Banque Cantonale de Genève (BCGE) has failed in its attempts to pin the blame for non-payment related to the collapse of oil trader Gulf Petrochem on a shipowner who permitted the alteration of a set of bills of lading.

The Swiss lender also came under severe criticism from the judge in the case heard in the Singapore High Court for its lax procedures relating to its management of letter of credit (L/C) transactions.

Case outline

In May 2020, BCGE provided L/C financing for the acquisition of 2,000 metric tons of lube base oil by Gulf Petrochem's Singapore subsidiary, GP Global, from the Thai trader IRPC. GP Global was tasked with selling the oil to Prime Oil Trading, which was expected to reimburse BCGE's L/C.

BCGE's claim centred on the argument that the owner of the ship that transported lube base oil, Jeil International, should not have switched bills of lading without the bank's permission and was therefore liable to reimburse the bank.

But the court rejected the bank's claim that this was a breach of contract and found that from the moment BCGE surrendered the bills of lading to GP Global, it "divested itself of any rights or interests in the cargo".

Judge's criticism

During the case, it emerged that it took BCGE a long time to establish that it did not have the bills of lading related to the transaction, which the Judge, S Mahon, described as "quite shocking, particularly for a financial institution like the plaintiff."

"As a major trade financing bank, one would expect the plaintiff to have systems in place to check in respect of a particular financing transaction if documents negotiated under a letter of credit were still in its possession and, if so, what those documents were," the judge concluded.

The judgment in this case, Owners of or other persons interested in the cargo lately laden onboard Jeil Crystal and owner of the vessel Jeil Crystal, can be found here.