Parties

Initiators (jointly): Bank I, Bank A

Summary of the representations

Background

Type of credit Irrevocable, unconfirmed

Application UCP 500

Issuing Bank Bank I

Advising / Negotiating Bank Bank A

Availability Any bank by negotiation of draft at 180 days after B/L date drawn on Bank I (for 85% of the credit value) At 180 days after sight drawn on Bank I (for 15% of the credit value). With separate sets of documents for each payment term

Expiry date June 30, 1998 in Bank A's Country

Circumstances

  • 17/12/97 - Bank I issued its irrevocable credit and advised it to the beneficiary through Bank A.

  • 31/12/97 - Bank A negotiated documents relating to the 85% provisional L/C value amounting to USD 501,700.45, having found them to conform.

  • 15/01/98 - Bank I refused the documents for the following reason: "Documents provisional weight and moisture certificate and provisional certificate of assay not showing issuing date".

  • 20/01/98 - Bank A refuted the discrepancy stating: "there is no requirement for the provisional weight and moisture certificate and provisional certificate of assay to show an issuance date". Bank A further stated that the certificates evidenced "M/V Eco Charger" and "B/L date 9/12/97" and could therefore be clearly identified and linked with other documents and have been accepted in accordance with Article 21 of UCP 500.

  • 26/03/98 - Documents relating to the final payment of 15% of the L/C value were negotiated by Bank A and subsequently accepted by Bank I on 9 April 1998.

  • 26/05/98 - Bank I maintained that "a document must have a reasonable issuing date in order to judge its qualification".

  • Bank I continued to maintain that there was a discrepancy with the first batch of documents and pointed out that its position was based on Case No. 21 in ICC publication no. 535, Case Studies on Documentary Credits under UCP 500.

  • Bank A disagreed, enquiring why Bank I accepted the second batch of documents while refusing the first one. Furthermore, Bank A pointed out that goods had already been cleared by the applicant.

  • Bank I reiterated its refusal of the first batch of documents and confirmed that the second set had been accepted due to the second set of documents containing the final weight and moisture certificate and certificate of assay which bore dates of issuance. The goods had been cleared by the applicant due to the beneficiary having released 1/3 B/L to the applicant without the consent of the issuing bank.

Questions

Does the discrepancy raised by Bank I stand? Are the provisional weight and moisture certificate and provisional certificate of assay required to show the issuing date? Answer: No. Since these documents show the name of the vessel and the date of the B/L, they unequivocally establish that these documents relate to the shipment and the necessary linkage between the documents presented.

The dating of "certificates" is not specifically addressed in UCP 500. These types of documents fall, partially, in the category of documents that are covered by Article 21. But one should also consider Article 13 which states inter alia "Banks must examine all documents stipulated in the Credit with reasonable care, to ascertain whether or not they appear, on their face, to be in compliance with the terms and conditions of the Credit. Compliance of the stipulated documents on their face with the terms and conditions of the Credit, shall be determined by international standard banking practice as reflected in these Articles."

The method for examination of such documents is based on the nature of these documents - certificates and their qualification. A certificate must serve the purpose for which it has been issued; that is the reason why it has to show either a date of issuance or otherwise to show the event (shipment or provision of services) to which it relates.

Answers to additional arguments of Bank A and Bank I

1. Did the final documents presented supersede the provisional ones and therefore should both presentations be accepted?

· No, by virtue of the independence principle of each presentation, which is commonly admitted as being international standard banking practice and which previous ICC opinions have reiterated, Bank I has the right to treat each set of documents independently.

2. Is the clearance of the goods by the applicant enforceable on Bank I?

· Article 4 of UCP states clearly that all parties concerned deal with documents and not with goods, services and/or other performances. It would appear that the release of the goods was due to an action on the part of the beneficiary in releasing one original bill of lading and not due to any failure on the part of the issuing bank in holding the documents at the risk of Bank A.

3. Is the use of ICC publication no. 535 valid in supporting arguments where a dispute has arisen?

· The ICC has previously commented that the publication no. 535 is not to be considered as representative of Opinions granted by the ICC Banking Commission. Only those publications which specifically reference those queries placed before the Banking Commission can be considered to be "Opinions of the ICC". The Chair of the panel of Experts declares that the decision was unanimous.