The advising bank on a letter of credit was situated in Florida. The place where the credit was payable was North Carolina, and the place where the issuing bank had its place of business was Kuwait.
Held: (Waterhouse J dissenting) The contract had its closest and most real connection with North Carolina, being the law of the place where the issuing bank’s obligation under the credit fell due. In the case of debts due under letters of credit the situs of the debt was the place of payment.
Lord Denning said: ‘Nor can I agree that the lex situs of the debt was Kuwait. It was in North Carolina. A debt under a letter of credit is different from ordinary debts. They may be situate where the debtor is resident. But a debt under a letter of credit is situate in the place where it is in fact payable against documents. I would hold therefore that Parker J. was right in giving summary judgment against the National Bank of Kuwait for the sums due.’
Griffiths LJ said: ‘Secondly, it was submitted that payment was unlawful according to the lex situs of the debt which it is said is Kuwait. But this is a debt that is owed in American dollars in North Carolina; I do not regard the fact that the bank that owes the debt has a residence in Kuwait as any reason for regarding Kuwait as the lex situs of the debt. The lex situs of the debt is North Carolina, and this ground for giving leave to defend cannot be supported.’
Waterhouse J agreed with the majority as to the result of the appeal but on the lex situs point said: ‘The more difficult issue for me has been that relating to the lex situs of the debt.
A debt is generally to be looked upon as situate in the country where it is properly recoverable or can be enforced and it is noteworthy that the sellers here submitted voluntarily to the dismissal of their earlier proceedings against the bank in North Carolina. We have been told that they did so because of doubts about the jurisdiction of the North Carolina court, which was alleged in the pleadings to be based on the transaction of business by the bank there, acting by itself or through another named bank as its agent. As for the question of residence, the bank has been silent about any residence that it may have within the United States of America. In the absence of any previous binding authority, I have not been persuaded that this debt due under an unconfirmed letter of credit can be regarded as situate in North Carolina merely because there was provision for payment at a branch of a bank used by the sellers in Charlotte: and I do not regard the analogy of a bill of exchange or a security transferable by delivery as helpful.’
Judges:
Lord Denning MR, Griffiths LJ, Waterhouse J
Citations:
[1981] 1 WLR 1233
Jurisdiction:
England and Wales
Citing:
Followed – Offshore International SA v Banco Central SA ChD 1977
A standby letter of credit was issued by a Spanish bank and advised (but not confirmed) by a New York bank payable in New York.
Held: The governing law was the law of New York, as the place where the letter of credit was opened, the documents . .
Cited by:
Cited – Pt Pan Indonesia Bank Ltd Tbk v Marconi Communications International Ltd CA 27-Apr-2005
The parties disputed the jurisdiction of the English courts over a letter of credit. It foresaw payment here and in sterling, made by the English bank as against the appropriate documents. Authority had been given for service out of the . .
Binding – Taurus Petroleum Ltd v State Oil Company of The Ministry of Oil, Republic of Iraq CA 28-Jul-2015
The parties had contractual disputes as to letters of credit governed by Iraqi law. The arbitration was in London applying Iraqi law. They now disputed whether the Enforcement of arbitration award was as an award made in London. Each appealed . .
Overruled – Taurus Petroleum Limited v State Oil Marketing Company of The Ministry of Oil, Republic of Iraq SC 25-Oct-2017
The parties disputed their contract arrangements. It was referred to an arbitration in London, but applying Iraqi law. The respondent failed to meet the award made against it, and the claimant sought to enforce the award here by means of third party . .
Lists of cited by and citing cases may be incomplete.
Banking
Updated: 29 September 2022; Ref: scu.224970