Экзамен зачет учебный год 2023 / The-independence-principle-of-letters-of-credit-and-demand-guarantees-150-373

Conflict o f Laws

2.The Common Law Regime

13.42Under the common law rules, the jurisdiction of the English court in actions in personam is founded on service of process on the defendant, except where the defendant has submitted to the English court’s jurisdiction. The defendant may be served with process either within the jurisdiction, without the permission of the court, or outside the jurisdiction, with the permission of the court.

A. Service within the jurisdiction

(i)Service o fprocess

13.43Process may be served on the defendant even if he is present in the jurisdiction only for a fleeting moment.79 Rules on the method of service of process within the jurisdiction are set out in Part 6 of the Civil Procedure Rules (CPR).80 Once jurisdiction has been assumed on the basis of service of process on the defendant it continues even if the defendant leaves the jurisdiction.81 Since jurisdiction based on service within the jurisdiction means that in cer­ tain cases the English court will have jurisdiction even though the case has little or no con­ nection with England, assumption of jurisdiction on this basis is subject to a discretionary power to stay English proceedings in cases where England is aforum non conveniens.82*

(ii)Forum non conveniens

13.44As Lord Golf explained in Spiliada Maritime Corp v. Cansulex Ltd,S3a stay will be granted on the ground o fforum non conveniens ‘where the court is satisfied that there is some other avail­ able forum, having jurisdiction, which is the appropriate forum for trial of the action, ie in which the case may be tried more suitably for the interests of all parties and the ends ofjustice’. Where the claimant has served process on the defendant within the jurisdiction, the burden is on the defendant who applies for a stay ofproceedings on the ground offorum non conveniens84 to show that there isan alternative available forum which is clearly or distinctly the appropriate forum for trial.85 However, the main criteria that govern the application of the forum conve­ niens doctrine, where the claimant wants to serve process abroad, are the same as those that govern application of theforum non conveniens doctrine, where the defendant wants to stay English proceedings.86 There are two main stages in the process of applying the doctrine.

13.45In the first stage the court considers whether England is the natural forum’ in the sense of the forum with which the action has its closest and most real connection. In doing so the court takes into account a wide range ofconnecting factors including: the nature of the dispute, the legal and practical issues involved, such as questions of local knowledge, the availability of witnesses and their evidence and expense,87 the connections between the parties and the cause

79HRH M aharanee Seethaderi GaekwarofBarodav. Wildenstein [1972] 2Q B 283; ColtIndustries Inc v. Sarlie

[1966] 1 A1IER 673.

80CPR Pt 6.3 to 6.19.

81Myerson v. M artin [1879] 1 WLR 1390.

82Spiliada M aritime Corp v. Cansulex Ltd [1987] AC 460; Conelly v. RTZ Corp Pic [1998] AC 854; Lubbe v. Cape Pic [2000] 1 WLR 1545.

33 [1987] AC 460 at 476.

84'Ihe application is made under CPR Pt 11.

85e.g. Bank o fCreditand Commerce Hong Kong Ltd (in liquidation) v. Sonali Bank [1995] 1 Lloyds Rep. 227.

86Spiliada M aritime Corp v. Cansulex Ltd [1987] AC 460.

87Amin Rasheed Corp v. Kuwait Insurance Co [1984] AC 50 at 12, per Lord Wilberforce.

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88Spiliaela M aritime Corp v. Consulex Ltd [1987] AC 460.

89Bank ofBaroda v. Vysya Bank Ltd [1994] 2 Lloyd’s Rep. 87 at 96.

90In the case of an application for permission to serve process out of the jurisdiction, permission will nor­ mally be refused.

91Deripaska v. Cherney [2009] EWCA Civ 849, risk of interference by the State of Russia in the judicial process.

92 Marconi v. P T Pan Indonesia Bank Ltd TBK [2004] 1 Lloyds Rep. 594, a ffd [2005] EWCA Civ 422 at [77].

93Lise ViskvaAbba [1990] 2 Lloyd’s Rep. 312.

