Global Distressed Alpha Fund 1 Limited Partnership v PT Bakrie Investindo [2011] EWHC 256 (Comm), 2 All ER 385 involved a straightforward action on an instrument of guarantee.

The defendant was an investment holding company incorporated in the Republic of Indonesia.  In 1996, the defendant raised finance through debt by the issue of Guaranteed Notes.  The defendant guaranteed the Notes by way of a guarantee that was to be governed by English law.

The sums due under the Notes were not paid upon their maturity date in December 1999.  In early 2002, a Debt Reorganisation Composition Plan was accepted by a majority of the defendant's creditors and ratified by the Indonesian Court.  In November 2009, the claimant purchased Notes worth USD2 million from a prior holder because they had been guaranteed by the defendant.  The claimant then issued a proceeding against the defendant in the English courts, notwithstanding that it accepted that as a matter of Indonesian law its claim against the defendant had been discharged by the Composition Plan.

The question for the Court was whether the guarantee had been discharged by the Indonesia Composition Plan as a matter of English law.  The Court held that the discharge of the defendant's obligation as guarantor as a matter of Indonesian law was of no effect in English law and judgment was entered for the claimant in the sum of USD2 million plus interest.

See court decision here.