CITIBANK, N.A., PETITIONER V. WELLS FARGO ASIA LIMITED No. 88-1260 In the Supreme Court of the United States October Term, 1989 On Writ of Certiorari to the United States Court of Appeals for the Second Circuit Brief for the United States as Amicus Curiae Supporting Petitioner TABLE OF CONTENTS Questions Presented Interest of the United States Statement A. Federal regulation of foreign branch banking B. The present dispute Introduction and summary of argument Argument: I. The court of appeals erroneously concluded that the parties had agreed to make WFAL's Eurodollar deposits legally payable in New York II. There is no occasion to consider whether federal law governs this controversy because it is at best doubtful that either Philippine or New York law imposes an obligation on Citibank to repay the deposits out of Citibank's non-Philippine assets Conclusion QUESTIONS PRESENTED 1. Whether, contrary to the design of federal banking regulation, a United States bank may be held liable for deposits made with its branch in a foreign country when the foreign government prevents the branch from repaying those deposits. 2. Whether, contrary to federal banking law and policy, the use of standard instructions to route funds through New York bank accounts of foreign depositors constitutes an agreement by United States banks to be liable for deposits in their foreign branches when the deposits are taken or frozen by foreign governments. INTEREST OF THE UNITED STATES The United States has a strong interest in questions of international banking law. The federal government supervises and pervasively regulates United States banks to secure their safe and sound operation and to implement monetary policy. The government also acts as insurer and as a lender of last resort for these institutions. Congress has entrusted the federal banking agencies with special responsibility for the foreign operations of United States banks, which may have a direct effect on foreign relations and commerce. The United States participated as amicus curiae in the court of appeals and previously submitted an amicus curiae brief in this case, at the Court's invitation, urging the Court to grant the petition for a writ of certiorari. STATEMENT Petitioner Citibank, N.A. (Citibank) seeks reversal of a court of appeals' decision holding that Citibank's New York office is obligated to repay two dollar-denominated deposits that respondent Wells Fargo Asia, Ltd. (WFAL) placed with a Citibank branch located in Manila, Republic of the Philippines. The court of appeals concluded that Citibank had agreed to repay the deposits in New York and accordingly rejected Citibank's defense that a Philippine government decree, prohibiting remittance of dollars for repayment of principal on obligations owed to foreign banks, suspended the obligation to repay. See Pet. App. 1a-8a. A. Federal Regulation of Foreign Branch Banking Congress has authorized federally chartered national banks, such as Citibank, to establish foreign branches "for the furtherance of the foreign commerce of the United States, and to act if required to do so as the fiscal agents of the United States." See Federal Reserve Act, 12 U.S.C. 601 et seq.; 12 C.F.R. Pt. 211. A national bank wishing to establish a foreign branch must seek permission from the Board of Governors of the Federal Reserve System (Federal Reserve Board) to operate the branch "upon such conditions and under such regulations as may be prescribed by the said board" (12 U.S.C. 601). See 12 C.F.R. 211.3(a). /1/ A foreign branch of a United States bank is also subject, of course, to local laws and regulations that may impose additional restrictions on its operations. /2/ Foreign branches attract funds for lending through various means. They typically compete with local banks for business and individual deposits, accepting savings, time, or demand deposits in local currency, allowing withdrawals, and paying interest in accordance with the terms of deposit agreements. Foreign branches may also accept dollar-denominated deposits, which are commonly known as "Eurodollars." In the case of Eurodollar transactions, the foreign branch may use dollar-denominated deposits to pay off its dollar-denominated obligations, or it may convert dollar-denominated deposits into local currency through the foreign government's central bank, lend the converted funds locally, and then repay the depositor by reconverting local currency into dollars. /3/ A United States bank normally is responsible for the ultimate solvency of its foreign branches, which are "office(s)" of the bank (12 C.F.R. 211.2(h)). See 3 Fed. Res. Bull. 198 (1917); see also Basle Concordat (May 1983), reprinted in 22 Int'l Legal Materials 901 (1983). Nevertheless, federal law requires that a United States bank "shall conduct the accounts of each foreign branch independently of the accounts of other foreign branches established by it and of its home office" (12 U.S.C. 604). The federal government has drawn other important distinctions between a United States bank's foreign and domestic deposits. For example, Congress has dictated that federally imposed reserve requirements on deposits "shall not apply to deposits payable only outside the States of the United States and the District of Columbia" (12 U.S.C. 461(b)(6)). This exemption, which was codified in 1980, reflects a Federal Reserve Board practice dating back to 1918. See H.R. Rep. No. 263, 96th Cong., 1st Sess. 10 (1979); 125 Cong. Rec. 19,671 (1979); 12 C.F.R. 204.1(c)(5) and 204.128; 35 Fed. Reg. 2768 (1970); 4 Fed. Res. Bull. 1123 (1918). Similarly, for more than 50 years, Congress has exempted from FDIC insurance assessments and coverage those deposits "payable only at an office * * * located outside of the States of the United States." 12 U.S.C. 1813(l)(5)(A). And when Congress or the Federal Reserve Board has imposed interest rate, payment, or advertising limitations on deposits, it consistently has provided that such limitations do not apply to deposits payable only abroad. See 12 U.S.C. 371a, 371b; 12 C.F.R. 217.1(c)(2); 21 Fed. Res. Bull. 862, 863 (1935). /4/ B. The Present Dispute Citibank currently operates a branch office in Manila, the Republic of the Philippines (Citibank/Manila). Although Citibank/Manila obtains funding from Philippine depositors, it has also obtained a portion of the funds needed for lending through Eurodollar deposits. Thus, in June 1983, a Singapore money broker acting on behalf of WFAL, a Singapore bank owned by Wells Fargo Bank, N.A., placed two Eurodollar deposits with Citibank/Manila. The broker telephoned Citibank/Manila and reached an oral agreement as to the amount of the deposits ($1 million each), the interest rate (10%), and the maturity date (December 1983). In accordance with the customs of the Eurodollar market, the parties exchanged brief computer-generated telex messages confirming those terms. The telexes also provided routing instructions for accomplishing transfer of the funds. As in the case of most Eurodollar transactions, the transfer was to be settled or "cleared" through the parties' correspondent New York City banks. Pet. App. 2a-3a, 15a-16a, 41a-42a, 46a-47a. The deposits proceeded routinely. WFAL, which maintained a correspondent account at the New York City office of Wells Fargo Bank, N.A., instructed that office to transfer $2 million from the WFAL account to Citibank/Manila's correspondent account at the New York City office of Citibank. The correspondent banks then effected the transfer through the use of the New York Clearing House Association's Interbank Payments System (CHIPS), an automated clearing mechanism that, among other things, permits member banks and other participants to credit and debit interbank dollar payments electronically and provides virtually instantaneous transfers of funds. See Pet. App. 16a, 20a, 45a; N.Y. Clearinghouse Ass'n and Inst. of Int'l Bankers Amici Br. at 1-2, 7, 11. /5/ Prior to the time for repayment, however, the Philippine government issued emergency economic regulations that prevented Citibank/Manila from collecting the necessary dollars -- by completing a "currency swap" with the Philippine Central Bank (see note 5, supra) or otherwise -- in order to repay WFAL's Eurodollar deposits. Specifically, the Philippine Monetary Board issued a Memorandum to Authorized Agent Banks (MAAB 47) requiring