Letter of credit jurisdiction clause overridden


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In Petrologic Capital SA v Banque Cantonale de Geneve [2012] EWHC 453 (Comm), a Swiss bank applied for a Declaration but the English court did not have jurisdiction to hear a claim brought by its customer, a Swiss company, relating to a letter of credit issued by the bank.

The company relied on an English jurisdiction clause contained in an instruction to the bank to open the credit and which governed the relationship between the parties. The draft of the letter of credit also contained an English jurisdiction and choice of law clause. In response, the bank argued that its general conditions for the banking relationship applied to all matters, with no exception for the letter of credit.

The court held that the general conditions were sufficiently wide to include future letters of credit transactions, and it was clear that the intention was that future business would be governed by the general conditions, despite the contents of the instruction document. The exclusive jurisdiction clause, and the choice of English law, in the draft letter of credit was not intended to govern the relationship between the company and the bank, but the bank and the beneficiary of the letter of credit.

Paul Howcroft, Partner, Fladgate LLP (phowcroft@fladgate.com)

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