EUPillar Fimbank PLC v Fortis Banque - 2008/AR/2906

Summary

FACTS OF THE CASE On 26 October 2000, the Postbank (a state-owned company of Azerbaijan) notifies Fimbank that it will issue an irrevocable documentary credit for a total 2,666,960 USD in favour of Alcatel Turkey. The Postbank asks Fimbank to act as the confirming bank. The bank designated to make the credit available to the beneficiary is Fortis Banque (Belgium). The credit will expire on 26 October 2001. It is destined to cover the carriage of equipment by air from Turkey to Azerbaijan, in different instalments of 10%, 40% and 50% of the total amount. The documents received by Fortis Banque contain several discrepancies. Fortis Banque notifies Fimbank. In a SWIFT message of 2 July 2001, Fimbank states that “we accept… all discrepancies in documents mentioned in your messages for amounts…”. Fimbank also said it would buy as soon as the funds were available. Fortis Banque proceeds with the payments to Alcatel Turkey and informs Fimbank that it still needs to receive the remaining balance of 50%. Fimbank, for its part, has not received the funds from Postbank. Postbank is in financial trouble and it appears its banking licence in Azerbaijan has been revoked. Fimbank repeats it will pay Fortis Banque when the funds are available. Fimbank also points out the discrepancies in the documents so that the documentary credit was not due, which is contested by Fortis Banque. After failed negotiations, Fortis Banque brings proceedings against Fimbank before the Brussels Commercial Court on 9 February 2006. The first judge grants Fortis Banque’s claim and condemns Fimbank to pay 1,717,595.31 USD plus legal interest. DECISION OF THE COURT ON OBJECTION TO JURISDICTION On appeal, Fimbank argues that the court is without jurisdiction. The Brussels Court of Appeal, however, agrees with the first judge, on the basis of Art. 5(1)(b) Brussels I Regulation. Fortis Banque was not only the Advising bank in this case, but also the bank designated to pay after receipt of the documents. The obligation of the confirming bank, i.e. Fimbank, towards the negotiating bank is not a mere obligation to pay, but an obligation to provide services within the meaning of Art. 5(1)(b) Brussels I Regulation, so that the courts of the place where the services were provided or should have been provided have jurisdiction, i.e. the courts of the place of performance of the obligation in question. When the obligation underlying the claim (the obligation to pay of the confirming bank) is accessory to another obligation, the place of performance of the principal obligation determines the jurisdiction of the courts. Fimbank’s principal obligation in this case is its obligation to make the credit issued by Postbank available to the beneficiary, after having verified the conformity of the documents with the terms and conditions of the documentary credit. This obligation is then performed through complex but indivisible operations that are executed in Belgium through the intervention of Fortis Banque. Fortis Banque is the representative of Fimbank, even if it has been designed by Postbank. This mandate-type agreement entails the obligation on the part of Fimbank to reimburse Fortis Banque, but this obligation to pay is accessory to its obligations as confirming bank. Fimbank’s principal obligation had to be performed in Belgium. Therefore, the Belgian courts have jurisdiction.