94Ronehigh Ltd v. MIL Exports Inc [1989] 1 WLR619.

95H abib Bank Ltd v. CentralBank o fSudan [2006] 2 Lloyd’s Rep. 412 at [45].

96Oppenheimer v. Louis Rosenthaland Co AG [1937] 1 A11ER23.

97Permission of the court is not required to serve a claim form on a defendant within the United Kingdom (Scotland and Northern Ireland) where the claim is in respect of a matter over which the English court has jurisdiction under the Modified Brussels I Regulation: CPR Pt 6.32). Permission is also not required for service of a claim form out of the United Kingdom where the claim is in respect of a matter over which the English courts have jurisdiction under the European regime: CPR Pt 6.33.

98Spiliada M aritime Corp v. Cansulex Ltd [1987] AC 460 at 481.

99These grounds were previously in the CPR 6.20 of the old rules. The CPR rules on service of process out of the jurisdiction replace the old rules under RSC Ord 11, r 1(1).

100 CPR 6.37(1) and (3). And see Seaconsar Far Eastern Ltd v. Bank M arkaziJomhouri Islami Iran [1994] 1 AC 438. Where the claimant has served a person within the jurisdiction and the claimantwants to serve another person out of the jurisdiction as a necessary and proper party, there is an additional condition that the claimant should show that there is between the claimant and the defendant (who has been served in England) a real issue which it is reasonable for the court to try: CPR 6.37(2).

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Conflict o f Laws

the breach was committed in England. Instances where there is such a connection with England are contained in the jurisdictional grounds listed in CPR 6BPD 3.1. In the case of a claim arising from a letter of credit or performance transaction a number of the jurisdic­ tional grounds in CPR 6BPD 3.1 are likely to be relevant. This will be the case where the claim is for a remedy against any party to the transaction domiciled in England101 (whether this is the bank, the beneficiary, or the account party), or, if the party is not domiciled in England, a claim for an injunction ordering that party to do or refrain from doing something within the jurisdiction102 (such as an injunction ordering the beneficiary not to demand payment from the bank in England), or on the ground that the claim is made in respect of'a contract where the contract was made in England, or was made by or through an agent trading and residing in England, or is governed by English law103 or contained a clause conferring jurisdiction on the English courts,104 or the claim is made in respect of a breach of contract committed within the jurisdiction.10516In some cases a claim may fall under more than one of thegrounds in CPR6BPD 3.1. In PTPan Indonesia BankLtdTBKv. Marconi Communications International Lad,106 a letter of credit was issued by a foreign bank and confirmed by another foreign bank and advised to the beneficiary in England by a bank in England. The credit was available by negotiation of drafts drawn on the confirming bank. The confirming bank refused to pay and the beneficiary commenced proceedings in England against the bank for damages for breach of contract by refusing to pay. The Court of Appeal gave permission for process to be served on the bank abroad, holding that the claim fell within four of the juris­ dictional grounds107 in that the contract between the beneficiary and the confirming bank was: (a) made within the jurisdiction, (b) made by the advising bank in London as agent for the confirming bank, (c) governed by English law, and (d) the refusal to pay constituted a breach of contract committed within the jurisdiction.

13.49An application for permission to serve out of the jurisdiction must set out which of the jurisdictional grounds of CPR 6BPD 3.1 is relied on.108 However, the claimant will need to provide the court with the necessary evidence to enable the court to determine whether on the facts the jurisdiction of the court has been established on the ground relied on. The stan­

dard to be applied in this regard is that of a good arguable case.1091In considering whether there is a good arguable case the court takes into account all the admissible material, not just the claimant’s case. The performance bond case oiAttock Cement Co Ltd v. Romanian Bank for Foreign Trade110 illustrates this point. The underlying contract was for the construction of a cement plant in Pakistan for the claimant, a Cayman Island company. Tire contract, which by its terms was governed by English law, required the Romanian contractor to provide a performance bond. The bond was issued by the defendant, a Romanian bank. There was no express provision in the terms of the performance bond as to jurisdiction or

101CPR 6BPD.3.1(1).

