Documentary credit - derogation from principle of autonomy on the basis that terms of draw-down have not been met

Sirius International Insurance Co Ltd v FAI General Insurance, 4 April 2003, Court of Appeal

The facts

Agnew was a Lloyd’s syndicate and had wish to reinsure its liabilities. FAI were proposed as the reinsurers. Agnew was not too keen to proceed and had wanted a stronger reinsurer. Sirius thus agreed to act as that reinsurer on the basis that FAI would in turn reimburse them if payment under the reinsurance was made. As consideration for fronting the arrangement, Sirius insisted on the issue of a letter of credit in their favour. The agreement also provided that Sirius would not draw down under the letter of credit unless: