We are happy to inform that SWS Law Firm, representing its client, a leading construction company (general contractor), won a dispute against the employer for payment of the amount of PLN 33.77 M as return of illegitimately called on bank guarantee which constituted a performance bond.
Both the court of the first instance (Regional Court in Szczecin), as well as the court of the second instance (Court of Appeal in Szczecin) fully accepted legal arguments raised by SWS lawyers, indicating that in case of contracts executed on the basis of the FIDIC Conditions of Contract, a bank guarantee may only cover specific claims (rather than merely hypothetical ones) that must exist on the day when the guarantee is called on. The courts of the first and the second instance, in their decisions, indicated that despite the abstract nature of a bank guarantee (unconditional, payable on first demand) the employer (the beneficiary of the guarantee) on the day when the guarantee is called on must have claims against the contractor (guarantee provider), which are to be satisfied from the funds obtained from the guarantee. In other words, the employer (the beneficiary of the guarantee) may not call on the guarantee to satisfy future or hypothetical claims. Doing so by the employer results in their unjustified enrichment, which the employer is obligated to return to the contractor (guarantee provider). The decision of the Regional Court and the Court of Appeal in Szczecin will, beyond doubt, be important also in other court disputes concerning calls on performance bond by employers (or private investors), in particular with regard to contracts performed on the basis of the FIDIC Conditions of Contract. The matter was argued by attorney-at-law Marta Krawczyk and attorney-at-law Jacek Sroczyński, partners representing the law firm.