102Ibid., at (2).

103Ibid., at (6)(c).

104Ibid., at (6)(d). See, e.g. H abib Bank Ltd v. Central Bank o fSudan [2006] 2 Lloyd’s Rep. 415.

105CPR6BPD 3.1(7).

106[2005] EWCA Civ 422.

107Under what was then CPR 6.20.

108CPR6.37(l)(a).

109Sharabv. HRH PrinceAtWaitedBin TalalBin Abdal-AzizAl-Saud[lQQ9\ EWCACiv353; The Republic o fPakistan v. Zardari [2006] EWHC 2411 (Comm) at [137], following бедсталг?-Far East Ltd v. Bank M arkazi Jonhouri Islami Iran [1994] 1 AC 438.

110[1989] 1 WLR 1147.

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II. Jurisdiction

the governing law. Construction failed to proceed as planned and the claimant made a demand under the bond but the defendants failed to honour the demand, 'fhe claimant brought proceedings against the defendants in England and applied for leave to serve the defendants outside the jurisdiction on the ground that the performance bond was governed by English law. The claimant contended that the performance was governed by English law on the bases that there was a collateral oral agreement to that effect or by implication from the proper law of the construction contract. After assessing the strength of the cases of both parties it was held that the claimant had failed to show a good arguable case that there had been an oral agreement concerning the governing law or that the performance bond was impliedly governed by English law (since the bond was intended to be separate and indepen­ dent of the underlying contract). In the result, the Court of Appeal refused the claimant permission to serve process abroad.

(ii) A reasonableprospect o fsuccess

It is not enough for the claimant to establish a good arguable case that his claim falls within 13.50 one of the jurisdictional grounds. An application for permission to serve out of the jurisdic­

tion must also set out that the claimant believes that the claim has ‘a reasonable prospect of success’.111 This does not mean that a mere statement by the claimant that he believes the claim has a reasonable prospect of success will be sufficient.112 The claimant’s application must show evidence that on the merits the claim has a reasonable prospect of success. This is the same as the test o f‘real prospect of success’ under CPR 3.2 and 24.113 The threshold of this test is lower than that of a good arguable case.114 It is the same as the test o f‘a real issue to be tried’11516which was applied in Seaconsar Far East Ltd v. Bank MarkaziJomhouri Islami 1гапш under the old RSC Order 11, rule 1 (1) in a claim concerned with a letter of credit. The claimant, a Hong Kong company, agreed to sell a large quantity of artillery shells to the Iranian Ministry of Defence. Payment was to be by letter of credit. The defendant, an Iranian bank, issued the letter of credit in favour of the claimant. The credit was unconfirmed and, as amended, was payable at sight on presentation of the required documents at the counters of a bank in London that had advised the credit. The credit permitted partial shipments. The claimant made two shipments and presented documents to the bank in London but the defendant failed or refused to pay under the credit. The claimant commenced proceedings in England against the issuing bank for damages for breach of contract and applied for per­ mission to serve process outside the jurisdiction on the ground that the contract was made within the jurisdiction or that the contract was made by or through the advising bank, as agent trading within the jurisdiction for the issuing bank which was out of the jurisdiction or on the ground of breach of contract within the jurisdiction (that is to say, the refusal to pay at the counters of the advising bank in London). The defendant bank did not dispute that the claim fell under either of the jurisdictional grounds but it contended that the claimant had not established a sufficiently strong case on the merits. The bank argued that it was entitled to refuse to pay because the documents were discrepant. The House of Lords gave the claimant permission to serve process on the bank abroad on the ground that there were

111CPR6.37(l)(b).

112Chemische Fabrik Vomiab Sandoz v. BadischeAnlin undSoda Fabriks (1904) 90 LT 733 at 735, per Lord Davey, referring to the equivalent requirement under the former Ord 11, r 4.

