Vneshprombank LLC v Georgy Ivanovich Bedzhamov

Compliance with a consent order permitting security to be replaced by a bank guarantee is assessed objectively from the order and the guarantee. A covering advisory note does not alter compliance where it has no legal effect on the guarantor’s liability. The court cannot add a term merely because it would protect the other party against uncertainty or future litigation. An implied term requires necessity: it must be obvious and/or necessary for business efficacy. Fairness or commercial improvement is insufficient. The court may decide the note’s legal effect between the parties even without the guarantor, while leaving the guarantor unbound by that determination. The appeal was dismissed.

An insolvent Russian bank had permission under consent orders to replace more than £4 million paid into court as security for costs with a bank guarantee substantially in scheduled terms. The guarantee was delivered late and accompanied by additional wording referring to Credit Suisse and an advisory note stating that Standard Chartered might not be liable if sanctions affected performance.

Master Kaye refused relief from sanctions. Mrs Justice Falk reversed that decision and permitted substitution of the guarantee. The appellant argued that the advisory note qualified the guarantee, that the judge should not have decided its legal effect without Standard Chartered, and that an implied term protected the unconditional bargain. The central questions were whether the consent orders had been complied with and whether relief from sanctions was properly granted.

The Court of Appeal unanimously dismissed the appeal. The Master of the Rolls gave the leading judgment. Lady Justice Asplin agreed, and Lord Justice Nugee also agreed.

1. Subsequent evidence. Events after delivery of the guarantee could not determine whether delivery on 19 February 2021 complied with the consent orders. Later developments might conceivably be relevant to the third stage of the relief-from-sanctions test in Denton v. T H White Ltd [2014] EWCA Civ 906, but the Court of Appeal could not make first-instance findings about the effect of later international sanctions.
2. Construction and compliance. The central question was the objective interpretation of the consent orders. They required a guarantee substantially in the scheduled terms. The judge had correctly concluded that the advisory note did not affect the guarantee’s terms or Standard Chartered’s liability. Even if the note formed part of the accompanying documentation and purported to qualify the bank’s obligations, it could not alter that conclusion. Performance bonds were to be interpreted strictly, consistently with article 12 of the ICC Uniform Rules for Demand Guarantees.
3. Absence of the guarantor. The judge had to decide the legal effect of the advisory note in order to determine compliance with the consent orders. The issue was not Standard Chartered’s ultimate liability under the guarantee. The decision therefore could be made without Standard Chartered or other transaction parties and did not bind them.
4. Implied terms. Consent orders are treated like other contracts for interpretation and implication of terms. A term may be implied only where necessary to make the contract work, because it is so obvious that it goes without saying and/or necessary for business efficacy. Fairness or an improvement in the bargain is insufficient. The suggested term would rewrite the consent orders, was not necessary, and was too general and vague. The court relied on the principles discussed in The Moorcock (1889) 14 PD 64, Liverpool City Council v. Irwin [1977] A.C. 239, Marks & Spencer Plc v. BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742 and Ali v. Petroleum Company of Trinidad and Tobago [2017] UKPC 2.
5. Relief from sanctions. Once the guarantee was held to be substantially compliant, the timing breaches and Credit Suisse wording did not justify refusing relief. The appeal was dismissed.

1. Court of Appeal (Civil Division): dismissed the appeal and upheld the grant of relief from sanctions. [2022] EWCA Civ 854
2. High Court of Justice, Business and Property Courts: Mrs Justice Falk reversed Master Kaye’s refusal of relief from sanctions and permitted the bank guarantee to replace the money paid into court. No neutral citation is stated in the judgment.