учебный год 2023 / Drobnig, Principles of European Law of Personal Security

Chapter 3: Independent Personal Security (Indemnities/Independent Guarantees)

personal security according to Cass. 6 Oct. 1989 no. 4006, Giust. civ. 1990 I 731; CA Milano 12 Feb. 2005, BBTC 2005 II 481 ss.; SPAIN: Sa´nchez Calero, El contrato aut+n- omo 384). Furthermore, there is an abuse of rights when the creditor demands performance from the security provider although vis- -vis the debtor it is not entitled to demand this security (BGH 10 Feb. 2000, BGHZ 143, 381, 384; BGH 8 March 2001, BGHZ 147, 99 for the special case of a dependent personal security on first demand). It is sometimes said that invoking an abuse of right is invoking an objection from the underlying relationship, contrary to the independent nature of the independent personal security and therefore permissible only in exceptional circumstances as against the creditor (BELGIUM: De Marez no. 70; FRANCE: cf. Simler nos. 984 ss.; GERMANY: BGH 12 March 1984, BGHZ 90, 287, 292; Staudinger/Horn nos. 309 s. preceding §§ 765 ss.; for documentary credits see Schu¨tze nos. 427 s.; GREECE: Georgiades § 6 no. 136; ITALY: Cass. 19 March 1993 no. 3291, Foro it. 1993 I 2171; SPAIN: Carrasco Perera, Las nuevas garant%as 741; Sa´nchez Calero, El contrato aut+nomo 385 and 387; SWEDEN: Dalman 199). More correctly, the security provider is only obliged within the limits of its obligation, and it may refuse performance if it can prove that the creditor’s assertion that the protected event has occurred is wrong (GREECE: Georgiades § 6 no. 136).

3.In ENGLAND, IRELAND, SCOTLAND and the NETHERLANDS, however, the term “fraud” is used instead of “abuse”, i.e. the personal security may not be called upon if the demand is fraudulent (ENGLAND: United City Merchants (Investments) Ltd v. Royal Bank of Canada [1983] 1 AC 168 (HL) (letter of credit); Edward Owen Engineering Ltd v. Barclays Bank International Ltd [1978] QB 159 (CA) (performance bond); IRELAND:

White 658; NETHERLANDS: Dutch Business Law § 6.05 [4] [e]; Pabbruwe, Bankgarantie / borgtocht 54, 58; SCOTLAND: Centri-Force Engineering Ltd v. Bank of Scotland 1993

SLT 190 (CFI)). The fraud exception does not apply, however, where the beneficiary only after the demand has been made discovers that the conditions of the personal security are not fulfilled (ENGLAND: Montrod Ltd v. Grundko¨tter Fleischvertriebs GmbH

[2002] 1 WLR 1975 (CA)).

4.In other countries the two terms abuse and fraud are cumulatively or alternatively used without distinction. This is so in AUSTRIA, BELGIUM, in FRANCE and in PORTU-

GAL, where the duty of the security provider not to pay upon a manifestly abusive or fraudulent call on the personal security (AUSTRIA: “firm court practice”, OGH 28 June 2005, BA 2006, 62 at 64 and 24 June 2003, BA 2003, 956 at 957; BELGIUM:

Wymeersch, Dambre, Troch no. 57; FRANCE: Deve`ze, Couret and Hirigoyen nos. 3702 ss.; PORTUGAL: Galva˜o Telles 289; STJ 14 Oct. 2004, CJ(ST) XII, II-55) is considered to be one of the exceptions to the general rule of strict compliance (garantieformalisme). Some FRENCH authors expressly say that “fraud” is equivalent to the “abuse of rights” (Simler nos. 985 ss.). In case of counter-securities, the payment is prohibited insofar as the demands of both the creditor and the provider of independent security are “manifestly abusive”. This requires either a fraudulent collusion between the creditor and the provider of independent security or a fraudulent intention of the latter (Cass.com. 9 Oct. 2001, Bull.civ. 2001 IV no. 158 p. 149, RTD com 2002, 144). In FRANCE the exceptions to the principle of independence were first very restricted; the FRENCH courts seemed to require a fraudulent intention of the creditor (Cass.com. 11 Dec. 1985, JCP G 1986, II no. 20593). Since 1987, a payment upon a manifestly abusive call may also be refused (Cass.com. 20 Jan. 1987, JCP G 1987, II no. 20764). This court practice is

348

Article 3:104: Manifestly Abusive or Fraudulent Demand

confirmed by CC, new art. 2321 para 2 of 2006, which requires for the discharge of the security provider a manifest abuse or a manifest fraud of the creditor or a fraudulent collusion between the creditor and the debtor.