113CarvillAmerica Inc v. Camperdown UKLtd [2005] 2 Lloyd’s Rep. 457 at [24].

114Ibid., at [45].

115The Republic o fPakistan v. Zardari [2006] EWHC 2411 (Comm) at [136].

116[1994] 1 AC 438.

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Conflict o f Laws

serious issues to be tried on whether the bank was entitled to reject the documents as noncompliant. Hie House ofLords also confirmed that for permission to serve process out of the jurisdiction to be granted it must be shown that: there is a good arguable case that the claim fell within one of the jurisdictional grounds of RSC Order 11 rule l(l),n ow C P R 6B P D 3 .1; there was a serious issue to be tried on the merits; and England was theforum conveniens.

(Hi) Forum conveniens

1 3 .5 1 Under CPR 6.37(3) the court will not give permission to serve abroad unless it is satisfied that England ‘is the proper place in which to bring the claim’. This requires the court to consider the question offorum conveniens, namely, whether England is the most suitable place for trial in the interests of all the parties and the ends of justice. The same general prin­ ciples that the court applies to determine whether England is aforum non conveniens, where the defendant has been served within the jurisdiction, are applicable mutatis mutandis when the court seeks to determine whether England is theforum conveniens, where permission is sought to serve out of the jurisdiction.117 It is therefore not necessary to repeat those princi­ ples here.118 There is, however, a difference in the burden of proof. Where permission is sought for service out of the jurisdiction the burden is on the claimant to satisfy the court that England is clearly the most appropriate forum for the trial of the action.

117Spiliada Maritime Corp v. Cansulex Ltd [1987] AC 460; Deripaska v. Cherney [2009] EWCA Civ 849.

118See discussion at paras 13.43 to 13.46 above.

119CPR 6BPD 3.1 (6)(c). See discussion above at para 13.48.

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120Implemented in the UK by the Contracts (Applicable Law) Act 1990.

121Council Regulation (EC) 593/2008 of 17 June 2008, [2008] OJ L I77/6).

122See reg. 5 of the LawApplicable to Contractual Obligations (England and Wales and Northern Ireland) Regulations 2009 (SI 2009/3064) and reg. 4 of the Law Applicable to Contractual Obligations (Scotland) Regulations 2009 (SSI 2009/410).

123See, e.g. Recitals 11, 16, and 23 of the Rome I Regulation.

124e.g. Wahda Bank v. Arab Bank [1996] 1 Lloyd’s Rep. 470 at 472.

125Vita Foods Product v. Unus Shipping Co Ltd [1939] AC 211.

126Amin RasheedShipping Corp v. Kuwait Insurance Co [1984] AC 50, a case concerned with service out of the jurisdiction on the ground that the contract is governed by English law.

127e.g. Compagnie Tunisienne de Navigation SA v. Compagnie dArmementM aritime SA [1971] AC 572.

128Bonython v. Commonwealth o fAustralia [1951] AC 201 at 219.

129 Cantieri Navali Riuniti SpA v. NV Omne Justitia, 'The Stolt M armaro [1985] 2 Lloyd’s Rep. 428 at

433-435.

130TheAssunzione [1954] P 150.

131ReAnglo Austrian B an k\Vm\ 1 Cti Jacobs v. Credit Lyonnais (1884) 12 QBD 589, 600, 602.

132Bonython v. Commonwealth o fAustralia [1951] AC 201 at 219—220.

133Samcrete Egypt Engineers and Contractors SAE v. Land Rover Exports Ltd [2002] CLC 533 at [39J.

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Conflict o f Laws

applicable law. Where there is no choice the Convention and the Regulation contain provi­ sions on how to identify the applicable law in the absence of choice.

