The law of the country where a bank account is kept will usually govern the banker-customer contract. However, the law of another country may affect the account.
In Ispahani v Bank Melli Iran, December 18 1997, the bank alleged by way of defence to an action for breach of mandate that the account-holder, a resident of Bangladesh, had operated certain accounts held at the bank's Kensington branch in breach of Bangladeshi exchange controls. The Court of Appeal allowed the defence to stand even though the bank could not establish that the controls were recognized and enforced under the Bretton Woods Amendments Order 1946. A court will not generally enforce an English law contract to be performed in a friendly foreign country, if performance is unenforceable under the laws of that country.
In Sierra Leone Telecommunications Co v Barclays Bank, February 25 1998, the plaintiff (a telecoms company wholly-owned by the Sierra Leone government) held a US dollar account at the bank's Knightsbridge branch. Under its mandate, the bank was required to act on the authority of the directors of Sierratel. After a coup in May 1997, the military junta purported to appoint new directors and revoke the existing mandate. In declaring the revocation to be ineffective, the judge applied the laws of Sierra Leone to determine that the new directors had not been validly appointed. Under the company's articles and the constitution of Sierra Leone, the directors could only be appointed by the government. The judge concluded that, because the UK government did not have dealings with the military junta, which had limited international recognition, it did not exist as the government of state and therefore was unable to appoint directors to the company.
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