British Arab Commercial Bank Plc v Bank of Communications & Anor, Court of Appeal - Commercial Court, February 17, 2011, [2011] EWHC 281 (Comm)
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British Arab Commercial Bank Plc v Bank of Communications & Anor, Court of Appeal - Commercial Court, February 17, 2011, [2011] EWHC 281 (Comm)
Neutral Citation Number: [2011] EWHC 281 (Comm)Case No: 2007 FOLIO 1449IN THE HIGH COURT OF JUSTICEQUEEN'S BENCH DIVISIONCOMMERCIAL COURTRoyal Courts of JusticeStrand, London, WC2A 2LLDate: 17/02/2011Before :MR JUSTICE BLAIR- - - - - - - - - - - - - - - - - - - - -Between :- - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - -Mr Alain Choo-Choy QC (instructed by Stephenson Harwood) for the ClaimantMr Simon Kverndal QC (instructed by Ince & Co) for the 1st DefendantMr Daniel Toledano QC (instructed by Ashurst) for the 2nd DefendantHearing dates: 25, 26, 27, 28 January 2011- - - - - - - - - - - - - - - - - - - - -JudgmentMr Justice Blair: 1. This is the trial of an action concerning bank guarantees entered into in connection with the Tishrin Dam Project, which is a project on the River Euphrates in Northern Syria. The General Organisation for Land Development (``GOLD'') is the Syrian state owned entity responsible for the project, and a Chinese company called Sichuan Machinery and Equipment Import and Export Corporation (``Sichuan Machinery'') is the contractor. The contract between them was entered into on 31 December 1992. Various disputes arose, and though the parties entered into a settlement agreement in 2009, GOLD has not released a performance bond that was issued to it in 1993. This has had consequences for the three banks involved in the transaction namely the Claimant, British Arab Commercial Bank plc (``BACB''), which is an English bank, the First Defendant, Bank of Communications (``BOC''), which is a Chinese bank, and the Second Defendant, Commercial Bank of Syria (``CBS''), which is a Syrian state bank. 2. In summary, under the terms of the contract between them, Sichuan Machinery was obliged to submit to GOLD a ``Good performance bond issued by [CBS] as per the text accepted by said Bank and amounting to (5%) of the total value of the Contract''. In value terms, the performance bond was to be for an amount of up to US$8,790,000. That was duly done, and a counter-guarantee was given to CBS by BACB, and a counter-guarantee was given to BACB by BOC, thereby passing liability up the line. At the end of 2001, there was a disputed demand by GOLD under the performance bond, and thereafter disputed demands by CBS against BACB, and by BACB against BOC, under their respective counter-guarantees. It is plain that very considerable efforts have been made to settle the underlying issues between the employer and contractor. But given the lapse of time without an apparent resolution, and no doubt concerned about limitation periods expiring, these proceedings were commenced by BACB against BOC and CBS in order to ascertain the parties' respective rights under the counter-guarantees. There are three principal issues for the Court to determine. First, what law governs the counter-guarantee BACB gave to CBS? BACB says it was English law, CBS says it was Syrian law. Secondly, is CBS right to say that under Syrian law BACB is liable under its counter-guarantee until 31 December 2011, alternatively liable to pay to CBS the full amount of the performance bond? Thirdly, does BOC have any liability under the counter-guarantee it gave to BACB? 3. Other than in respect of Syrian law, the facts are not in dispute. There is a witness statement from Mr Gary Bishop, BACB's Head of Operations, and his evidence was not disputed (he did not give oral evidence at trial). The documents show that the banks began exchanging brief communications with each other in early 1993. The first contact was between BOC's Chengdu Branch in China and BACB (then called UBAF Bank Ltd) in London on 25 February 2003. At that point in time, a five year bond in favour of GOLD was envisaged expiring in July (later agreed to be November) 1998. In Syria at this time, all bonds of this nature were issued by CBS, which did so against counter-guarantees from its correspondent bank abroad. As will be seen, a major issue so far as Syrian law is concerned is that such counter-guarantees were always issued on the basis of standard terms contained in applicable CBS circulars, the operative one being its circular 164/40 of 19 January 1988. In chronological order, the three instruments which are relevant for...See the full content of this document
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