Marconi Communications International Ltd v PT Pan Indonesia Bank Ltd

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mr Justice David Steel

Introduction

The Claimant ("Marconi") is an English company. It changed its name from GPT International Limited in December 1998. The Defendant ("Panin Bank") is an Indonesian bank. It has no place of business within this jurisdiction. Marconi claims damages against Panin Bank for breach of contract in respect of the latter's failure to honour its obligations as a confirmer of a Letter of Credit. Marconi alleges that Panin Bank wrongfully failed to accept drafts properly drawn upon it and presented to it under the terms of that credit.

In this application Panin Bank applies: -

i) To set aside the order of Andrew Smith J dated 16 ^th May 2003 permitting Marconi to serve the claim form on Panin Bank out of the jurisdiction.

ii) To set aside the order of David Steel J dated the 12 ^th June 2003 permitting the Claimant to serve the claim form on the defendant at the London Offices of Messrs Thomas Cooper and Stibbard, Panin Bank's solicitors.

iii) To set aside the service of the claim form on Panin Bank.

iv) For a declaration that, in all the circumstances of the case, this court has no jurisdiction over Panin Bank in respect of the subject matter of this action.

Marconi resists the application on the basis that it has a good arguable case that the English court has jurisdiction and that England is clearly the most convenient forum for the determination of the claims.

Background

Marconi is a manufacturer of telephone equipment. Pursuant to a sale contract concluded in 1996, Marconi agreed to supply telephone equipment and services to an Indonesian company called PT Prismasentra Agung ("the Buyers"). The total contract price was for $14,221,972.60 fob UK port, to be shipped from a UK airport or seaport to Singapore. The price was expressed to be payable by means of Letters of Credit, 60 days from date of shipment, such credits to be established two weeks prior to the commencement of deliveries for the subsequent 3 month period.

The sale contract further provided that such letters of credit "shall be established and advised through Standard Chartered Bank, 25 New London Bridge House, London SE1 9TB ("SCB") to GPT upon contract signature". The payment for the equipment would be "upon presentation of … documents at the counters of the advising bank". Clause 23 of the sale contract stipulated that its "validity constitution and performance.… shall be governed by English law."

The Letter of Credit

In accordance with the terms of the sale contract, the Buyers established various Letters of Credit, including two relating to the final call-off of 7,500 units. The first, which related to 3,000 units, was paid. The second, and final, Letter of Credit was issued in respect of the remainder (4,500 units) of the call-off. It is this second, and final, Letter of Credit ("the L/C") which is the subject of these proceedings.

The L/C was issued by Hastin Bank, another Indonesian bank, on the application of the Buyers and it was duly advised to Marconi in this country by SCB London by telex dated 27 ^th March, 1997 at the direction of Hastin Bank. The relevant terms of the L/C were as follows: -

" TO: STANDARD CHARTERED BANK. LONDON

ATTN: L/C DEPT

FM: HASTIN BANK, H.O., JAKARTA

WE OPEN USANCE IRREVOCABLE CREDIT AVAILABLE BY NEGOTIATION OF BENIFICIARY'S DRAFT AT 60 DAYS AFTER AWB AND OR B/L DATE DRAWN ON US FOR 100 PCT OF THE INVOICE VALUE INDICATING CREDIT:

……..

ISSUE DATE: MAR.27, 1997

EXPIRY DATE: APR.21, 1998 IN BENEF'S COUNTRY

APPLICANT: PT. PRIMASENTRA AGUNG

WISMA TAMARA LT.2, SUITE 1102

JAKARTA SELETAN.

BENEFICIARY: GPT INTERNATIONAL LTD

EDGE LANE, LIVERPOOL L7 9NW, UNITED KINGDOM

L/C AMOUNT: GBP.3,307,500.00 CIF

SHIPMENT: PARTIAL ALLOWED

TRANSHIPMENT: ALLOWED

PORT LOADING: UNITED KINGDOM AIRPORT AND OR SEAPORT

PORT DESTINATION: SINGAPORE AIRPORT AND OR SEAPORT

DESCRIPTION OF GOODS:PAYPHONES AND EQUIPMENT

COUNTRY OF ORIGIN: UNITED KINGDOM

DOCS REQUIRED:

- SIGNED COMMERCIAL INVOICE

- PACKING LIST IN THREE FOLDS

- ORIGINAL MASTER AIRWAY BILL

- CERTIFICATEOF ORIGIN

- INSURANCE CERTIFICATE

OTHER CONDITIONS:

THIS CREDIT REQUIRES CONFIRMATION BY PANIN BANK, JAKARTA AND CONFIRMATION FEE FOR APPLICANT'S ACCOUNT.

THE ADVISING BANK IS REQUIRED TO NOTIFY THE BENEFICIARY WITH ADDING THEIR CONFIRMATION.

