British Arab Commercial Bank Plc v Bank of Communications & Anor

A counter-guarantee without an express choice of law is governed under the Rome Convention. A tacit choice requires a genuine common intention demonstrated with reasonable certainty. If no choice is established, the characteristic-performance presumption may be displaced where the circumstances show a closer connection with another country. In assessing that connection, the court may consider related contracts and their governing laws.

Under Syrian law, a performance bond issued in a public procurement context remains subject to its terms. A beneficiary’s request for extension does not automatically extend the bond. Liability requires either a demand for payment within the validity period or a consensual extension. A chain of guarantees remains autonomous, so liability under one instrument does not automatically create indemnity liability under another.

The claimant, an English bank, issued a counter-guarantee to the second defendant, a Syrian bank, which issued a performance bond for a Syrian public works project. The first defendant, a Chinese bank, issued a further counter-guarantee to the claimant.

The beneficiary requested an extension of the performance bond before its expiry, but no demand for payment was made within the validity period and no consensual extension was documented thereafter. The claimant sought declarations concerning the governing law and the parties’ liabilities. The principal issues were whether the claimant’s counter-guarantee was governed by English or Syrian law, whether Syrian law continued the claimant’s liability, and whether the first defendant remained liable under its counter-guarantee.

1. Governing law. The Contracts (Applicable Law) Act 1990 and Articles 3 and 4 of the Rome Convention applied. The absence of an express choice, particularly when an express English-law clause appeared in the related counter-guarantee, militated against any real choice of Syrian or English law. A tacit choice required a genuine common intention demonstrated with reasonable certainty.
2. Under Article 4(2), the characteristic performance was that of the claimant as guarantor, whose central administration was in England. That presumption was displaced under Article 4(5). The court could consider the connected performance bond, the need to determine the meaning of “claim” by reference to its governing law, and the wider contractual structure. The counter-guarantee was therefore more closely connected with Syria and was governed by Syrian law.
3. Syrian law. The Public Procurement Act was lex specialis in relation to the public authority’s obligations, but Articles 41(B) and 42 did not impose an automatic extension obligation on the issuing bank. The bank’s liability remained governed by the terms of its instrument. Syrian law required either a demand for payment during the bond’s validity period or a consensual extension. The beneficiary’s request to work for an extension was not a demand for payment, and no consensual extension occurred.
4. The word “claim” in the counter-guarantees meant a demand for payment, not a request for extension. No claim was made within the stipulated period, so the claimant was not liable under its counter-guarantee. Article 99 of the Syrian Civil Code did not deem the claimant to have accepted later extensions: its communications were not silence amounting to acceptance.
5. The phrase “soonest thereafter” was an administrative requirement rather than a condition precedent. It was deliberately imprecise and was satisfied on the facts. This issue did not affect the result because no timely claim existed.
6. The first defendant’s counter-guarantee was an autonomous undertaking triggered by a compliant demand, not a general back-to-back indemnity. Since no timely payment claim had been made, the first defendant also ceased to be liable. Neither defendant was liable on its counter-guarantee. Consequential matters were reserved for further hearing.

First-instance judgment. No prior appellate decision is stated in the judgment.