Rupert Choat and CMS Cameron McKenna Nabarro Olswang LLP were successful in obtaining summary judgment against Korea Development Bank (KDB) in the Technology and Construction Court on 14 February 2020. KDB was ordered to pay the full value of a demand guarantee (£8.2 million) plus interest and costs.
The case is a good example of the TCC’s ability to act quickly in such cases (the guarantee having an English court jurisdiction clause and providing for English law to apply). The litigation lasted 21 days: from the claim form being issued on 24 January to judgment on 14 February 2020.
Tecnicas Reunidas Saudia (TRS) was engaged by Saudi Aramco to execute two EPC contracts for the Fadhili Gas Plant in Saudi Arabia; a multi-billion US dollar project designed to process 2.5 billion cubic feet a day of gas from the Hasbah and Khursaniyah fields.
TRS engaged as a subcontractor Sungchang & Abdullah Al-Shaikh Contracting Co. Ltd. (Sungchang).
In October 2017 TRS paid Sungchang an advance payment, after Sungchang provided TRS with a demand guarantee from KDB, by way of security. In October 2019 TRS terminated its engagement of Sungchang.
In December 2019 TRS demanded payment of KDB under the bank guarantee.
KDB refused to pay TRS relying upon the fact that Sungchang, from 23 December 2019, was seeking from a Korean court an injunction restraining KDB from paying TRS. KDB opposes Sungchang’s application before the Korean court, stating that if its non-payment of the guarantee were known to the financial markets, the impact would be “very serious”, while also referring to the impact on the Republic of Korea (which wholly owns KDB). A decision from the Korean court is awaited.
Before the TCC, KDB rejected TRS’ right to be paid on the basis that it was a condition of the demand guarantee that TRS’ advance payment to Sungchang had been paid into a numbered account held with HSBC Bank (the “HSBC Condition”)
Mr Justice Waksman held that as a matter of interpretation, the HSBC Condition referred to an account held with a branch of HSBC or a bank associated with HSBC. The bank where the advance payment had been paid – the Saudi British Bank – was a bank associated with HSBC. Alternatively, “HSBC Bank” was a misnomer for Saudi British Bank.
Waksman J held (obiter) that, in any event:
- KDB should have disregarded the HSBC Condition – as a non-documentary condition – pursuant to Art. 7 of the ICC’s Uniform Rules for Demand Guarantees 2010 (URDG) (which the guarantee incorporated). This is the first English judgment on the operation of Art. 7 and, by extension, the similar Art. 14(h) of UCP 600, which are incorporated into many of the demand guarantees and documentary credits that are issued internationally every day. Some doubt had previously been cast on how a provision incorporated by reference (like Art. 7) could operate so that a specifically agreed non-documentary condition should be disregarded.
- KDB’s notice of rejection was not sent within 5 business days of TRS’ demand to TRS as the presenter of the demand, pursuant to the time bar provision in Art. 24(d) of the URDG (but was instead sent to KDB’s advising bank instead).
Accordingly, but for Waksman J’s decision on interpretation/misnomer, TRS would have succeeded on either of the above two bases too.
Rupert Choat of Atkin Chambers was instructed by CMS Cameron McKenna Nabarro Olswang LLP (Adrian Bell, Robin Wood, Joaquin Gotor and Sofia Diaz de Aguilar Puiggari) for TRS.
Alec Haydon QC of Brick Court Chambers was instructed by Fladgate LLP for KDB.
To read the full judgment please click here: Tecnicas Reunidas Saudia for Services and Contracting Co Ltd v The Korea Development Bank  EWHC 968 (TCC).
14 February 2020