DCW Updates
DCW Monthly: December 2024
We’re thrilled to share the newest edition of DCW’s premium monthly content. This month’s highlights include: * Five
DCW Litigation Digest
Eurobank Ergasias S.A. v. Bombardier Inc. [2024]
The Canadian Supreme Court affirmed Quebec appellate and trial courts, upholding permanent injunction restraining Counter-Guarantor against payment of demand by Counter-Guarantee Beneficiary.
![Eurobank Ergasias S.A. v. Bombardier Inc. [2024]](/content/images/size/w30/2024/08/eurobank-v-bombadier-court-case-dcw.jpeg)
8 min read
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Eurobank Ergasias S.A. v.
Bombardier Inc. [2024]
2024 S.C.C. 11 [Canada]
Type of Lawsuit: Final appeal from grant of permanent injunction restraining Counter-Guarantor against payment of Counter-Guarantee Beneficiary on basis of allegedly fraudulent demands by underlying Local Guarantee Beneficiary and Local Guarantor/Counter-Guarantee Beneficiary.
Topics: Autonomy (Independence) Principle; Comity; Counter-Guarantee; Fraud; Government Beneficiary; ICC Arbitration; Letter of Guarantee; Liquidated Damages; Permanent Injunction
Parties:
• Appellant/Local Guarantor/Counter-Guarantee Beneficiary – Eurobank Ergasias, S.A.
• Respondent/Seller/Counter-Guarantee Applicant – Bombardier Inc.
• Second Respondent/Counter-Guarantor – National Bank of Canada
• Second Appellant/State Sovereign/Buyer/Local Guarantee Beneficiary – General Directorate for Defense Armaments and Investments of the Hellenic Ministry of National Defense (HMOD)
Underlying Transaction: Procurement contract for ten amphibious firefighting aircraft valued over USD 250 million. Underlying transaction included an Offsets Contract requiring Bombardier to subcontract some work to Greek companies, with liquidated damages for breach, backed up by the Guarantee and Counter-Guarantee.
Instrument: Local Guarantee as amended for USD 13,868,354.60 subject to Greek law and Counter-Guarantee governed by Quebec law. Both governed by URDG458 (1992).
Decision: The Canadian Supreme Court (Côté and Karakatsanis, JJ., dissenting), affirmed Quebec appellate and trial courts, upholding permanent injunction restraining Counter-Guarantor against payment of demand by Counter-Guarantee Beneficiary under Counter-Guarantee.
Rationale: No reviewable error in finding of fraudulent demand by Guarantee Beneficiary; knowledge thereof attributable to Local Guarantor/Counter-Guarantee Beneficiary demand on Counter-Guarantor, thus tainting Counter-Beneficiary’s demand under Counter-Guarantee, triggering fraud exception and justifying permanent injunction against payment by Counter-Guarantor under Quebec law.
Bombardier Inc. [2024]
2024 S.C.C. 11 [Canada]
Type of Lawsuit: Final appeal from grant of permanent injunction restraining Counter-Guarantor against payment of Counter-Guarantee Beneficiary on basis of allegedly fraudulent demands by underlying Local Guarantee Beneficiary and Local Guarantor/Counter-Guarantee Beneficiary.
Topics: Autonomy (Independence) Principle; Comity; Counter-Guarantee; Fraud; Government Beneficiary; ICC Arbitration; Letter of Guarantee; Liquidated Damages; Permanent Injunction
Parties:
• Appellant/Local Guarantor/Counter-Guarantee Beneficiary – Eurobank Ergasias, S.A.
• Respondent/Seller/Counter-Guarantee Applicant – Bombardier Inc.
• Second Respondent/Counter-Guarantor – National Bank of Canada
• Second Appellant/State Sovereign/Buyer/Local Guarantee Beneficiary – General Directorate for Defense Armaments and Investments of the Hellenic Ministry of National Defense (HMOD)
Underlying Transaction: Procurement contract for ten amphibious firefighting aircraft valued over USD 250 million. Underlying transaction included an Offsets Contract requiring Bombardier to subcontract some work to Greek companies, with liquidated damages for breach, backed up by the Guarantee and Counter-Guarantee.
Instrument: Local Guarantee as amended for USD 13,868,354.60 subject to Greek law and Counter-Guarantee governed by Quebec law. Both governed by URDG458 (1992).
Decision: The Canadian Supreme Court (Côté and Karakatsanis, JJ., dissenting), affirmed Quebec appellate and trial courts, upholding permanent injunction restraining Counter-Guarantor against payment of demand by Counter-Guarantee Beneficiary under Counter-Guarantee.
Rationale: No reviewable error in finding of fraudulent demand by Guarantee Beneficiary; knowledge thereof attributable to Local Guarantor/Counter-Guarantee Beneficiary demand on Counter-Guarantor, thus tainting Counter-Beneficiary’s demand under Counter-Guarantee, triggering fraud exception and justifying permanent injunction against payment by Counter-Guarantor under Quebec law.
Factual Summary:
In this 154-page 7-2 split decision, the Supreme Court of Canada grappled with fundamental principles underlying international trade finance. The primary issue is the independence principle (referred to by the Court as autonomy) and the fraud exception to it. Both the majority opinion and the dissent acknowledge that the independence principle is foundational to the integrity of LCs (or in this case Demand Guarantees), upon which beneficiaries rely.
They also acknowledge the necessity of a countervailing fraud exception to independence, upon which applicants rely. The gravamen of this case involved striking a proper balance between these competing reliance interests under the unique circumstances presented, with the majority and the dissent arriving at different conclusions. The case also highlights the legal risk inherent in linked back-to-back undertakings governed by the laws of different countries.
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Related Litigation:
• Eurobank Ergasias S.A. v. Bombardier Inc., 2022 QCCA 802 (Can. Que. C.A. June 7, 2022) [Canada] (affirming trial court);
• Bombardier Inc. v. HMOD, 2018 QCCS 2127 (trial judgment granting injunction), summarized by Dr. Karl Marxen in Oct. 2018 DCW at 13.
• There was also related litigation in Greek courts and ICC Arbitral Tribunal proceedings.
• Eurobank Ergasias S.A. v. Bombardier Inc., 2022 QCCA 802 (Can. Que. C.A. June 7, 2022) [Canada] (affirming trial court);
• Bombardier Inc. v. HMOD, 2018 QCCS 2127 (trial judgment granting injunction), summarized by Dr. Karl Marxen in Oct. 2018 DCW at 13.
• There was also related litigation in Greek courts and ICC Arbitral Tribunal proceedings.
The underlying transaction was a contract, entered into in 1998, under which Bombardier agreed to manufacture and sell amphibious firefighting aircraft to the Hellenic (Greek) Ministry of Defense (HMOD), a sovereign governmental body. The transaction included an Offsets Contract under which Bombardier agreed to subcontract a specified level of procurement to Greek companies, failing which Bombardier would owe liquidated damages to HMOD. Bombardier’s contingent liquidated damages obligation was backed up by a Demand Guarantee (governed by URDG458 and Greek law) issued by Eurobank Ergasias S.A. (Eurobank, a Greek bank) to HMOD.
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Cases Referenced:
• Bank of Nova Scotia v. Angelica-Whitewear, [1987] 1 S.C.R. 59. [Canada]
• Bank of Nova Scotia v. Angelica-Whitewear, [1987] 1 S.C.R. 59. [Canada]
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