SPLIETHOFF'S BEVRACHTINGSKANTOOR BV V BANK OF CHINA LTD

[2015] EWHC 999 (Comm), Queen's Bench Division, Commercial Court, The Honourable Mrs Justice Carr DBE, 17 April 2015

Banking - Guarantees - Performance bonds - Guarantees in respect of contract - Effect of finding of fraud under the substantive contract by court in China - Illegality - Guarantees but not contracts containing English law and arbitration clause - Submission to foreign jurisdiction and effect of anti-suit injunctions - Public policy - Civil Jurisdiction and Judgments Act, sections 32 and 33

This was the trial of two actions brought by SBV (a Netherlands ship operator) against BOC (Bank of China) in respect of refund guarantees issued by BOC in support of two shipbuilding contracts between SBV as buyer and XXK and Electronics as sellers. SBV had pursuant to the shipbuilding contracts between October 2006 and July 2011 paid instalments of US$28.68 million to sellers towards the purchase prices, on terms that the instalments would be refunded with interest if the contracts were cancelled. The BOC guarantees secured the sellers' obligation to refund. The ships were not delivered on time and SBV claimed repayment from the sellers. The contracts provided for dispute resolution by way of arbitration in London. SBV obtained arbitral awards under both contracts against the sellers and now sought payment from BOC under the guarantees. BOC's defence and application for a stay in the event of liability arose out of various interim orders and two judgments made by the Qingdao Maritime Court ("QMC") in two sets of proceedings brought by the sellers against SBV and W, the ships' engine manufacturers and suppliers where it was alleged that W and SBV agreed to pass second-hand and defective refurbished engines off to the sellers as new. The sellers obtained ex parte interim orders in July, August and September 2011 against SBV and BOC, requiring SBV to provide a cash or other guarantee and prohibiting BOC from making any payment anywhere under the guarantees to SBV. SBV unsuccessfully challenged the jurisdiction of the Chinese courts by reference to the arbitration clauses in the contracts and then fully defended the claims. In April 2013 the QMC found W and SBV liable for fraud and awarded substantial damages. In April 2014 those findings were upheld by the Shandong High Court on appeal, an effective and enforceable decision. BOC had not been a party to the proceedings in China and it was common ground that it had taken every step available to have the orders against it set aside. The central issue before Mrs Justice Carr was whether the judgments granted in China afforded BOC a defence to SBV's claims under the guarantees, alternatively whether a stay was justified.