#5177 - Trafigura Beheer V. Kookmin Bank - Conflict of Laws BCL

Trafigura Beheer v. Kookmin Bank

Facts

This dispute arises out of the provision of a letter of credit (‘L/C’) by the defendant (‘Kookmin’), a Korean bank, as the issuing bank, in favour of the claimant, a Dutch company, (‘Trafigura’), which sold a cargo of decant oil to a Korean company, Huron Co Ltd (‘Huron’). When the cargo arrived at the discharge port in South Korea it was discharged without production of the bills of lading and the cargo was later released to Huron. Trafigura received payment under the letter of credit through an advising bank in London, ANZ Bank.

The buyers, Huron, became insolvent and Kookmin has not been reimbursed by Huron for the purchase price of the cargo that was financed by the L/C. Kookmin has brought proceedings in Korea against Trafigura; the shippers of the cargo (Pertamina PT); the owners of the ship that carried the cargo from Indonesia to Korea and the managers of the vessel, in an attempt to recover its loss. In those proceedings Kookmin alleges (broadly speaking) that Trafigura, as beneficiary under the L/C, has acted in breach of various obligations it is said to owe to Kookmin, as the issuing bank of the L/C. Kookmin also asserts that Trafigura has acted fraudulently towards Kookmin. Kookmin alleges that Trafigura is therefore liable to Kookmin under Article 750 of the Korean Civil Code to pay damages to Kookmin which are equal to the amount of payment under the L/C, which was US$5,920,000.

Questions

1. Are the issues raised by Kookmin concerning the ‘security claim’ to be regarded as ‘issues relating to tort’, for the purposes of section 9(1) of PILA, such that the rules set out in Part III of PILA must be applied to decide on which applicable law is to be used to determine the issues arising on the ‘security claim’?

2. If those rules must be applied, then, in which country did the most significant element or elements of the events constituting the tort in question (i.e. those constituting the ‘security claim’) occur, for the purposes of section 11(2)(c) of PILA?

3. Are there any factors which connect the tort constituting the ‘security claim’ with a country different to that identified as a result of the exercise carried out under (2) above? If so, is the significance of those factors such that it makes it substantially more appropriate for the law of that other country to be the applicable law to determine the issues relating to the ‘security claim’, within section 12(1) of PILA?

Holding

Did the security claim constitute a “tort”?

PILA does not define what is meant by ‘tort’ or ‘issues relating to tort’. As those are words are used in a statute dealing with English law, logically those words should be interpreted according to English law principles of statutory construction.

But some assistance is given by section 9(2) on how ‘tort’ and ‘issues relating to tort’ are to be interpreted for the purposes of deciding whether Part III of PILA is relevant at all. That sub-section provides that: ‘… the characterisation for the purposes of private international law of issues arising in a claim as issues relating to tort or delict is a matter for the court of the forum’.

But I also agree with the editors of Dicey & Morris that, on its proper construction, section 9(2) is doing more than stating an obvious truism. I think its proper interpretation must be approached by asking: what is the purpose of section 9(2) in the context of Part III of PILA? It must be to define the process by which the court decides which (if any) issues between the parties ‘relate to tort’, so as to enable the courts of the forum to decide whether Part III of PILA will apply for the purposes of deciding which law applies to determine those issues.

Section 9(2) tells the court of the forum that it must characterise the issues arising in a claim (to see if it relates to tort) ‘for the purposes of private international law’. section 9(2) does not say that the process of deciding whether an issue is to be characterised as one ‘relating to tort’ must be done according to English conflicts of laws rules of characterisation, or by using only juridical concepts as defined by English law. The method of characterising an issue is left open. I agree with the view of Professor CGJ Morse, 11 referred to in Dicey & Morris, 12 that the words ‘for the purposes of private international law’ in section 9(2) indicate that Parliament intended that the court should examine relevant issues to decide whether they will be characterised as ‘relating to tort’ not only by reference to English legal concepts and classifications, but by taking a broad ‘internationalist’ view of legal concepts. Thus even if an analysis using English legal concepts and classification would not characterise an issue as ‘relating to tort’, the English court must take account of legal concepts and classifications in any other relevant system of law. How this is to be done in each case must depend on the relevant facts and issues. Ultimately, this statutory approach to characterisation may not be very different from that adopted by the English common law, if one compares, for example, the principles set out in Macmillan Ltd v Bishopsgate Investment Trust plc (No. 3), although that was not a case of a claim in tort, but one for a restitutionary remedy.

I think that it must follow from this that the word ‘tort’ in section 9(1) and (2) is to be construed broadly, so as to embrace non-contractual civil wrongs that give rise to a remedy. The phrase ‘issues relating to tort’ must mean all those relevant factual issues which relate to the civil wrong in dispute between the parties.

Section 11(2)(c) – “most significant element or elements” occurred

So, first, I have to identify all the elements constituting the tort that are relied on by both Kookmin and Trafigura. Having identified those elements, I must then make a value judgment regarding the significance of the different elements in making up the tort alleged.

The wording of section 11(2)(c) forces me to decide in which country the most significant element or elements occurred. Having attempted to value the significance of all the elements, I conclude that the most significant were those that took place in Singapore. That is because the acts on which Kookmin principally relies occurred there. Although the loss is also significant, it is not the most significant element in this case. In a sense, Kookmin was out of pocket from the moment it reimbursed ANZ in Tokyo. What really made the difference, on its case, was the actions of Trafigura in Singapore.

Therefore the ‘general rule’ must be that the law of Singapore should determine the issues relating to the ‘security claim’.

Section 12 – are there factors that make it substantially more appropriate to apply the law...