5.In DENMARK the demand must be “unwarranted”, in order for the security provider to deny payment (Pedersen, Bankgarantier 155).

6.Three cases decided in different countries dealt with the consequences of the revolutionary changes and expropriations that occurred in Iran in late 1979. European entrepreneurs working in Iran on constructions projects gave up these activities because they were expelled or otherwise forced to stop work. When their Iranian contracting parties or successors demanded payment under independent performance guaranties, a DUTCH court prohibited this upon the request of the Dutch contractor (CFI Amsterdam 18 Dec. 1980, Schip en Schade 1981 no. 135) and the FINNISH Supreme Court rejected the demand as being unfair (HD 26 Oct. 1992, KKO 1992:145, English translation in SisulaTulokas 41 ss.); for a related case, but with only a preliminary negative ruling cf. GERMAN BGH 12 March 1984, BGHZ 90, 287.

II. ‘‘Manifestly’’ Abusive or Fraudulent Demand and Evidence

A.‘‘Manifestly’’ Abusive or Fraudulent Demand

7.According to most of the aforementioned statutory provisions or generally accepted rules (supra no. 1), the abuse of rights must be “manifest”. This term implies the gravity of the abuse, on the one hand, and the feasibility of proving it, on the other. Manifest is an abuse if the abusive demand is detectable by anybody, e.g. if the underlying claim has been held by court or arbitral decision to be invalid or when the demand is made for reasons of political vengeance (AUSTRIA: letter of personal security accidentally sent to a wrong person who promised return but demands performance, OGH 8 July 1993, SZ 66 part 2 no. 82 p. 21; generally speaking, there must be an evident abuse of right or fraud to be proved by liquid means of evidence: OGH 16 Dec. 1981, SZ 54 no. 189 p. 929; OGH 14 Nov. 1985, JBl. 1985, 424, 426; BELGIUM: “abuse that stares one in the face”,

Wymeersch, Bank guarantees no. 4; De Marez no. 35 at 23; FRANCE: Deve`ze, Couret and Hirigoyen no. 3707; GERMANY: BGH 12 March 1984, BGHZ 90, 287, 292; Staudinger/ Horn no. 313 preceding §§ 765 ss.; GREECE: Georgiades § 6 no. 138; ITALY: Mastropaolo 307; Cassera 2768; CFI Milano 3 May 1984, BBTC 1985 II 85 and 12 Oct. 1985, BBTC 1987 II 57; CA Milano 27 May 1994, BBTC 1995 II 423; CFI Verona 30 Dec. 2003, Giur.mer. 2005, 176; PORTUGAL: STJ 14 Oct. 2004, CJ(ST) XII, II-55; STJ 1 June 1999, 347/99 www.dgsi.pt; Almeida Costa and Pinto Monteiro 20-21; the same for documentary credits, GERMANY: Schu¨tze no. 429; GREECE: Georgiades § 11 nos. 73-77). Concerning personal securities on first demand, only legal or factual objections that exist obviously to everybody are relevant, all other legal or factual problems or questions having to be settled between creditor and debtor (GERMANY: BGH 12 March 1984, BGHZ 90, 287, 239 s.; cf. also BGH 17 Jan. 1989, NJW 1989, 1480, 1481; for dependent personal security cf. recently BGH 5 March 2002, NJW 2002, 1493). Also the ITALIAN Supreme Court tends to restrict the possibility of invoking the exceptio doli (Cass. 19 March 1993 no. 3291, Foro it. 1993 I 2171; De Nictolis 114).

