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

The Banks argued that the Assignment was invalid under the terms of the Bonds, in that EuroChem NW2 could only assign the proceeds of the Bonds in circumstances where a demand had not already been made. They said that this followed from the language of clause 9.1, which refers to the assignment of “the proceeds arising from the possible drawdown of this bond… to EuroChem AG”. They said that the word “possible” was only consistent with a demand not yet having been made.

The fallacy in this argument is illustrated by the facts of this case. There have been demands, which are valid and which, if the Claimants were otherwise right, would oblige the Banks to pay. However, the Banks have not paid, with the result that there has been no “drawdown”, and no “proceeds arising from” such drawdown. On the assumption that the Claimants’ case is otherwise correct, they must be entitled to the occurrence of the drawdown and to the arising of the proceeds – in the form of cash. However, because the Banks have not accepted the demands, that legal entitlement currently represents only an abstract possibility. There are as yet no proceeds, i.e. no cold, hard cash that the Claimants can identify as rightfully theirs.

Accordingly, if a beneficiary under a Bond makes a valid demand, which the Bank wrongfully refuses to pay, I do not see how the wording of clause 9.1 can be read as preventing the beneficiary from making an assignment of the proceeds. As at the date of assignment, they are (in the language of the clause) “possible proceeds”. They will become actual proceeds only if and when the claim is accepted by the Bank, or succeeds at trial.

The Banks also argued that because the original demands were accompanied by payment instructions requesting payment to EuroChem NW2’s own bank account, it was not possible for EuroChem NW2 subsequently to request payment to EuroChem AG, following the Assignment, and this too was inconsistent with clause 3 and/or clause 9.1. This argument does not reflect the language of either provision, and I cannot accept it.