that "remittance of foreign exchange for repayment of principal on all foreign obligations due to the foreign banks and/or financial institutions, irrespective of maturity, shall be submitted to the Central Bank * * * for prior approval" (Pet. App. 63a). The Philippine Central Bank interpreted that decree to prohibit Citibank/Manila from repaying WFAL using its Philippine assets, and Citibank/Manila thereafter failed to repay WFAL's deposits at maturity. Id. at 3a-4a, 22a-23a, 30a-31a, 42a, 47a-48a. WFAL commenced this action against Citibank on February 10, 1984, in the United States District Court for the Southern District of New York, to obtain repayment of its Citibank/Manila deposits. /6/ Citibank/Manila obtained permission from the Philippine Central Bank to repay the deposits -- to the extent Citibank/Manila could -- through the use of its non-Philippine dollar-denominated accounts (such as Citibank/Manila's New York account). As a result, Citibank/Manila was able to repay $934,000 of the $2 million owed. In addition, the Philippine Central Bank has permitted Citibank/Manila to reconvert sufficient pesos into dollars to make interest payments on the remaining principal. Wells Fargo seeks return of the unpaid portion of the principal. Pet. App. 4a, 28a-29a, 42a, 48a. WFAL moved for summary judgment, but the district court denied its motion (Pet. App. 41a-55a), concluding that the case hinged upon the interpretation of the parties' agreement (id. at 50a), which in turn depended upon the meaning of their telex communications "as they were used in the Eurodollar trade" (id. at 54a). The court then held a trial and ruled that Citibank's home office was required to repay the deposits. Id. at 28a-38a. The court accepted WFAL's "invitation to assume that Philippine law governed this action" (id. at 30a) and, after reviewing the parties' conflicting affidavits concerning the law of that country, "conclude(d) that under Philippine law Citibank's worldwide assets are available for satisfaction of plaintiff's claim" (id. at 35a). /7/ Citibank appealed, arguing that Philippine law, correctly applied, required judgment for Citibank and that the district court's interpretation of Philippine law was contrary to the banking law and policy of the United States. The United States also filed an amicus brief urging reversal. The court of appeals heard argument and remanded the case for clarification. Pet. App. 25a-27a. The court of appeals found it "unclear from the district court's (opinion) whether the court found that the parties agreed that the deposits were collectible only at the Manila branch" and whether Philippine law "precludes or negates an agreement between the parties to have the deposits collectible outside of Manila" (id. at 25a-26a). It therefore requested the district court to address several specific questions relevant to that issue. Pet. App. 26a. On remand, the district court first addressed whether the parties had reached agreement on the place of repayment of the deposit. The court stated that "it appears to us that repayment and collection describe two distinct concepts" (Pet. App. 14a): Repayment refers to the location where wire transfers effectuating repayment at maturity were to occur. Collection refers to the place or places where plaintiff was entitled to look for satisfaction of its deposits in the event that Citibank should fail to make the required wire transfers at the place of repayment. Ibid. The court then ruled, based on the routing instructions contained in Citibank/Manila's and WFAL's telex confirmations, that the parties had "agree(d) that repayment was to occur in New York" (id. at 16a). It further concluded, however, that the parties had reached no agreement as to where the debt was collectible, reiterating a previous observation that "neither party succeeded in establishing any universal understanding amounting to custom or practice within the banking community which would imply a collection term into the contract" (id. at 17a). With respect to what law should apply, the district court appeared to disavow its prior conclusion that Philippine law was controlling. Instead, the court reasoned that, given the need for uniform banking rules, the parties' contacts with New York, and the fact that Eurodollar transactions are customarily cleared in New York, New York law should govern the scope of Citibank's undertaking (Pet. App. 18a-24a). Applying New York law, the court then concluded, as it had previously ruled based on Philippine law, that "Citibank is liable for the debt of its Manila branch and plaintiff is entitled to look to Citibank's worldwide assets for satisfaction of its depositors" (id. at 24a). Citibank again appealed, and the United States submitted a letter supporting Citibank's position. The court of appeals nevertheless affirmed the district court's judgment (Pet. App. 1a-8a). The court characterized the dispute as a contract action in which WFAL sought repayment of a debt. The court observed that generally "a creditor may collect or enforce a debt wherever he can obtain jurisdiction over the debtor" (id. at 5a), explaining: "All debts are payable everywhere, unless there be some special limitation or provision in respect to payment; the rule being that debts as such have no locus or situs, but accompany the creditor everywhere, and authorize a demand upon the creditor everywhere." Id. at 5a-6a (citations omitted). The court further recognized, however, an exception to this general rule: A special limitation has traditionally been recognized under general banking principles. Thus, "'(t)he situs of a bank's debt on a deposit is considered to be at the branch where the deposit is carried. . . . '" Id. at 6a (citations omitted). The court explained that, as a consequence of that special banking rule, a debt on a bank deposit "normally authorizes a demand for the money only at the relevant branch" (Pet. App. 6a). "This normal limitation on the situs of a banking debt is, however, subject to variation by agreement of the parties. If the parties agree that repayment of a deposit in a foreign bank or branch may occur at another location, they authorize demand and collection at that other location" (ibid.). The court of appeals stated that "the district court found that the parties had agreed that repayment was to occur in New York" (Pet. App. 7a), and it concluded that this factual determination "plainly is not clearly erroneous" (ibid.), reasoning that the telex communications specifying that the funds shall be transferred through the parties' correspondent New York banks "amply support the district court's finding that the parties agreed that repayment would be made in New York" (ibid.). It noted that the district court had treated repayment and collection as divisible concepts, but it concluded that the distinction was immaterial because "a debt may be collected wherever it is repayable" (id. at 8a). The court accordingly held that WFAL was "entitled to collect the deposits out of Citibank assets in New York" (ibid.). INTRODUCTION AND SUMMARY OF ARGUMENT The lower courts in this case advanced three different legal theories in support of the determination that Citibank's New York office is obligated to repay Eurodollar deposits placed with Citibank's branch in Manila. In its initial judgment, the district court held, as a matter of Philippine law, that an obligation incurred by Citibank/Manila was considered an obligation of the bank as a whole. Thus, respondent could look to assets of Citibank's home office in order to satisfy a deposit that had been placed with its Philippine branch. In its second judgment, the district court apparently disavowed any reliance on Philippine law, and held, this time as a matter of New York law, that an obligation incurred by Citibank/Manila was also an obligation of the parent bank (Pet. App. 20a-21a). The court of appeals did not embrace either of these theories. On the contrary, it acknowledged that under "general banking law principles" a debt on a deposit "normally authorizes a demand for the money only at the relevant branch" (Pet. App. 6a). Nevertheless, the court of appeals concluded that these general principles did not apply here, because the written instructions exchanged by the parties for settlement of the deposit constituted an agreement to make the deposit payable in New York, and