'IV. The facts

42. In this section, the Arbitrator sets out the facts established by the testimonial and documentary evidence tendered by the parties … While much of the factual background to the dispute is uncontested, the Arbitrator has noted the several principal areas of disagreement.

43. In September 2008, the parties entered into the Contract. Among other things, the Contract provided for (a) Respondent's purchase from Claimant of a specified amount of [goods] (hereinafter referred to as the "Cargo") …, (b) shipment of the Cargo from [Claimant's country] to [Respondent's country] on or before 15 October 2008 …, and (c) payment to be made in US dollars, CFR FO CQD, duty paid [port of destination] in accordance with Incoterms 2000 … The Contract also required Respondent to arrange for the issuance of an "irrevocable and confirmed documentary Letter of Credit", 100% payable at sight, which was to be applied for by Respondent on or before 19 September 2008, for issuance to [Claimant's bank], with Claimant as beneficiary ...

44. As required by the Contract, on 19 September 2008, [Respondent] opened an irrevocable documentary letter of credit issued by its bank … in favour of Claimant, with an expiration date of 25 October 2008 ("Letter of Credit") … The Letter of Credit required that Claimant present the required documents within 10 days after shipment but before expiry of the Letter of Credit. The required documents were listed in item 46A of the Letter of Credit. Claimant accepted the Letter of Credit as issued.

45. The Cargo was loaded onto the vessel … on or before 15 October 2008. It was inspected, on instructions from Claimant, by [inspection company] … There is disagreement over whether the Cargo was also inspected by a survey company appointed by Respondent, per sub-section 13.13 of the Contract. In its Memorandum, Claimant asserts that it did not object to Respondent's request to appoint an inspection company, and submits an email dated 10 October 2008 in which a representative of [Respondent]'s [office in Claimant's country] notified [Claimant's representative] that Respondent had selected the company [X] "for the loading survey of [the vessel]" … The appointment of [company X] is confirmed by [Respondent's president], who adds however that Claimant "barred the [company X] inspector from entering the port and inspecting the cargo to be loaded" … This allegation is denied by Claimant, who writes in its Supplemental Memorandum that [company X] "was not barred from entering the port, and did, in fact, perform a full and complete inspection of the Cargo … Claimant relies on the declarations of [two employees of Claimant], each of whom asserts that [company X] did perform the inspection of the Cargo at the port of origin …, and that [company X] provided a loading report to Respondent …

46. Following shipment of the goods, Claimant's bank … presented documents to [Respondent's bank] on 20 October 2008 … On 22 October 2008, [Respondent's bank] acknowledged receipt of the "documentary remittance", and notified [Claimant's bank] by "advice of refusal" that it was refusing the claim in accordance with Article 16 of UCP 600 due to a series of discrepancies in the documents.1 In particular, [Respondent's bank] advised [Claimant's bank] that it rejected the documents presented based on the following discrepancies:

- Bills of Lading: non-negotiable copies not signed as per special condition G).

- Inspection Certificate does not detail any packing, no colour codes confirmed, no chemical composition of the goods stated and it does not mean anything just to mention: "We confirm that the loaded quantity, total number of bundles, packing, color codes and the quality and chemical composition of the goods".

- Despite of [sic] the transmission report presented, no shipment advice has been sent to us.

- Master's agent's certificate does not refer to quantity nor goods shipped.

- Shipper's certificate for dunnage does not refer to quantity shipped.

47. [Respondent's bank] put the documents on hold and contacted [Respondent] … According to Claimant, [Claimant] did not learn of [Respondent's bank's] rejection of the documents until 27 October 2008, five days after the notice of rejection and two days after the Letter of Credit had expired. It is unclear from the record in this arbitration when [Claimant's bank] learned of [Respondent's bank's] rejection, and what position [Claimant's bank] took in relation to the documents.2 Indeed, it is even unclear whether [Claimant's bank] confirmed the Letter of Credit.3

48. According to [Respondent's president], as late as 24 October 2008 (the day before the expiry of the Letter of Credit), [Respondent] was making arrangements with the port of [destination] to handle the goods on the assumption that Claimant would amend its documents and provide [Respondent] access to the goods to inspect them at [that port]. However, [Respondent's president] adds, Claimant never tendered conforming documents …

