Parties

Initiator: Bank C

First Respondent: Bank B (Issuing Bank)

Second Respondent: Company S (beneficiary)


Dispute

Whether the issuing bank (First Respondent) was entitled to refuse payment based on the fact that:

the issuing bank was not able to check the signature of the nominated bank on the covering letter hen documents sent by courier service were received,

the issuing bank has "not received telex reimbursement claims" and "not received authenticated telex reimbursements claims" before the date of expiry.


Documentation

- Letter (Request) from Bank C (The Initiator) of 28 March 2000 to ICC International Centre for Expertise, Paris requesting a DOCDEX Decision, stating inter alia:

- that a copy of the request and all documentation was sent to the First Respondent, and

- the Initiator's Summary of the Dispute;

- Letter (Request) from Bank B (First Respondent) of 21 April 2000 to ICC International Centre for Expertise, Paris requesting a DOCDEX Decision stating inter alia that a copy of the request and all documentation be sent to the Initiator;

- Copy of documentary credit no. 123456;

- Copy of beneficiary's presentation to the nominated bank;

- Copy of courier service's tracking summary stating the issuing bank's receipt of documents;

- Copies of telex reimbursement claim and further telexes/SWIFT messages to the issuing bank;

- Copies of SWIFT messages/telexes from issuing bank to nominated bank;

- Copy of letter from beneficiary to nominated bank;

- Copies of telex messages from Bank F.

The appointed Experts came to a unanimous Decision.


Analysis

The credit in question was issued subject to UCP 500 and was available for negotiation at the counters of the nominated bank.

The credit stated that the credit was "available for negotiation at sight but not earlier than 30/10/99 at the counters of Bank C, ... ". The credit was issued on 21/06/99 and expired 30/11/99 at the counters of Bank C. The credit thereby stated twice that Bank C was appointed to be the nominated bank.

The credit required the beneficiary to present 2 documents only:

1. a claim for the amount due, and

2. a statement declaring that the applicant has failed to repay outstanding debts.

The correctness of the documents has not been questioned by the issuing bank

The credit included a reimbursement instruction: "Upon receipt of your authenticated SWIFT message stating that documents have been presented in strict conformity with L/C terms we shall effect payment in accordance with your instructions value three ... working days after receipt."

Documents were presented at the nominated bank on 8 November 1999 and forwarded by the nominated bank by courier service to the issuing bank The cover letter did not state that documents were negotiated, but stipulated that the beneficiary had submitted credit conforming documents and requested the issuing bank to remit the amount to a named bank in Country U.

At the same time the nominated bank sent a telex to the issuing bank, indicating the credit number and other references stating that it had taken up documents and requesting the issuing bank to remit cover to the named bank in Country U.

1. Issuing bank's refusal to accept documents timely received

According to sub-Article 9(a) of UCP 500, the issuing bank has an obligation to pay when conforming documents are timely presented at the counter of the nominated bank. They were in conformity. Further it is evident that documents arrived at the counter of the issuing bank, also before the date of expiry.

Neither UCP 500 nor the credit itself contain any stipulation as to how a covering letter must be worded or signed, nor as to whether a covering letter must be presented.

If documents "on their face" are in compliance with the credit and UCP 500 and with each other, then the issuing bank must pay (sub-Article 13(a)), even if documents were presented timely by the beneficiary without using the services of the nominated bank (sub-Article 9(a)).

It is normal and good international banking practice to rely on the covering letter of a presentation under a credit, whether it is signed or not, and whether the signature is known by the bank. If the issuing bank does not know who the presenter is, it should seek information from the nominated bank, or alternatively from the beneficiary

2. Issuing bank's statement that it did not receive a timely authenticated reimbursement claim

The documentary credit includes a reimbursement instruction giving the nominated bank the possibility of being reimbursed before documents reach the issuing bank. From the reimbursement it is clear that the issuing bank requires an "authenticated SWIFT message ... ".

Reimbursement instructions are not part of the credit itself, and the issuing bank's payment obligation is not dependent on whether such instructions are fulfilled. The obligation to pay under a credit depends on the timely presentation of documents and not on the receipt of documents or messages.


Decision

1. Issuing bank's refusal to accept documents timely received

When conforming documents are received by the issuing bank, that bank has an obligation to examine them and to decide whether they comply (sub-Article 13 (a)). If they are not in compliance, the issuing bank can refuse the documents and serve notice in accordance with sub-Article 14(d). Otherwise, the issuing bank must pay.

2. Issuing bank's statement that it did not receive a timely authenticated reimbursement claim

As stated under "Analysis", the reimbursement instruction is a facility providing for prompt payment to the presenter (nominated bank). If no reimbursement claim had been received (and if no documents had been received), then the issuing bank would not be obliged to pay.

However, in accordance with the reimbursement instructions, upon receipt of a reimbursement claim from the nominated bank stating that conforming documents have been timely presented, the issuing bank must pay (whether or not by that time the credit has expired).

If it is necessary to have an "authenticated reimbursement message" and the message is not so authenticated, the issuing bank should go back to the sender of the message in order to clarify the authentication.

We there conclude that:

Conforming documents were timely presented and the issuing bank had no reason to refuse payment.

The payment should have been effected on receipt of a reimbursement claim or on receipt of the documents, whichever occurred first.