Hamilton Reserve Bank Ltd. v. The Democratic Socialist Republic of Sri Lanka
1:22-cv-05199
S.D.N.Y.Apr 23, 2024Background
- Hamilton Reserve Bank Ltd. (Hamilton) claims to own over $250 million in Sri Lankan government bonds purchased between August 2021 and April 2022.
- Sri Lanka defaulted on these bonds, prompting Hamilton to sue for the principal and accrued interest.
- The case was stayed for sovereign debt restructuring negotiations until August 1, 2024.
- Intercoastal Finance Ltd. (a Belize company), Ultimate Concrete, LLC (a Texas company), and Jesse Guzman (U.S. citizen) moved to intervene, claiming a right to funds they deposited with Hamilton allegedly used to purchase the bonds.
- Intervenors claim an equitable interest in the bonds via a constructive trust theory based on the timing of their deposit and Hamilton’s bond purchases.
- Hamilton opposed the intervention, and mediation between the parties was initiated in Saint Kitts and Nevis.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject matter jurisdiction | Intervention possible via § 1367 | Intervenors’ claims not related to core bond claim; lack common nucleus of fact | Intervention denied; no jurisdiction under § 1367 |
| Common nucleus of operative fact | Claims derive from associated transactions | Claims are about distinct facts (alleged deposit misuse, not Sri Lanka default) | Court agrees; no substantial factual overlap |
| § 1367(b) supplemental jurisdiction bar | Not applicable as suit is against foreign state under § 1330 | Intervenors are foreign nationals; bar applies | Court: Bar not applicable under § 1330 actions |
| Constructive trust/equitable interest | Funds deposited used to buy bonds equals equitable interest | No direct link between deposit and bond purchase; different legal issues | Court: Insufficient for intervention |
Key Cases Cited
- Achtman v. Kirby, McInerney & Squire, LLP, 464 F.3d 328 (2d Cir. 2006) (lays out the standard for "common nucleus of operative fact" for supplemental jurisdiction)
- F5 Capital v. Pappas, 856 F.3d 61 (2d Cir. 2017) (discusses § 1367(b)'s bar on supplemental jurisdiction for certain claims with foreign parties)
- Clarendon, Ltd. v. State Bank of Saurashtra, 77 F.3d 631 (2d Cir. 1996) (clarifies that § 1367(b) bar does not apply in suits based on § 1330 against a foreign state)