49. On 5 November 2008, [Respondent] offered to accept the shipment despite the rejection of the documents if Claimant agreed to discount the price of the goods by [amount]. Claimant rejected this offer. Indeed, on 6 November 2008, [Claimant's bank] objected to this "huge" discount requested on the basis of "minor discrepancies," and urged [Respondent's bank] to take a "more rigid" stand against [Respondent] in relation to the documents … On the same day, Claimant advised Respondent by letter fax that the vessel had arrived and berthed at [the port] and was prepared to discharge its cargo; the same letter noted that "Buyers refuse to discharge and take delivery of their cargo basis [sic] alleged minor discrepancies in LC" … On 7 November 2008, Claimant offered a discount of [a lower amount], but provided only one hour for acceptance of its proposal … According to [Respondent's president], Claimant transmitted its counter-offer via banking channels after business hours and, as a result, [Respondent] did not learn of the counter-offer until after it had already expired … Furthermore, according to [Respondent's president], Claimant did not discharge the Cargo in [the destination port] or provide [Respondent] with an opportunity to inspect it, but instead diverted the vessel to and discharged the Cargo in [another port] … [Respondent's president] adds that had Claimant provided Respondent with an opportunity to inspect the goods, [Respondent] "would have accepted the counter-offer …" …

50. According to [an employee of Claimant], during a telephone conversation that he had with [Respondent's president] on 6 November 2008, [Respondent's president] said that [Respondent] would not take delivery of the Cargo "due to the downfall in the market" …

51. Claimant ultimately sold the Cargo to [another company] for a purchase price of … representing a difference relative to the higher purchase price set forth in the Contract of …

V. Summary of the parties' positions and arguments

A. Claimant's Memorandum

52. In its Memorandum, Claimant submits that Respondent should be ordered to pay to Claimant the [difference between the contract price and the price for which the Cargo was actually sold] (together with interest and costs) on the basis of three points of argument:

a) Claimant substantially performed all of its obligations under the Contract, while Respondent breached the Contract by refusing to accept delivery of the Cargo or to pay the purchase price prescribed in the Contract;

b) Respondent is not relieved of its obligation to accept delivery of, and pay for, the Cargo by [Respondent's bank's] failure to honour the Letter of Credit; and

c) Claimant was justified in mitigating its damages by selling the Cargo to a third party … when Respondent refused to take delivery of the Cargo or pay for the Cargo as required by the Contract.

53. In connection with the first point, Claimant argues that its substantial compliance consists of "furnishing product (the Cargo) to Respondent consistent with the requirements of the Contract, and by making that product available to Respondent on a timely basis at the agreed upon port of discharge".4

54. Claimant's second point is based on three related propositions, namely that:

a) Respondent's obligation to pay under the Contract, as a matter of the law applicable to the Letter of Credit (i.e. the latest version of the Uniform Customs and Practice for Commercial Documentary Credits ("UCP 600")), is independent from [Respondent's bank's] obligation to honour drafts drawn on the Letter of Credit by Claimant;

b) Claimant did not accept the Letter of Credit as the exclusive mode of payment, nor relinquish its right to seek payment directly from Respondent upon substantial performance of its obligation; and

c) Claimant's entitlement to recover the purchase price directly from Respondent is supported by Section 2-325(2) of New York's Uniform Commercial Code ("UCC"), which according to applicable authority may be applied to the issue of Respondent's non-payment notwithstanding the fact that the Letter of Credit expressly designates UCP 600 as the governing body of rules.

B. Respondent's Memorandum

55. Respondent, in opposition to Claimant's Memorandum, submits that Claimant's claim should be rejected in its entirety, and develops its argument in six points.

56. Respondent's Point I asserts that Claimant's Memorandum is defective, in that it has presented certain documents in [Claimant's language] without English translation (contrary to the Terms of Reference, para. 35) and it did not comply with the Provisional Timetable in two respects: its legal brief was submitted two days late, and it did not submit any supporting affidavits …

57. Next, Respondent makes two points concerning [Claimant's bank]:

First, Respondent asserts that the fact that [Claimant's bank] was required to, and did, confirm the Letter of Credit raises several critical questions that are not addressed by Claimant and in relation to which there is no contemporaneous evidence in the record; "(1) did [Claimant's bank] determine that the documents complied with the Letter of Credit; and if so, (2) did [Claimant's bank] pay Claimant? If not, did [Claimant's bank] reject the tender as non-complying, and submit them to [Respondent's bank] knowing that they were non-complying?"5

Second, Respondent argues that if Claimant was precluded from timely correcting the discrepancies in its documents because [Claimant], allegedly, did not learn of the rejection of the document until 27 October 2008 (five days after [Claimant's bank] was notified, and two days after the Letter of Credit expired), then Claimant's claim "should properly be lodged against [Claimant's bank] (not [Respondent]) for breach of its obligations as confirming bank".6

58. Respondent's Points IV and V respond to Claimant's principal arguments concerning the relationship between the Letter of Credit and the Contract.

