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Prior History: Speedway Motorsport Int'l Ltd. v. Bronwen Energy Trading Ltd., No. 08-CVS-9450, 2009 WL 406688 (N.C. Feb. 18, 2009) [U.S.A.] noted in 2010 ANNUAL REVIEW OF INTERNATIONAL BANKING LAW PRACTICE at 630.

Note: At the request of Speedway Motorsport International Ltd. (Surety/Applicant), BNP Paribus Suisse (Counter Guarantor) issued a US$ 11,750,000 Counter Guarantee (Counter Guarantee) in favor of BNP Paribus France (Counter Guarantee Beneficiary/Local Bank) to secure standby letters of credit (Local Undertaking) issued by Counter Guarantee Beneficiary/Local Bank in favor Kuwait Petroleum Corporation (Petroleum Seller/Local Beneficiary) to cover spot oil purchases by Bronwen Energy Trading Ltd. (Petroleum Buyer).

The instructions for the Counter Guarantee given to Counter Guarantor by Surety/Applicant included a forum selection clause that indicated that the Counter Guarantee would be subject to Swiss law and that the forum for any litigation was Geneva, Switzerland. The Counter Guarantee itself similarly included a forum selection clause indicating that the Counter Guarantee would be subject to Swiss law and that the forum for any litigation was Geneva, Switzerland.

When Local Bank drew under the Counter Guarantee and was paid, Surety/Applicant sued Counter Guarantor for wrongful honor and sued Counter Guarantee Beneficiary/Local Bank for fraud, among other things, in the state courts of North Carolina. Counter Guarantee Beneficiary/Local Bank moved to dismiss, arguing that North Carolina was an improper forum for the suit under the terms of the instructions for the Counter Guarantee. The North Carolina Superior Court, Diaz, J., denied the motion, citing the independence principle for the proposition that the provisions in the Counter Guarantee did not establish an obligation by the Applicant to the Counter Guarantee Beneficiary/Local Bank to abide by the forum selection clause.

On appeal, the Court of Appeals of North Carolina, Geer, Hunter, and Calabria, JJ., in an opinion by Geer, J., affirmed, rejecting both of Counter Guarantee Beneficiary/Local Bank's claims that it was either a third-party beneficiary of the Surety/Applicant's Counter Guarantee, or that the forum selection clause in the Counter Guarantee Instructions between Surety/Applicant and Counter Guarantor were "inextricably linked" with the forum selection clause in the actual Counter Guarantee between Counter Guarantor and Local Bank so as to bind the Surety/Applicant in an action against the Local Bank.

The appellate court determined that the Counter Guarantee is a letter of credit under North Carolina law and is thus governed by the independence principle of letter of credit law.

The appellate court ruled that the forum selection clause integrated into the instructions from Surety/Applicant to Counter Guarantee Beneficiary/Local Bank was independent of the actual Counter Guarantee's forum selection clause between Counter Guarantor and Counter Guarantee Beneficiary/Local Bank, despite the identical wording indicating that, "THIS GUARANTEE IS SUBJECT TO SWISS LAW, PLACE OF JURISDICTION IS GENEVA". Under this ruling, Applicant is, therefore, not bound by the forum selection clause in the Counter Guarantee.

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