulatory enforcement, white collar defense, intellectual
property, antitrust, domestic and international tax, reinsurance and
insurance, environmental, real estate, bankruptcy and financial
restructuring, employment law and ERISA, trusts and estates and government
contract matters. The Firm has offices in New York, Washington, D.C., Los
Angeles, Houston, Moscow, Kyiv, Warsaw (through a Polish partnership),
Beijing and a multinationalpartnership, Chadbourne & Parke, in London. For
additional information, visit

Andrew Blum
Public Relations Manager
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, NY 10112
tel 212-408-5100 direct tel 212-728-4519
fax 212-489-5314 direct fax 646-710-4519
[email protected]

Scroll to Top