Execution of arbitration award of a documentary credit in favour of the defendant
Taurus Petroleum Limited v. State Oil Marketing Company of the Ministry of Oil, Republic of Iraq  UKSC 64
The “Supreme Court” is the last civilian court in the United Kingdom. Last October 25, 2017 issued a new ruling in arbitration. We discuss it here.
The plaintiff, Taurus Petroleum Ltd., tried to run an arbitral award against State Oil Marketing Company of the Ministry of Oil (“SOMO”), an Iraqi State-owned company. To do so, he asked the English judge that it confiscate a letter of credit that SOMO had open in its favour as a result of a purchase of crude oil to the oil company Shell. The embargo was practiced in the place where the bank Crédit Agricole, liable to the payment of the letter of credit, had its office in London.
SOMO opposed the embargo. After several judicial instances, the case went to the “Supreme Court”. Among other reasons, SOMO claimed that the English judge lacked jurisdiction. According to SOMO, the debtor of the documentary credit was not properly the Bank Crédit Agricole in London Office, but the main establishment of the Bank, whose registered office was in New York. SOMO, also argued that the letter of credit provided that the payment should be conducted from the account that the Bank Crédit Agricole had at the Federal Reserve Bank in New York.
Rejected all the arguments of SOMO, the “Supreme Court” declared the competency of the English judge and admitted the execution of the award on the documentary credit in London. This was based on the rules uniform customs and practices for documentary credits (“UCP 600”), whose article 3 establishes that the “branches of a bank in different countries are considered to be different banks”. It decided that the Bank Crédit Agricole in London branch was an entity with its own legal personality, and that its debt from SOMO was enforceable in the place of residence of the Bank in London and not in the place where the payment (i.e. New York) should be effective.
This sentence implies a change in the English jurisprudence line, since it replaces the traditional rule based on the place of payment under rule of the domicile of the debtor, thus making easier the implementation of Executive titles, such as arbitration awards. This is a jurisprudential development that increases the potential of execution in front of individuals or foreign entities which, although they have no roots or goods in the territory, they operate with banking instruments.