THE AMOUNT OF EACH DRAFT MUST BEENDORSED ON THE REVERSE OF THE CREDIT BY THE NEGOTIATING BANK.

INSTRUCTION FOR NEGOTIATING BANK:

— UPON RECEIPT OF DOCUMENTS BY US IN FULL COMPLIANCE WITH THE CREDIT TERM AND CONDITIONS. AT MATURITY DATE WE SHALL REMIT THE PROCEEDS IN ACCORDANCE WITH NEGOTIATIONS BANK'S INSTRUCTION.

WE HEREBY AGREE WITH DRAWERS, ENDORSERS AND BONAFIDE HOLDERS OF DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS CREDIT WILL BE HONOURED AND THAT DRAFTS ACCEPTED WITHIN THE TERM OF THIS CREDIT WILL BE DULY HONOURED AT MATURITY:

THIS CREDIT IS SUBJECT TO THE UCP FOR DOCUMENTARY CREDIT 1993 RE VISION, ICC PUBLICATION NO.500".

Panin Bank's confirmation was added to the credit by telex dated 1 ^st April 1997 addressed to SCB with the request:

"PLEASE ADVISE BENEFICIARY ACCORDINGLY".

The credit was also amended that same day to provide that the Beneficiary's draft should be drawn on Panin Bank and that the documents were to be sent to Panin Bank in Jakarta.

The Claims

The first and second shipments, respectively of 1000 and 500 units of telephone equipment from the final call under the sale contract, were shipped by sea to Singapore for delivery to the buyer. Marconi drew two drafts on Panin Bank which, together with the other documents stipulated in the credit, were presented on its behalf to Panin by SCB which, it is alleged, acted as Marconi's collecting agent. These documents were sent on about 23 ^rd December 1997 and on 16 ^th January 1998 respectively and were received by Panin Bank in Indonesia a few days later.

It appears, that on receipt of these documents, Panin Bank passed them on to Hastin Bank which rejected them as not conforming to the documents required by the credit. In turn Panin Bank also refused to take up the documents or accept the two drafts, which had been drawn upon it, adopting the reasons for rejection advanced by Hastin Bank. It is accepted that the reasons given by Hastin Bank for rejecting the documents are, to put it no higher, arguably unjustified. By way of example, the credit described the Beneficiary as "GPT International Limited, Edge Lane, Liverpool L7 9NW United Kingdom" whilst the documents referred to "GPT International Limited Payphone Systems, Edge Lane, Liverpool L7 9NW", a difference characterised by Hastin Bank as a discrepancy.

The various discrepancies were rejected by SCB on Marconi's behalf as unjustified. But Panin Bank maintained its refusal to pay. Hastin Bank, in the meantime, became insolvent. Indeed it is notable that shortly after the rejection of the documents, both the Buyers and Hastin Bank asked for the balance of the sale contract, and also the credit, to be cancelled because of the rapidly deteriorating economic situation in Indonesia.

Aside from contending that the documents were not discrepant, SCB further asserted on Marconi's behalf that Panin Bank, as the confirming bank, was responsible for communicating discrepancies under Article 14 (G) (i) of the UCP to SCB from whom it had received the documents. An opinion supporting this interpretation of Panin Bank's obligations as a confirming bank was given by the ICC UK Committee on 7 ^th June 1997. Panin Bank has refused to accept this opinion.

Marconi has been paid for these two consignments by its Credit Insurers. These proceedings have been brought in Marconi's name for the benefit of such insurers.

After correspondence and discussion failed to resolve the situation, a statutory demand was then issued against Panin Bank in this country and, upon its failure to comply, a winding up petition was presented against it. Panin Bank disputed the jurisdiction of the Companies Court to wind it up. Panin Bank retained Messrs Thomas Cooper and Stibbard for that purpose. Thereafter, Panin Bank, it was alleged, removed its only asset from the jurisdiction, which was said to have consisted of a credit balance with HSBC. In any event, the petition was dismissed by consent in March 2003.

It was following such dismissal that this action was commenced in which the claim is for £I,102,500.

Permission to serve out

The basis of the successful application to serve proceedings out of the jurisdiction pursuant to CPR 6.20 was formulated in various ways: -

a) The contract between Panin Bank, as confirming bank, and Marconi, as beneficiary, was made within the jurisdiction.

b) The contract was made by SCB London who was Panin Bank's agent for the purpose of advising the confirmation to Marconi.

c) The credit was governed by English law.

d) The failure to honour the credit constituted a breach of contract within the jurisdiction.

Panin Bank's response in short is that the credit was governed by Indonesian law not English law and, further, that by virtue of Indonesian law, all three of the alternative grounds cannot be made...