59. In Point IV, Respondent emphasizes that Claimant accepted the Letter of Credit, and therefore accepted its documentary obligations under the Letter of Credit:7 "[t]he beneficiary under a letter [of credit] cannot shift either to the issuing bank or its contractual counterpart the risk that it cannot present complying documents. This is the very reason that a beneficiary is given the opportunity to examine and either accept or reject the letter of credit."8

60. In Point V, Respondent argues that the Contract is not a contract for the sale of goods, but rather a contract for the sale of documents:

As such, Claimant had two fundamental obligations: (1) deliver conforming goods to a carrying vessel; and (ii) tender strictly complying documents to the bank. The strictly complying documents served as a constructive evidence of shipment. Had Claimant tendered proper documents, it would have been paid. [Respondent]'s obligation was to procure a letter of credit, which it did.9

61. As such, under the law governing the Contract, which Respondent submits is the United Nations Convention on Contracts for the International Sale of Goods ("CISG"), Respondent argues that Claimant's failure to deliver documents strictly complying with the terms of the Letter of Credit was a fundamental breach of the Contract, allowing Respondent to avoid the Contract.10 On these issues, Respondent relies on [an expert report].

62. Finally, Respondent argues that Claimant did not suffer damages (and did not enter into a cover transaction to mitigate damages) because it was Claimant, not [Respondent], who breached the Contract.11 In any event, says Respondent, had Claimant accepted [Respondent]'s offer of a price reduction … or provided [Respondent] sufficient time to accept its counter-offer of a price reduction …,12 Claimant would have received more … than it received from [the alternative buyer].13 On this basis, Respondent maintains that "the sale to [the alternative buyer] was not commercially reasonable nor mitigation".14

63. Respondent concludes with a request that it be awarded its attorney fees, and be reimbursed for the costs of this proceeding. Respondent writes: "as demonstrated by Claimant's abject lack of candor in its submission and failure to provide any admissible factual support for its claim, it is submitted that Claimant is aware that its claim lacks legal and factual basis".15

C. Claimant's Supplemental Memorandum

64. In its Supplemental Memorandum … Claimant begins with a three-pronged attack on the [expert report]. First, according to Claimant, the [expert report] is objectionable not only because it gives "ultimate legal conclusions", but also because such conclusions were requested by Respondent's counsel. Second, [the expert's] testimony on industry standards, particularly with regard to letters of credit, is not material to this case, since Claimant's case is based on Respondent's failure to comply with what Claimant submits is an independent obligation of Respondent to pay the purchase price under the Contract "if [the] letter of credit was dishonoured, or cancelled".16 And third, Claimant argues that the [expert report's] conclusion - that the Letter of Credit relieves Respondent of any separate payment obligation under the Contract - is undermined because it is based on the false assumption that the inspectors nominated by Respondent … were barred from inspecting the Cargo.17

65. Claimant then responds to [Respondent]'s points on applicable law. Claimant asserts that there is no justification for concluding that the choice of New York law means the choice of the CISG. In any event, argues Claimant, "there is a plethora of case law supporting the use of the UCC to inform decisions under the CISG".18 Claimant also notes that the CISG "in no way detracts from the fundamental principle of contract law that the intention of the parties determines how a contract should be construed".19

66. Finally, Claimant reiterates the position it took earlier in the proceeding, namely that there is no need for a hearing. Claimant justifies this position on the basis that Respondent's "preoccupation" with alleged discrepancies in the documents presented to [Respondent's bank] under the Letter of Credit "presents a false issue".20 According to Claimant:

This is not, as Respondent incorrectly contends in Point III of the Memo in Opposition, a proceeding claiming wrongful dishonor or cancellation of an issued or confirmed letter of credit. Instead, it is a proceeding claiming breach by Respondent of the Sales/Purchase Contract.21

D. Respondent's Supplemental Memorandum

67. Respondent's Supplemental Memorandum addresses (1) Claimant's comments on and objections to the [expert report], (2) the content of the witness statements submitted by Claimant with its second submission, and (3) the CISG and related questions of applicable law.