thus subject to satisfaction out of the assets of the parent bank. Citibank asks this Court to reverse the judgment below, and to hold, as a matter of federal law, that a United States bank may not be held liable for foreign sovereign interference with deposits placed at a foreign branch absent an express agreement to the contrary. Although we find Citibank's proposed rule attractive, we are not convinced that, at least at this juncture in the litigation, it is necessary that such a federal rule be established. The conclusion of the court of appeals that the parties had agreed to make the deposits payable in New York is inconsistent with the district court's factual findings and contrary to both the assumptions underlying the federal regulatory structure and the actual operation of the Eurodollar market. And although the court of appeals did not address either of the theories endorsed by the district court, there is substantial reason to believe that, on remand, the court of appeals would reject those theories as well. Thus, it is quite possible that this case can be resolved in such a way as to avoid any conflict with federal law and policy, and thus to avoid any need to apply federal preemption or federal common law. /8/ 1. The court of appeals correctly identified the general banking law principle that, absent an agreement to the contrary, a bank deposit is legally repayable at, and hence is governed by the law of, the place where the deposit is made. The court erred, however, in concluding that Citibank and WFAL had agreed to depart from this established rule. Citibank and WFAL reached an agreement that WFAL's Eurodollar deposits would be settled through electronic transfers between their correspondent New York banks, but that agreement did not alter the understanding that the deposits would be legally payable only at the place of deposit -- Citibank's Manila branch. Since WFAL's Eurodollar deposits are payable in the Philippines, they are subject to all applicable provisions of Philippine law, including the Philippine Government's remittance restrictions. The Eurodollar market exists in large part because the United States banking regulations give special treatment, in the form of exemptions from federal reserve requirements and insurance assessments, to dollar-denominated deposits that are legally payable only outside the United States. Eurodollar deposits command higher interest rates because they are free from costly reserve and insurance requirements that are imposed on non-exempt deposits, but they are strictly subject to the condition that they are legally payable only abroad. Citibank and WFAL plainly understood that WFAL's funds would be placed with Citibank's Manila branch as Eurodollar deposits. Although the deposit was settled, as is customary in the Eurodollar trade, through interbank transfers between the parties' correspondent New York banks, that method of settlement did not alter the deposits' situs at Citibank/Manila, nor did the clearing instruction constitute an agreement that would have rendered the deposits legally payable in New York. The court of appeals erroneously concluded that Citibank and WFAL had agreed to make the account payable in New York because it misunderstood the unconventional terminology that the district court used to describe the transactions and it mistook the parties' settlement terms for an agreement to change the situs of the debt. In actual fact, the district court correctly recognized that the parties specified only the place of settlement. They left the place of legal payment to be controlled, as is customarily the case, by the general banking principle that a deposit is payable at the branch where it is deposited -- in this case, Citibank/Manila. Indeed, the placements, by every relevant indication, were routine Eurodollar deposits payable only abroad. 2. Because the court of appeals mistakenly concluded that the parties had agreed to make WFAL's deposits payable in New York, it did not reach the district court's theories grounded in Philippine law and New York law. Without expressing any concluded view about those alternative theories, we would note that there is, at the very least, significant doubt about the correctness of the district court's conclusions. None of the authorities cited by the district court in support of its initial holding that Philippine law would treat WFAL's deposits as a general obligation of Citibank actually stands for that proposition. In fact, after remand, when the district court was confronted with additional authorities questioning this conclusion, it abruptly determined that the dispute should be resolved under New York law. The district court then held, relying on Sokoloff v. National City Bank, 239 N.Y. 158, 145 N.E. 917 (1924), that New York law made deposits placed with Citibank/Manila an obligation of the New York office. But that case arose in the distinct context of funds originally placed with a New York bank for deposit in a foreign branch. In any event, if Citibank/Manila's refusal to repay the deposit was proper under the law of the Philippines, then there would be no basis for recognizing a cause of action under New York law for wrongful refusal to honor a deposit made with a foreign branch. Any theory grounded in either Philippine or New York law that would make United States banks liable for foreign sovereign interference with deposits placed with foreign branches would also create considerable tension with federal banking law and policy. Federal reserve requirements and deposit insurance obligations are based on the understanding that "(a) customer who makes a deposit that is payable solely at a foreign branch assumes whatever risk may exist that the foreign country in which a branch is located might impose restrictions on withdrawals." 12 C.F.R. 204.128(c). The repudiation of that premise would require a fundamental reassessment of domestic reserve requirements, insurance assessments, and the federal government's exemption for deposits payable only abroad. It would also frustrate important federal policies relating to the encouragement of this nation's foreign commerce and the protection of the safety and soundness of the United States banking system. ARGUMENT I. THE COURT OF APPEALS ERRONEOUSLY CONCLUDED THAT THE PARTIES HAD AGREED TO MAKE WFAL'S EURODOLLAR DEPOSITS LEGALLY PAYABLE IN NEW YORK The international banking community employs interbank placements of Eurodollar deposits to promote the efficient accumulation and allocation of capital. Participating banks make those placements in accordance with internationally accepted principles of banking law and in light of the regulatory restrictions that the United States and the host countries have placed on dollar transactions. As the court of appeals recognized, American and English courts have developed a number of general banking law principles governing private transactions that have been adopted around the world as the international banker's "law merchant." The court of appeals accurately identified those controlling principles, but it mistakenly concluded that Citibank and WFAL had agreed to depart from them in this case. A. The court of appeals correctly stated that "(t)he situs of a bank's debt on a deposit is considered to be at the branch where the deposit is carried" and that "(t)he consequence of this limitation is that a debt on a deposit normally authorizes a demand for the money only at the relevant branch" (Pet. App. 6a). This rule, which is often referred to as the "separate entity doctrine," was historically justified at least in part because of the perceived "impracticality of requiring constant transmission of reports on the status of accounts in one branch to all other branches." United States v. First Nat'l City Bank, 321 F.2d 14, 22 (1963), aff'd en banc, 325 F.2d 1020 (2d Cir. 1964), rev'd on other grounds, 379 U.S. 378 (1965). Given modern telecommunications technology, a more enduring justification flows from the choice-of-law implications of the doctrine. If a deposit is payable only at the place where it is made, then the deposit generally will be subject to the law of the jurisdiction where the deposit is made. See Restatement (Second) of Conflict of Laws Section 195 (1971). In terms of international banking law, the separate entity doctrine thus gives recognition to the fact that