LONDON, Jan. 30, 2017 /PRNewswire/ -- The Court of Appeal has ruled in favour of PetroSaudi ordering full payment of sums owing to them under a standby letter of credit.
The judgment by the Court of Appeal overruled the High Court's previous decision that the signatory was fraudulent in their representation of law. Christopher Clarke LJ who was presiding over the appeal held that the signatory's understanding not only was "not fraudulent in any sense" and was in fact "the same conclusion as I have reached" and "consistent with commercial good sense."
In 2009, PetroSaudi entered into a drilling contract with Petróleos de Venezuela, S.A. (PDVSA), the Venezuelan state-owned oil and natural gas company. In light of what the judgment describes as "Venezuela's dilatory payment history," an autonomous standby letter of credit was procured to provide security for payments from PDVSA. The commercial purpose of a standby letter of credit is to ensure the beneficiary – in this case, PetroSaudi – can obtain payment of sums due under a principal contract from a creditworthy bank, regardless of whether those sums are disputed or whether the counterparty is unable to pay. In countries with strong payment risk such as Venezuela, procurement of a letter of credit is standard business practice.
PetroSaudi subsequently conducted drilling services for PDVSA totaling US $129 million. The agreed credit period elapsed without payment of any of the invoices and the dispute over payment was then referred to arbitration.
David Bennet, Partner at Clyde & Co and lead lawyer on the case said: "Clearly the decision strongly supports the conduct, integrity and professionalism of PetroSaudi International and its General Council."
The final ruling found the payment under the letter of credit had been wrongly restrained and the appellant (PetroSaudi) was entitled to full payment from the issuing bank.
ABOUT PETROSAUDI INTERNATIONAL
PetroSaudi International is a privately owned oil exploration and production company with its main offices in the United Kingdom, Saudi Arabia and Switzerland. Founded in 2005 by Saudi Arabian businessman Tarek Obaid, PetroSaudi is involved worldwide in oil and gas projects.
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SOURCE PetroSaudi International