Petrosaudi Oil Services (Venezuela) Ltd v Novo Banco SA & Ors [2016] EWHC 2456 (Comm) (05 October 2016)

Petrosaudi Oil Services (Venezuela) Ltd v Novo Banco SA & Ors [2016] EWHC 2456 (Comm) (05 October 2016)

The claimant's presentation under the standby letter of credit was fraudulent because the certification that the applicant was obligated to pay was knowingly false or made with reckless disregard for the truth. The arbitral awards and Venezuelan law rendered the relevant contract clauses null and void, so no present debt was due. The fraud exception to the autonomy principle applied, and the bank was restrained from paying under the letter of credit.

Citation
[2016] EWHC 2456 (Comm)
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 for Declaratory Relief and Injunction / Post Trial Judgment
Outcome
Claim dismissed; injunction granted restraining payment under the letter of credit.
Legal Topics
Letters of Credit, Fraud Exception, Contractual Interpretation, Arbitration Awards, Public Procurement Law
Commercial Law Banking Law Arbitration Contract Law Letters of Credit Fraud Exception Contractual Interpretation Arbitration Awards +1 more

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 for Declaratory Relief and Injunction / Post Trial Judgment

Legal Issues

  1. 1 Whether the claimant was entitled to payment under a standby letter of credit despite disputed invoices and pending arbitration
  2. 2 Whether the presentation under the letter of credit was fraudulent due to a false certification of obligation
  3. 3 Effect of Venezuelan law and arbitral awards on the contractual payment obligations

Ratio Decidendi

The claimant's presentation under the standby letter of credit was fraudulent because the certification that the applicant was obligated to pay was knowingly false or made with reckless disregard for the truth. The arbitral awards and Venezuelan law rendered the relevant contract clauses null and void, so no present debt was due. The fraud exception to the autonomy principle applied, and the bank was restrained from paying under the letter of credit.

Court Disposition

Claim dismissed; injunction granted restraining payment under the letter of credit.

Orders

  • The bank is restrained from paying out to POS under the standby letter of credit.
  • Claimant's claim for declaratory relief is dismissed.