Reimbursement under letters of credit

In Société Générale SA v Saad Trading [2011] EWHC 2424 (Comm), the claimant bank Société Générale (‘SG’) claimed a sum of approximately US$50m against the applicant Saad Trading (‘D1’) pursuant to a facility letter, and the same sum against the guarantor Maan Abdulwahid Abduljmajeed Al-Sanea (‘D2’) in respect of a guarantee for D1’s liability.

Jingbo Zhang, PhD Candidate, School of Law, University of Southampton

The facts

SG had provided a credit facility to D1 in connection with the purchase of gold from AGR Matthey on 29 January 2009, and meanwhile SG sought a guarantee from D2 concerning all liabilities of D1. Pursuant to the facility letter (the ‘Facility’), SG issued two letters of credit subject to UCP 600 at the request of D1. The mandate from D1 relating to the letters of credit was contained in the Facility, and D1 promised to indemnify all liabilities under such letters of credit. Moreover, D1 agreed to hold SG harmless provided that actions were taken in good faith. In addition, D2 had unconditionally and irrevocably guaranteed that a primary obligation would be undertaken to indemnify SG in respect of any amounts due from D1 under the Facility.