National Infrastructure Development Co Ltd. v BNP Paribas

English law treats standby letters of credit as having a status equivalent to cash. A bank must honour a conforming demand unless a recognised defence, such as fraud or non-compliance, is established. A foreign injunction directed to the bank does not ordinarily create an arguable English law defence, justify postponing summary judgment, or warrant a stay of execution. Procedural measures cannot be used to undermine the commercial certainty and autonomy of the letter of credit.

National Infrastructure Development Co Ltd sought summary judgment against BNP Paribas for sums demanded under two English-law standby letters of credit. The demands complied with the credits. A Brazilian court had issued an injunction which, on the assumed basis for the application, prohibited BNP Paribas from paying and exposed it to possible Brazilian penalties.

The central issue was whether those matters created an arguable defence under English law, or otherwise constituted a compelling reason for trial, an adjournment, or a stay of execution.

1. Summary judgment. Summary judgment was granted for the claimant in the sum of $58,786,765. The court proceeded on the basis that there was a good arguable case that the Brazilian injunction bound BNP Paribas and that non-compliance could attract a Brazilian penalty. Those matters did not amount to an English law defence. The underlying disputes between NIDCO and OAS were irrelevant because of the autonomy principle applicable to letters of credit. (paras [12]–[14], [23]–[24])
2. Limited defences. The integrity of letters of credit and standby letters of credit is vital to international trade. English courts therefore approach interference with their enforcement with great circumspection. The recognised exceptions include a non-compliant demand and fraud. Neither exception was suggested on the facts. Groups Jossi Re v Walbrook Insurance Co Ltd [1996] 1 WLR 1152 was cited in support of that approach. (para [15])
3. Foreign injunction and procedural relief. The existence of a foreign injunction, and the risk of sanctions for breaching it, did not constitute a compelling reason for trial or justify adjourning the summary judgment application. The principle in Power Curber v National Bank of Kuwait [1981] 2 Lloyd's Rep 394 applied. It would undermine the sanctity of standby letters of credit if payment could be subverted by procedural means. The bank’s difficult position attracted sympathy but provided no defence and no basis for procedural relief. (paras [17]–[20])
4. Stay of execution. Section 32 of the Civil Jurisdiction and Judgments Act 1982 did not assist NIDCO on the material before the court, because the relevant injunction operated on BNP Paribas itself and was not shown clearly to have been obtained in breach of an agreement concerning the forum for resolving the present dispute. Independently, a stay of execution would improperly subvert the limited substantive defences available under English law. The application for a stay was refused. (paras [21]–[22])