8.In ENGLISH law the fraud exception applies only if it is “seriously arguable that, on the material available, the only realistic inference is that [the creditor] could not honestly

349

Chapter 3: Independent Personal Security (Indemnities/Independent Guarantees)

have believed in the validity of its demands” (United Trading Corporation SA v. Allied Arab Bank [1985] 2 Lloyd’s Rep 554 (CFI), at 561 per Ackner LJ.; see also Goode, Commercial Law 992 s.). These strict requirements stem from the fact that the courts are reluctant to interfere with the smooth operation of documentary credits which are regarded as the “life-blood of international commerce” (R. D. Harbottle (Mercantile) Ltd

v. National Westminster Bank Ltd [1978] QB 146 (CFI), at 155 per Kerr J.).

9.In DENMARK it must be proven that the claim is unwarranted (Pedersen, Bankgarantier 156).

10.There is neither court practice nor literary opinion on this specification of the abuse and its proof in SPAIN. Authors have merely indicated in general that, in order to preserve the economic function of independent personal securities and their legal nature, objections to the creditor’s demand must be limited (Sa´nchez Calero, El contrato aut+nomo 384; for an in-depth discussion of the topic on the basis of references to foreign countries Carrasco Perera, Fianza 216 ss.).

B.Present Evidence

11.In some countries the proof can be made with any evidence which is “present” and allowed by law, i.e. not only with documents, but also with witnesses or affidavits (ENGLAND: Etablissement Esefka International Anstalt v. Central Bank of Nigeria [1979] 1 Lloyd’s Rep 445 (CA); GERMANY: Staudinger/Horn no. 315 preceding §§ 765 ss.; contra CA Kçln 7 Aug. 1986, WM 1988, 21, demanding documentary means of evi-

dence; GREECE: Georgiades § 6 no. 140; for documentary credits cf. Georgiades § 11 no. 75). Furthermore, it suffices e.g. that the security provider is informed of the abuse by the debtor or by certain information in the newspapers, or just by certain well-known facts (BELGIUM: De Marez no. 29; PORTUGAL: STJ 14 Oct. 2004, CJ(ST) XII, II-55; Cortez 513 ss.).

12.In other countries, however, courts admit a manifest fraud or abuse only if based on documentary evidence, e.g. a final judgement against the creditor, a certificate of payment from the creditor, because the proof must be beyond doubt (DENMARK: Pedersen, Bankgarantier 155); the same in FRANCE, where in only one decision the manifestly abusive call was not proved by documentary evidence, but by the admission of the creditor (CFI Paris 1 Aug. 1984, JCP G 1984, II no. 20526). In ITALY opinions on this point are more fragmented (for the necessity of documentary evidence Mastropaolo 307; Pontiroli, Garanzie autonome 76 s.; but contra Bonelli, Le garanzie bancarie 107, fn. 70; for an overview of the diverging opinions expressed on this point by scholars and courts see Calderale, Fideiussione 305 ss.; more recently Barilla`, L’abuso 93 ss., fn. 15; Cuccovillo 103 ss. and CFI Bologna 20 Jan. 2003, BBTC 2005 II 79 on the relevance of testimonial evidence in proceedings for the granting of an interim injunction inhibiting payment by the security provider).

C.Consequences for Security Provider

13.In some countries the security provider is not obliged, but can refuse, or is only entitled not to pay the creditor in cases of abusive/fraudulent demand (DENMARK: Pedersen, Bankgarantier 155; GERMANY: Staudinger/Horn no. 312 preceding §§ 765 ss.; PORTUGAL: CA Lisboa 11 Dec. 1990, CJ XV, V-134; Almeida Costa and Pinto Monteiro 21: the security

350

Article 3:104: Manifestly Abusive or Fraudulent Demand

provider however should not pay and he may loose his right of recourse; in AUSTRIA one writer concludes that the security provider is only entitled to refuse performance if it is fully convinced, on the basis of present evidence, that the conditions summarized supra no. 6 have been met; if there is merely a doubt, performance must be made: Harrer 67).

