## Facts

- Grindlays Bank (Uganda) issued an irrevocable letter of credit for $406,846.80 in favor of J. Zeevi & Sons, an Israeli partnership, funded by a related depositor in Uganda.
- The credit was payable against clean drafts in monthly installments and required the negotiating bank to send drafts to Grindlays.
- The letter authorized the negotiating bank to obtain reimbursement in New York by debiting Grindlays’ account at First National City Bank (Citibank), upon certification of compliance with the credit’s terms.
- Ugandan monetary authorities instructed Grindlays to cancel foreign-exchange arrangements with Israeli entities and to stop foreign-exchange payments under the credit.
- Chemical Bank, acting as negotiating bank, presented demands for reimbursement to Citibank in New York; Citibank refused after receiving Grindlays’ instructions grounded in Ugandan exchange-control measures.
- Zeevi sued in New York and obtained attachment of Grindlays’ Citibank account; the trial court granted partial summary judgment on the letter-of-credit claim, and the Appellate Division affirmed.

## Issues

1. Whether New York or Ugandan law governs enforceability of an irrevocable letter of credit providing for reimbursement through a New York bank account.
2. Whether Ugandan exchange-control directives and the act of state doctrine bar a New York court from enforcing the issuer’s payment/reimbursement obligations.
3. Whether the issuer may avoid liability on an irrevocable credit because foreign governmental action interfered with foreign-exchange arrangements underlying the credit.

## Decision

- The New York Court of Appeals affirmed the judgment for Zeevi on the letter-of-credit claim.
- New York law applied, given the credit’s performance and reimbursement mechanism centered on New York banking channels and New York’s interest in the reliability of such transactions.
- Ugandan exchange-control measures did not defeat enforcement in New York, and the act of state doctrine did not require a New York court to give those measures extraterritorial effect.
- Grindlays remained liable on its irrevocable letter of credit; attachment and recovery against the New York reimbursement account were permitted.

## Legal Principles

- Choice of law in international banking disputes may turn on interest analysis and the jurisdiction with the strongest connection to the performance of the obligation, including the place of reimbursement and banking operations.
- An irrevocable letter of credit creates an independent undertaking by the issuer to honor conforming drafts, distinct from disputes or impediments in related commercial or governmental arrangements.
- The act of state doctrine does not automatically bar adjudication where the foreign sovereign’s measures would need extraterritorial effect to negate obligations structured for performance through New York.
- New York courts will protect the certainty of New York-centered letter-of-credit reimbursement arrangements absent a controlling foreign law directly governing the New York performance.

## Conclusion

The court enforced an irrevocable letter of credit designed to be reimbursed through New York banking channels, holding that New York law governed and that Ugandan exchange controls and act-of-state arguments did not excuse the issuer’s independent obligation to honor the credit.


J. Zeevi & Sons, Ltd. v. Grindlays Bank (Uganda) Ltd., 37 N.Y.2d 220 (N.Y. 1975)