68. On the [expert report], Respondent makes the following points: (i) Claimant has "simply reiterated" its previous objections to the Report, which were overruled by the Arbitrator;22 (ii) Claimant's position that [Claimant] did not intend to relieve Respondent of any payment obligation if the Letter of Credit was dishonoured, or cancelled, "flies in the face of international law pertaining to the sale of goods and letter of credit";23 and (iii) Claimant's attempts to undermine the [expert report] on the basis of [the expert's] understanding of the inspection of the Cargo made on [Respondent]'s behalf (or lack thereof) are unavailing because (a) the [expert report] refers to the non-conforming nature of the inspection certificate issued by the independent inspection agent …, not to the inspection done (or not done) on Respondent's behalf by [company X], and (b) Claimant concedes that the independent inspection certificate was non-conforming, while seeking to introduce inadmissible hearsay evidence to suggest that [company X] performed its inspection of the Cargo.24

69. Next, Respondent turns to the witness statements submitted by Claimant with its Supplemental Memorandum. Respondent asserts that a series of admissions in the [declarations by Claimant's employees] establish that [Claimant] failed to present documents that strictly conform with the Letter of Credit, and that Claimant has failed to introduce any legal authority to counter the necessary conclusion that [Claimant] was therefore in material breach of the Contract …

70. Respondent's last point of argument explains that the CISG applies to the Contract because the CISG is New York law pursuant to the Supremacy Clause in the United States Constitution, and the Parties' choice of New York law, without expressly excluding the CISG, is not sufficient, under the guiding authorities, to opt out of the CISG (as is permitted by the CISG).25

VI. Issues to be determined

A. Issues as framed by Claimant

71. In the Terms of Reference, Claimant framed the issues to be determined as follows:

a) Did Claimant comply with its responsibilities under the Contract (as amended by the Addendum)26 to furnish complying product, and to make that product available for Respondent at the agreed-upon port of discharge?

b) Did the failure on the part of [Respondent's bank] to honour the Letter of Credit justify Respondent's cancellation of the Contract, or relieve Respondent of its obligation to accept delivery of the Cargo and to pay to Claimant the agreed-upon purchase price reflected in the Contract (as amended by the Addendum)?

c) Did Respondent breach the Contract by failing to accept delivery of the Cargo and failing to pay to Claimant the purchase price reflected in the Contract (as amended by the Addendum)?

d) Was Claimant justified in mitigating its damages by finding an alternate buyer for the Cargo?

e) Did Claimant ultimately sell the Cargo at a loss relative to the purchase price set forth in the Contract (as amended by the Addendum) in the sum of …?

f) Is Respondent liable to Claimant for damages in the sum of …, plus interest and expenses of this arbitration proceeding?

B. Issues as framed by Respondent

72. In the Terms of Reference, Respondent framed the issues to be determined as follows:

a) Whether Claimant demanded arbitration against the incorrect party. A claim for wrongful dishonour of a letter of credit is properly lodged against the bank issuing the letter of credit, here, [Respondent's bank], and not against the purchaser of the goods under the sales contract.

b) Whether Claimant is entitled to any relief in light of the fact that it presented non-conforming documents to [Respondent's bank].

c) Whether Claimant's presentment of non-conforming documents to [Respondent's bank] entitles it to a claim against [Respondent], the commercial buyer.

d) Whether Claimant failed to correct the discrepancies or present conforming documents before expiry of the Letter of Credit.

e) Whether Claimant suffered any damages or failed to mitigate damages.

C. Issues as determined by the Arbitrator

73. Listed above, in the previous two paragraphs, are the issues as framed by Claimant and Respondent, respectively, in the Terms of Reference … The Arbitrator is not strictly bound by the issues so framed. As provided in paragraph 29 of the Terms of Reference, "[t]he issues to be determined by the sole arbitrator are those arising from the submissions, statements, applications and pleadings of the Parties and include any question of fact or law that the sole arbitrator may deem necessary to decide in order to determine such issues within the limits of Article 19 of the ICC Rules."

74. The Arbitrator considers the following questions of fact and law to be dispositive of the claim in these proceedings, for the reasons set out in the next section:

a) Did [Claimant] timely tender documents to [Respondent's bank] that strictly complied with the Letter of Credit?

b) In the circumstances, was [Respondent] required to accept delivery of the Cargo and to pay [Claimant] the agreed-upon purchase price reflected in the Contract?

VII. The Arbitrator's analysis and decision

A. Did [Claimant] timely tender conforming documents?

75. As set out in the previous paragraph, the Arbitrator considers it essential to establish first whether [Claimant] timely tendered documents that strictly complied with the Letter of Credit.

76. The Arbitrator has no difficulty coming to the conclusion that [Claimant] did not.

77. In its Memorandum, Claimant argues that it substantially performed all of its duties and obligations under the Contract, namely "by furnishing product (the Cargo) to Respondent consistent with the requirements of the Contract, and by making that product available to Respondent on a timely basis …" … In relation to the documents required by the Contract and by the Letter of Credit, Claimant takes the position that the documents it supplied to Respondent, "either directly or through [Respondent's bank]", were "in full compliance with the provisions of the Contract".

78. The critical question, however, is whether documents strictly conforming with the requirements of the Letter of Credit were delivered to [Respondent's bank] on or before 25 October 2008, the expiration date of the Letter of Credit. The answer is no.

