Eurobank Ergasias SA v Bombardier inc - 2024 SCC 11 - 5 April 2024
Country
Year
2024
Summary
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When the Canadian company determined that it would be unable to meet its subcontracting obligations under the offsets contract, an ICC Arbitral Tribunal was constituted and arbitration hearings took place. HMOD formally undertook not to demand payment under the Greek Letter of Guarantee for as long as the arbitration procedure was ongoing. However, while the issuance of the final award was still pending, HMOD repeatedly demanded payment from the Greek bank. The Canadian company sought and obtained an order from the ICC Arbitral Tribunal preventing HMOD from demanding payment under the Greek Letter of Guarantee until issuance of the final award. It also sought and obtained provisional injunctions from the Superior Court of Quebec to prevent payment under the Greek Letter of Guarantee and the Canadian Letter of Counter-Guarantee. Despite this, HMOD made a final demand for payment, seven days before the final award was set to be released, and said that the Greek bank would be subject to civil and criminal legal measures if it refused to pay. The Greek bank paid HMOD under the Greek Letter of Guarantee, and the Greek bank then demanded payment from the Canadian bank under the Canadian Letter of Counter-Guarantee.
The ICC Arbitral Tribunal's final award decided that the offsets contract violated European Union law such that it was null and void ab initio and that no liquidated damages were due by the Canadian company to HMOD. In response to the final award, the Greek bank commenced proceedings before Greek courts, where it unsuccessfully sought to recover the money that it had paid to HMOD. The Greek courts decided that the conduct of HMOD under the Greek Letter of Guarantee was not fraudulent under Greek law. In parallel proceedings before Quebec courts, the Canadian company sought a permanent injunction enjoining the Canadian bank from paying the Greek bank under the Canadian Letter of Counter-Guarantee. It argued that the fraud exception to an issuing bank's near absolute duty to honour a demand for payment under a letter of credit applied to the Greek bank as beneficiary under the Canadian Letter of Counter-Guarantee. Given that HMOD's conduct was fraudulent, the Greek bank's demand for payment under the Canadian Letter of Counter-Guarantee was, by extension, also fraudulent. The trial judge held that the manner in which HMOD obtained payment under the Greek Letter of Guarantee was fraudulent, and that the Greek bank's own conduct was fraudulent because its payment to HMOD was a result of fraud of which it was aware. He thus enjoined the Canadian bank from paying any amount to the Greek bank under the Canadian Letter of Counter-Guarantee. The Greek bank appealed. The Court of Appeal dismissed its appeal, holding that it was open to the trial judge to conclude that the Canadian bank was not bound to pay the Greek bank as beneficiary under the Canadian Letter of Counter-Guarantee, since the Greek bank had sufficient knowledge of the fraud prior to paying under the Greek Letter of Guarantee.
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