Standard Account Terms as a Global Waiver of Sovereign Immunity & The Civil Nature of Large Coercive Fines

Comprehensive Commentary on JPMorgan Chase Bank, N.A. v. VTB Bank, P.J.S.C.
United States Court of Appeals for the Second Circuit, 17 July 2025

I. Introduction

After sweeping U.S. economic sanctions were imposed against Russian entities in 2022-2023, Plaintiff-Appellee JPMorgan Chase Bank (“JPMorgan”) froze a U.S. dollar account held by Defendant-Appellant VTB Bank, P.J.S.C. (“VTB”), one of Russia’s largest state-controlled banks. VTB responded by suing JPMorgan in a Moscow commercial court for allegedly wrongful freezing of funds. JPMorgan, citing a New York forum-selection clause contained in its standard account terms, filed suit in the Southern District of New York to halt the Russian litigation. Judge Lorna G. Schofield granted a temporary restraining order (“TRO”) and later a preliminary injunction directing VTB to discontinue the Moscow proceeding. VTB nevertheless pressed forward abroad. The district court found VTB in civil contempt and—after warning of escalating consequences—levied a US $500,000 fine when non-compliance continued.

Before the Second Circuit, VTB challenged (i) the contempt findings and (ii) the nature of the US $500,000 fine, contending it was an impermissible criminal penalty. The panel (Menashi, Lee, & Kahn, JJ.) summarily affirmed. Although issued as a “Summary Order” without formal precedential value under Local Rule 32.1.1, the decision enunciates two practical principles of first-impression significance for cross-border banking disputes:

1. Generic or “standard” account terms—if sufficiently broad—can effect a global waiver of sovereign immunity under FSIA § 1605(a)(1) across all of a sovereign’s accounts at the bank, not merely the account for which the terms were originally executed.
2. A sizable, one-off fine triggered by continued non-compliance with an injunction retains its character as a civil coercive sanction so long as the contemnor had the real-time opportunity to avoid or mitigate the assessment by obeying the underlying order.

II. Summary of the Judgment

• Contempt Affirmed. The district court correctly found contempt because: (a) its injunction was clear and unambiguous; (b) evidence of VTB’s violation was clear and convincing; (c) VTB made no diligent effort to comply.
• Personal & Subject-Matter Jurisdiction. VTB’s signature on JPMorgan’s standard account terms constituted an express and implied waiver of sovereign immunity and consent to New York jurisdiction.
• Fine Upheld as Civil. The US $500,000 assessment was coercive, not punitive—VtB could have purged the sanction by discontinuing the Moscow action after the warning.
• Reasonableness of Amount. The size matched the threatened counter-fine JPMorgan faced in Russia and was proportionate to the stakes.

III. Detailed Analysis

A. Precedents Cited & Their Influence

1. GTE Sylvania, Inc. v. Consumers Union, 445 U.S. 375 (1980).
   Reaffirmed the obligation to obey injunctions pending appeal. Guided the panel’s view that VTB’s belief in ultimate reversal offered no excuse.
2. Paramedics Electromedicina Comercial v. GE Medical, 369 F.3d 645 (2d Cir. 2004).
   Supplied both the abuse-of-discretion standard for reviewing contempt and factors for calibrating fines. Also underscored the “magnitude-of-harm” metric.
3. Matrix Essentials, Inc. v. Quality King Distribs., 324 F. App’x 22 (2d Cir. 2009).
   Cited for the proposition that contempt may stand even if the underlying injunction is later vacated.
4. Weston Capital Advisors v. PT Bank Mutiara, 738 F. App’x 19 (2d Cir. 2018).
   Restated the three-part test for civil contempt.
5. Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985) & C.M.M.I. v. Pemex, 832 F.3d 92 (2d Cir. 2016).
   Established that parties can confer personal jurisdiction by contract; applied to the forum-selection clause.
6. Int’l Union, United Mine Workers v. Bagwell, 512 U.S. 821 (1994).
   Defined the civil/criminal contempt divide, focusing on purgation.
7. CBS Broadcasting v. FilmOn.com, 814 F.3d 91 (2d Cir. 2016).
   Confirmed that “no further purge opportunity” after a warned deadline does not convert a sanction from civil to criminal.
8. N.Y. State NOW v. Terry, 159 F.3d 86 (2d Cir. 1998) & Perfect Fit Industries v. Acme Quilting, 673 F.2d 53 (2d Cir. 1982).
   Influenced the proportionality analysis regarding fine size.