79. The following facts are not contested:

• Following shipment of the goods, Claimant's bank … presented documents to [Respondent's bank] on 20 October 2008 …

• On 22 October 2008, [Respondent's bank] acknowledged receipt of the "documentary remittance", and notified [Claimant's bank] by "advice of refusal" that it was refusing the claim in accordance with Article 16 of UCP 600 due to a series of discrepancies in the documents …

• In particular, [Respondent's bank] advised [Claimant's bank] that it rejected the documents presented based on the following discrepancies:

- Bills of Lading: non-negotiable copies not signed as per special condition G).

- Inspection Certificate does not detail any packing, no colour codes confirmed, no chemical composition of the goods stated and it does not mean anything just to mention: "We confirm that the loaded quantity, total number of bundles, packing, color codes and the quality and chemical composition of the goods".

- Despite of [sic] the transmission report presented, no shipment advice has been sent to us.

- Master's agent's certificate does not refer to quantity nor goods shipped.

- Shipper's certificate for dunnage does not refer to quantity shipped …

• [Claimant] did not correct the discrepancies before the expiry of the Letter of Credit.27

80. Claimant does not contest these facts. Instead, Claimant argues that the discrepancies identified by [Respondent's bank] were "manifestly non-material",28 "minor",29 "technical"30 and "trivial in nature".31 Further, Claimant submits that "the doctrine of substantial performance" absolves [Claimant] from any consequences that [Respondent] (or its bank) might seek to impose on it as a result of such "venial faults",32 given that it furnished the Cargo ("consistent with the requirements of the Contract"33) and made the Cargo available to [Respondent] "on a timely basis at the agreed-upon port of discharge".34

81. The doctrine of substantial performance, however, has no application in letter-of-credit law, including under New York law. It is the principle of strict compliance that applies.35 Respondent is therefore correct when it asserts that "[i]t is well established that documents must strictly comply, and even a single discrepancy will obligate an issuing bank to reject the documents."36

82. Moreover, the discrepancies in this case were serious. They included unsigned bills of lading, an inspection certificate that did not identify or confirm the packing, color codes or quality/chemical composition of the Cargo, and an incomplete mate's certificate.37

83. The Arbitrator therefore concludes that [Claimant] failed to timely tender documents to [Respondent's bank] that strictly complied with the Letter of Credit, and that [Respondent's bank] acted properly in refusing to honour [Claimant's] draft on the Letter of Credit. The consequences of this finding for Claimant's claim for payment against [Respondent] are addressed in the next section.

B. Was [Respondent] required to accept delivery of and pay for the Cargo?

84. As set out in an earlier section of this Award, Claimant argues that Respondent is not relieved of its obligation to accept delivery of, and pay for, the Cargo, even though [Respondent's bank] refused to honour [Claimant's] draft on the Letter of Credit. Claimant thus submits that it is [Respondent] that has breached the Contract, entitling Claimant to damages for its associated alleged losses. Respondent counters that [Claimant's] failure to timely submit strictly conforming documents under the Letter of Credit, which allowed [Respondent's bank] to refuse to honour [Claimant's] draft, constituted a fundamental breach of the Contract under applicable law, allowing [Respondent] to avoid its obligations to accept delivery of, and pay for, the Cargo.

85. The Arbitrator first addresses applicable law, and then the issue of breach.

1. Applicable law

86. This case involves the interaction of the Contract and the Letter of Credit. The law applicable to each must therefore be determined.

87. The Arbitrator has considered the Parties' arguments on the law applicable to the Contract, and concludes that the applicable law is the CISG. This follows from the Parties' choice of New York law,38 the inclusion of the CISG as part of New York law,39 and the fact that the Parties did not expressly opt out of the CISG.40

88. The Letter of Credit, for its part, states expressly that the "UCP latest version" applies as the "Applicable Rules" … The Parties agree that this is a reference to UCP 600 …

2. Breach

89. Having established the applicable law, it is now to be determined whether [Respondent] may avoid its obligations to accept delivery of, and pay for, the Cargo, based on [Claimant's] failure to submit conforming documents under the Letter of Credit. This leads to the following related question: did the Parties agree that the Letter of Credit was the exclusive mode of payment, or did [Respondent] retain an independent obligation to pay the purchase price under the Contract upon delivery of the Cargo?

90. For the reasons set forth below, the Arbitrator concludes that [Respondent] was entitled to avoid its obligations under the Contract after the defective presentation of documents.

