Liability for Foreign Branch Deposits in English Law1
In the introduction to his classic series of lectures entitled Payment Obligations in Commercial and Financial Transactions,2 Professor Goode points out that of all contractual obligations, the duty to pay money is the most fundamental. In this essay, one aspect of that duty is considered, namely the liability of a bank at the place of its head office to repay deposits held at a branch abroad. The issue is considered from the perspective of liability, ignoring any jurisdictional problems: in other words, jurisdiction in the courts of the place of the head office is assumed. It is an issue on which there is little direct English authority, but a considerable body of American case law and academic writing. It has arisen from time to time during the twentieth century, reflecting a variety of political and economic upheavals. Some have been catastrophic, such as the collapse of South Vietnam at the end of the Vietnam war. Some have been less dramatic; usually steps taken by a state in response to an economic crisis, such as the freeze on US dollar payments imposed by the Philippine authorities in 1983. In each case, the normal operation of the local banking system has been disrupted, and depositors have had to look elsewhere for repayment of their money.
It may be that, for the time being at least, these events will diminish in frequency. Ideologically-inspired seizure of banks by communist administrations was once a commonplace: but barely 15 years after the dramatic evacuation of Saigon, Soviet Communism itself collapsed. Foreign banks are now welcome in countries where they were once shunned. At the macro-economic level, under pressure from bodies such as the International Monetary Fund ( IMF), states have been less ready to seek to resolve financial crises by measures intended to block capital outflows. Mexico provides a good example. The peso crisis of 1982 was tackled by a variety of measures, including exchange controls which depositors sought____________________