Marconi Communications International Ltd. v PT Pan Indonesia Bank Ltd. TBK

For a letter of credit without an express governing-law clause, the presumptive law of the confirming bank’s place of business may be displaced where the transaction as a whole is more closely connected with another country. The place where documents are to be presented and payment is to be made may provide that closer connection, even if the documents are ultimately sent elsewhere for collection.

For service out of the jurisdiction, a good arguable case may be established on several alternative contractual bases. The court’s discretion to permit alternative service under the Civil Procedure Rules 1998 is broad. Extensive delay in serving proceedings, particularly in a stale claim, may constitute good reason.

Marconi, an English manufacturer, claimed damages from Panin Bank, an Indonesian bank, for failing to honour drafts drawn under a confirmed letter of credit. The credit was issued by another Indonesian bank, advised in London by Standard Chartered Bank, and contemplated negotiation and payment through London.

Marconi obtained permission to serve the claim form out of the jurisdiction and permission for alternative service on Panin Bank’s English solicitors. Panin Bank applied to set aside those orders and the service, and sought a declaration that the court had no jurisdiction. The issues included the governing law of the confirmation, whether the contract was made in England or through an English agent, whether the breach occurred in England, whether Indonesia was clearly the more appropriate forum, and whether there was good reason for alternative service.

1. Governing law. The court held that Marconi had a good arguable case that the confirmation contract was governed by English law under Article 4 of the Rome Convention. Although Article 4(2) pointed presumptively to Indonesia, Article 4(5) permitted that presumption to be disregarded. The relevant circumstances included the contemplated communication of the credit in England, presentation of documents in London, availability of negotiation through the London advising bank, and payment in sterling. The fact that the documents were ultimately collected and sent to Jakarta did not alter the conclusion.
2. This approach was consistent with Offshore International SA v Banco Central SA [1976] 2 Lloyd’s Rep. 402; [1977] 1 WLR 399 and Power Curber International Ltd v National Bank of Kuwait SAK [1981] 1 WLR 1233 (C.A.), where the place of performance was treated as providing the closest connection. The court also relied on the reasoning in Bank of Baroda v Vysya Bank [1994] 2 Lloyd’s Rep. 87.
3. Alternative jurisdictional grounds. Even if Indonesian law governed the credit, there remained a good arguable case that the confirmation contract was made in England when the confirmation was conveyed to Marconi, and that Standard Chartered Bank acted as Panin Bank’s agent in advising the confirmation. There was also a good arguable case that the breach occurred in England because payment was required in London. The court treated these conclusions as consistent with Bank Melli Iran v Barclays Bank 1951 2 Lloyd’s Reps 362.
4. Forum. Indonesia was not shown to be distinctly the more appropriate forum. The material documents were in English, the issues principally concerned documentary compliance and the UCP, and substantial delay in the Indonesian courts was a legitimate consideration.
5. Alternative service. The court distinguished Knauf UK GmbH v British Gypsum Ltd [2002] 1 WLR 907. The case did not establish that alternative service required service abroad to be impracticable. Under the new rules, extensive delay in service, together with the solicitors’ continuing involvement and the apparent absence of a genuine procedural justification for delay, amounted to good reason. Panin Bank’s application was dismissed.