Attock Cement Company Ltd v Romanian Bank for Foreign Trade
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STAUGHTON,THE VICE-CHANCELLOR,LORD JUSTICE WOOLF |
| Judgment Date | 21 December 1988 |
| Judgment citation (vLex) | [1988] EWCA Civ J1221-5 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 88/1130 |
| Date | 21 December 1988 |
[1988] EWCA Civ J1221-5
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
LEGGATT J.
Royal Courts of Justice
The Vice-Chancellor
(Sir Nicolas Browne-Wilkinson)
Lord Justice Woolf
and
Lord Justice Staughton
88/1130
NO. 1988 F NO. 902
MR. K. ROKISON Q.C. and MR. P. ROTH (instructed by Messrs Amhurst Brown Colombotti) appeared on behalf of the Appellant (Plaintiff)
MR. M. BURTON Q.C. and MR. R. TER HAAR and MISS E. GRIFFITHS (instructed by Messrs Simon Olswang & Co.) appeared on behalf of the Respondent (Defendant).
On 23rd June 1988 Leggatt J. in the Commercial Court had to consider two summonses. The first, by the defendants in this action, was to set aside service of proceedings out of the jurisdiction in Romania, on two grounds: that the case was not within Order 11 rule 1, so that leave to serve out of the jurisdiction should not have been given, and that as a matter of discretion the case was not a proper one for service out of the jurisdiction within Order 11, rule 4 (2). On the first point, the grounds put forward for service out were those in Order 11, rule l (l) (d) (iii) and (iv), viz. that the contract sued on was governed by English law, and contained a term that the High Court should have jurisdiction.
The other summons, taken out by the plaintiffs, was for summary judgment under Order 14.
The judge held (a) that the contract was governed by English law, (b) that it contained a term that the High Court should have jurisdiction, but (c) that the case was not a proper one for service out of the jurisdiction as a matter of discretion, and (d) that he would not have granted summary judgment. Consequently the proceedings were set aside. From this decision the plaintiffs applied for leave to appeal, seeking to challenge conclusions (c) and (d). The defendants resisted that challenge and also, by a draft respondents' notice, disputed conclusions (a) and (b). Kerr L.J. adjourned the plaintiffs' application for leave to appeal to the full court. After hearing full argument we granted leave to appeal, and by consent of the parties treated this as the hearing of the appeal.
Outline Facts
On 11th May 1981 the plaintiffs, whom I shall call "the Owners", concluded a contract with Uzinexportimport Enterprise for Foreign Trade ("the Contractors") for the construction of a cement plant at Lasbella in Pakistan at a price of U.S.$66m. It was to be successfully completed by 10th February 1984. Article 19 provided:
"The Contractor shall provide to the Owner a performance bond of 10% (ten per cent) of the Turnkey Contract price, to cover and secure the Contractor's faithful performance and execution of this Turnkey Contract…The wording of this Performance Bond shall be agreed upon by the Owner and the Contractor."
By Article 25 all disputes arising out of the contract or in connection with it
"may be submitted by either party to arbitration in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce in Paris."
The arbitration court was to be "seated in Paris or at a place to be mutually agreed." By Article 26, the construction contract was to be governed by the laws of England. The Owners are a Cayman Islands company, with connections in England, Pakistan and Saudi Arabia. The Contractors are a Romanian state trading organisation.
On 16th March 1982, no doubt at the request of the Contractors, Romanian Bank for Foreign Trade issued a performance bond. They are another Romanian state trading organisation, the defendants in this action, and I shall call them "the Bank". It is the contract contained in or evidenced by that performance bond which is sued on in this action. Its written terms were as follows:
"Whereas, UZINEXPORTIMPORT Bucharest, foreign trade company, established under the laws of the Socialist Republic of Romania (the Contractor) and ATTOCK CEMENT LTD., incorporated under the laws of the Cayman Islands (the Owner) have executed a United States Dollars Sixty Six Million fixed price Turnkey Contact signed on 11.05.1981, for engineering, supply and construction of a 2.000 mtpd cement plant in Pakistan, on basis of successful operation and completion no later than February 10, 1984.
Whereas, in accordance with Article 19 of the above Turnkey Contract, UZINEXPORTIMPORT (the Contractor) has to furnish a Performance Bond of 10 (ten/percent) of the Turnkey Contract Price for its obligations stipulated in the said contract.
