Parties

Initiator: Company R in Country U (the beneficiary)

Respondent: Bank B in Country A (the issuing bank)

Background

The credit, which covered merchandise to be shipped from Country U to Country I, was available with any bank in Country U by negotiation. Documents were thus to be presented to a bank in Country U, but the credit also stipulated that one document, an inspection certificate, was to be issued by the applicant and presented by the applicant directly to the issuing bank.

The credit further called for 1/3 original bill of lading to be sent by the beneficiary to a bank in Country I for submission to the consignee in a city in Country I. By a subsequent amendment this 1/3 original bill of lading was to be sent by the beneficiary directly to the consignee in the city in Country I.

The beneficiary presented the documents to a bank in Country U, which sent them on to the issuing bank. However, as the issuing bank was not able to obtain the inspection certificate, which should have been issued and presented by the applicant directly to the issuing bank. The issuing bank rejected the documents submitted by the beneficiary in terms of UCP Article 14.

The consignee succeeded in taking delivery of approximately one third of the goods shipped, before he was stopped by a court order obtained by the beneficiary.

Summary of the representations relevant to the issue determined

The beneficiary maintains that the issuing bank is liable to pay in accordance with sub-Article 9(a)(ii) of the UCP, as all stipulated documents within the beneficiary's control had been presented to the nominated bank and had been found by the nominated bank to comply with the terms and conditions of the credit.

The issuing bank maintains that it was not liable to pay under the credit as one document, the inspection certificate, which was required to be issued by the applicant and presented by the applicant directly to the issuing bank, was never presented.

The majority decision by the experts

Based on the facts as presented, the issuing bank is not liable to pay under its credit. UCP and international standard banking practice require the presentation of all documents as stipulated in the credit and that the terms and conditions of the credit are complied with before the issuing bank's obligation under the credit comes into effect.

We refer to UCP Articles 2 and 9.