The High Court in London has ruled in favour of Litasco, a Swiss petroleum trading company, in its dispute with Mauritanian bank Banque El Amana (BEA) over a standby letter of credit (L/C).

The judgment granted summary judgment to Litasco, thereby compelling BEA to honour the standby L/C.

Background

Litasco had entered into loan agreements with Mauritanian investment firm Société Kerkoub pour l'Investissement (SKI) to finance the development of a liquefied petroleum gas distribution network in Guinea.

As security for one of these loans, BEA issued a standby L/C on 28 March 2019, amounting to US$1.8 million, with a payment deadline of 31 December 2021. After BEA failed to pay, Litasco made a formal demand on 13 January 2022, which BEA did not fulfil.

Legal Arguments

Litasco contended that the standby L/C was governed by English law and the Uniform Customs and Practice for Documentary Credits (UCP 600).

They argued that BEA did not provide timely notice of discrepancies as required by Article 16 of UCP 600, thereby obligating BEA to honour the payment.

BEA's defence

The bank cited Mauritanian court orders prohibiting the payment under the standby L/C, invoking the Ralli Brothers principle. This legal doctrine suggests that if fulfilling a contract is illegal in the place of performance, the obligated party is excused from performing.

BEA sought to amend its defence to include these orders and requested a stay of proceedings pending the outcome of related Mauritanian litigation.

Court's decision:

The court rejected BEA's defences, stating that the Mauritanian court orders did not excuse BEA from its payment obligations under the standby L/C governed by English law. Consequently, the court granted summary judgment in favour of Litasco, ordering BEA to make the payment as stipulated in the standby L/C.

This ruling underscores the autonomy of L/Cs and reinforces the principle that obligations under such instruments must be honoured irrespective of disputes or legal actions in other jurisdictions.

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