ETC Export Trading Company SA (A Company Incorporated In Switzerland) & Anor v APLA Importer (A Company Incorporated in Ethiopia) & Anor

The court may grant urgent interim relief under Arbitration Act 1996, section 44, where there is a good arguable jurisdictional basis and immediate intervention is necessary to preserve the position pending arbitration. In an appropriate case, section 44 jurisdiction is not confined to preventing fraudulent demands under a performance guarantee. Relief may also be granted where the beneficiary is clearly not entitled to call on the guarantee. The court may restrain both the beneficiary and an intermediary bank from demanding or paying out under related guarantees where there is a good arguable case of no entitlement and a real risk of irrecoverable loss. The least-risk-of-injustice approach applies, supported by an adequate cross-undertaking in damages.

The applicants, a Swiss commodity trader and its Mauritian parent, sought urgent without-notice injunctions against an Ethiopian importer and an Ethiopian bank. The dispute arose from a wheat-supply arrangement containing arbitration clauses and English choice-of-law provisions, together with a performance guarantee and related counter-guarantees.

The required letter of credit had not been opened, and the parties had treated the sale contract as incapable of performance. Nevertheless, a demand was made under the counter-guarantee, creating an imminent risk of payment of approximately US$2.18 million. The application concerned jurisdiction under section 44 of the Arbitration Act 1996, the scope of the court’s power to restrain calls on performance guarantees, and the adequacy of the applicants’ cross-undertaking in damages.

1. Application granted. The court granted urgent without-notice injunctions and ordered an early return date. Proceeding without notice was justified under rule 25.3 of the Civil Procedure Rules 1998 because notice risked payment through the chain of guarantees before an effective hearing.
2. There was a good arguable case that the court had jurisdiction. The performance guarantee was subject to English jurisdiction; the related undertaking was arguably given in support of that guarantee; and the London-seated arbitration agreement engaged section 44 of the Arbitration Act 1996. Given the urgency, interim relief could be granted without the permission of the arbitral tribunal or the parties under section 44(3).
3. The court’s jurisdiction to restrain payment under a performance guarantee was broader than fraud. Following the approach in Simon Carves Ltd v Ensus UK Ltd [2011] EWHC 657 (TCC), fraud need not be proved where the beneficiary was clearly not entitled to make the demand.
4. There was a good arguable case that the importer had undertaken not to call on the performance guarantee except for breach of the sale agreement, and that no such breach had been alleged or established. The importer was therefore required to confirm that it asserted no claim and to withdraw any claim already made.
5. The bank was restrained from making further demands under the counter-guarantee or paying out the secured funds. The evidence indicated that there had been no proper demand under the performance guarantee and that payment might be made to an unauthorised or fraudulent claimant. The injunction preserved the status quo and involved the least risk of injustice.
6. The parent company’s audited net assets of US$574 million adequately fortified the applicants’ cross-undertaking in damages.

First-instance decision on an urgent without-notice injunction application. No appellate history was stated in the judgment.