Petrosaudi Oil Services (Venezuela) Ltd v Novo Banco SA & Ors

Petrosaudi Oil Services (Venezuela) Ltd v Novo Banco SA & Ors

The claimant's certificate under the Letter of Credit was false, as no sum was due and payable under the contract at the time of presentation due to the nullity of Clauses 803(3) and (4) and the mandatory effect of Article 141. The claimant, through its director, did not honestly believe the certificate was true, or was reckless as to its truth, thus the fraud exception applies and the bank must be restrained from paying out under the Letter of Credit.

Parties
Claimant: Petrosaudi Oil Services (Venezuela) Ltd; First Defendant: Novo Banco S.A.; Second Defendant: PDVSA Servicios S.A.; Third Defendant: PDVSA Services B.V.
Jurisdiction
England and Wales
Judgment Date
05 October 2016
Procedural Posture
Commercial Court Claim / Judgment After Trial
Outcome
Claim dismissed; injunction granted restraining payment under the Letter of Credit.
Legal Topics
Fraud Exception in Documentary Credits, Autonomy Principle, Arbitration Awards, Good Faith in Contract Performance
Commercial Law Banking Law International Arbitration Fraud Exception in Documentary Credits Autonomy Principle Arbitration Awards Good Faith in Contract Performance

Case Brief

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Parties

Petrosaudi Oil Services (Venezuela) Ltd

Claimant

Novo Banco S.A.

First Defendant

PDVSA Servicios S.A.

Second Defendant

PDVSA Services B.V.

Third Defendant

Procedural Posture

Commercial Court Claim / Judgment After Trial

Legal Issues

  1. 1 Whether the claimant was entitled to payment under the Letter of Credit given the arbitration awards and Venezuelan law
  2. 2 Whether the certificate presented under the Letter of Credit was fraudulent or reckless
  3. 3 Whether the fraud exception to the autonomy principle applies

Ratio Decidendi

The claimant's certificate under the Letter of Credit was false, as no sum was due and payable under the contract at the time of presentation due to the nullity of Clauses 803(3) and (4) and the mandatory effect of Article 141. The claimant, through its director, did not honestly believe the certificate was true, or was reckless as to its truth, thus the fraud exception applies and the bank must be restrained from paying out under the Letter of Credit.

Court Disposition

Claim dismissed; injunction granted restraining payment under the Letter of Credit.

Orders

  • Bank restrained from paying out to POS under the Letter of Credit.
  • No payment to be made under the Letter of Credit pending further order.