## Facts

- Three Australian banks obtained authorization from the Comptroller of the Currency in 1981–1982 to operate limited federal branches in Illinois under the International Banking Act of 1978 (IBA).
- In 1983, the Illinois Commissioner of Banks and Trust Companies demanded payment of a “nonreciprocal license fee” under § 3 of the Illinois Foreign Banking Office Act.
- The fee applied to foreign banks whose home countries did not provide reciprocal licensing authority to Illinois state or national banks; Australia was treated as nonreciprocal.
- The banks filed suit in the Circuit Court of Cook County seeking declaratory and injunctive relief, asserting federal preemption and constitutional violations.
- The circuit court declared § 3 void and unenforceable and enjoined its enforcement.
- The Commissioner appealed directly to the Illinois Supreme Court; the Comptroller participated as amicus curiae supporting the banks.

## Issues

1. Whether § 3’s nonreciprocal license fee, as applied to limited federal branches of foreign banks, conflicts with the IBA and is therefore preempted under the Supremacy Clause.
2. Whether constitutional challenges to § 3 must be decided if the statute is invalid under federal statutory preemption.

## Decision

- The Illinois Supreme Court affirmed the circuit court’s judgment on federal statutory preemption grounds.
- The court held § 3 invalid and unenforceable as applied to the banks’ limited federal branches because it conflicted with the IBA’s federal regulatory scheme.
- The court declined to reach the constitutional arguments after resolving the case on preemption grounds.

## Legal Principles

- A state law is preempted when it imposes conditions that conflict with a comprehensive federal scheme governing the same subject matter.
- A reciprocity-based “license fee” imposed for the privilege of operating a foreign bank office functions as a condition on establishment or operation, not a generally applicable tax.
- Where federal law authorizes and regulates limited federal branches through federal officials, a state may not add operating conditions that burden or qualify the federally conferred authority.
- Courts should avoid deciding constitutional questions when a case can be resolved on statutory grounds.

## Conclusion

Illinois could not enforce a nonreciprocal license fee against limited federal branches of foreign banks because the fee operated as an additional state licensing condition that conflicted with the federal regime established by the International Banking Act of 1978, rendering the state provision preempted and unenforceable.


National Commercial Banking Corp. of Austl., Ltd. v. Harris, 125 Ill. 2d 448, 532 N.E.2d 812 (Ill. 1988)