At the request of UZINEXPORTIMPORT (the Contractor), the Romanian Bank for Foreign Trade Bucharest hereby open our unconditional and irrevocable performance bond for an amount of United States Dollars 6.600.000 (six point six million).
Now, therefore, we, the Romanian Bank for Foreign Trade, do hereby expressly and unconditionally agree and undertake to pay, in favour of ATTOCK CEMENT LTD. in United States Dollars, within 30 days from its first demand without any other formality of whatever nature or without recourse to the Contractor, such sum or sums as may be demanded by ATTOCK CEMENT LTD. against the simple demand accompanied by its declaration that UZINEXPORTIMPORT (the Contractor) has failed to fulfil any of its obligations under Articles 3; 15; 16 and 17 of the above contract.
This Performance Bond shall come into force immediately and remain in full force and effect and be operative and binding on us for a period of twelve months after the completion date of the Turnkey Contract i.e. up to 10 February 1985.
Providing the contracting parties agree to one or several extensions of the validity of this Performance Bond, the liability herein shall be automatically extended accordingly, without any other formality.
Those, as I say, were the written terms. The case for the Owners is that there was a collateral oral agreement as to proper law and jurisdiction. This is put forward in the affidavit of Munawar Ahmed Akhtar, a solicitor acting for the Owners.
"8. Following the signing of the said Contract in Paris on 11th May 1981 there were negotiations between the Plaintiff's lawyer Amer Lodhi and the UEI's legal Adviser Georgou Marenescu who also represented the Defendant about the Performance Bond and about advance payments bank guarantees to be issued pursuant to the Contract. At these negotiations it was specifically agreed that since the Performance Bond was a creature of the main Contract it would be governed by English law and that it was unnecessary to repeat the Appropriate Law Clause in the Performance Bond. Further it was expressly said on behalf of the Defendant that as London is the centre of international trade and commerce and the Defendant had an office in London (which at the time it probably did) and its officers regularly visited London, English Law should be the appropriate law and English Courts the appropriate forum…
10. Negotiations continued on various other aspects of the project culminating in meetings in Bucharest, Romania, between 25th October 1981 and 1st November 1981, attended by Taltif Ahmed Tausif Lodhi, Amer Lodhi and Mahmood Ahmad on behalf of the Plaintiff, Rapanu Toader, Radu Traian and Petra Valer of UEI. At those meetings Radu Traian acted for the Defendant having authority to make decisions about the form of the Performance Bond on their behalf. At this meeting it was inter alia stressed that delivery of the Performance Bond to the Plaintiff was overdue. In the light of the previous negotiations it was again agreed by all parties that the Performance Bond would be governed by English law and that English Courts would be the appropriate forum for any dispute. A final draft for the Performance Bond was initialled on 2nd November 1981."
That evidence is firmly denied in evidence from the Bank and the Contractors. Subsequently there were by agreement various extensions of the expiry date in the performance bond, the latest being to 2nd August 1987.
Meanwhile all had not gone well in the performance of the building contract. The completion date of 10th February 1984 was not achieved. An inauguration ceremony was held on 1st October 1986 and some cement was produced, but there is still a dispute whether the contract was properly performed. Finally on 8th February 1987 the Owners gave notice to the Contractors stating that, in the light of the Contractors' substantial breaches of their obligations, the contact was terminated. On the following day armed security guards of the Owners prevented the Contractors' employees from entering the plant.
It is said that the Owners have paid sums totalling $13m. towards the total purchase price of $66m. Further sums totalling $35m. would be accruing due from the Owners to the Contractors, under the terms of the building contract, if some documents called sectional protocols had been signed by the parties. These were, in effect, certificates of completion up to a certain stage of each production department in the plant. The sum of $35m. was to be paid in twenty half-yearly instalments, the first falling due twelve months from the date of the last sectional protocol. It is said by the Contractors that the Owners have wrongfully failed to sign the sectional protocols.
On 24th (or 25th) July 1987 the Owners made a demand upon the performance bond. It was in these terms:
"Attock Cement Limited hereby declares that Uzinexportimport (The Contractor) has failed to fulfil its obligations under Articles 3, 15, 16 and 17 of the Turnkey Contract including in...
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