14.In other countries the security provider must refuse payment because it has the duty to protect the debtor and is thus obliged as against the latter to omit payment (BELGIUM: de Marez no. 33; FRANCE: Deve`ze, Couret and Hirigoyen no. 3708; however, according to new CC art. 2321 para 2 of 2006 the security provider is not obliged to refuse to pay, it is only entitled to; GREECE: Georgiades § 6 no. 143; CFI Athens 9714/1996, EED 49, 45; for documentary credits Georgiades § 11 no. 73; ITALY: so according to the prevailing opinion among scholars and courts, often on the basis of the principal-agent relationship existent between debtor and security provider; see for all De Nictolis 113; Calderale 259 ss.; Tommaseo, Autonomia negoziale 425; CFI Torino 27 Sept. 2003, Giur.mer. 2004, 280; CFI Bologna 20 Jan. 2003, BBTC 2005 II 79; CFI Treviso 24 Dec. 1997, Riv.Dir.Civ. 1998 II 443; CFI Roma 26 May 1995, Foro it. 1996 I 1091; SPAIN: Sa´nchez Calero, El contrato aut+nomo 389). In ENGLAND the security provider may be restrained from performance towards the creditor by an injunction sought by the debtor if clear knowledge of the fraud on the security provider’s part can be shown (Andrews and Millet no. 16-021; O’Donovan and Phillips nos. 13-28 ss.).

15.As to the security provider’s claim for return of its performance against the creditor, cf. national notes on Art. 3:105 sub IV.

D.Scope of Debtor’s Protection

a.As against Both the Security Provider and the Creditor

16.The debtor may take legal action against the creditor: the debtor has a claim arising from its relationship with the creditor that the latter omit to demand performance of the personal security, if the secured risk has not occurred (BELGIUM: de Marez no. 39; ENGLAND: Andrews and Millet nos. 16-025 ss.; there is some discussion whether the standard of proof for a case of fraud might be lower in such a constellation as opposed to an action against the security provider, cf. Themehelp Ltd v. West [1996] QB 84 (CA); see also O’Donovan and Phillips nos. 13-38 s.; minority opinion in GREECE: CFI Athens 7913/1998, EED 50, 279; Georgiades § 6 no. 148; for documentary credits, Georgiades § 11 no. 60; PORTUGAL: Pinheiro 461). In the NETHERLANDS and in ITALY often for procedural reasons the debtor enjoins both the security provider and the creditor, the former from performing the personal security, the latter from utilizing it (NETHER-

LANDS: Pabbruwe, Bankgarantie / borgtocht 54, 58; Dutch Business Law § 6.05 [4] [e]; ITALY: CFI Roma 26 Jan. 1996, Foro it. 1996 I 2540; CFI Genova 9 Dec. 1992, Giur.comm. 1993 II 757; however, interim protection of the debtor is rarely claimed against the creditor, especially in international commerce: Bonelli, Le garanzie bancarie

153 ss.; see however also infra, no. 17).

17.The debtor may demand from the security provider that it make no payment to the creditor. This right can be enforced in court by requesting an interim injunction (AUSTRIA: OGH 16 Dec. 1981, SZ 54 no. 189 at p. 931; GERMANY: Horn, B4rgschaften und Garantien nos. 583-591 with case law; ITALY: CCP arts. 700 ss.; Bonelli, Le garanzie

351

Chapter 3: Independent Personal Security (Indemnities/Independent Guarantees)

bancarie 133 ss.; Tommaseo, Autonomia negoziale 426 ss.; e.g. CFI Milano 17 July 2003, Foro pad. 2003 I 398; CFI Bologna 20 Jan. 2003, BBTC 2005 II 79; PORTUGAL: STJ 14 Oct. 2004, CJ(ST) XII, II-55).

b.As against the Security Provider Only

18.In other countries, however, the debtor may only prohibit the security provider from making payment if the creditor abuses its rights. This right of the debtor can be enforced

by an interim injunction (AUSTRIA: OGH 28 June 2005, BA 2006, 62, 64 (“firm court practice”); 16 Dec. 1981, SZ 54 no. 189 p. 931; FRANCE: Deve`ze, Couret and Hirigoyen no. 3692; Simler no. 971; GERMANY: M4nchKomm/Habersack no. 35 preceding § 765). In some countries however, the debtor is not allowed to intervene in the relationship between security provider and creditor and therefore may not prohibit the security provider from making payment to the creditor (SPAIN: Sa´nchez Calero, El contrato aut+nomo 391; GREECE: CA Athens 3425/1985, Arm 41, 578; minority opinion in GERMANY: Staudinger/Horn nos. 320 ss. and 336 ss. preceding §§ 765 ss.).

c.As against the Creditor Only

19.In DENMARK the debtor is entitled to try to prohibit the calling-up of a manifestly abusive payment only as against the creditor (Pedersen, Bankgarantier 65, 148, 155 and 158).

