## Facts

- A Mexican power-plant project required a standby letter of credit issued December 10, 2002, in favor of a Mexican state-owned utility, for up to $36,812,687.68.
- Société Générale (SG) issued the letter of credit and requested Banco Nacional de México (Banco Nacional) to add its confirmation.
- The letter incorporated the UCP and, where not inconsistent, selected New York law; it also required disputes arising from the letter to be resolved exclusively in courts seated in Manhattan.
- The beneficiary made a demand supported by documents treated as facially compliant for purposes of the motion.
- Banco Nacional notified SG of its intent to honor and then paid the beneficiary.
- The applicants disputed the beneficiary’s entitlement in Mexican litigation and obtained Mexican court orders purporting to stay payment under Mexican law.
- After Banco Nacional paid, it demanded reimbursement from SG as issuing bank; SG refused, citing the Mexican stay orders.

## Issues

1. Whether an issuing bank must reimburse a confirming bank that honored a facially compliant presentment, despite disputes and injunctive orders in foreign litigation between applicant and beneficiary.
2. Whether international comity required a New York court to give effect to Mexican court orders staying payment so as to suspend or excuse the issuing bank’s reimbursement obligation.
3. What effect the letter’s incorporation of the UCP, New York choice-of-law clause, and Manhattan forum-selection clause had on the enforceability of the reimbursement obligation.

## Decision

- The Appellate Division, First Department reversed the order denying summary judgment and granted summary judgment to Banco Nacional.
- The court held SG was obligated to reimburse Banco Nacional after Banco Nacional honored a compliant demand under the letter of credit.
- The Mexican stay orders did not relieve SG of its reimbursement obligation in the bank-to-bank dispute governed by the UCP and New York law.
- International comity did not require New York courts to enforce the foreign stay orders where doing so would defeat the letter-of-credit obligations the parties placed under New York law and forum.

## Legal Principles

- Letter-of-credit obligations are independent of the underlying transaction; banks must pay (and reimburse) based on facial documentary compliance, not underlying contractual disputes.
- Where a letter of credit incorporates the UCP and selects New York law and a New York forum for disputes arising from the credit, those choices govern the issuing-confirming bank relationship absent a controlling contrary rule.
- International comity is discretionary and does not require enforcement of foreign orders that would impair New York’s policy favoring certainty and enforceability of documentary credits.

## Conclusion

The court enforced the independence of the letter of credit by requiring the issuing bank to reimburse the confirming bank after honor on a compliant presentment, rejecting reliance on foreign stay orders and declining to extend comity in a manner that would defeat the parties’ New York-law and Manhattan-forum allocation of risk.


Banco Nacional de México, S.A. v. Société Générale, 34 A.D.3d 124, 820 N.Y.S.2d 588 (1st Dep’t 2006)