any banking operation in a foreign country is necessarily subject to the foreign sovereign's own laws and regulations regarding such matters as the timing and amount of withdrawals; rates of interest; convertibility into foreign currency; local capital, reserve and insurance requirements; and the scope of permissible activities. See United States v. First Nat'l City Bank, 321 F.2d at 14. /9/ If a deposit made in one country could be converted into an obligation payable in another country, however, these laws and regulations could be readily evaded. The separate entity doctrine applies even though the foreign operations of United States banks are conducted through branches rather than subsidiaries. Some countries permit foreign bank operations only in branch form, /10/ while in others local rules may make branch operations the only commercially feasible alternative. The separate entity doctrine therefore permits United States banks to operate in these countries, while at the same time assuring that foreign sovereign authority over banking activity within its own territory is fully respected. Indeed, any other rule would require a substantial restructuring of the international operations of United States banks, and could put those banks at a competitive disadvantage relative to their foreign counterparts. Thus, it is well settled that absent an agreement to the contrary, a bank is legally obligated to repay a deposit only at the place where the deposit is made. /11/ B. Although the court of appeals correctly recognized the separate entity rule, it mistakenly concluded that the parties had elected to depart from that rule in this case and had agreed, instead, to make the deposits payable in New York. That conclusion is inconsistent with the terms of the standard Eurodollar transactions at the heart of this dispute. The Eurodollar market has come into being largely because the United States gives special treatment to dollar-denominated deposits that are legally payable only abroad. Although United States bank deposits are generally subject to federal reserve requirements and deposit insurance assessments, which increase the costs to banks of acquiring such funds (see p. 3, supra), Congress and the Federal Reserve Board have exempted from those requirements bank deposits that are "payable only" outside the United States. See p. 3, supra; see, e.g., 12 U.S.C. 461(b)(6); 12 U.S.C. 1813(l)(5)(A); 12 C.F.R. 204.1(c)(5) and 204.128. These exemptions provide the impetus for United States banks to participate in the Eurodollar market. Financial institutions that accept deposits qualifying for exemption from reserve requirements and insurance assessments can achieve substantial savings in obtaining funds. See R. Dale, The Regulation of International Banking 12-13 (1986). United States banks have realized those savings by authorizing their foreign branches to accept dollar-denominated funds that are legally "payable only" at the foreign branch. By limiting repayment in that manner, United States banks are able to obtain dollar-denominated deposits abroad on the same basis as foreign banks, free from United States reserve requirements and insurance assessments, and are able to compete with foreign financial institutions in the international money markets. See 12 C.F.R. 204.128(c). The federal government's regulatory exemptions, which provide a "forceful stimulus" and "the basic inducement" for United States banks to participate in the Eurodollar market (R. Dale, supra, at 12, 14, 23), impose an essential condition on that participation: the foreign branch deposit must be "payable only" abroad. A foreign branch deposit that lacks that essential feature receives the same regulatory treatment (and incurs the same associated costs) as a domestic dollar deposit. See 12 C.F.R. 204.128(c). Thus, the distinctive characteristic of a Eurodollar deposit is its place of payment. Indeed, international bankers and commentators generally define Eurodollars as dollar-denominated deposits that have their situs outside the United States. /12/ Citibank and WFAL clearly understood that WFAL's funds would be placed with Citibank's Manila branch as Eurodollar deposits. WFAL placed its deposits with Citibank/Manila through the methods routinely employed in Eurodollar transactions. See Pet. App. 42a, 45a. The record indicates that WFAL's broker offered WFAL's funds on the Eurodollar market and that Citibank's Manila branch accepted WFAL's funds under the standard terms of a Eurodollar deposit at the prevailing Eurodollar interest rate. /13/ The testimony offered at trial concerning interest rates confirms that both Citibank and WFAL understood that WFAL's funds would be held as Eurodollar deposits. Citibank's and WFAL's respective experts disagreed on a number of matters, but they agreed that the difference between the rate of interest paid on the WFAL deposits (10%) and the lower rate that would be paid on a deposit placed with Citibank's New York office was attributable, at least in part, to the fact that the WFAL deposits were not subject to domestic reserve and insurance requirements. /14/ As we have just explained, this would be true only if -- as both of the commercially sophisticated parties must have understood -- the WFAL deposits were "payable only" outside of the United States. See 12 U.S.C. 461(b)(6); 12 U.S.C. 1813(l)(5)(A). The method and terms of the placement persuasively indicate that WFAL's funds were deposited as Eurodollars and were legally payable only abroad. The specific place for repayment was, of course, Citibank's Manila branch. Since WFAL deposited its funds with Citibank/Manila, the deposits had their situs at that branch. Under the general banking principles that the court of appeals cited (p. 13, supra), they were legally payable only at that location. The deposit was settled, as is customary in Eurodollar transactions, through interbank transfers between the parties' correspondent New York banks. But that method of settlement did not affect the situs of the deposits or constitute an agreement that would make them legally payable in New York. The federal bank regulatory agencies administering the statutes that have, in essence, created the Eurodollar market are in agreement that the settlement of a Eurodollar transaction through electronic transfers between New York banks does not alter the situs of the deposit or render it legally payable in New York. The New York Clearing House Association (which has created the CHIPS mechanism for settling these transactions and clears approximately $750 billion in interbank payments each day) and the Institute of International Bankers (whose membership includes 230 banks from more than 50 countries) explain that there is simply no other feasible way to settle international dollar transactions. See N.Y. Clearing House Ass'n and Inst. of Int'l Bankers Amici Br. To our knowledge, no market participant -- including WFAL -- has ever suggested that the routine transfer of funds through correspondent banks can change the situs of a deposit. That result would be manifestly inconsistent with the settled understandings of Eurodollar market participants and would alter the character and terms of Eurodollar deposits held throughout the world. C. The court of appeals therefore erred in concluding that Citibank and WFAL had agreed to make WFAL's deposits payable in New York. As the foregoing discussion shows, WFAL placed its funds with Citibank/Manila as Eurodollar deposits that, by definition, were legally payable only outside the United States. The placements, by every relevant indication, were routine Eurodollar deposits legally payable only at their place of deposit -- Citibank/Manila. The court of appeals' error arises from its misunderstanding of the district court's somewhat confusing distinction between "repayment" and "collection" of a debt. As we have explained (p. 7, supra), the district court found that the parties had agreed that WFAL's deposits would be "repaid" in New York, but that they had reached no express understanding of where the deposits could be "collected." The court of appeals failed to comprehend the meaning that the district court had ascribed to these terms. The district court used the term "repayment" to describe the place where the account would be settled. See Pet. App. 14a ("the location where the wire transfers