Central Térmica de Temane SA and Citibank NA v Banco Santander SA
| Court | High Court of Justice, Business and Property Courts, Commercial Court |
| Judge | Mr Justice Calver |
| Judgment | 13 October 2026 |
| Hearing | 15 to 17 September 2026 |
| Jurisdiction | England and Wales |
| Claimants | Central Térmica de Temane SA; Citibank NA, London Branch |
| Defendant | Banco Santander SA |
| Case reference | CL-2025-000494 |
| Outcome | Part 8 claim on two on-demand bonds succeeded; illegality defence under Ralli Brothers rejected; stay of execution and deferred payment refused |
Summary
The employer on a Mozambique power project made valid demands under two bonds issued by a Spanish bank at the contractor's request. Before payment fell due, the contractor obtained an ex parte injunction in Spain restraining the bank from paying. The bank relied on it as a defence under the rule in Ralli Brothers.
The employer said the place of performance was Mozambique, where it had named the receiving account. The bank said it was Spain, where the demands had to be delivered. Mr Justice Calver held that payment into the Mozambique account was the bank's only contractual performance, so the defence failed. He refused a stay of execution and a deferred payment order. The employer won.
Background and facts
The first claimant was the employer under an EPC contract for a 450 MW combined-cycle power plant at Temane, Mozambique. At the contractor's request the bank issued two bonds dated 2 December 2021: a performance bond for USD 86,030,000 and an advance payment bond, reduced by milestones to USD 4,766,078.66. Both were governed by English law with exclusive English jurisdiction, and both were accepted to be autonomous demand instruments. Clause 4 required demands at the bank's Madrid office. Clause 2 required payment within five business days. Clause 7 required every payment to be made to the account specified in the demand.
On 3 April 2025 the contractor gave notice terminating the EPC contract for prolonged force majeure; the employer disputed it and a London-seated arbitration followed. On 4 April 2025 the employer demanded USD 90,796,078.66 in total, payable to its account at a bank in Mozambique, due by 11 April 2025. On 10 April 2025, on the contractor's without notice application, a Spanish court of first instance ordered the bank not to pay, and the bank suspended payment.
The employer's application in Spain to discharge the injunction was dismissed on 20 January 2026 and is under appeal. Part 8 proceedings were issued in London on 29 October 2025. The bank accepted the demands were valid and that the employer was the beneficiary.
The issue
Ralli Brothers excuses performance of an English law contract where performance requires an act in a place where that place's law makes it unlawful. The court took four questions: whether a foreign court order can engage the rule; whether the place of performance was Mozambique or Spain; whether the bank could rely on the rule having taken no steps to discharge the injunction; and whether it could rely on it when it might have paid earlier. The bank argued that receiving and processing the demands in Madrid formed part of its performance, relying on obiter reasoning of Bright J in LLC EuroChem v Société Générale. If it lost, it sought a stay under CPR 83.7 or a later payment date under CPR 40.11.
The decision
The judge took place of performance first, and it decided the case. Clause 7 was more than machinery for identifying the destination account. It specified what the bank had to do to comply with its payment obligation.
Payment into the account in Mozambique is the performance of Santander's payment obligation.Mr Justice Calver, paragraph 73
Receiving demands in Spain was at most preparatory to payment. The judge disagreed, respectfully, with the obiter analysis in EuroChem, because it ran together two different things: the demand, which is for the beneficiary to make, and payment, which is the bank's one obligation. He rejected the bank's presumptive starting point: the contract is construed first. Payment in Mozambique was lawful there, so the bank had no defence.
It was open to the Bank to have insisted upon Spanish law being the governing law of the Bonds, or to have insisted on a clause which stated that the place of performance/payment was to be Spain, but it chose not to do so.Mr Justice Calver, paragraph 121
The judge said the other Ralli Brothers questions did not arise, and answered them only in case he was wrong on place of performance. On that footing, a foreign court order, including an interim injunction, is capable of engaging the rule, and Litasco was clearly wrong in so far as it suggested otherwise. The defence would also have failed because the bank, which bore the burden, never applied in Spain for its discharge and led no evidence that intervening would have made no difference.
The fact is that Santander made no effort at all to have the injunction discharged.Mr Justice Calver, paragraph 185
The employer lost the fourth point: payment was not due until 11 April 2025, so the bank was not at fault for not paying sooner. The stay was refused. Delay was already very substantial, the Spanish outcome was uncertain, and the experts agreed the bank's risk of civil or criminal liability in Spain if it paid under an English order was limited.
Practical implications
Where an English law demand bond lets the beneficiary name the receiving account, the beneficiary fixes the place of payment by its demand. An injunction from the bank's home court does not make payment elsewhere unlawful, and the bank stays liable here. A bank that wants its home law to govern payment must say so in the bond.
The findings on court orders and reasonable steps are obiter, and the departure from EuroChem and Litasco leaves first instance authority in tension. Expect the point to be argued again.
Practice points
- Beneficiaries: name a receiving account in a country where payment is lawful and safe from the contractor's local courts. Under a clause like clause 7, that choice fixes the place of performance.
- Serve a conforming demand exactly as the bond requires, at the stated office. Here the bank conceded validity, which left it only the illegality defence.
- Contractors: an ex parte order abroad may delay payment but will not stop an English court ordering it. Fight the call in the arbitration under the underlying contract, not by attacking the bond.
- Issuing banks: if you want your home jurisdiction to govern payment, take Spanish or other home law, or an express place of payment clause, when the bond is drafted.
- A bank relying on a foreign injunction carries the burden of showing it tried to have it discharged. Join the discharge application and put your prejudice in evidence.
- Watch the expiry date. The bonds here had been extended, and the employer issued in England while its Spanish challenge was still pending.