Central Térmica de Temane SA & Anor v Banco Santander SA

For an English-law demand bond, the place of performance is determined by construing the payment obligation. Where the bond requires payment to the account specified in the demand, payment at that account is performance; receiving or processing the demand and preparing funds are not.

The Ralli Brothers exception is narrow. It may in principle apply where performance at the contractually required place is unlawful under foreign law. The judgment’s further conclusion that a foreign court order can create that illegality was obiter. A party relying on the exception must also show that it took reasonable steps to secure lawful performance. A foreign injunction does not, by itself, justify delaying enforcement of an English judgment on an on-demand bond.

Central Térmica de Temane SA (CTT), the beneficiary of two English-law demand bonds issued by Banco Santander SA, demanded about US$90.8 million after a dispute with its project contractors. The demands required payment into CTT’s account in Mozambique. Santander did not pay because a Spanish court had enjoined payment at the contractors’ request. Santander relied on the Ralli Brothers principle and, alternatively, sought a stay or deferred payment while it pursued relief in Spain.

The court had to determine the place of performance under the bonds, whether the Spanish injunction could engage the principle, whether Santander had taken reasonable steps to remove the impediment, and whether enforcement should be stayed.

1. Claim allowed. The bonds required Santander to pay within five business days after a conforming demand and to pay into the account identified in that demand. Clause 7 made payment to the specified account part of the contractual obligation, not an administrative detail. The place of performance was therefore Mozambique. Receiving the demand in Spain and taking steps there to prepare payment were preparatory acts. The Ralli Brothers exception did not provide a defence because performance at the required place was not unlawful. The court applied the reasoning in Chailease Finance Corp v Credit Agricole Indosuez [2000] 1 All ER (Comm) 399 and preferred its analysis of the payment obligation.
2. The court rejected Santander’s proposed two-stage approach of first identifying a normal or presumptive place of payment and then asking whether the contract displaced it. Construction starts with the parties’ actual agreement. Clause 7 gave CTT the choice of payment account, and Santander had to accept the consequences of that term.
3. The court stated, as an alternative and expressly obiter conclusion, that a foreign court order can in principle engage the Ralli Brothers exception. The principle rests on international comity and respect for foreign sovereignty; a judicial order is a manifestation of that sovereignty. The court considered Litasco SA v Banque El Amana SA [2025] EWHC 312 (Comm) and Beneathco DMCC v RJ O’Brien Ltd [2025] EWHC 3079 (Comm) clearly wrong to the extent that they excluded court orders. That conclusion did not determine the claim because the place of performance was Mozambique.
4. As a further alternative ground, Santander could not rely on the principle because it had not taken reasonable steps to secure lawful performance. The non-performing party bears the burden of proving reasonable efforts, or that such efforts would have failed. Santander had not joined or supported CTT’s application in Spain to discharge the injunction and had not shown that its participation would have made no difference. The court rejected the argument that Santander should have paid before the contractual deadline: it was not in default before that deadline, and the injunction was granted without prior notice to it.
5. The court refused a stay of execution under Civil Procedure Rules 1998 rule 83.7 and refused a deferred payment order under rule 40.11. A stay would undermine the commercial purpose of an on-demand bond. Further delay was uncertain, and Santander had made no attempt to secure discharge of the injunction. The Spanish injunction did not justify postponing enforcement.