Banco de la Republica de Colombia v. Bank of New York Mellon

U.S. DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
Contracts

, New York Law Journal

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Judge Alvin Hellerstein

Banco de la Republica de Colombia (Banco de Colombia) is Colombia's central bank. Investment Guidelines §3.7 of its 2005 contract with defendant BNY Mellon Asset Servicing BV (BNYMAS) barred investments with Cayman Islands issuers. BNYMAS allegedly breached the pact by investing $20 million with Cayman Islands incorporated Sigma Finance Corp. (SFC). The bank lost its investment after SFC's defaulted on its guarantees on notes that Delaware incorporated parent Sigma Finance Inc. (SFI) defaulted upon in September 2008. District court granted the bank summary judgment as to BNYMAS's liability on its claims of contract breach and failure to disclose that SFI and SFC were in bad financial condition. The bank did not ratify BNYMAS's breach. However, fact issues existed on Banco de Colombia's damages claim. BNYMAS claimed §3.7 inserted to ensure that Colombia's government did not invest its reserves in countries that assisted corporations in tax avoidance. Further, the record lacked evidence regarding intervening causes of harm. BNYMAS asserted that Banco de Colombia lost its Sigma investment as a result of the global financial crisis following the collapse of Lehman Brothers and other financial institutions.

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