91. Claimant's own authority supports this conclusion. In its Memorandum, Claimant refers to First Commercial Bank v. Gotham Originals, Inc., 64 N.Y.2d 287, 486 N.Y.S.2d 715 (1985), in which the Court of Appeals of New York, among other things, endorsed the doctrine of independent contracts. As Respondent correctly argues, however, in developing its argument, Claimant "turns this principle on its head".41

92. The doctrine of independent contracts does not give a seller of goods who has accepted a letter of credit in payment an opportunity to seek separate payment directly from the buyer. This would undermine the entire framework for documentary transactions. The very passage of First Commercial Bank cited by Claimant (at p. 7 of its Memorandum) underlines this point:

Stated another way, this principle stands for "the fundamental proposition … that all parties [to a letter of credit transaction] deal in documents rather than with the facts the documents purport to reflect." 42

93. The Court of Appeals left no doubt regarding the effect of a letter of credit on the payment obligation in a sale-of-goods transaction:

The purpose of a letter of credit is to substitute for, and therefore support, an engagement to pay money. Letters of credit are used in various ways in modern business practice, but when used in the traditional manner to finance a sale of goods, the credit subsumes a separate agreement by a buyer to pay money to a seller.43 (Emphasis added)

94. Consequently, since [Claimant] failed to deliver conforming documents under the Letter of Credit, it cannot be heard to seek payment directly from [Respondent] for the Cargo. Indeed, in a documentary sales contract governed by the CISG, such as the one at issue in this proceeding, the seller's failure to deliver documents that strictly comply with the requirements of the letter of credit constitutes a fundamental breach, giving the buyer the right to avoid the sales contract.44

95. In addition to arguing that [Claimant ] was entitled to payment from [Respondent] on the basis of substantial performance (which argument fails, for the reasons explained in part A of this Section, above), Claimant argues that (i) [Claimant] did not intend to accept the Letter of Credit as the exclusive mode of payment (and thus to relinquish its right to such payment directly from [Respondent]) and (ii) [Claimant's] right to recover the purchase price directly from [Respondent] is supported by the UCC. Neither argument is convincing, for the reasons set forth below.

96. Claimant bases its argument relating to intention on the testimony of [employees of Claimant]. [One of those employees] states:

Whenever a [Claimant] export contract contains a provision requiring payment by L/C, that provision is intended solely as a method of payment, in order to ensure collection of funds. No provision of the [Claimant] contract that is the subject of this arbitration was intended to allow the buyer to escapte [sic] from its own contractual obligation in the unfortunate situation like this one, where the L/C becomes compromised. …

[Another of Claimant's employees] adds that "the obligations of [Respondent] in the … Contract were in no way intended to be undermined by any dishonor or cancellation by its bank of the Letter of Credit, regardless of whether that dishonor or cancellation was justified" …

97. These statements relating to [Claimant's] subjective intention, assuming they are true, are insufficient to overcome the normal application of letter-of-credit principles to this transaction. The Arbitrator is persuaded by Respondent's answer to the above-cited testimony:

Here, Claimant neither provides any statements, agreements or other evidence from before execution of the contract, nor points to any provision in the Contract to support its position. To the contrary, Claimant offers only its own self-serving interpretation. Even under Claimant's erroneous view of the law, this is insufficient to alter the clear terms of the Contract and the well-established custom and practice of international traders.45

98. Claimant's UCC argument must also fail. As established above, the UCC does not apply to either the Contract or the Letter of Credit, which are governed by the CISG and the UCP 600, respectively. Claimant argues that "although the UCP applies to the Letter of Credit, it neither conflicts with, treats, nor addresses the subject matter of Section 2-325(2) of the UCC, and, thus, the relief accorded to Claimant by that Section is applicable".46 Section 2-325(2) of the UCC provides as follows:

The delivery to seller of a proper letter of credit suspends the buyer's obligation to pay. If the letter of credit is dishonored, the seller may on seasonable notification to buyer require payment directly from him.

99. In this case, even if the UCC applied,47 Section 2-325(2) would be of little assistance to Claimant, since the Letter of Credit was not "dishonored" (a defined term in the UCC);48 rather, Claimant failed to deliver the required documents under the Letter of Credit, and [Respondent's bank] was thus entitled not to honour [Claimant's] draft on the instrument.49 This situation is not equivalent to a letter of credit being dishonoured or cancelled by the issuing bank in circumstances when the seller is not at fault, and the bank fails to do what is required by the letter of credit.50

C. Conclusion

100. For all of the above reasons, the Arbitrator decides that there is no basis in fact or in law for Claimant's claim against Respondent for its alleged losses in connection with the sale of the Cargo. Having failed to present documents in strict compliance with the Letter of Credit, Claimant was in no position to insist that Respondent take delivery of and pay for the Cargo, and Respondent was within its rights to refuse delivery.'

