CL-2022-000456 - [2025] EWHC 1938 (Comm)

The Banks alleged that the claims must fail because the Bonds all expired some time ago – most in September 2023; two in August 2024. They said that, under clause 3.2 of the Bonds, they were obliged to pay immediately upon receipt of a valid demand, and in any case no more than four days later. If they were prohibited from paying when the demand was made and for the next four days, that demand ceased to have effect. Upon expiry, no further demands could be made.

The Claimants pointed out that clause 6(a) of the Bonds provides that the obligations are irrevocable and primary, and clause 6(b) provides that on expiry the Bond “shall cease to have effect save in connection with any demand notified to the Issuer on or prior to the said date.” They also said that the effect of the rule in Ralli Brothers is to suspend, not extinguish, a payment obligation, referring to Banco San Juan Internacional Inc v Petroleos De Venezuela SA [2020] EWHC 2937 (Comm), per Cockerill J at [77]:

“[77]The rule in Ralli Bros… provides that an obligation under an English law contract is invalid and unenforceable, or suspended in the case of a payment obligation, insofar as the contract requires performance in a place where it is unlawful under the law of that required place of performance.”

I consider that the Claimants are right on both their points. If the effect of sanctions was to suspend payment for so long as to frustrate the purpose of the Bonds, the Banks’ obligation to pay might be discharged for that reason. However, the effect in this case has not been such as to amount to legal frustration. If sanctions are lifted within the reasonably near future, or if the position of one of the relevant NCAs changes, the Banks will be obliged to pay by reason of the original demands.