COMPLIANCE WITH THE TERMS OF A PERFORMANCE BOND

In AES-3C Martiza East EOOD v Crédit Agricole Corporate and Investment Bank [2011] EWHC 123 (TCC), [2011] All ER (D) 30 (Feb) Mr Justice Ramsay affirmed that on-demand bonds are payable against an appropriately worded demand accompanied by such documents as the demand requires and without proof of the existence of a liability under the underlying contract. It is therefore necessary to examine the terms of the on-demand bond with some care in order to identify whether its requirements have been satisfied. On the facts of the present case it was held that the claimant was entitled to summary judgment in respect of one of its demands but not in respect of the other because it could not demonstrate that it had complied with the terms on which the demand was required to be made.

The facts

The claimant brought proceedings against the defendants in which it sought summary judgment in respect of two demands made on an on-demand bond which was governed by the ICC Uniform Rules for Demand Guarantees (ICC Publication No 458). The bond was provided in relation to a contract for the construction of a power plant in Bulgaria (referred to as the ‘EPC Contract’). The second defendants were, between them, responsible for the construction of the power plant. The first defendant was the bank that issued the bond. The second defendants had agreed to indemnify the first defendant and, in order to protect their position, they had applied for and obtained an interim injunction in France which had the effect of preventing the first defendant from making payment to the claimant under the bond.