EURO-ASIAN OIL SA V ABILO (UK) LTD
 EWHC 3340 (Comm), Queen's Bench Division, Commercial Court, Mr Justice Cranston, 21 December 2016
Banking - Letters of credit - Sale of goods - Letters of indemnity - Bank co-signing letter of indemnity for presentation under a letter of credit to another bank - Whether arrangement delaying payment causing contract not to be on CIF terms
This was the claim of Euro-Asian against Abilo and against Credit Suisse in respect of a sale contract and letter of indemnity. The background was that Euro-Asian had, for reasons of personal business relations between officers of Abilo and of Euro-Asian, become inserted in a string of sale contracts for petroleum products to be delivered to Constanza under a series of CIF sale contracts. The oil was purchased by Abilo from major suppliers with the support of a letter of credit from Credit Suisse which in turn relied upon letters of credit procured by Euro-Asian. Euro-Asian received as security for these transactions holding certificates from the Constanza terminal. The petroleum products were then sold to other companies controlled by the same interest as Abilo. There were four such transactions in 2009-2010. The letters of credit provided that payment was to be against bills of lading, but with the backup option of payment against seller's invoice and an LOI. Under the first sale contract, the cargo was unbeknownst to Euro-Asian delivered to an ultimate buyer which as a result of tax difficulties never paid. As a result, the cargo under the second sale contract came to be used as security for payment both under that letter of credit and the next one, with the holding certificate (from which the vessel's name had carefully been omitted) as well as the bills of lading being used separately. This was repeated under the following transactions with payment taking place in each case so that calling upon the security was not necessary. At some stage, Euro-Asian's officers became aware of the "carousel" but permitted it to continue, to allow their counterpart to "close the circle". In the final transaction, Credit Suisse presented an invoice and a letter of indemnity, co-signed by itself and Abilo, to Euro-Asian's bank which honoured the letter of credit and debited Euro-Asian. Credit Suisse had not been involved in the underlying transactions, but had co-signed the letter of indemnity with Abilo in reliance upon a letter of indemnity issued by the major supplier. In this action, Euro-Asian claimed against Abilo under the fourth sale contract on the basis that it had paid for the petroleum products but not received them. It also claimed against Credit Suisse and Abilo as co-signatories of the letter of indemnity presented to its bank for payment.
The rest of this document is only available to i-law.com online
If you are already a subscriber, please enter your details below to log in.