Reed International, Inc. v. Afghanistan International Bank

Background

Reed International, Inc. provided security, training, and logistics services supporting the United States Military in Afghanistan. To obtain a private-security-company license from Afghanistan’s Ministry of Interior Affairs, Reed obtained a bank guarantee from Afghanistan International Bank (AIB), a bank based in and operating in Afghanistan. Reed provided $300,000 in cash collateral for the guarantee and also maintained a bank account with AIB.

The guarantee was extended through August 21, 2021. After Reed decided not to renew its Afghan license and shut down its Afghan operations, it asked AIB to return the guarantee collateral and the funds in its bank account. Reed alleged that AIB refused to release the funds. The account allegedly held $16,062.84. Reed sued for breach of contract and, alternatively, unjust enrichment, seeking a total of $316,062.84.

The guarantee was subject to the Uniform Rules for Demand Guarantees, which included a mandatory provision requiring disputes to be heard in Afghanistan. The opinion also discussed a counter-guarantee that Reed issued to AIB from its Kabul office; that counter-guarantee was likewise subject to the same rules. The account agreement required claims against AIB to be lodged in Afghanistan and provided that the agreement was governed by Afghan law.

Motions and jurisdiction

AIB moved to dismiss based on lack of personal jurisdiction, improper venue, and the contractual forum-selection clauses under the doctrine of forum non conveniens, which allows a court to dismiss a case when another country is the appropriate forum. Reed moved for limited jurisdictional discovery to investigate whether AIB had sufficient contacts with New York.

The court held that Reed failed to establish either general or specific personal jurisdiction. Reed relied principally on AIB’s past correspondent-banking relationship with Standard Chartered Bank in New York, AIB’s relationship with Crown Agents Bank and Bank of New York Mellon, an alleged relationship with Citibank, internet activity, alleged marketing, and banking services allegedly provided to the United Nations.

The court found that the Standard Chartered relationship had ended by October 2019, before Reed filed this action in December 2021. Reed also did not connect the Standard Chartered transactions to the alleged contractual breaches, which arose from agreements made in Afghanistan concerning services provided there. The court rejected Reed’s argument that AIB’s relationship with Crown Agents Bank created jurisdiction through Crown Agents Bank’s use of Bank of New York Mellon, explaining that one correspondent-banking relationship does not automatically create another. The court likewise found no adequate connection to Citibank, and held that AIB’s website and alleged charitable or marketing activities did not establish the required connection to the claims.

The court also held that venue was improper in New York. AIB was chartered under and operated subject to Afghan banking laws, no substantial part of the events occurred in New York, and Reed had not shown that AIB was subject to personal jurisdiction there.

Forum-selection clauses

The court found that the forum-selection clauses were valid, mandatory, and applicable to the parties and claims. Reed had signed the relevant agreements and acknowledged the guarantee’s governing rules. The counter-guarantee required disputes to be resolved exclusively in the country where Reed’s issuing office was located, which the court identified as Afghanistan. The account agreement required claims against AIB to be lodged in Afghanistan.

Reed argued that enforcing the clauses would be unreasonable because its representatives could face serious danger in Afghanistan and would effectively be denied a trial. The court rejected that argument, finding that Reed had not provided enough information to show that litigating in Afghanistan would be so difficult and inconvenient that it would lose its opportunity to be heard. The court also noted Reed’s experience operating in high-risk locations and its agreement to conduct business under Afghan law.

Disposition

The court held that exercising personal jurisdiction over AIB would be improper and that dismissal was appropriate on that basis. It also enforced the contractual forum-selection clauses. AIB’s motion to dismiss was granted. Reed’s motion for limited jurisdictional discovery was denied because Reed had not made a preliminary showing of personal jurisdiction or identified a genuine jurisdictional factual dispute. The clerk was directed to terminate the motions and close the case.