Fortis Bank SA NV v Stemcor UK Ltd, Court of Appeal - Commercial Court, March 17, 2011, [2011] EWHC 538 (Comm)

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Fortis Bank SA NV v Stemcor UK Ltd, Court of Appeal - Commercial Court, March 17, 2011, [2011] EWHC 538 (Comm)

Case No: 2009 Folio 34

Neutral Citation Number: [2011] EWHC 538 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 17 March 2011

Before : Jonathan Hirst QC sitting as a Deputy Judge of the High Court

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Between :

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Timothy Young QC and Malcolm Jarvis (instructed by DLA Piper UK LLP)

for the Second Claimants

Sara Cockerill (instructed by Holman Fenwick Willan LLP) for the Defendants

Hearing dates: 14-16 February 2011

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JUDGMENT

Mr Hirst QC :

1. The issue before the Court is whether the Second Claimant (``Stemcor'') is entitled to recover damages from the Defendant Bank (``IOB'') for having wrongfully failed to honour five letters of credit, or alternatively to recover in restitution.

Background and previous judgments

2. Between 1 and 19 August 2008 Stemcor entered into five contracts Numbered RMS0098, RMS0099, RMS00105, RMS00110 and RMS00125. for the sale of a total of 15,500 MT (10% more or less in seller's option) shredded steel scrap to SESA International Limited (``SESA'') of Kolkata in India. The prices ranged from US$525 to $620 per metric tonne. Delivery was to be CFR CY Haldia/Kolkata in seller's option according to INCOTERMS 2000 - viz. Cost and Freight Container Yard Haldia/Kolkata. INCOTERMS 2000 provide that the carriage must be arranged and paid for by the seller and that risk transfer from seller to buyer occurs when the goods pass the ship's rail. The buyer must accept delivery at the named destination and pay all costs relating to the goods from the time they have been delivered.

3. Payment was to be 100% by sight letter of credit opened by a first class bank and advised by Fortis Bank (``Fortis'') in London. The sale contracts contained London arbitration clauses and were expressly governed by English law.

4. IOB opened five letters of credit in relation to the sale contracts and notified Fortis. They were as follows:

(The letters of credit will be referred to below by the number in the first column in the above table. The asterisks indicate confirmation by Fortis).

5. All were subject to the Uniform Customs and Practice for Documentary Credits, 2007 revision, ICC Publication no. 600 (``UCP 600''). The applicant for the L/Cs was MSTC Limited (``MSTC''), an Indian Government owned company operating under the aegis of the Ministry of Steel one of whose roles is to assist Indian companies purchasing steel scrap from abroad. MSTC was described as the ``facilitator'' in the letters of credit. The arrangements between MSTC and SESA appear to be governed by a memorandum of agreement dated 21 November 2006, as amended It has...

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