(Karpathakis/Dr. Fiorentini)

Article 3:105: Security Provider’s Right to Reclaim

(1)The security provider has the right to reclaim the benefits received by the creditor if

(a)the conditions for the creditor’s demand were not or subsequently ceased to be fulfilled;

or

(b)the creditor’s demand was manifestly abusive or fraudulent.

(2)The security provider’s right to reclaim benefits is subject to PECL article 4:115 and the general rules on unjustified enrichment.

352

Article 3:105: Security Provider’s Right to Reclaim

A.The Issue

1.In the factually triangular situation of an independent security it is not quite clear who is entitled to request return of a performance that had been made by the security provider on the creditor’s demand, although the terms and conditions of the demand had not been fulfilled or later disappeared or the demand was abusive or fraudulent. Is the security provider entitled or rather the debtor or both?

2.National legal systems vary considerably on this issue, using sometimes very fine distinctions in allocating the right to the one or the other party. However, in this field any such distinction does not appear to be practicable since it leaves a margin of uncertainty. Therefore, only the alternative between security provider and debtor offers clarity and certainty.

3.Doubts may arise due to the fact that the security provider’s performance of the creditor’s demand at the same time often will extinguish (or reduce) an obligation of the debtor vis- -vis the creditor in the framework of an underlying relationship between these two parties. This fact is sometimes invoked as justifying that return of such performances can only be requested by the debtor. However, this thesis overlooks the fact that the security provider’s obligation is a separate and independent obligation and usually its content will also differ from the debtor’s obligation to the creditor. The security provider only performs its obligation; usually, of course, such performance may also extinguish (or reduce) (one of) the debtor’s obligation(s) towards the creditor, but this effect is derived from the security agreement between these parties.

4.The better reasons speak for entitling the security provider: The person who performed has the greatest interest in rectifying an unjustified performance. Also, the security provider is more familiar with the circumstances under which it performed and its defences and objections against the creditor’s claim which it had been precluded from raising against the creditor. Even more important is the necessity of the security provider’s entitlement if the debtor has become bankrupt.

5.However, the security provider often will require the debtor’s assistance with respect to the facts or legal rules envisaged by the terms and conditions of the independent security for justifying the creditor’s demand. Such assistance is even more important if the conditions for the creditor’s demand under the independent security had originally been fulfilled but later disappeared (infra D).

6.If the parties feel that it is more convenient to let the debtor bring the claim or an action against the creditor, they are free to agree on an assignment (cf. PECL Chapter 11) of the security provider’s claim to the debtor.

7.However, there is an important outer limit to the security provider’s entitlement. This follows from the limited scope of application of Article 3:105 laid down in para (1) litt. (a) and (b): The security provider may only invoke the terms of the independent security as against the creditor. By contrast, it is not entitled to invoke the terms of an underlying contract or other legal relationship between the debtor and the creditor. If the

353

Chapter 3: Independent Personal Security (Indemnities/Independent Guarantees)

security provider’s promise of performance had been invoked and honoured although the debtor had not, or not properly, performed the secured obligation to the creditor, any claim for return of this performance or repayment must be brought by the debtor against the creditor. The only exception to this limitation is the case of an evidently abusive or fraudulent demand according to Article 3:104; but this exception is to be very strictly construed.

B.Terms of Demand Not Fulfilled

8. Upon receiving a demand for performance, the security provider must examine the validity of the independent security and whether the demand exactly complies with the terms and conditions of the independent security; the debtor must be informed of the demand (cf. Article 3:102 (1) and (2)). Nevertheless, due to a misunderstanding or due to temporary absence of a competent person in either the security provider’s or the debtor’s office it may occur that the security provider erroneously believes to be obliged to perform the creditor’s demand and in fact performs. The security provider is then entitled to demand return of the performance made.

Illustration 1

B in France has concluded with S in England a contract of sale for 500 English sheep. On S’ demand, B requests X-Bank in London to assume an independent security for payment of the purchase price which may be utilised by S on the day of shipping the sheep to France and on presentation of a veterinary certificate for the sheep. Although S has not presented such a certificate because he did not apply for it, he demands payment. An employee at X-Bank overlooks the absence of the required certificate and therefore honours S’ demand for payment. X-Bank may request repayment of the amount paid under the independent security from S.