(i)Where there is a choice o flaw

13 .5 7 Under Article 3(1) of the Convention and the Regulation a contract is governed by the law chosen by the parties. This is subject to the provisions on mandatory rules and public policy.134

13 .5 8 Article 3(1) of the Convention provides that choice may be express ‘or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case’. Thus where there is no express choice it is necessary to determine whether choice could be inferred or implied. Choice may be inferred from the terms of the contract where, for example,135 the contract contains a clause conferring jurisdiction on the courts of a particular country or an arbitration clause for arbitration to take place in a particular country or where the agreement is in a standard form which is known to be governed by a particular system of law.13617In Egon Oldendorffv. Liberia Corp137 the court inferred choice of English law from a clause providing for arbitration in London. Choice may also be inferred from the circumstances of the case. Examples of such circumstances, according to the Giuliano and Lagarde Report138 include a case where there has been a previous course of dealing under contracts containing an express choice and this choice of law clause is omitted in circumstances which do not indicate a deliberate change of policy by the parties and a case where there is an express choice in a related contract.139

13 .5 9 The Regulation has introduced a couple of changes to implied choice. First, under Article 3(1) of the Regulation the choice is to be clearly’ demonstrated rather than demonstrated with ‘reasonable certainty’. It is not clear whether any change in substance is intended here. Secondly, Recital (12) provides that a clause conferring exclusive jurisdiction on the courts of a Member State should be one of the factors taken into account in determining whether a choice of law has been clearly demonstrated. This clarification has been introduced because under the Convention courts in some Member States were not as keen as the English courts to infer choice of law from a jurisdiction clause.140 Since Recital (12) only mentions a juris­ diction clause conferring exclusive jurisdiction on the courts of a Member State, it is not clear whether this factor will carry the same weight where the jurisdiction clause gives exclusive jurisdiction to the courts of a non-Member State.

(ii)Absence o fchoice

13 .6 0 Where there is no choice, the applicable law is determined in accordance with Article 4 .141 There is, in paragraph (1), a general rule that in the absence of choice the contract is governed

134Special rules apply in the case of certain consumer contracts (Art. 5) and individual employment contracts (Art. 6).

135See Giuliano and Lagarde Report, 15-17.

136Gan Insurance Co Ltd v. Tai Ping Insurance Co Ltd [1999] I L Pr 729; Cadre 571 v. Astra Asigurari [2004] EWHC (QB); Dornach Ltd v. Mauritius Union Assurance Co Ltd [2006] Lloyds Rep. 475 at [43].

137e.g. Egon Oldendorffv. Liberia Corpn [1995] 2 Lloyd’s Rep. 64; [1996] 1 Lloyd’s Rep. 380.

138At 17.

139But choice will not be inferred in every case where there is express choice in a related contract. See, e.g.

ISS Machinery Services Ltd v. Aeolian Shipping SA [2001 ] Lloyd’s Rep. 641.

140See Green Paper of 14 January 2003 on the Conversion of the Rome Convention, COM (2002) 654 final, 23-25.

141There are special provisions for certain types of contract such as certain consumer contracts (Art. 5) and individual employment contracts (Art. 6).

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142Contracts involving a right to immovable property or a right to use immovable property and a contract for the carriage of goods.

143For an example of severance, see Libyan Arab Foreign Bank v. Bankers Trust Co [1989] QB 728, decided

before the Convention entered into force.

144This work is not concerned with the specific presumptions in para (3), relating to immovable property, and para (4), relating to contracts for the carriage of goods.

145Samcrete Egypt Engineers and Contractors SAE v. Land Rover Exports Ltd [2001] EWCA Civ 2019

at [38].

