The case of Spliethoff's Bevrachtingskantoor
BV v Bank of China Ltd (2015) concerned two refund guarantees for
two hulls (38 and 39) built for Spliethoff's
Bevrachtingskantoor BV (SBV), the Claimant. The refund guarantees
were provided by the Bank of China (BOC). As the vessels were not
delivered on time, SBV claimed the repayment of instalments from
the shipyard. SBV claimed payment from BOC under the guarantees
after obtaining arbitration awards to that effect.
In parallel, the shipyard brought proceedings against SBV, in
China, claiming SBV had been fraudulent in assisting engine
manufacturers to supply second hand engines to the vessel. The
Chinese Court upheld the claim of fraud, and issued orders
requiring SBV to provide a guarantee in the Chinese Court, and
preventing any payment out under the BOC guarantees.
Consideration of the Guarantees
The guarantees were found to be on terms consistent with
"on demand" guarantees, as considered in a number of
recent cases1. This was despite the inclusion of a
proviso to the effect that where arbitration was commenced, payment
needed to be made only in accordance with the terms of any award
obtained by SBV.
BOC's main arguments on the issue of the guarantees were
(a) the arbitration award in the hull 39 reference was not an
award for the purposes of the guarantee which triggered an
obligation on the part of BOC to pay under the hull 39 guarantee;
(b) on the basis that the guarantees were true guarantees, or
sureties, they were discharged by the findings of fraud against SBV
As to argument (a), the Court held that any demand by SBV was
valid, regardless of any arbitration award ordering the instalments
to be repaid. The demand was independent of any dispute between SBV
and the shipyard, and the disputes served only to
defer payment under the guarantee. They did not
affect the validity of the demand itself. The Court therefore held
that once the arbitration award ordered the instalments to be
repaid, and the shipyard failed to repay those instalments, BOC was
obliged to pay under the guarantee.
In light of the Court's decision that the guarantees were
performance bonds, argument (b) fell away. However, the Judge did
go on to consider the situation had the guarantees been sureties in
light of the wording, which stated that "our obligations
shall not be affected or prejudiced by any dispute between you as
the Buyer and the Seller". The Court held that this would
include any finding of fraud against SBV. In particular, the Judge
held that the word "dispute" was sufficiently
wide to cover a situation where a judgment had been handed down
following a dispute. There was, therefore, no need for a matter
still to be contentious in order to count as a dispute.
Orders Against BOC in China
The Court also considered the orders against BOC in China. The
Court held that the orders against BOC, preventing any payment out
under the guarantees, were still current, based on expert evidence.
The Court then considered whether those orders should be recognised
by the English Courts, despite being obtained in breach of the law
and jurisdiction clause of the relevant contracts. The Court
considered the fact that SBV had opposed jurisdiction of the
Chinese Court to the full extent possible, but that when the
Chinese Court ruled against it, and assumed jurisdiction, SBV took
full part in defending the claims in China. The Court held that
where a party takes full part in foreign proceedings; that party is
held to have submitted to that jurisdiction, and loses its shield
against recognition of the foreign judgment.
Despite the enforcement of the Chinese Court Orders, the Court
declined to order a stay of enforcement of the guarantees. The
Judge held that when considering an English law contract, such as
the refund guarantees, English law regards illegality by the place
of the performing party's domicile or place of business as
irrelevant. The Judge, therefore, ordered judgment for SBV in the
full amount of the guarantees claimed.
1 Such as Wuhan Guoyo Logistics Group Co Ltd v Emporiki
Bank of Greece SA  EWCA civ 1629 and Meritz Fire and Marine
Insurance Co Ltd v Jan Denul NV  2 Lloyd's Rep
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Local and international news about shipping, aviation, rail and road transport.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).