Riyad Bank, London Branch v Dragados Industrial SA

A facially compliant demand under an on-demand bond may trigger the bank’s corresponding counter-indemnity rights where the contract authorises payment and makes disputes about the underlying project irrelevant to reimbursement. A court may proceed and determine a summary judgment application in a defendant’s absence where effective notice shows the defendant chose not to participate; permission to apply despite no acknowledgment of service will ordinarily be granted where the opportunity to participate was ample. Where a contract refers to LIBOR after publication has ceased, a reasonable substitute rate similar to LIBOR may be implied. Post-judgment interest may be fixed at a practical standing rate.

Riyad Bank, London Branch v Dragados Industrial SA was a first-instance claim for reimbursement under three English-law counter-indemnities. The bank had paid demands made under Saudi-law performance bonds and sought summary judgment after the defendant failed to pay or acknowledge service. The defendant did not attend the hearing. The court considered whether to proceed in its absence, whether to permit a summary judgment application without acknowledgment of service, whether the counter-indemnity claims had any realistic defence, and what interest and costs should be awarded.

1. The court proceeded in the defendant’s absence. The proceedings and hearing notices had been effectively served, and the defendant knew of its right to participate and what it needed to do. Its absence was a choice, rather than an oversight. An adjournment would cause delay without good reason and would be unjust to the claimant. The court applied the approach in R v Jones [2001] EWCA Crim 168 to that assessment.

2. Permission to apply for summary judgment was granted despite the absence of an acknowledgment of service. The purpose of permission is to ensure that a defendant is not unfairly deprived of the opportunity to participate, including to challenge jurisdiction. That opportunity had been amply provided, and the counter-indemnities contained exclusive jurisdiction clauses. The general rule was to grant permission where the claimant sought a determination on the merits rather than default judgment.

3. On the merits, the bonds and counter-indemnities created classic on-demand obligations. The beneficiary’s demands complied on their face, as did the bank’s reimbursement demands. Any dispute concerning the construction project or related arbitration did not affect the bank’s obligation to pay or the defendant’s obligation under the counter-indemnities. The defendant had no realistic prospect of defending the claims, and judgment was entered for the claimant on all three.

4. Because LIBOR had ceased to be published, the court accepted that the counter-indemnities carried an implied entitlement to interest at a reasonable rate similar to LIBOR. Applying the approach in Standard Chartered plc v Guaranty Nominees Ltd and others [2024] EWHC 2605 (Comm), it found SOFR plus the contractual 1% margin reasonable. If no contractual substitute rate could be identified, the court would have awarded the same rate under the Senior Courts Act. For post-judgment interest under section 44A of the Administration of Justice Act 1970, the US prime rate was a starting point. The court fixed interest at 6.5% per annum, with the order to state a daily amount. It drew on Lonestar Communications Corp LLC v Kaye and others [2023] EWHC 732 (Comm).

5. The counter-indemnities entitled the bank to its litigation costs on the indemnity basis. The court summarily assessed costs rather than require a detailed assessment. It accepted the claimed hourly rates given the claim’s value, complexity and international context, but reduced the recovery to reflect excessive document hours. Costs were summarily assessed at £160,000.