Eurobank Ergasias S.A. v. Bombardier Inc.:

Eurobank Ergasias S.A. v. Bombardier Inc.:

Guarantors Caught Between Home Courts That Do Not Apply the Fraud Exception and Courts in the Counter-Guarantor's Country That Do

The recent decision of the Court of Appeal of Quebec in the matter of Eurobank Ergasias S.A. v. Bombardier Inc.1 (the “QCA’s Decision”) involves an application for an injunction taken by the account party, a Canadian aircraft manufacturer (“Bombardier”), against a local bank (National Bank of Canada, or “NBC”), to prevent it from making payment under a counter-guarantee that NBC had issued in favour of a Greek bank (Eurobank Ergasias S.A, or “Eurobank”).2

The counter-guarantee supported a letter of guarantee issued by Eurobank in favour of a branch of the Greek government, the Hellenic Ministry of National Defense (“HMOD”), to whom Bombardier had sold firefighting airplanes. The letter of guarantee secured the obligations of Bombardier to pay amounts owed pursuant to an offsets contract entered into between Bombardier and HMOD, alongside the main procurement contract.

This note summarizes the facts and the reasons of the QCA’s Decision and offers some comments on the legal reasoning and practical consequences of the case. At the time of this note, Eurobank has sought leave to appeal the QCA’s Decision to the Supreme Court of Canada.


A dispute arose between Bombardier and HMOD as to what amounts of offsets were owed and whether the duty to pay such amounts was even legally enforceable.

In December 2008, the parties submitted their dispute to an arbitration which was conducted over the course of a 5-year period. It culminated in an award released on 31 December 2013 which was entirely favourable to Bombardier. A contestation of this award by HMOD was dismissed by the Cour d’Appel de Paris in April 2015.

At the commencement of the arbitration, HMOD undertook that it would not demand payment of the letter of guarantee before release of the award (the “Voluntary Undertaking”). However, notwithstanding this undertaking, HMOD drew on the letter of guarantee two times during the arbitration.

The first draw was made in the summer of 2013.3 When it received notice of the draw, Bombardier petitioned the arbitral tribunal and the Superior Court of Quebec on an urgent basis. The arbitration tribunal issued an order (the “Arbitration Tribunal’s Interim Order”) preventing HMOD from demanding payment under the letter of guarantee.

The Quebec Superior Court also issued a provisional order (the “QSC’s Provisional Injunction No. 1″)4 which not only prevented HMOD from demanding payment under the letter of guarantee, but also prevented Eurobank from paying any such draw by HMOD and demanding payment under the counter-guarantee and prevented NBC from honouring any such draw by Eurobank under said counter-guarantee.

In light of these decisions, HMOD recanted its first draw and Bombardier did not seek to renew the QSC’s Provisional Injunction No. 1 when it expired.

Eurobank then petitioned the Court of First Instance in Athens to prevent HMOD from demanding payment under the letter of guarantee. The court issued the order. However, HMOD appealed this decision. On 16 December 2013, the Court of Appeal of Athens reversed the CFI Athens’ decision and dismissed Eurobank’s application (the “CA Athens’ Decision (Injunction)”), effectively allowing HMOD to demand payment. Two days after this green light from the Court of Appeal of Athens, HMOD drew under the letter of guarantee for the second time. Eurobank found the draw to be compliant.

Bombardier urgently applied again for an injunction before the Superior Court or Quebec, which, on 19 December 2013, issued a provisional injunction and other provisional orders on the same terms as the QCS’s Provisional Injunction No. 1 (the “QSC’s Provisional Injunction No. 2”).5 There were now less than two weeks before the date on which the arbitral tribunal had indicated it would release the award.

Eurobank formally asked HMOD if it would waive its demand for payment, given the Arbitration Tribunal’s Interim Order, the QCS’s Provisional Injunction No. 2 and the soon to be released arbitral award. As the letter of guarantee would remain in force after the expected date of such award, it was open for HMOD to wait and draw on the letter of guarantee only in the case of a favourable award.

HMOD replied by serving an order (known as an “Extrajudicial Invitation Protest”), which required Eurobank to proceed with payment, under pain of severe consequences which, in addition to compulsory enforcement and collection, included the potential freezing of its assets, withholding of tax certifications and indictment for criminal sanctions punishable by imprisonment.

The day following such Extrajudicial Invitation Protest, on 24 December 2013, Eurobank paid HMOD and demanded payment from NBC under the counter-guarantee.

A few days later, the arbitration award was released. The award was entirely favourable to Bombardier and ruled that the offsets contract, the duty to pay offsets amounts stipulated thereunder and the letter of guarantee guaranteeing the payment of same were all null and void.

Bombardier promptly filed new proceedings before the Superior Court of Quebec and on 8 January 2014, that court issued an interim safeguard order enjoining NBC not to pay any amount under the counter-guarantee (the “QSC’s Safeguard Order”).6

A trial was held in October 2017 and in its decision (the “QSC’s Decision”)7 the Quebec Superior Court (A) enjoined NBC from paying the amount claimed by Eurobank under the counter-guarantee, (B) declared the counter-guarantee null and void, (C) homologated the arbitration tribunal’s award, (D) declared that the payment by Eurobank to HMOD under the letter of guarantee was not due and could not form the basis of a demand for payment under the counter guarantee, and (E) ordered HMOD to comply with the arbitration tribunal’s award.

Read the full story

Sign up now to read the full story and get access to all posts for DCW - Individual Access, DCW - Site Access and DCW - Global Organizational Access tiers only.

Already have an account? Sign in

Great! You’ve successfully signed up.

Welcome back! You've successfully signed in.

You've successfully subscribed to Documentary Credit World.

Success! Check your email for magic link to sign-in.

Success! Your billing info has been updated.

Your billing was not updated.