Jurisdiction In The Case Of a Bank About To Enter Into a Loan Essay

Jurisdiction In The Case Of a Bank About To Enter Into a Loan Agreement with A Foreign Company - Essay Example This paper illustrates that the agreement as to which country shall have jurisdiction of the contract should be clearly stated therein to avoid the ambiguity of the provisions. Under the recent ruling of Marconi Communications International Limited v PT Pan Indonesia Bank Limited TBK (2005) AER (D) 389, the Court of Appeals dealt with the jurisdiction of the letter of credit. Under this contract, it was specifically stated that the governing law would be English law. However, there was a provision in the contract itself, which gave an indication for confirmation of the letters of credit. The conflict now in this case is in the interpretation of the contract as to whether or not Article 4(2)3 of the Convention would apply since although the forum specifically chose by the parties in England, the perfection of the contract is more closely connected with the other country which is Indonesia as the confirming bank is located in that country. Another argument presented in this case is the application of Article 4(5)4. Now, therefore, the court has to resolve whether or not to use Article 4(5) and disregard Article 4(2). In its resolution, the Court ruled that Article 4(5) should apply therefore the law of England should be the governing law as provided for in the contract. Most interesting in this case is the Court’s recommendations that â€Å"the same system of law should govern the co-existing contracts between (a) the issuing bank and the beneficiary, (b) the confirming bank and the beneficiary and (c) the issuing bank and the confirming bank.