C.Security Provider’s Defence or Counterclaim

9. The security provider may have a defence or a counter-claim against the creditor which it was not permitted to raise or to set off under the terms of the independent security or under an independent security on first demand (cf. Article 3:103 (3)). After having performed the security, it is entitled to request return of the performance made on the basis of those defenses or to raise the counter-claim.

D.Terms of Demand Subsequently Disappeared

10. The justification for a demand that existed at the time of presentation of the security may later have disappeared.

354

Article 3:105: Security Provider’s Right to Reclaim

Illustration 2

The basic facts are as in Illustration 1. However, S has applied for and obtained such a certificate, and X-Bank duly makes payment to him. Thereafter, the veterinary certificate is revoked due to the BSE crisis in England.

For the reasons set out in Comment A, the security provider should also in this case be entitled to request return of the performance.

11. It deserves to be mentioned that the provider of independent security is entitled to demand return of its performance only if the conditions of the independent security had not been fulfilled or had later fallen away. If performance of the independent security for reasons rooted only in the underlying relationship never was justified or subsequently is no longer justified, then only the debtor as a party to that contract is entitled to request “return” of the performance.

Illustration 3

As in Illustration 2, but it turns out that the sheep are infected and therefore the French customs authorities refuse entry of the sheep to France. B terminates the contract. Only B and not X-Bank may request repayment of the purchase price from S.

E.Manifestly Abusive or Fraudulent Demand

12.If the provider of independent security for whatever reason performs a demand which fulfills the conditions set out in Article 3:104, it is entitled to request return of the performance made. The reasons correspond to those mentioned in Comment A.

13.However, if the security provider has already been (or may in future be) reimbursed by the debtor for its performance to the creditor, it may be more convenient for the parties to have the claim for repayment brought by the debtor; the security provider may then simply assign its claim against the creditor to the debtor.

F.Consequences Governed by Rules on Unjust Enrichment

14.The conditions set out in the first paragraph of Article 3:105 closely correspond to the basic conditions of a claim for unjust enrichment. It is therefore consistent to refer with respect to the details of the provider’s claim for return of the performance to those rules, as exemplified so far for a special set of cases by PECL Article 4:115.

15.In particular, the rules on unjust enrichment may preclude a security provider’s claim for return if it knew (or ought to have known) at the time of the creditor’s demand that this demand did not comply with the terms and conditions of the independent security or that the demand was manifestly abusive or fraudulent, if and insofar as it had been entitled to raise those defences.

355

Chapter 3: Independent Personal Security (Indemnities/Independent Guarantees)

National Notes

I. Restitution if Independent Security is Invalid

1.According to AUSTRIAN, DANISH, GERMAN, GREEK, ITALIAN, PORTUGUESE and SPANISH law, the provider of independent security may claim restitution of its performance from the creditor if the contract of independent security was invalid (AUSTRIA: OGH 11 May 2005, BA 2005, 899, 901; Avancini/Iro/Koziol no. 3/156; DENMARK: Pedersen, Bankgarantier 72 s.; GERMANY: Staudinger/Horn no. 346 preceding §§ 765 ss.; Hadding, Ha¨user and Welter 727; GREECE: Georgiades § 6 no. 128;

ITALY: Cass. 6 Oct. 1989 no. 4006, Giust.civ. 1990 I 731; Rossetti 16; PORTUGAL: Pinheiro 455; SPAIN: Sa´nchez-Calero, El contrato aut+nomo 402).

II. Restitution upon Non-Compliance with Terms of Independent Security – Para (1) Lit. (a)

2.According to GERMAN, GREEK, ITALIAN, PORTUGUESE and SPANISH law, the provider of independent security may claim restitution of its performance from the creditor if there was no right to claim under the independent security because the performance, as effected by the provider of the independent security, was according to the terms of the independent security not owed as to its amount, at this time or to this beneficiary (GERMANY: Staudinger/Horn nos. 346 and 244-246 preceding §§ 765 ss.;

Hadding, Ha¨user and Welter 727; GREECE: Georgiades § 6 no. 128; ITALY: Cass. 6 Oct. 1989 no. 4006, Giust.civ. 1990 I 731; Viale 203; De Nictolis 196; NETHERLANDS: Pabbruwe, Bankgarantie 63; PORTUGAL: Castelo Branco 79; Pinheiro 455; SPAIN: Sa´nchezCalero, El contrato aut+nomo 403). Similarly, in ENGLISH law, the security provider might in appropriate circumstances be entitled to reclaim its performance where it has inadvertently paid against non-conforming documents; it is thought by one eminent writer, however, that such a recovery is limited to situations where the documents presented are totally valueless (cf. Goode, Commercial Law 998).

