How UCC Article 5 governs letters of credit in the US, its non-variable provisions, and the legal nuances that affect issuers and beneficiaries.
English Court of Appeal (Civil Division) reversed trial judgments in favour of standby beneficiaries.
Canada's Court of Appeal of Alberta affirmed trial judgment, dismissing LC Applicant's appeal and terminating short term interim injunction.
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)
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.
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.
How UCC Article 5 governs letters of credit in the US, its non-variable provisions, and the legal nuances that affect issuers and beneficiaries.
![Pacific Atlantic Pipeline Construction Inc. v. Coastal Gaslink Ltd. [2024]](/content/images/size/w30/2024/08/pacific-atlantic-pipeline-case-summary-dcw.jpeg)
Canada's Court of Appeal of Alberta affirmed trial judgment, dismissing LC Applicant's appeal and terminating short term interim injunction.
English Court of Appeal (Civil Division) reversed trial judgments in favour of standby beneficiaries.
![Pacific Atlantic Pipeline Construction Inc. v. Coastal Gaslink Ltd. [2023]](/content/images/size/w30/2024/08/pacific-atlantic-pipeline-case-2023.jpeg)
Canada's Court of King’s Bench of Alberta denied injunction application of LC Applicant who sought to enjoin Beneficiary demand on standby LC.
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