In a departure from previous authority, the Supreme Court has confirmed that the situs of a debt created by a letter of credit is the place of residence of the issuing bank: Taurus Petroleum Limited v State Oil Marketing Company of the Ministry of Oil, Republic of Iraq  UKSC 64.
In the previous authority on this issue, Power Curber International Ltd v National Bank of Kuwait SAK  1 WLR 1233, a majority of the Court of Appeal had held that the situs of a debt created by a letter of credit was the place of payment. This contradicted the long standing principle in English law that the situs of a debt is the place of the residence of the debtor.
The principle from Power Curber stood for over 35 years and created some uncertainty as to why debts which arose under a letter of credit were treated differently to other debts under English law. The Supreme Court has now confirmed that it was wrong in principle and should not be followed.
For more information see our Banking Litigation e-bulletin.