1
… Article 16 of the UCP 600 provides: a. When a nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank determines that a presentation does not comply, it may refuse to honour or negotiate.b. When an issuing bank determines that a presentation does not comply, it may in its sole judgement approach the applicant for a waiver of the discrepancies. This does not, however, extend the period mentioned in sub-article 14 (b).c. When a nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank decides to refuse to honour or negotiate, it must give a single notice to that effect to the presenter.The notice must state:i. that the bank is refusing to honour or negotiate; andii. each discrepancy in respect of which the bank refuses to honour or negotiate; andiii. a) that the bank is holding the documents pending further instructions from the presenter; orb) that the issuing bank is holding the documents until it receives a waiver from the applicant and agrees to accept it, or receives further instructions from the presenter prior to agreeing to accept a waiver; orc) that the bank is returning the documents; or d) that the bank is acting in accordance with instructions previously received from the presenter.d. The notice required in sub-article 16 (c) must be given by telecommunication or, if that is not possible, by other expeditious means no later than the close of the fifth banking day following the day of presentation.e. A nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank may, after providing notice required by sub-article 16 (c) (iii) (a) or (b), return the documents to the presenter at any time.f. If an issuing bank or a confirming bank fails to act in accordance with the provisions of this article, it shall be precluded from claiming that the documents do not constitute a complying presentation.g. When an issuing bank refuses to honour or a confirming bank refuses to honour or negotiate and has given notice to that effect in accordance with this article, it shall then be entitled to claim a refund, with interest, of any reimbursement made.

2
Claimant comments as follows: "Respondent appears to contend in this proceeding that Claimant may have had an alternative means of obtaining payment, in the event that [Claimant's bank] confirmed the Letter of Credit. However, the issue of whether such confirmation was made is irrelevant, inasmuch as plaintiff elected not to pursue payment options, if any, from [Claimant's bank]" (Cl. Memo ...). Respondent disagrees: "This suggests that [Claimant's bank] paid Claimant, or that [Claimant's bank] rejected the tender as nonconforming, or that [Claimant's bank] presented the non-conforming documents to [Respondent's bank]. Either of these scenarios demonstrate [sic] that the claim lacks merit and should be rejected" (Resp. Memo ...).

3
Claimant takes the position that confirmation of the Letter of Credit was "optional" (see Cl. Memo ...) and, as evidenced in the quote from Claimant's Memorandum in the previous footnote, has advanced its case without indicating whether [Claimant's bank] did or did not confirm the Letter of Credit. Nor are the documents issued by [Respondent's bank] and [Claimant's bank] themselves, respectively, conclusive on this point (see [Respondent's bank's] "Issue of a documentary credit" ... ("[…] If you could add your confirmation to the credit, please inform us accordingly without delay. In this case, your reimbursement claim must indicate that you have honoured a complying presentation."); and [Claimant's bank's] "Advice of payment/acceptance/negotiation" ... (certifying that the terms and conditions of the Letter of Credit "have been strictly complied with", but without indicating whether the Letter of Credit was confirmed and whether [Claimant's bank] was seeking reimbursement for having honoured what it described as a complying presentation)). Indeed Respondent notes, in its final submission, that Claimant has not addressed "whether it paid [Claimant's bank] to confirm the Letter of Credit, as required by the Contract" (Resp. Supp. Memo ...).

4
Cl. Memo …

5
Resp. Memo ...

6
Ibid. …

7
See ibid. …

8
Ibid. …

9
Ibid. …

10
See ibid. …

11
See ibid. …

12
Respondent asserts that it was motivated to negotiate a deal for the Cargo, after Claimant's breach, since [Respondent] had signed contracts with customers for the shipped [goods]. …

13
See ibid. …

14
Ibid.

15
Ibid. …

16
Cl. Supp. Memo. …

17
See ibid. … Claimant accuses [Respondent] of furnishing "false and misleading evidence" on the issue of the [X] inspection … The evidence on this issue is summarized in para. 45, above …

18
Cl. Supp. Memo. …

19
Ibid. … Claimant also cites a 1998 decision of the US District Court for the Southern District of New York for the proposition that there is a greater openness to considering extrinsic evidence, under the CISG, to ascertain the intention of the parties. See ibid.

20
Ibid. …

21
Ibid.

22
Resp. Supp. Memo. …

23
Ibid. …

24
See ibid. … On the issue of the evidence tendered by the Parties in relation to the inspection of the Cargo, see para. 45, above …

25
See ibid. … Respondent also distinguishes the one case relied on by Claimant in support of its argument that the CISG is more permissive on the admission of extrinsic evidence to assist in the interpretation of the Contract. ….

