Article

COURT OF APPEAL

CANADA

PROVINCE OF QUEBEC

REGISTRY OF MONTREAL

No: 500-09-023645-138

(500-17-077601-139)

DATE: 14 June 2013

DESCRIPTION: Motion for Safeguard Order

[Minutes of the Hearing]

Legal Analysis:

BY THE COURT

JUDGMENT

[1] In connection with a contract entered into with Air Algérie, the Appelant, a construction company, agreed to have its obligations guaranteed by way of letters of guarantee issued by Banque Nationale d’Algérie (BNA), in favour of its client.

[2] In return, BNA obtained counter-guarantees issued in its favour by Banque Nationale du Canada (BNC), at the request of the Appellant.

[3] On June 10th, 2013, BNC presented four demands under the counter-guarantees, for a total amount of almost $23,000,000.

[4] Claiming fraud by Air Algérie, the Appellant applied for an injunction order of the Superior Court in order to prevent BNC from paying BNA’s demands.

[5] By its decision rendered earlier today, the Superior Court rejected such application, which lead to the filing of a Notice of Appeal and this present motion for a Safeguard Order for the duration of the appeal.

[6] The agreement between the issuing bank, BNC, and the Appellant, entitled “Application for the Issuance of a Letter of Guarantee or Standby Letter of Credit” contains the following provision:

9. Law applicable hereto. Notwithstanding the choice of law and jurisdiction indicated in the Guarantee, this Application and the Client’s obligations toward the Bank shall be governed by the law in force in Quebec. The Client agree, however, that if foreign laws are designated in the Agreement, this Application may be subject to such laws, at the sole discretion of the Bank. The courts of the District of Montréal, Québec shall have non-exclusive jurisdiction to hear any lawsuit, litigation or proceeding in relation to the Guarantee or this Application. In the event that the Guarantee provides for the jurisdiction of foreign courts to the exclusion of those of Québec, the Client (i) acknowledges that the Bank may not be bound by any temporary order or injunction issued by such foreign courts and (ii) agrees to not refer to the courts of Québec in order to obtain an injunction or otherwise prevent payment of the Guarantee. The Client irrevocably waives its right to a trial or process before a jury in all cases where legal proceedings are commenced in a jurisdiction where civil proceedings are heard before a jury.

[emphasis added]

[7] Moreover, the counter-guarantees, issued in favour of BNA and defining it relationship with BNC, expressly provide that any dispute in connection with the execution of the counter-guarantees is subject to courts of Algeria and to Algerian laws.

[8] It is well established that a letter of credit constitutes an autonomous contract between the issuing bank and the beneficiary and that it is defined by its own conditions, independently and regardless of the terms of the contract between the applicant and the issuing bank or that between the beneficiary and the applicant (Uniform Customs and Practice for Documentary Credits; Bank of Nova Scotia v. AngelicaWhitewear, 1987 CanLII 78 (CSC), [1987] 1 R.C.S. 59; JetsGo Corporation (Syndic de), 2006 QCCA 1521 (CanLII)).

[9] The Appellant does not dispute this principle.

[10] The Appellant’s main reasoning rests on the alleged invalidity - on account of its abusive nature (art. 1437 Civil Code of Québec) - of the clause by which the Appellant waived its right to request an injunction in Québec, in order to prevent BNC from honouring its obligations toward BNA.

[11] The Court is of the opinion that this argument, in the context in which it is currently submitted to the Court, is not sufficiently serious to justify a Safeguard Order and to dismiss BNC’s payment obligation toward BNA as per applicable rules.

FOR THESE REASONS, THE COURT:

[12] REJECTS the motion for a Safeguard Order, with costs.

Note: This is a translation of the case provided to the Institute by an attorney. It is not an official translation.

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