BOK Vs. Melamchi Guarantee Dispute case reaches to Chinese Court

Thu, Feb 14, 2019 8:56 AM on Corporate, Latest, Stock Market,

In an effort to expedite recovery of counter guarantee amount from the China Construction Bank, Bank of Kathmandu Limited has sent a team of legal experts to China to take part in the Chinese court hearing on the case of non-payment of Counter Guarantee issued by China Construction Bank to Bank of Kathmandu for Melamchi Water Drinking Project. The court hearing is scheduled on 15th February 2019.

The Bank had issued guarantees favoring Melamchi Water Development Board for USD 6.62 million & EURO 1.4 million against the security of a counter guarantee issued by China Construction Bank on behalf of the Chinese Contractor, China Railway 15 Bureau Group the payment of which was suspended by the Chinese Court in line with the lawsuit filed by China Railway citing breach of underlying contract between China Railway and Melamchi.

As per the international law and practice, the guarantee provided to BOK by China Construction Bank is an independent and unconditional obligation of the Chinese Bank and Nepal owes to receive this money back from China as per the ICC-URDG (Uniform rules for demand guarantees) law and practice.

The non-payment of guarantee by China has resulted in a loss of public funds of Nepal as the authorities are expected to extend a helping hand on this recovery process. The recovery of counter guarantee amount from China could be expedited quickly with meaningful intervention from the Government of Nepal and the regulator.