356

Article 3:105: Security Provider’s Right to Reclaim

III. Restitution upon Non-Compliance with Terms of Underlying Relationship

3.Apart from cases of a manifestly abusive demand (infra no. 6), in GERMANY the provider of independent security may not rely upon the relationship between debtor and creditor, unless, and only insofar as, the security refers to that relationship. However, it is controversial (cf. Hadding, Ha¨user and Welter 729) in how far without such a reference, especially in the case of an independent security on first demand the provider of independent security may rely upon a lack in the underlying relationship. The Federal Supreme Court and the majority of writers today do not in such a case allow the security provider to reclaim its performance from the creditor and merely consider a claim for damages for breach of contract against the debtor (BGH 25 Sep. 1996, ZIP 1997, 275, 277 s.; contra Staudinger/Horn nos. 347 s. preceding §§ 765 ss.; cf. also Horn, FS Brandner 632; Zahn, Eberding and Ehrlich no. 9/122). Even less may the provider of independent security reclaim its performance when the debtor performs subsequently (cf. Canaris, ZIP 1998, 500 and Bankvertragsrecht no. 1143). Also in AUSTRIA, ENGLAND,

FRANCE, ITALY, the NETHERLANDS and PORTUGAL it is the debtor who is entitled to reclaim a payment made under the independent security if that was not justified according to the terms of the underlying agreement with the creditor (AUSTRIA: Avancini/Iro/Koziol no. 3/157; OGH 12 Aug. 1996, BA 1997, 64, 66; OGH 16 March 1988, SZ 61 no. 63 p. 327; ENGLAND: Goode, Commercial Law 998; FRANCE: Simler no. 1002; ITALY: Cass. 6 Oct. 1989 no. 4006, Giust.civ. 1990 I 731; De Nictolis 197; NETHERLANDS: Dutch Business Law § 6.05 [4] [b]; Pabbruwe, Bankgarantie 63; cf. also CFI Breda 27 April 1993, NJB 1996 no. 99; PORTUGAL: Galva˜o Telles 283).

4.In GREECE, in the case of documentary credits which according to prevailing opinion are regarded as a payment order lato sensu according to CC arts. 876 ss., the debtor is entitled to a claim for unjust enrichment if an underlying relationship is lacking or it has been defectively performed (cf. Georgiades § 11 no. 65).

5.According to DANISH law, the creditor has to pay back an amount, which has been paid under an independent security if it turns out that the security provider’s payment according to the contract between creditor and debtor was in fact unwarranted; normally, both the security provider and/or the debtor are entitled to this claim (see Pedersen, Bankgarantier 72 s.).

IV. Restitution upon Manifestly Abusive Demand – Para (1) Lit. (b)

6.According to the law of most member states, the provider of independent security may claim restitution of its performance in cases of manifestly abusive demand (AUSTRIA: Avancini/Iro/Koziol no. 3/57; DENMARK: Andersen, Madsen, Nørgaard, Aftaler 144; ENGLAND: Goode, Commercial Law 997; GERMANY: for an independent security on first demand BGH 10 Nov. 1998, BGHZ 140, 49, 51 s.; Staudinger/Horn no. 358 preceding §§ 765 ss.; GREECE: Demetriades 77; ITALY: Cass. 6 Oct. 1989 no. 4006, Giust.- civ. 1990 I 731; Bonelli, Le garanzie bancarie 176; NETHERLANDS: Pabbruwe, Bankgarantie 63 s., on the ground that if the creditor’s demand is obviously abusive, the security provider is to refuse performance and therefore may not debit the debtor;

PORTUGAL: Ferrer Correia 257; SPAIN: Sa´nchez-Calero, El contrato aut+nomo 389; Carrasco Perera a.o. 339, 360).

357