A Maltese company can carry on with its legal battle for €20.4 million from a bank, as promised in a letter of credit, after an appeals court threw out the bank’s claim that it was bound to the company by other agreements.

The letter of credit is between Azrow International Trading Company and Fimbank.

The bank had argued in the First Hall of the Civil Court that its relations with the company was regulated by separate agreements such as a facility letter and a pledge of bank account agreement.

This court, however, ruled that the beneficiary of an irrevocable standby letter of credit was entitled to take legal action against the confirming bank for payment under the letter of credit.

The payment was independent of any financial agreement the company might have with the bank. Fimbank appealedthis decision.

The background to the case is a business deal struck by Azrow in 2010 to take charge of the construction of a motor vehicle recycling plant in Libya.

The other party undertook to pay it through a letter of credit for the full value of the project, €29 million.

The letter of credit was issued by the National Commercial Bank of Libya and received and confirmed in Malta by Fimbank.

The first claims made by Azrow against the letter of credit were honoured by Fimbank.

However, Fimbank then told Azrow that the Libyan bank had claimed some default in theirinternal procedures.

Fimbank therefore stopped honouring the letter of credit and, as a result, Azrow took legal action.

One of the legal issues that arose in the case was whether Azrow could make such a claim against Fimbank exclusively on the basis of the letter of credit – and the first court’s decision confirmed it could.

Presided over by Chief Justice Silvio Camilleri, Mr Justice Geoffrey Valenzia and Mr Justice Giannino Caruana Demajo, the Appeals Court yesterday again threw out Fimbank’s arguments, saying that it had accepted to act as the confirming bank.

The appeals court confirmed the previous decision and ordered that the judgement be sent to the first court for the law suit to continue.

Lawyers Shazoo Ghaznavi and Robert Galea appeared for Azrow. Lawyer Louis Degabriele appeared for Fimbank.