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Note: To pay for the sale of decant oil under a contract governed by English law, buyer, H Ltd., requested that Kookmin Bank Co., a Korean domiciliary, issue an LC in favor of Trafigura Beheer BV, Dutch seller. The LC provided that if the bills of lading were not available at the time of negotiation, payment was to be made against a letter of indemnity (LOI) and an invoice. The form of the LOI was expressly prescribed by the LC which required it to be expressly subject to English law and contain an exclusive jurisdiction clause making it subject to English courts.

When the goods arrived in Korea, the original bills of lading were not available, so an indemnity was given to Carrier for discharge by Beneficiary. Beneficiary obtained payment from ANZ Bank (Negotiating Bank) which was reimbursed by Issuer.

Applicant became insolvent and never reimbursed Issuer for the amount paid under the LC. Issuer sued Beneficiary, Carrier, and others in South Korea for wrongful acts, including fraudulently or negligently representing that the original bills of lading were not available when nonconforming bills of lading were, in fact, available. Beneficiary, in turn, commenced proceedings against Issuer in England and sought to enjoin Issuer from pursuing its claims in South Korea. Issuer responded to the English action by challenging the jurisdiction of the English court. In an earlier decision, Cooke, J., had found that England was the appropriate forum and that the letter of credit was governed by English law but due to a possible tort claim under Korean law he had declined to grant an anti-suit injunction against the claims in South Korea. [2005] EWHC 2350 (Q.B. Comm) [England], abstracted at 2006 ANNUAL SURVEY 458.

Subsequently, Issuer submitted to the jurisdiction in the English proceedings and "a trial of a Preliminary Issue" was held to decide what law or laws governed the issues raised in Issuer's claims against Beneficiary. The Queen's Bench Division, Aikens, J., found that Issuer's remaining claims were "issues relating to tort" under the Private International Law Act 1995 and were subject to English law because the sale contract was governed by English law and it would "be bizarre" for a different law to govern Issuer's tort claim. [2006] EWHC 1450 (Q.B. Comm).

In a separate ruling, the court granted Beneficiary's request for an anti-suit injunction and a declaration of non-liability. [2006] EWHC 1921 (Q.B. Comm). Field, J., ruling that Issuer's tort claims arose solely from the LC claims and were not independent of them and that it was clear that Beneficiary was not in breach of the LC, LOI, or sale contract, stated:

I would be very surprised if the Korean Court were to hold otherwise than that England is the country most closely connected with the L/C contract and that therefore the L/C is governed by English law. But even if the Korean Court held that the governing law is Korean law, the question is simply one of construing a document in the English language and it is not suggested that under Korean law words in a commercial agreement are given other than their plain and ordinary meaning in light of the context in which they appear.

The English Court plainly has a strong legitimate interest to protect its proceedings in this case and in my opinion it is vexatious for [Issuer] to attempt to persuade the Korean Court to apply Korean law to the Presentation Claim and to invite that court to: (i) construe the words "documents required" in Field 47A(M) of the L/C as including discrepant documents; and (ii) to hold that the original bills of lading were available when they were not physically in the custody of [Beneficiary].

The court concluded that it would be unjust to allow Issuer, through its action in South Korea, to invoke Korean conflicts of law and jurisdiction rules in the Korean proceedings, apply Korean law rather than English law, or apply a different law to tort claims than applied to the underlying contracts on which they were based.

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