Continental Transfert Technique, Ltd. v. The Federal Government of Nigeria, Civil Action No. 08-2026 (D.D.C. Aug. 6, 2019) [click for opinion

In November 2007, Continental Transfert Technique, Limited ("Continental") initiated arbitration proceedings in the United Kingdom against the Federal Government of Nigeria for breach of a 1999 commercial contract. In August 2008, the arbitral tribunal issued an award in Plaintiff's favor, later converted into $276.1 million with interest. Continental originally obtained a default judgment enforcing the award, which was vacated when Nigeria did intervene. The award was enforced anyway in 2013 and upheld by the D.C. Circuit in 2015.

In its efforts to collect on the award, Continental was able to subpoena JP Morgan Chase Bank ("JPM"), with whom Defendant has a banking relationship, for account records on 52 bank accounts associated with Nigeria. On May 29, 2018, Continental filed a motion for writ of attachment for a JPM account titled the "Central Bank of Nigeria Main Account" (the "Account"). No attorney had entered an appearance for Nigeria in the proceedings since the court had granted Nigeria's counsel's motion to withdraw in February 2017, but the Central Bank of Nigeria ("CBN") filed a motion to intervene.

The court first granted CBN's motion to intervene because the motion was timely, because it appeared to own and control the Account so it had a legally protected interest in the action, because the attachment posed a clear risk to CBN's legally protected interest in the Account, and because the existing parties could not adequately represent CBN's interests since Defendants in this case had stopped appearing. The court also found that CBN had standing to intervene because there was an "imminent, concrete and particularized injury to CBN's interest in the Account" that is "fairly traceable to the challenged action" and can be resolved by a favorable ruling by this court. The court also granted CBN's motion to file a surreply.

Section 1610 of the Foreign Sovereign Immunities Act (the "FSIA") provides that property of a foreign State is generally immune from attachment, unless used for commercial activity. However, Section 1611 provides a further carve out that even an account used for commercial activity is immune if it is the property of "a foreign central bank or monetary authority held for its own account" unless the bank has otherwise consented to jurisdiction. Whether the Account can be attached, therefore, depends on whether it is property of CBN and whether it is "held for its own account." The court explained that these are two separate requirements.

First, the court held, agreeing with CBN, that "an account that is registered in the name of a foreign central bank is presumed to be the 'property of' that foreign central bank under Section 1611 absent specific evidence overcoming the presumption and establishing that the central bank does not own the account." Determining ownership of a bank account based on the name of the account is a longstanding banking law principle and, in accordance with precedent, appropriate to extend to the FSIA since Congress had not otherwise provided guidance on this point. It rejected Plaintiff's approach, not based in any case law, to look at the true owner of the account. The court also noted that overcoming the presumption, particularly the account is owned by a central bank, requires substantial evidence that has not been presented here.

Second, in interpreting what it means to be "held for its own account" the court agreed with the modified central bank functions test articulate in the Second Circuit's NML Capital decision. Under the modified central bank functions test, "property of a central bank is immune from attachment if the central bank uses said property for central banking functions, as such functions are normally understood, irrespective of their commercial nature." This meaning is consistent with the FSIA's text, structure, and purpose. The court also noted that the "need for legal certainty to encourage foreign central banks to deposit funds in United States banks underscore[d] the correctness of the NML Capital standard" because it did not require a fact-intensive inquiry into the nature of the transaction. Pursuant to this standard, the presumption would only be rebutted by "obvious departures from the norm…."

The court rejected Continental's interpretation based on a report from the House Committee on the Judiciary that Section 1611 only excludes "funds used or held in connection with central banking activities, as distinguished from funds used solely to finance the commercial transactions of other entities or of foreign states." The court considered that the sparse legislative history was in tension with the broad grant of immunity provided by the statutory text. It would also undermine the structure of immunities established by other portions of the FSIA, particularly the interplay with Section 1610.

Continental argued that the presumption that the Account is the property of CBN is rebutted because Nigeria deposited at least $100 million into the account and directed CBN to pay its commercial bills in the U.S. The court, however, found that these assertions were not sufficiently supported by the evidence presented. Even if proven, these facts would not necessarily rebut the presumption because otherwise the exception would swallow the rule. The court considered that Continental was attempting to take advantage of the potential alter-ego exception without proving Nigeria exercised day-to-day control over the account. The court also noted that, if relevant, Nigeria law did not support Continental's point.

The court also held that the funds were being held for CBN's account. The parties agreed that the account was being used as an external reserve and to pay for certain commercial bills owed to third parties. The court considered this to be standard central banking activity and so immunity applied.

Finally, the court rejected Continental's argument that this was a mixed-use account or that this would change the court's determination. Based on Birch Shipping Corp. v. Embassy of United Republic of Tanzania, Continental argued that immunity did not extend to accounts used for mixed purposes—some that are and some that are not immune. The court explained that Birch Shipping was decided in regards to embassy property under Section 1610 and not the broader immunity provided to central banks in Section 1611. The court also considered that all of the Account's activity was immune and Continental had not proposed any mechanism to reliably distinguish between immune and non-immune funds.