B. Legal Reasoning of the Second Circuit

1. Jurisdiction & Waiver under the FSIA.
   • Statutory predicate: 28 U.S.C. § 1605(a)(1).
   • The “standard terms” contained an irrevocable waiver of immunity as to accounts and services ‑— broad wording permitting the district court to exercise jurisdiction over disputes pertaining to any VTB account.
   • At the preliminary injunction stage, JPMorgan needed only a “reasonable probability” of ultimately proving jurisdiction (Visual Sciences v. Integrated Commc’ns). Evidence met this low threshold.
2. Finding of Contempt.
   The injunction’s command—cease Russian litigation—was explicit; VTB’s ongoing Moscow filings were indisputable; and no diligent compliance efforts existed. Hence, contempt elements satisfied.
3. Civil vs. Criminal Sanction.
   • The court applied the Bagwell and CBS “purgation” test.
   • The US $500,000 fine was pre-announced and avoidable; purpose: compel compliance, not punish.
   • Size alone does not transmogrify a sanction into criminal territory; proportionality to threatened harm (another US $500k Russian penalty) rendered the sum reasonable.
4. Forum-Selection Clause Enforcement.
   • Clause designated New York state and federal courts as exclusive venues.
   • Under M/S Bremen v. Zapata Off-Shore principles, such clauses are presumptively enforceable; here, no “gravely unjust” reason to disregard.

C. Potential Impact of the Judgment

• Banking & Sanctions Compliance. Affirms that U.S. financial institutions may rely on broad boilerplate terms to compel sovereign counterparties into U.S. courts, crucial when sanctions disorders arise.
• FSIA Waiver Jurisprudence. Indicates that a waiver signed for one account can bleed over to other accounts if the contractual language is sufficiently expansive—an unresolved grey area now receiving appellate endorsement.
• Contempt Enforcement Against Foreign States. Demonstrates a pragmatic pathway—monetary coercion—to enforce injunctions even when the contemnor is a sanctioned foreign sovereign perceived as beyond traditional reach.
• Guidance on Fine Calibration. The decision underscores tying the “coercive fine” amount to a concrete, measurable harm or exposure figure, strengthening defensibility on appeal.
• Forum-Selection Reliability. Reassures commercial actors that U.S. courts will robustly protect contractual choices of forum against parallel foreign proceedings, even when geopolitical frictions loom large.

IV. Complex Concepts Simplified

FSIA (Foreign Sovereign Immunities Act)

Federal statute granting foreign states presumptive immunity from U.S. litigation, subject to enumerated exceptions, including express or implied waiver.

Sovereign Waiver by Contract

If a foreign state signs a contract containing an immunity waiver or forum-selection clause, it generally forfeits FSIA protection for disputes arising under that contract.

Civil Contempt

Sanction designed to coerce compliance or compensate a party. The contemnor can usually “purge” the contempt by obeying the order.

Criminal Contempt

Punitive measure to vindicate the court’s authority, often involving fixed fines or imprisonment without purge option; requires additional procedural safeguards.

Forum-Selection Clause

Contractual provision specifying where disputes must be litigated. U.S. courts treat such clauses as presumptively valid unless enforcement would be unreasonable.

Temporary Restraining Order (TRO) / Preliminary Injunction

Emergency, pre-trial orders preserving the status quo. TROs are short-term; preliminary injunctions last until final judgment.

V. Conclusion

Although couched as a non-precedential “Summary Order,” JPMorgan v. VTB delivers a potent message in transnational banking litigation: boilerplate matters. A foreign sovereign’s signature on “standard” U.S. bank forms can strip immunity across all accounts, and defiance of forum clauses will draw swift injunctive relief. Equally salient, the Second Circuit confirmed that sizeable, one-time fines following a clear purge opportunity remain civil and therefore demand fewer constitutional safeguards than criminal contempt. The ruling fortifies the practical enforceability of U.S. judgments and injunctions against sanctioned or recalcitrant foreign state entities, reinforcing New York’s pre-eminence as an international financial forum.

Key takeaway for practitioners: ensure that account opening documents and service agreements contain explicit, broad waiver language; and, in contempt scenarios, tie coercive fines to identifiable harms, pre-announce consequences, and provide a path to compliance.