A dispute arose between the parties, both banks, over whether a drawdown could be made under a documentary credit issued for 'operation cost' relating to the shipment in 1983 of 63,000 heads of live animals 'at an average weight of abt 53 kilos per head at USD 28 per head FOB Australian port'. The arbitral tribunal recorded that the parties had agreed upon the application of Greek law.

'We cannot approach the questions put in this paragraph without making an effort to find out the possible nature of "operation cost". Since this cost is to be invoiced by the Beneficiary, it has to be incurred by the Beneficiary (seller) who will subsequently pass (invoice) it to the Applicant (buyer). Therefore, the expense may concern only goods delivered (so that they may become the object of an "operation") and not goods simply ordered but not delivered.

During the hearing . . . the Claimant, to a question about what one should understand from the term "operation cost", claimed that this was the cost of alteration of the spaces of a ship in order to accommodate 63,000 [animals]. This is, however, inconsistent with the permission of partial shipments and concomitant fact that more than one ship might be used for the transportation of the 63,000 [animals]. We have to make clear that this [sic] is unlikely that the amount of USD 582,750 represent the cost of ship transformation. This exact amount was evidently agreed upon between Applicant and Beneficiary prior to the opening of the L/C. Therefore, if it were cost of ship transformation, it should rather refer to a definite ship or ships, because ships differ from one another and so should also the cost of their transformation. However, in the L/C the operation cost was not linked to a ship or ships, but to the quantity of goods to be shipped.

Another statement of Claimant was that the meaning of the term "operation cost" was irrelevant and that it had to effect payment against an invoice indicating "operation cost for 63,000 [animals]" (accompanied by the telex of the ship's agent) independently of what "operation cost" meant. In the L/C, the additional clause refers to "operation cost of the goods i.e. 63,000 heads of alive [animals]" and not simply and vaguely to "operation cost". It is clear that this cost does not concern any expense for putting the [animals] on board of the vessel, since goods are delivered FOB Australian port and according to Incoterms any such expense is borne by the seller. It is more likely that the goods being live animals, expected to travel for more than three weeks, they should need to be fed, attended to and, if they were to remain healthy, the spaces they would occupy on the ship should be cleaned regularly. The amount of USD 582,750 was therefore likely destined to cover the cost of this work, which is beyond the duties of the crew and it is carried out by extra workers who accompany the animals. In fact, such expense occurring after the [animals] are loaded is, according to Incoterms, to be borne by the buyer. This kind of cost is likely to exist in the case of long distance transportation of live animals and is obviously proportionate to the quantity of the animals shipped.

Commenting on the arguments advanced by the Claimant and mentioned in the section of Facts:

The payment of USD 582,750 is explicitly indicated in the L/C as being "additional and in excess of the L/C amount", which, we believe, means it is an accessory payment and not an independent one. Moreover, it is indicated as being related to the quantity of goods. Taking into consideration the meaning of the term "operation cost" given above, we conclude that without shipment of [animals], there is no operation to be executed and no cost to be paid. The L/C allows for partial shipments. Therefore, we cannot see how a drawing for any amount of the operation cost can be honoured without cross checking the corresponding quantity of the goods shipped and appearing on the Bill of Lading. Evidently, any drawing for operation cost should be made only in conjunction with a drawing for value of the goods.'