effectuating repayment at maturity were to occur" (emphasis added)). It used the term "collection" to describe the place where the account was legally payable. See Ibid. ("the place or places where plaintiff was entitled to look for satisfaction of its deposits in the event that Citibank should fail to make the required wire transfers"). Thus, the district court simply found that the parties had expressly agreed to settle the transactions in New York, but that they did not state any express understanding of where the account would be legally repayable. Since they had stated no express agreement on the latter question, they left it to be controlled -- as is usually the case -- by the general banking principle that a deposit is payable at the branch where it is made. /15/ The court of appeals was misled by the district court's unconventional terminology. It equated the district court's finding of an agreement respecting "repayment" with an agreement respecting where the deposits were legally payable and, as a consequence, gave WFAL something it did not bargain for and had no right to receive -- dollar-denominated deposits that are exempt from federal reserve requirements and insurance assessments but legally payable in the United States. The court of appeals incorrectly transformed a standard instruction for clearing Eurodollar deposits in New York into an agreement that the head office will be liable for Eurodollar deposits. In effect, the court of appeals transformed WFAL's conventional Eurodollar deposits into a new hybrid creature that, like the centaur, can be imagined but does not exist. /16/ II. THERE IS NO OCCASION TO CONSIDER WHETHER FEDERAL LAW GOVERNS THIS CONTROVERSY BECAUSE IT IS AT BEST DOUBTFUL THAT EITHER PHILIPPINE OR NEW YORK LAW IMPOSES AN OBLIGATION ON CITIBANK TO REPAY THE DEPOSITS OUT OF CITIBANK'S NON-PHILIPPINE ASSETS Absent an agreement between the parties altering the general legal rule that "a debt on a deposit normally authorizes a demand for the money only at the relevant branch" (Pet. App. 6a), general banking principles dictate that WFAL's deposits are legally payable only at Citibank/Manila. The proper question in this case then becomes whether Citibank has committed an actionable breach of the deposit contracts by wrongfully refusing payment at that location. There can be little doubt that the district court correctly determined that the Philippine decree -- MAAB 47 -- prevented Citibank/Manila from repaying the full amount of WFAL's deposit out of the assets of Citibank/Manila. MAAB 47 prohibits "(a)ny remittance of foreign exchange for repayment of principal on all foreign obligations due to foreign banks" without prior approval of the Philippine Central Bank. Although the Central Bank has permitted Citibank/Manila to use its non-local assets in partial discharge of the deposit obligations (Pet. App. 34a), it has not permitted Citibank/Manila to remit the balance of the obligations out of its Philippine assets. Thus, the critical issue that divided the parties below, and which the court of appeals did not reach, is whether Citibank/Manila must look to Citibank's non-Philippine assets in order to satisfy the deposit obligation. In its first judgment, the district court identified an obligation to look to Citibank's non-Philippine assets grounded in Philippine law; in its second judgment, the district court held that WFAL could reach Citibank's general assets under principles of New York law. Although this Court's normal practices would call for a remand to allow the court of appeals to consider these alternative theories in the first instance, we nevertheless set forth several considerations that should bear on the proper resolution of these issues, in the event the Court finds it appropriate to address them. In either event, if it is ultimately determined that neither Philippine law nor New York law requires that a deposit placed with Citicorp/Manila be repaid out of Citicorp's United States assets, there would be no occasion to consider the broader issues of federal law presented by Citicorp. A. The district court found that it was "not disputed that the Decree currently prevents Citibank's Manila branch from using its Philippine assets toward repayment of the Deposits" (Pet. App. 30a); it accordingly concluded that Citibank was not in breach of the deposit agreement insofar as repayment was required out of Citibank/Manila's assets. This conclusion follows from the separate entity doctrine: a bank deposit that is legally payable in a foreign country is generally subject to the laws of that country and to the attendant risk that the foreign sovereign may alter the parties' rights and obligations. In this case, WFAL's deposits with Citibank's Manila branch are subject to Philippine law. The Philippine government obviously can change that law, and, thus, it is fair to say that both Citibank and WFAL voluntarily assumed a risk that the Philippine government might alter the terms for repayment of a debt made payable within its territory. /17/ WFAL's primary contention in the lower courts was not that Citibank/Manila was in breach of the deposit agreements because of its failure to use its own assets to repay the obligations. Rather, WFAL contended that Citibank/Manila was required to call upon the world-wide assets of Citibank, including those held by branches outside the Philippines, to satisfy the deposit obligations incurred by the Manila branch. The district court, in its initial judgment, agreed with this contention, concluding (Pet. App. 35a) "that under Philippine law Citibank's worldwide assets are available for satisfaction of plaintiff's claim, and that the Decree does not prevent transfer of such assets from outside the Philippines to Manila in order to repay the Deposits." Although we do not take any concluded position on the issues of Philippine law presented by this case, it is a matter of some doubt whether the district court's initial judgment was correct. In finding that Philippine law made Citibank's worldwide assets available to satisfy WFAL's claim, the district court placed primary reliance on two authorities. The first was a 1934 decision of the Philippine Supreme Court, National City Bank v. Posadas, 60 Phil. 630 (1934), aff'd, 296 U.S. 497 (1936), holding that the doctrine of intergovernmental tax immunities prohibited the territorial government of the Philippines (as it then was) from imposing a capital and deposits tax on a branch of a national bank of the United States. The second was a telex from the Philippine central bank authority, indicating that it would not object if Citibank/Manila sought to repay the deposit obligations out of non-Philippine assets. Pet. App. 35a. Neither authority, however, provides that deposits placed with the Philippine branch of a foreign bank are regarded as general obligations of the home office of that bank, repayable out of non-Philippine assets. On appeal, Citibank presented additional Philippine authorities, including a letter from the Senior Deputy Governor of the Central Bank of the Philippines. Citibank C.A. Br. Add. A. The letter explained that the previous telex had merely stated that MAAB 47 would not be violated on the assumption that "either a court declared as a matter of law that payment was required by the non-Philippine office of a foreign bank or that the parties agreed by way of settlement to payment by a non-Philippine office." Id. at 2. The letter further stated (id. at 1): (T)here is no obligation imposed under Philippine law on a foreign bank to remit funds to its Philippine branch to pay deposits whose payment has otherwise been temporarily suspended as aforesaid stated. Nor is there an obligation imposed under Philippine law that the foreign bank pay the Philippine branch deposits in those circumstances at branches outside the Philippines. After the court of appeals remanded the matter to the district court, the district court took note of the additional materials adduced by Citicorp, stating (Pet. App. 14a) that "(h)ad Citibank made a motion before us to reconsider our decision on the basis of this additional authority, we certainly would have granted such a motion * * * ." The district court then proceeded to reexamine the issues presented in the case on the assumption that New York law, rather than Philippine law, would apply. It thus appears that there