Macquarie Bank Limited v Banque Cantonale Vaudoise

Where a financial instrument is governed by English law, the forum conveniens inquiry must consider whether the proposed forum can give effect to the instrument’s substantive legal characteristics, including its autonomous and cash-like nature. Delay caused by foreign proceedings may be decisive where it prevents enforcement while investigations take place and thereby frustrates substantive rights. The case is not treated as a mere delay comparison between procedural systems. The claimant must show clearly that England and Wales is the most appropriate forum, but strong weight may be given to the governing law and to the English court’s ability to apply it. Links with the bank’s domicile and the place of payment may be outweighed by those considerations.

Macquarie Bank Limited sought declarations concerning its entitlement to enforce two standby letters of credit issued by Banque Cantonale Vaudoise. The instruments were subject to UCP 600 and English law. Macquarie had previously commenced Swiss civil proceedings for the same relief, but those proceedings were stayed indefinitely pending a Swiss criminal investigation. The parties’ only live issue was whether England and Wales was clearly the most appropriate forum. The court considered the governing law of the standby letters of credit, the consequences of the Swiss stay, the parties’ connections with Switzerland, parallel proceedings, comity and the Lugano Convention 2007.

1. Jurisdiction challenge dismissed. Macquarie satisfied the burden of showing clearly that England and Wales was the forum in which the dispute could most suitably be tried for the interests of the parties and the ends of justice.
2. Letters of credit governed by English law must generally be honoured where the documents comply with the credit. The fraud exception requires established, obvious or very clearly established fraud. The enhanced merits requirement is a substantive consequence of treating irrevocable credits as instruments akin to cash.
3. The same substantive characteristics have procedural consequences. The court will rarely, if ever, stay enforcement under a letter of credit, and only exceptional circumstances justify such interference. A foreign procedural stay which prevents enforcement while a third-party fraud investigation continues therefore fails to give effect to the governing English law, particularly where no arguable case of fraud against the beneficiary has been advanced.
4. The Spiliada test requires consideration of the forum most suitable for all parties and the ends of justice. In a service-out case the claimant must show clearly that England is appropriate. Governing law, factual focus, witnesses and documents are relevant, and delay may be sufficient in an extreme case.
5. This was not merely a delay case. The indefinite and uncertain Swiss stay created a real risk that enforcement would be stymied for several years, whereas the English court could determine the dispute in a matter of months consistently with the instruments’ substantive characteristics. Those factors outweighed BCV’s Swiss domicile and the Swiss place of expiry, payment and presentation.
6. The Swiss proceedings had made no substantive progress. Macquarie’s proposed best-endeavours undertaking to discontinue them addressed concerns about duplicative proceedings and inconsistent judgments. The jurisdiction challenge was dismissed.