EUPillar Taurus Petroleum Ltd v State Oil Marketing Co of the Ministry of Oil, Iraq [2013] EWHC 3494 (Comm)

Summary

Taurus got an arbitral award against SOMO. Taurus obtained an interim third party debt order (ITPDO) against the London branch of a French Bank. SOMO was a beneficiary in letters of credit issued by the French bank. SOMO made an application for the ITPDO to be set aside. SOMO’s application was upheld by the English High Court. In this context it was established that, since the relevant debt was based in New York, the English courts had no jurisdiction to make such orders. Mr Justice Field inter alia addressed the choice of law issue, holding that: “18 In my opinion the letters of credit are contracts falling within the residual rule in Article 4(2) of Rome I in which the characteristic performance is Crédit Agricole making payment by taking steps in London to credit CBI's account at FRBNY through the use of an intermediary bank in New York and accordingly the credits are governed by English law. It is true that I have made the assumption that payment was made against conforming documents presented at CBI's counters in Baghdad, but the crucial element in Crédit Agricole's performance was the making of the stipulated payment and the performance of this obligation involved Crédit Agricole taking steps in London as we have seen.” [18] The Court of Appeal dismissed the appeal. Lord Justice Moore-Bick held: “35. Although the parties did not consider the proper law of the letters of credit to be relevant to any of the issues we have to decide, for this purpose (but as far as I can see for no other) it is necessary to identify the proper law of the contracts, because, unless it is English law, a receivership order could well place Crédit Agricole in the invidious position of being required to pay the receiver to avoid being in contempt of court without obtaining a good discharge of its debts. The letters of credit contain no express choice of proper law and in those circumstances, by virtue of article 4(1) of the Rome Convention (“Rome I”), they are governed by the law of the country with which they are most closely connected. That is presumed to be the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence (article 4(2)). The judge held that the characteristic performance was the making of payment by Crédit Agricole by taking steps in London to credit CBI’s account at First Reserve Bank in New York and that the contracts were therefore governed by English law. Although I do not, with respect, agree that the performance which is characteristic of the contract is taking steps to effect payment rather than actually making payment, the result is the same, since Crédit Agricole was resident in London when it entered into the contracts with SOMO. To make a receivership order in this case, therefore, would not appear to infringe the rights of Crédit Agricole.” [2015] EWCA Civ 835 [35] Lord Justice Briggs held: “55. I agree that this appeal should be dismissed. In particular I agree with the conclusion of Lord Justice Moore-Bick that the relevant debt is situated in New York, so that the courts of this country have no jurisdiction to make a third party debt order (“TPDO”) in relation to it.” [2015] EWCA Civ 835 [55]