is at least substantial ground to believe that the district court's construction of Philippine law in its initial judgment may have been erroneous. And if it turns out that Philippine law does not in fact impose risk of sovereign interference on the home offices of banks maintaining branches in the Philippines, then it will be unnecessary to decide whether such a rule would be inconsistent with federal law. /18/ B. The district court, in its second judgment, held that New York law imposed liability on Citibank for losses due to foreign sovereign risk sustained by depositors of Citibank/Manila. In the absence of preemptive federal law, we agree that New York courts would have the power to create a cause of action against New York based banks that does not exist in the country where the bank's foreign branch is located. And indeed, the New York Court of Appeals apparently exercised that power in Sokoloff v. National City Bank, 239 N.Y. 158, 145 N.E. 917 (1924), which concluded that the Bolshevik government's seizure of a New York bank's Russian branch did not discharge the bank's liability to a depositor who had originally placed his funds with the New York office for deposit at the Russian branch. The court determined, on the pleadings, that the depositor could maintain an action "based upon the theory of rescission with an accompanying right to restitution" or "based upon the theory of the breach of an outstanding contract" (239 N.Y. at 171, 145 N.E. at 921). Properly construed, however, we do not believe that Sokoloff requires a finding of liability in the circumstances presented by this case. As an initial matter, Sokoloff dealt with the acts of a government that the United States did not recognize and that therefore did not qualify as acts of state. See Sokoloff, 250 N.Y. 69, 81, 164 N.E. 745, 749 (1928). The Republic of the Philippines, in contrast, is a duly recognized sovereign government whose judgments and decrees are entitled to respect in United States courts insofar as they reflect that nation's exercise of authority over assets within its territory. See generally Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964). /19/ In addition, Sokoloff by its terms provides a remedy only for depositors who place funds with a United States bank for deposit in a foreign branch. The New York courts have not extended the rationale of the decision to give a remedy to a foreign depositor, such as WFAL, who places deposits directly with the foreign branch of a United States bank. See Sokoloff v. National City Bank, 130 Misc. 66, 87, 224 N.Y.S. 102, 128-129 (Sup. Ct. 1927), aff'd, 223 A.D. 754, 227 N.Y.S. 907 (1928). /20/ Finally, even if WFAL were a domestic depositor, it still would qualify for relief under Sokoloff only if Citibank had wrongfully refused to repay the deposit. As Justice Harlan explained Sokoloff's application in the case of a Uruguayan bank account: The bank account is a contract for payment on demand at the Montevideo branch. If demand were wrongfully refused, a cause of action for breach of contract would be created on which (the depositor) could sue in New York. Thus, analytically, it is not the account itself which would become payable in New York, but damages for breach of the contract to pay on demand in Montevideo. United States v. First Nat'l City Bank, 379 U.S. 378, 405 n.27 (1965) (Harlan, J., dissenting). Thus, unless Philippine law requires that a deposit placed with Citibank/Manila be repaid out of Citibank's general assets, Citibank/Manila's refusal to repay the deposit cannot be regarded as "wrongful" under New York law. And if Citibank's action was justifiable under the law in effect at the place where the deposit was made -- the Philippines -- it cannot be converted into a cause of action in New York. /21/ C. It is also important to consider how any rule of law that purported to hold United States banks liable for sovereign interference with foreign deposits would affect the law and policy of the United States. One consequence of such a rule is that it could increase the incidence of such foreign sovereign interference, because the costs to depositors would be shifted at least in part to the home offices of United States banks. /22/ The potential liability in turn could induce United States banks to reduce the assets of their foreign branches, in order to limit their exposure to such potential risks. Such a reaction would diminish the financing available to United States businesses abroad and to local economies where the branches are located, contrary to United States policy. Of more immediate concern, imposing liability on the head offices of United States banks for foreign deposits that have been frozen or restricted would threaten the bank regulatory framework. Such additional liabilities would present substantial risks for the system of federal deposit insurance supervised by the FDIC. Insurance assessments, which exempt the deposits of United States banks that are payable only abroad, play an important role in assuring the safety and soundness of the United States banking system, and they reflect, to a degree, the federal government's evaluation of the potential liabilities of United States banks. /23/ In addition, the Federal Reserve Board's reserve requirements, which also exempt foreign deposits, are a key tool in the conduct of monetary policy in the United States. The Board's longstanding exemption of deposits that are legally payable abroad is based, in part, on the understanding that: A customer who makes a deposit that is payable solely at a foreign branch assumes whatever risk may exist that the foreign country in which a branch is located might impose restrictions on withdrawals. 12 C.F.R. 204.128(c); 35 Fed. Reg. 2768 (1970). /24/ If it turns out that the United States bank's home office -- rather than the customer -- bears that risk, then a basic premise of the current monetary system would be destroyed. The repudiation of the premises underlying federal banking regulations would require a fundamental reassessment of the exemption from insurance assessments and domestic reserve requirements for deposits payable only abroad. United States banks maintain billions of dollars of foreign branch deposits in potentially unstable countries. The federal government established its present reserve requirements and insurance assessments on the understanding that United States banks are not liable for foreign sovereign action that may restrict the availability of those funds. If that understanding is incorrect, then the relevant federal agencies will have to determine whether to increase insurance assessments and reserve requirements in order to cover the risks inherent in foreign deposits that may be subject to foreign sovereign action. If foreign deposits are found to be payable in the United States as a result of such action, then the deposits would by statute become domestic deposits for purposes of insurance assessments and a fundamental reassessment of the applicability of reserve requirements to such deposits would be required. As a result, the domestic costs to United States banks would substantially increase and United States banks would find it more difficult and costly to participate in the Eurodollar markets. Such a change in current practice would have serious implications for the foreign relations of the United States. As previously observed, these starkly undesirable alternatives need not be confronted if WFAL's deposits are found not to be payable out of Citibank's general assets. Moreover, if it is concluded that neither Philippine nor New York law requires repayment out of United States assets, then there would be no need to articulate a federal common law rule to protect federal interests in this case. /25/ If a United States bank's home office is not liable for foreign sovereign interference with a foreign branch's obligation to repay deposits that are legally payable only abroad, then the federal bank regulatory framework is consistent with, and indeed reflects, that established principle of banking law. CONCLUSION The judgment of the court of appeals should be reversed. Respectfully submitted. KENNETH W. STARR Solicitor General STUART M. GERSON Assistant Attorney General THOMAS W. MERRILL Deputy Solicitor General JEFFREY P. MINEAR Assistant to the Solicitor General ABRAHAM D. SOFAER Legal Adviser Department