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Conflict o f Laws

connected to the contract. Where the contract is concluded in the course of the trade or profession of that party it is the country where that party’s principal place of business is situ­ ated that is presumed to be most closely connected to the contract. And where, under the terms of the contract, performance is to be effected at another place of business, the pre­ sumption is that it is the country where that other place of business is located that is most closely connected to the contract. It has been held that in the case of a bank account contract the characteristic performance is that of the bank in repaying the money deposited by the customer and that performance is effected through the branch where the account is kept. Therefore the law of the country where the branch is situated is the governing law.146

1 3 .6 5 The presumption in Article 4(2) is subject to Article 4(5) which provides that the presump­ tion is not applicable in two situations. The first is where the characteristic performance cannot be determined. This is unlikely to arise in many letter of credit or demand guarantee cases. The second is where it appears from the circumstances as a whole that the contract is more closely connected with another country. Where, under Article 4(5), the presumption does not apply, the applicable law is to be determined under Article 4(1). The English courts have adopted a two-stage approach to the application of Article 4 by which the court first identifies the country with which the contract is most closely connected by applying the presumption in Article 4(2) and then considers whether there are factors that justify disre­ garding the presumption under Article 4(5).147

1 3 .6 6 The question of what weight should be given to the presumption in Article 4(2) or the strength to be attached to the connecting factors that are taken into account in determining whether the presumption should be disregarded has been one of much controversy. Some courts took the view that the presumption is not a strong one and so may be displaced when­ ever there is another country that is more closely connected to the contract.148 Others took the contrary view that the presumption is a strong one, and should be disregarded only if, in the special circumstances of the case, the place of business of the party who is to effect the characteristic performance has no real significance as a connecting factor.149 However, more recently, in ICF (Intercontainer Interfrigo) SC v. Balkenende Oosthuizen BV,,150 the European Court ofJustice has laid the controversy to rest. The court, relying on the natural meaning of the wording of Article 4(5), rather than the overall Convention objection oflegal certainty and predictability, rejected the view that the presumption should be displaced only where the connecting factors applied by the presumption (place of residence or business of character­ istic performer) do not have any genuine connecting value. Instead it held that the presump­ tion in Article 4(2) should be displaced where it is clear from the circumstances as a whole

146Sierra Leone Telecommunications Co Ltd v. Barclays Bank Pic [1998] 2 All ER 821.

147Samcrete Egypt Engineers and Contractors SAE v. Land Rover Exports Ltd [2001] EWCA Civ 2019 at [37].

148e.g. Credit Lyonnais v. New Hanpsbire Insurance Co [1997] 2 Lloyd’s Rep. 1 at 5, describing the presump­ tion as ‘very weak’. See also Ennstone Building Products Ltd v. Stanger Ltd [2002] 1 WLR 3059 (CA).

149e.g. Caledonia Subsea Ltd v. Microperi Sri, 2002 SLT 1022 at [41], following the approach in Societe Nouvelle des Papeteries de LAa v. M achinefabrik BOA, Hoge Raad, 25 September 1992, NJ No 750, noted E.H.D. Strucyken, [1997] LMCLQ 18. For a mild version of this view, see Samcrete Egypt Engineers and Contractors SAE v. Land RoverExports Ltd [2001] EWCA Civ 2019 at [41], stating that the presumption should

be regarded as ‘a rule of thumb’ to be displaced only where ‘a preponderance of contrary connecting factors’ is established. See also Ennstone Building Products Ltd v. Stanger Ltd [2002] 1 WLR 3059 at [41 ],per Keene L.J.;

P I Pan Indonesia Bank Ltd TBKv. Marconi Communications InternationalZfe/[2007] 2 Lloyd’s Rep. 72 at [44], per Potter L.J.

150 Case C -133/08, 6 October 2009.

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concluded in the course of the operations of a branch, agency, or other establishment, or if the contract, by its terms, is to be performed by a branch, agency, or other establishment, the habitual residence is the place where the branch, agency, or other establishment is located.

2.Letter of Credit and Demand Guarantee Transactions

A.Effect of the independence principle

When applying the general rules relating to the applicable contractual relationships in 1 3 .7 0 a letter of credit or demand guarantee transaction an issue to bear in mind is whether the independence principle has any effect. Where the parties have made a valid choice there is no

151At [64].

152Art. 4(1) (a).

153Ib id ., at (b).

154Art. 19(1).

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