A Conflict of Laws Model for Foreign Branch Deposit Cases

Many U.S. banks have tried to take advantage of and contribute to economic growth in developing countries by establishing branches in foreign nations.' When political and economic conditions become unstable, foreign governments have on occasion expropriated the branches' assets. Depositors unable to withdraw their funds because of the expropriation may attempt to recover from the U.S. bank's home office. A depositor's ability to recover ultimately depends on the court's choice of law. If U.S. law applies, the depositor usually can recover, because the bank has not repaid its debt to the depositor. Conversely, if foreign law applies, the depositor usually loses because the foreign government's expropriation carries the force of law and extinguishes the debt. Instead of analyzing these foreign branch deposit cases under conflict of laws principles, however, the courts have emphasized two doctrines developed in other contexts.