Article of the Day: Chang & Chang on the Chinese Bank Secrecy Cases

The article of the day is Megan C. Chang and Terry E. Chang, Brand Name Replicas and Bank Secrecy: Exploring Attitudes and Anxieties Towards Chinese Banks In The Tiffany and Gucci Cases, 7 Brook. J. Corp. Fin. & Com. L. 425 (2013). Unfortunately, the paper does not seem to be freely available online. The article discusses two cases we’ve discussed here at Letters Blogatory, Tiffany (NJ) LLC v. Qi, 276 F.R.D. 143 (S.D.N.Y. 2011), and Gucci America, Inc. v. Li, 2011 WL 6156939 (S.D.N.Y. Aug. 23, 2011), and one that we missed, Tiffany (NJ) LLC v. Forbse, 2012 WL 1918866 (S.D.N.Y. May 23, 2012). The issue in all of the cases (each of which was a luxury knockoff case litigated under federal trademark law) was the reach of a US subpoena directed to a US branch of a Chinese bank where the documents sought were located in China and production would violate China’s bank secrecy statutes. In each case, the courts applied an Aerospatiale analysis, but the cases reached differing holdings. In Qi, the judge found that there was an alternative means of obtaining the information, namely a letter of request under the Hague Evidence Convention, and that resort to the Convention would not be futile. The judge also found that China’s interest in its bank secrecy laws was more signficant than the US interest in enforcement of its trademark laws. In Li the judge disagreed with Qi, pointing to precedents asserting that resort to the Convention would indeed be futile and asserting that the US interest was more significant than the Chinese interest. And in Forbse, the judge, who had the benefit of the passage of time to see what had happened in Qi after transmission of the letter of request, noted that the Chinese central authority had not responded to the letter for six months. The judge did not draw a firm conclusion on futility, and she found that neither national interest was predominant; but she did find that the Bank of China was acting in bad faith by continuing to act for the defendant, which was subject to a preliminary injunction, and she therefore required the Bank of China to respond to the subpoena, while allowing the other two banks whose records were at issue to insist on a letter of request under the Convention.

The authors contrast these cases with SEC v. Stanford International Bank, 776 F. Supp. 2d 323 (N.D. Tex. 2011), a case of the day from April 2011, involving attempts to obtain information about the assets of R. Allen Stanford, the Ponzi schemer. The case involved a subpoena that would require a bank to violate Swiss bank privacy laws. There, the judge refused to try to balance the competing national interests, noting that both the US Switzerland had compelling interests and the inherently political nature of any attempt to weigh these competing interests; and he did not discuss the risk of Swiss non-compliance with the Convention, “presumably,” the authors write, because he “found it unthinkable that the Swiss government would not comply with the Hague Convention.”

The point the authors want to make is that some US courts, e.g., the court in Li, treat China with unfair and unwarranted suspicion. The comparison with Switzerland is meant, I think, to suggest a particularly anti-Chinese perspective. This is interesting. But given that the authors acknowledge that China’s “past record” under the Convention is not sterling, and since the US government once took that view as well, it would have been useful to have some data on changes in Chinese compliance with the Convention over time.

About Ted Folkman

Ted Folkman is a shareholder with Murphy & King, a Boston law firm, where he has a complex business litigation practice. He is the author of International Judicial Assistance (MCLE 2012), a nuts-and-bolts guide to international judicial assistance issues, and of the chapter on service of process in the ABA's forthcoming treatise on International Aspects of US Litigation, and he is the publisher of Letters Blogatory, the Web's first blog devoted to international judicial assistance, which the ABA recognized as one of the best 100 legal blogs in 2012, 2014, and 2015.

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