of State EDITH E. HOLIDAY General Counsel Department of the Treasury J. VIRGIL MATTINGLY General Counsel Board of Governors of the Federal Reserve System MARK I. ROSEN Deputy General Counsel Federal Deposit Insurance Corporation ROBERT B. SERINO Deputy Chief Counsel Office of the Comptroller of the Currency JANUARY 1990 /1/ The Federal Reserve Board also approves the establishment of foreign branches of state-chartered banks that are members of the Federal Reserve System (12 U.S.C. 321). In addition, the Federal Deposit Insurance Act requires state-chartered banks that are not members of the Federal Reserve System to seek approval from the Federal Deposit Insurance Corporation (FDIC) before establishing foreign branches (12 U.S.C. 1828(d)(2). /2/ The major industrial nations have formulated general guidelines describing the regulatory responsibilities of the home country and the host country. See Basle Concordat (May 1983), reprinted in 22 Int'l Legal Materials 901 (1983). See also Citibank, N.A. v. Trinh, No. 88-1031 Pet. App. 68a-73a (excerpts). /3/ Foreign branches generally solicit Eurodollar deposits from financial institutions located throughout the world that seek short-term investment of idle dollar-denominated funds. Financial institutions may participate directly in the worldwide "Eurodollar market" or they may employ international money brokers to place their funds. /4/ The Federal Reserve Board informs us that, as of December 31, 1988, 171 federally chartered banks maintained more than 878 foreign branches and that, as of December 31, 1987, the deposits booked at those foreign branches amounted to more than $240 billion. /5/ Once WFAL's funds had been electronically credited to Citibank/Manila's New York account, Citibank/Manila could enter into a "currency swap" agreement with the Philippine Central Bank to exchange the dollars for pesos at a specified rate and to reexchange pesos for dollars at a specified rate and date in the future. To clear that transaction, Citibank/Manila's correspondent bank would transfer the dollars from Citibank/Manila's New York account through CHIPS to the Philippine Central Bank's correspondent New York account. The Philippine Central Bank would then credit pesos to Citibank/Manila's account with the Philippine Central Bank in Manila. Citibank informs us that such a transaction took place in this case. /6/ WFAL's complaint invoked the court's jurisdiction based on diversity of citizenship (28 U.S.C. 1332) and on a provision of federal banking law providing that "all suits of a civil nature at common law or in equity to which any corporation organized under the laws of the United States shall be a party, arising out of transactions involving international or foreign banking, * * * shall be deemed to arise under the laws of the United States, and the district courts of the United States shall have original jurisdiction of all such suits * * * " (12 U.S.C. 632). See Pet. App. 19a. /7/ The court determined that its reliance on Philippine law "renders irrelevant most of the questions the parties have disputed before us" (Pet. App. 35a). It nevertheless observed that neither party had established a relevant Eurodollar trade "custom or practice" that resolved the matter (id. at 35a-36a). It also "accepted -- for the purposes of this lawsuit -- the proposition that the deposits were payable only in Manila" (id. at 36a), but concluded that its resolution of the dispute rendered that question moot (ibid.). /8/ There can be no doubt that this Court may resolve the case on nonfederal grounds. The Court's Rules do not limit the exercise of its power of supervision over judgments rendered by courts of appeals to cases decided on federal grounds. See Rule 10.1(a) (1990). And it is significant that Congress has determined that disputes "arising out of transactions involving international or foreign banking" are sufficiently important and have a sufficient nexus to federal interests to be "deemed" federal questions for purposes of federal court jurisdiction. See 12 U.S.C. 632. As we explained more fully in our brief filed at the jurisdictional stage (at 16-17), we believe that the judgment of the court of appeals in this case may prove to be sufficiently disruptive to the international Eurodollar market to warrant this Court's review and correction whether or not the Court enunciates a federal rule of decision. /9/ It is well established that a foreign sovereign generally has broad authority to affect debtor-creditor relationships involving debts payable within its jurisdiction. See, e.g., Note, The Act of State Doctrine: Resolving Debt Situs Confusion, 86 Colum. L. Rev. 594, 612, 616 (1986). See also Restatement (Third) of the Foreign Relations Law of the United States Section 403 (1987); Restatement (Second) of the Foreign Relations Law of the United States Section 17 (1965). Cf. Shaffer v. Heitner, 433 U.S. 186, 218 (1977) (Stevens, J. concurring) ("If I visit another State, or acquire real estate or open a bank account in it, I knowingly assume some risk that the State will exercise its power over my property or my person while there."). /10/ This was true, for example, in pre-communist Vietnam. See Trinh v. Citibank, N.A., 850 F.2d 1164, 1166 (6th Cir. 1988), petition for cert. pending, No. 88-1031. /11/ See, e.g., Det Bergenske Dampskibsselskab v. Sabre Shipping Corp., 341 F.2d 50, 53 (2d Cir. 1965); United States v. First Nat'l City Bank, 321 F.2d at 19-20; McCloskey v. Chase Manhattan Bank, 11 N.Y.2d 936, 183 N.E.2d 227, 228 N.Y.S.2d 825 (1962); Bluebird Undergarment Corp. v. Gomez, 139 Misc. 742, 744, 249 N.Y.S. 319, 321 (City Ct. 1931); Heininger, Liability of U.S. Banks for Deposits Placed in Their Foreign Branches, 11 Law & Pol. Int'l Bus. 903, 930-931 (1979). England and other common law jurisdictions have long recognized that rule. See, e.g., Joachimson v. Swiss Bank Corp., (1921) 3 K.B. 110, 127 ("promise to repay is to repay at the branch of the bank where the account is kept"); Clare & Co. v. Dresdner Bank, (1915) 2 K.B. 576, 578 ("no obligation on a bank to pay in one country a debt due to a customer on current account in another country"). The civil law countries seem to follow that rule as well. See Dame Ba Tu Thu Van v. Banque National de Paris, Tribunal de grande instance de Paris, 9eme Chambre (Mar. 8, 1985), and Dame Thi To Tam et autres v. Banque Francaise Commerciale, Tribunal de grande instance de Paris, 9eme Chambre (Mar. 12, 1985), reported in Recueil Dalloz Sirey 500-501 (1985). /12/ See, e.g., E. Roussakis, Commercial Banking in an Era of Deregulation 188 (1984); P. Oppenheim, International Banking 146 (3d ed. 1978); S. Robinson, Multinational Banking 162 (1972); M. Friedman, The Euro-Dollar Market: Some First Principles, in The Eurodollar 272, 275 (H. Prochnow ed. 1970); Harfield, International Money Management: The Eurodollar, 89 Banking L.J. 579, 585 (1972). WFAL's expert witness, Professor Gunter Dufey, agreed that "(a) Eurodollar deposit is a time deposit denominated in U.S. dollars in a bank or bank branch located outside the United States" (Tr. 632). /13/ WFAL's counsel stated at the outset of the trial that "these are very standard transactions" (Tr. 6). Citibank's executive vice-president and chief financial officer, Donald Howard, and WFAL's expert witness, Professor Dufey, described the transaction of Eurodollar placements in general terms that mirror the steps followed here. See Tr. 448-455, 474-478. Professor Dufey also acknowledged that "a dollar deposit with a Manila branch of Citibank is a Eurodollar deposit" (Tr. 638-639). /14/ That view was expressed by Donald Howard (Tr. 443-444, 452), Serge Ballenger, a French bank executive (Tr. 863-864), and Ian Giddy, a business professor (Tr. 1032, 1088-1089) who testified on Citibank's behalf concerning international banking practices. The view was also expressed by WFAL's counsel in his opening statement (Tr. 63) and by Professor Dufey (Tr. 598, 601, 640, 704-706), who testified on WFAL's behalf. /15/ The court of appeals stated (Pet. App. 7a) that the district court's factual finding concerning repayment was not "clearly erroneous" (Fed. R. Civ. P. 52(a)), citing the district court's reliance on the parties' telex confirmations setting forth the routing instructions between the correspondent banks. See Pet. App. 16a-17a. However, the district