26
In this Final Award, the Contract is already defined as incorporating the Addendum ... The language in paragraph 71, however, tracks the language of the Terms of Reference, in which the term Contract did not include the Addendum. See Terms of Reference, para. 10.

27
See [declaration of employee of Claimant] (explaining that [Claimant] was informed "after the expiry date 25.10.2008, that the [Letter of Credit] issuing bank, [Respondent's bank], had made reservation regarding alleged discrepancies in certain documentation"). It is thus clear that [Claimant] did not submit any further documents in response to [Respondent's bank's] "advice of refusal" prior to the expiry date of the Letter of Credit.

28
Cl. Memo ….

29
Ibid. …

30
Ibid.

31
Ibid. …

32
Ibid. ... (citing Oppenheimer & Co., Inc. v. Oppenheim, Appel, Dixon & Co., 205 A.D.2d. 412, 613 N.Y.S.2d 622 (1st Dep't 1994): "Parties may indeed stipulate in a contract 'to effectuate a purpose that performance of every term shall be a condition of recovery' … In the absence of such specific conditioning of recovery '[t]here will be no assumption of a purpose to visit venial faults with oppressive retribution.'" Ibid. At 623 (quoting Jacob & Youngs v. Kent, 230 N.Y. 239, 242-43 (1921) ("We must weigh the purpose to be served, the desire to be gratified, the excuse for deviation from the letter, the cruelty of enforced adherence")).

33
Cl. Memo …

34
Ibid.

35
See Western International Forest Products, Inc. v. Shinhan Bank, 860 F. Supp. 151 at 153 (S.D.N.Y. 1992) ("A fundamental tenet of letter of credit law is that a beneficiary must present precisely conforming documents in order to be paid. Under the 'strict compliance' rule, 'the terms and conditions of a letter of credit must be strictly adhered to'. Corporation de Mercadeo Agricola v. Mellon Bank International, 608 F.2d 43, 47 (2d Cir.1979)"); see also M. Bijl, "Fundamental Breach in Documentary Sales Contracts: The Doctrine of Strict Compliance with the Underlying Sales Contract", 2009:1 Eur. J. Commercial Contract L.19 at 20-21 (describing the principle of strict compliance, and its adoption in "a long line of court rulings all over the world - especially in the United Kingdom and the United States…") (hereinafter referred to as "Fundamental Breach").

36
Resp. Memo ...

37
The [expert report] explains why "[a] cargo put in transit without a valid inspection certificate and without valid bills of lading is a suspect cargo." See ibid. ...

38
See Contract ... ("This contract shall be governed by New York law.").

39
Pursuant to the Supremacy Clause of the United States Constitution.

40
See Asante Technologies, Inc. v. PMC-Sierra, Inc., 164 F. Supp. 2d 1142, 1150 (N.D. Cal. 2001) (holding that the choice of "laws of the State of California" was not sufficient to opt out of the CISG because the CISG is part of California law).

41
Resp. Memo …

42
Id. ... (quoting H. Harfield, Letters of Credit 76 (ALI-ABA Uniform Commercial Code Practice Handbook 1979)). See also [the expert report]: "CFR and CIF transactions in connection with letters of credit are said to be 'sale of documents' rather than 'sale of goods' because the seller is only paid upon presentation of strictly-conforming documents."

43
Ibid …

44
See generally "Fundamental Breach", supra note [33]; see also [the expert report] (explaining the reasons for the strictness of the documentary requirement, including the need to support the re-sale of documents in letter-of-credit transactions, and the desire to reduce fraud in international sales).

45
Resp. Supp. Memo …

46
Cl. Memo …

47
Under the version of the UCC applicable to this transaction, it appears that the choice-of-law provision gives precedence to the UCP. See UCC, Section 5-116. The Parties did not submit argument or authorities on Section 5-116; Respondent cites Western International Forest Products Inc. v. Shinhan Bank for the proposition that "[b]y its terms, the UCC does not apply to letters of credit governed by the UCP" (Resp. Memo ...), but that case was decided under the earlier version of Article 5 of the UCC, whose Section 5-102(4) provided so expressly.

48
See UCC, Section 5-102(a)(5) : "'Dishonor' of a letter of credit means failure to timely honor or to take an interim action, such as acceptance of a draft, that may be required by the letter of credit."

49
See UCP 600, Article 16, whose full text is set out in note [1], supra.

50
For similar reasons, Greenough v. Olivier Straw Goods Corporation, 53 F.2d 362 (2d Cir. 1931), cited by Claimant, is inapplicable, since in that case the seller's draft was dishonoured by a defaulting insolvent bank.