JPMorgan Chase Bank v. Traffic Stream (BVI) Infrastructure Ltd.

Traffic Stream (BVI) Infrastructure Ltd.

Company type	Private company
Industry	Infrastructure / Financing
Headquarters	British Virgin Islands

JPMorgan Chase Bank v. Traffic Stream (BVI) Infrastructure Ltd., 536 U.S. 88 (2002), represents a Supreme Court decision confirming that a corporation formed under the jurisdiction of a British overseas territory qualifies as a "citizen or subject of a foreign state" for purposes of federal court jurisdiction.

Background

Chase Manhattan Bank, presently known as JP Morgan Chase, initiated legal action against Traffic Stream (BVI) Infrastructure Ltd., a company incorporated in the British Virgin Islands, concerning financing matters. The case was brought before the United States District Court for the Southern District of New York, invoking alienage jurisdiction pursuant to 28 U.S.C. § 1332(a)(3), which applies to disputes involving a U.S. entity and a foreign citizen or subject. The District Court ruled in favor of Chase, prompting an appeal by Traffic Stream.

Although not initially contested, the United States Court of Appeals for the Second Circuit raised the question of federal jurisdiction sua sponte and determined it did not possess jurisdiction. The court reasoned that because the British Virgin Islands are classified as a dependent territory rather than an independent "foreign state," corporations incorporated there do not qualify as foreign citizens or subjects. This interpretation was consistent with earlier Second Circuit rulings concerning Hong Kong prior to its transfer of sovereignty.

Traffic Stream sought review by the Supreme Court, supported by an amicus curiae brief submitted by the UK government. The Supreme Court agreed to hear the case.

Opinion of the Court

Justice David H. Souter authored a unanimous opinion overturning the Second Circuit’s decision, concluding that corporations established in the British Virgin Islands constitute "citizens or subjects of a foreign state" under federal jurisdiction standards.

The Court emphasized that Congress permits federal courts to adjudicate cases exceeding $75,000 involving parties who are U.S. citizens and foreign citizens or subjects, including corporations formed under foreign jurisdiction. The Second Circuit’s distinction—that the dependent territory status of the British Virgin Islands excludes its companies from alienage jurisdiction—was found inconsistent with the statutory framework.

After examining political status and legislative history, the Court determined such corporations should be treated as citizens or subjects of a sovereign nation—the United Kingdom—for alienage jurisdiction purposes. While residents of the British Virgin Islands do not hold UK citizenship under nationality law, this fact does not undermine their classification under federal jurisdiction statutes. This ruling aligned with positions presented by the governments of the UK, British Virgin Islands, and United States.

See also

• HIH Casualty and General Insurance Ltd v Chase Manhattan Bank