court's exclusive reliance on those telexes simply underscores that it was addressing only the question of where the transactions would be settled and not where the deposits were legally payable. We note that a different case might be presented if withdrawals or deposits were actually made through an office of a bank located in this country to an office of that bank in a foreign country. /16/ Federal government enforcement actions involve additional considerations and are governed by express statutory provisions that mean they are not necessarily subject to the same rules that govern private contractual disputes between banks and their depositors. For example, in the case of forfeiture actions, the Comprehensive Drug Abuse Prevention Control Act of 1970 provides that "(a)ll right, title, and interest in the property (derived from narcotics transactions) vests in the United States upon the commission of the act giving rise to forfeiture" (21 U.S.C. 853(c)) and authorizes courts to enter orders "without regard to the location of any property that may be subject to forfeiture" (21 U.S.C. 853(l)). Likewise, federal law, rather than state law, determines the United States' remedies as a creditor seeking to levy on taxpayers' accounts, United States v. National Bank of Commerce, 472 U.S. 713, 726-733 (1985), and the United States' right to a temporary injunction freezing assets under the control of a foreign branch, United States v. First Nat'l City Bank, 379 U.S. 378, 383-385 (1965). /17/ For this reason, it cannot be regarded as unfair to subject WFAL, as well as Citibank/Manila, to the risk of foreign sovereign interference with deposits placed with foreign branches. In this instance, for example, the Philippine government imposed a restriction on the repayment of dollar-denominated accounts that effectively freezes the principal, but permits WFAL to continue to earn interest. The Philippine government has authorized Citibank/Manila to pay that interest, in dollars, to WFAL, until the government's monetary difficulties are resolved. Thus, although WFAL cannot gain access to its principal, Citibank/Manila cannot extricate itself from the obligation to continue to pay interest on that principal at the rate agreed upon in 1983. Both Citibank and WFAL therefore bear part of the burden of the Philippine government's decree, as well as the risk of future government action. /18/ If Philippine law does make deposits placed with Citibank/Manila a general obligation of Citibank, a United States court might not be obligated to enforce such a judgment if it would be inconsistent with United States law and policy. See Hilton v. Guyot, 159 U.S. 113, 164 (1895). /19/ For example, the Second Circuit has held that the act of state doctrine generally requires U.S. courts to refrain from questioning the foreign sovereign's actions with respect to bank deposits that have their situs within the foreign country. Compare Braka v. Bancomer, S.N.C., 762 F.2d 222 (1985) with Allied Bank International v. Banco Credito Agricola de Cartago, 757 F.2d 516 (1985). See also Garcia v. Chase Manhattan Bank, N.A., 735 F.2d 645, 650 n.5 (2d Cir. 1984) ("where a foreign government has both the parties and the res before it and alters their relationship thereto, our courts realize that there is little that they can do to change the legal relationship"); see generally, Note, supra, 86 Colum. L. Rev. at 594. /20/ As the Sokoloff referee stated in subsequent proceedings, "we are not concerned with questions of liability for transactions originating in Russia and wholly to be performed in Russia, but with a debt incurred in this State which the defendant agreed to pay on demand at its own branch in Petrograd." Sokoloff v. National City Bank, 130 Misc. 66, 73-74, 224 N.Y.S. 102, 114-115 (Sup. Ct. 1927), aff'd, 223 A.D. 754, 227 N.Y.S. 907 (1928). The trial court subsequently made a similar point in determining the measure of damages. 130 Misc. at 87, 224 N.Y.S. at 128-129. See also Dougherty v. Equitable Life Assurance Society, 266 N.Y. 71, 88, 193 N.E. 897, 903 (1934); Dougherty v. National City Bank, 157 Misc. 849, 862-864, 285 N.Y.S. 491, 506-508 (Sup. Ct. 1935); Restatement (Third) of the Foreign Relations Law of the United States Section 414 reporter's note 6 (1987) (characterizing Sokoloff as involving a "New York depositor"). /21/ New York has provided by statute that "branch offices (of a bank) in any foreign country shall be liable for contracts to be performed at such branch office or offices to no greater extent than a bank * * * organized and existing under the laws of such foreign country would be liable under its laws." N.Y. Banking Law Section 138(1) (McKinney 1990). See also Tillman v. National City Bank, 118 F.2d 631, 633, 635 (2d Cir.), cert. deined, 314 U.S. 650 (1941); Tat Ba v. Chase Manhattan Bank, N.A., 616 F. Supp. 10 (S.D.N.Y. 1984), aff'd without opinion, 762 F.2d 991 (2d Cir. 1985). The Second and Sixth Circuits have mistakenly suggested that if a bank closes a foreign branch, "the situs of the debt represented by the deposit would spring back and cling to the home office." See Vishipco Line v. Chase Manhattan Bank, N.A., 660 F.2d 854 (2d Cir. 1981), cert. denied, 459, U.S. 976 (1982); Trinh v. Citibank, N.A., 850 F.2d 1164 (6th Cir. 1988), petition for cert. pending, No. 88-1031. As we explained in our amicus curiae brief at the petition stage in Trinh (at 11-14), that conclusion rests on a misunderstanding of the Sokoloff decision. The New York Court of Appeals did not determine that the closure of a branch office altered the situs of the debt. The "spring and cling" proposition is a commentator's inaccurate description of the case. See Vishipco Line, 660 F.2d at 864, citing Heininger, supra, 11 Law & Po. Int'l Bus. at 975. /22/ That concern is even more substantial in the case of Trinh v. Citibank, N.A., 850 F.2d 1164 (6th Cir. 1988), petition for cert. pending, No. 88-1031, which involves an expropriation of the assets of a foreign branch of a United States bank. /23/ Further, to the extent that the FDIC has determined that such deposits are "payable only * * * outside the United States," the FDIC has no statutory authority to impose insurance assessments on the deposits of a foreign branch. See 12 U.S.C. 1813(l)(5)(a). Conversely, to the extent that foreign Eurodollar deposits are transformed into deposits payable in the United States, the FDIC would be required by statute to impose insurance assessments and to take substantial administrative steps to deal with its increased obligation to supervise potentially billions of dollars in additional deposits. /24/ This point is reflected in the Federal Reserve Board's original decision, rendered in 1918, to exempt deposits payable only abroad from domestic reserve requirements. The Board observed that Congress had vested it with discretion "as to the restrictions to be imposed upon the operations of foreign branches in order to assure that the interests of the parent bank might be safeguarded and the creditors in this country be protected." 4 Fed. Res. Bull. 1123 (1918). Thus, the Board clearly expected that foreign branch depositors would rely on -- and be subject to -- foreign government regulation of their deposits. As time progressed, reserve requirements came to be recognized largely as an important tool of monetary policy. In 1970, the Board formally incorporated the interpretation exempting deposits in foreign branches from reserve requirements into its regulations. 12 C.F.R. 204.9 (1988). In 1980, Congress amended the Federal Reserve Act to incorporate the Board's 70-year-old exemption (12 U.S.C. 461(b)), indicating that it intended to preserve "the classifications as between domestic and foreign deposits which have been developed under existing law." H.R. Rep. No. 263, 96th Cong., 1st Sess. 10 (1979). /25/ There may be cases where it is appropriate for United States courts to rely on federal common law or federal preemption to protect federal interests in international banking disputes. Indeed, the federal act of state doctrine, related doctrines, and the exceptions thereto indicate that judicially made federal common law may figure prominently in such cases. We submit, however, that the proper application of general banking law principles, as we have described them, may well adequately protect federal interests in this case.