Given the flows of credit through London, the Third Party Debt Order is a useful tool in the armoury of international award creditors seeking to enforce against monies of award debtors passing through England. The recent Supreme Court judgment in Taurus Petroleum Limited (Appellant) v State Oil Marketing Company of the Ministry of Oil, Republic of Iraq (Respondent) [2017] UKSC 64, which was decided on a thin 3:2 majority, is therefore important to the international arbitration community because it changes the English law position on the situs of a debt due under a letter of credit from the place of payment to the place where it is recoverable. This removes an anomaly that had existed in English law that treated debts due under a letter of credit differently to other debts. This decision is therefore particularly important to those industries where letters of credit are widely used, such as oil and gas trading.


In February 2013 an award was granted in favour of the appellant, Taurus Petroleum Limited (“Taurus“), against the respondent, State Oil Marketing Company of the Ministry of Oil, Republic of Iraq (“SOMO“) for the sum of USD 8,716,477.

In March of the same year, Taurus sought to enforce the award in England. As part of its enforcement attempts, it applied for a Third Party Debt Order (“TPDO“) and an associated receivership order from the High Court against SOMO in respect of monies due to SOMO under two letters of credit issued by the London branch of Crédit Agricole S.A. (“CA“) addressed to the Central Bank of Iraq (“CBI“). Under each letter of credit, SOMO was identified as the beneficiary but stated that payment should be made in New York to an account at the Federal Reserve Bank of New York. Each letter of credit contained a promise on the part of CA in favour of CBI to pay in that manner, despite any conflicting instructions which might be given by SOMO.

A TPDO is a method by which a judgment creditor (A) enforces a judgment against sums that a judgment debtor (B) is owed by a third party (C). The TPDO requires C to pay the debt it owes B over to A, and in so doing, C’s debt to B is discharged by the same amount. Given that, in law, a bank account balance is a debt owed by the bank to its account holder, banks are frequently targets for third party debt orders.

Following an appeal by SOMO, the TPDOs were set aside by the High Court, whose decision was upheld by the Court of Appeal in July 2015. Taurus appealed to the Supreme Court.

Supreme Court Findings

Construction of the letters of credit: who is the beneficiary?

Pursuant to CPR r.72.2(1), the TPDO could only be granted if CA’s debt was owed exclusively to SOMO and not SOMO and CBI jointly. The Court held on a majority basis that SOMO was the sole beneficiary of the letters of credit; because the language of the letters clearly identified SOMO as such, and this finding was in line with the use of the term “beneficiary” in articles 2 and 18 of the Uniform Customs Practice.

Situs of the debt

A fundamental feature of a TPDO is that the third party’s debt to the judgment debtor must be discharged by payment of that debt to the judgment creditor. If CA’s debts to SOMO were situated outside England and Wales, the court would be unable to make a TPDO in respect of them unless, under the law of the location of the debt, payment in compliance with the TPDO would discharge CA from those debts to the extent of CA’s payment.

It was therefore necessary to ascertain whether the debt was situated in England or New York. The Supreme Court unanimously held that the situs of the debt was London as the location where the debt was issued and recoverable. This finding overruled the longstanding Court of Appeal decision in Power Curber v National Bank of Kuwait [1981] 1 WLR 1233, which had stood for 35 years and held that a debt owed under a letter of credit was different to ordinary debts (but did not explain why) and that the situs of a debt under a letter of credit is determined by the location where it is payable. The Supreme Court was unanimous in overturning Power Curber and criticised the reasoning in that case, noting that it was not widely followed, and saw no reason to distinguish between a debt under a letter of credit and an ordinary debt. Lord Neuberger, who dissented from the majority on other points, observed at [124] – [125]: “I can see no reason for holding that a debt due under a letter of credit should be differently treated from other debts for the purpose of deciding its situs … Such unreasoned distinctions do the common law, and in particular, commercial law, no favours. Consistency, certainty and clarity should be guiding principles.

Honest dealing: what happens to the collateral obligation owed to CBI?

It was held that there is no independent principle whereby a TPDO can only be made in respect of assets in which a judgment debtor can “honestly deal”. Instead, the principle is simply that a TPDO cannot be made in respect of assets that do not belong to the judgment debtor. CBI was deemed not to have proprietary rights over the debts arising under the letters of credit. Furthermore, once the primary obligation for CA to pay the debt to SOMO was met, the collateral obligation, owed to CBI regarding the means of payment, fell away. Therefore, CA (as the third party) would receive good discharge of its obligations to both SOMO and CBI when complying with the TPDO.

The receivership order

It was held that had a TPDO not been available, a receivership order could have been made without infringing the rights of CA because: i) it was entirely foreseeable by SOMO that it could be sued in England, under English law, for the purpose of enforcing the arbitral award; and ii), both domestic and international policy favours the efficient recognition and enforcement of arbitration awards. Furthermore, Lord Clarke agreed with the appellants that it would be inconsistent to deny a remedy in the enforcement of an international arbitral award that would be available to a domestic judgment on the grounds of an allegedly insufficient connection with the jurisdiction.


This Supreme Court decision will be of particular interest to international dispute resolution lawyers and the many parties who seek to enforce awards in a major financial centre such as London. It reaffirms the English Court’s support of arbitration.

Looking at the effect of this this judgment internationally, it should be noted that the previous English law position on the situs of a debt owed under a letter of credit had been adopted in various other commonwealth jurisdictions. The unsuccessful respondent cited the laws of (i) Singapore; (ii) Australia; (iii) Malaysia; (iv) New Zealand and (v) Canada; all jurisdictions which frequently engage in international trade. It remains to be seen whether those countries will follow the Supreme Court’s new path.