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The URBPO rules are the Uniform Rules for Bank Payment Obligations.
The scope of the Uniform Rules for Bank Payment Obligations (URBPO) lies solely in the bank-to-bank space. This is the scope agreed in the memorandum of understanding signed between ICC and SWIFT in September 2011 and the terms of reference provided to the Drafting Group. URBPO are designed to operate in what is known as the 'collaborative' space as will any Transaction Matching Application (TMA) chosen by financial institutions (known in URBPO as Involved Banks) for a given transaction.
URBPO do not cover the interaction between a bank and their corporate client. It is for each bank, in what can be described as the 'competitive' space to offer their clients financing or other services and products based on the strength of agreeing to incur a Bank Payment Obligation (BPO) or through the receiving of one. URBPO indicate the separateness and independent nature of the BPO from the underlying sale or other contract. This follows the wording and principles expressed in UCP 600 article 4 as adapted to suit the context of these rules.
BPO is an irrevocable undertaking given by an Obligor Bank (typically the Buyer's Bank) to a Recipient Bank (the Seller's Bank) to pay a specified amount under the condition of a successful electronic matching of data or acceptance of mismatches. It is an alternative instrument for trade settlement, designed to complement existing solutions and not to replace them.
A BPO is established through the use of a TMA, a centralised data matching and workflow application. It should be noted that a TMA does not of itself create a BPO; rather it notifies each Involved Bank of the BPO's existence, reflecting the agreement of each Involved Bank to participate in a transaction that includes a BPO. Once established, a BPO constitutes a legally binding, valid and enforceable payment obligation of the Obligor Bank to the Recipient Bank under applicable law. Similar to a letter of credit under UCP, a collection under URC and a guarantee under URDG, settlement of a BPO is outside the scope of URBPO.
A TMA provides a mechanism for presentation of data to the Obligor Bank through processing of messages received from Involved Banks, the automatic comparison of the data contained in such messages against agreed requirements (specified in an established baseline), and the subsequent notification of a Data Match or Data Mismatch to each Involved Bank. URBPO are predicated on the fact that messages sent and received by Involved Banks will comply with ISO 20022 standards. ISO is the International Organisation for Standardisation and is the world's largest developer and publisher of international standards with a membership of more than 160 national standards bodies.
ISO 20022 organises financial message definitions by business area, each one of which is uniquely identified by a four-character business area code. In the case of Trade Services Management, the business area code is TSMT. ISO 20022 TSMT standards specify the format for commercial, transport, insurance, certificate or other certificate sets to be submitted by an Involved Bank in respect of an underlying trade transaction, and for the related TSMT messages to be exchanged between Involved Banks and the TMA. Definitions for TSMT messages that specifically relate to a BPO are included in Article 4 'Message Definitions'. Any TMA used in connection with these rules must be able to implement the ISO 20022 TSMT messages as defined in Article 4.
Message standards are essential in order to achieve inter-operability and effective multi-banking communication and understanding. Standards ensure consistency and uniformity of format and terminology through use of a common data dictionary. As is the case with other ISO standards in the area of financial services, ISO 20022 standards for TSMT messages are publically available and are not proprietary to any technology provider or financial institution.
Two articles of the early drafting process that attracted national committee comments were "Charges" and "Branches of Banks in Different Countries".
Charges - As originally drafted, this article followed the concept in UCP that if an agent is not able to recover its costs, the instructing party remains liable. Over the course of drafts two and three, various comments were received, first to make the Obligor Bank liable and then to assign liability for charges to the Recipient Bank. The current charges field within the Payment Obligation Segment of a Baseline is not conducive to any specific rule being applicable. The decision was therefore taken to remove the article from URBPO and for the banks to decide on the payment of charges through a bi-lateral agreement pending implementation of ISO message enhancements being requested.
Branches of Banks in Different Countries - The Drafting Group were aware of the issues surrounding the concept that two different legal entities are generally required to establish a contract, and consider this to have been addressed in sub-article 15 (b).
URBPO are issued with version numbers, similar to eUCP, in order to allow for individual articles to be updated or added, reflecting changes in any industry practice, and without the need for a full revision. This is URBPO version 1.0.
It has been recognized during the drafting process that the current ISO TSMT messages will require some amendments to be made, including in the context of providing mandatory fields for data that will be necessary to comply with the requirements of global, regional and country regulators and applicable sanctions requirements. The ICC is in the process of registering with ISO to enable them to submit amendment requests and to be part of the decision process for any changes to the TSMT messages. Any requests for changes must be made to ISO no later than 1 June of each year and requests that are approved are usually made available for the commencement of the following year.
The Drafting Group would like to place on record its appreciation for the comments that have been received to each of the three drafts and, in many cases, the level of detail that was provided.
Our appreciation also extends to the support and input provided by the URBPO Consulting Group that operated under the guidance of Michelle Knowles (South Africa) and Sanjay Tandon (Hong Kong).
Similarly, our appreciation extends to the URBPO Education Group, under the guidance of Michael Quinn (USA), that facilitated the creation of material to accompany the second draft of the URBPO and thereby further aid the learning process. This group also ran an invaluable proof of concept exercise at the end of 2012 to ensure that the content of the URBPO matched the message flows and definitions explained in the rules.
The Drafting Group that brought this important text to fruition deserves special mention. Their names are listed below:
John Bugeja, Head of Trade Sales, Lloyds Banking Group, UK
Neil Chantry, Global Head of Policy and Compliance, Global Trade and Receivables Finance, HSBC Bank plc, UK
David Hennah, Senior Manager, ex-SWIFT, UK
Patrick Krekels, Deputy General Counsel, Corporate Legal Department, SWIFT, Belgium
Robert Marchal, Lead Standards Specialist, SWIFT, Belgium
Manoj Menon, Global Head of Trade Service, Innovation & Customer Proposition International Banking, RBS, UK
David Meynell, Owner, TradeLC Advisory, Ex-Deutsche Bank, UK
Harriette I. Resnick, Managing Director and Associate General Counsel, Legal Department, J.P. Morgan Chase & Co., USA
André Casterman, Head of Corporate and Supply Chain Markets, SWIFT, Belgium
Dan Taylor, Managing Director, Corporate & Investment Bank, Global Market Infrastructures, J.P. Morgan Chase & Co., USA
Chair, URBPO Drafting Group,
Managing Director, Collyer Consulting LLP, UK