This allowed funds to be attached in the U.S. when they passed through the banking system in the U.S.
As most international shipping is done in U.S. dollars, there was almost always the chance that funds would flow through the U.S.
Now, some relief from these attachments.
A US appeals court has issued a landmark ruling that electronic funds transfers cannot be attached through maritime law’s Rule B.
In 2002, the same court ruled in Winter Storm v. TPI that EFTs could be attached. Over the past year, the shipping crisis has led to a flood of Rule B EFT attachments in New York, with garnished funds used as security for London arbitration.
In Friday's ruling on the case of Shipping Corporation of India v. Jaldhi Overseas, the 2nd Circuit conceded that it erred in Winter Storm. It now believes EFTs are not attachable properties, while also citing the extreme pressures on the New York banking system caused by maritime EFT attachments.
The Clearing House Association estimated that between 1 October 2008 and 31 January 2009, maritime claimants filed 962 lawsuits seeking to attach $1.35Bn. Such lawsuits comprised a third of all suits filed in the Southern District Court of New York.
It is believed that over $100M in funds previously attached as arbitration security may now have to be relinquished. This could have several effects: first, it could derail arbitrations in London that were only proceeding because EFTs had been attached; second, it could lead to more traditional ship arrests; and third, it could hurt the bottom lines of Manhattan maritime law firms specialising in litigation.