The Irish High Court has rejected an application for injunctive relief by a Nigerian infrastructure fund, First Modular Gas Systems, in a ruling that underscores the demanding criteria for successfully obtaining an injunction to halt payment under a letter of credit (L/C).

The case, involving a transaction for a gas processing plant in Nigeria, originated from a contract between First Modular and Canada's Ennovate Consultants for the supply and installation of the plant. Ennovate subcontracted China's Bosai Energy Technology for the supply of the gas plant.

First Modular issued an L/C in favour of Bosai, with Citibank acting as confirming bank and Nigeria's Access Bank serving as issuing bank. The L/C required Bosai to produce documentation proving the shipment of goods to Nigeria.

Allegations and denials

First Modular alleged that Bosai's payment claim was fraudulent and that the goods were not dispatched and sought an injunction to prevent a US$1.65 million payment to Bosai.

The high court denied the request. Judge Rory Mulcahy concluded that First Modular failed to meet the necessary threshold for injunctive relief concerning L/Cs and emphasised the requirement of a "seriously arguable case" of fraud to restrain payment under such instruments.

"I was not satisfied that the very high threshold to restrain payment on foot of a

letter of credit - a seriously arguable case that the only reasonable inference that the claim

for payment on foot of the letter of credit was fraudulent - had been met," he said.

No evidence of fraud

Mulcahy concluded that First Modular had not identified anything within its engagement with Bosai that would suggest that the Chinese company is the type that would engage in the type of fraudulent behaviour alleged.

"I identified that it was First Modular rather than Bosai which seemed to be trying to avoid its contractual obligations," he added.

The judgment in the case of First Modular Gas Systems Limited (Plaintiff) and Citibank Europe, Bosai Energy Technology Corporation and Access Bank plc (Defendants) can be found here.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.