Parties

Initiator (applicant): Company S, Country T

1st Respondent (issuing bank): Bank F, Country Z

2nd Respondent (confirming bank): Bank U, Country A

3rd Respondent (the beneficiary): Company W, Country A

The case

The Group of Experts has studied the Initiator's request for a DOCDEX Decision dated 4 October 2001 regarding a dispute under a documentary credit issued subject to the Uniform Customs and Practice for Documentary Credits, ICC Publication no. 500 (the UCP).

The 1st Respondent and the 2nd Respondent have both informed the International Center for Expertise of the International Chamber of Commerce that they do not want to give any response and that they oppose a DOCDEX Decision being made. No communication has been received from the 3rd Respondent

The Group of Experts has made their unanimous decision based on the request itself, a copy of the documentary credit issued by the 1st Respondent and copies of the correspondence and the documents received with the request.

The request is for the Experts to decide whether the Initiator is within his rights to claim repayment of an amount of USD 2,439,548.63 which the 1st Respondent has debited his account in cover of a payment it has made to the 2nd Respondent against a set of documents presented under the credit.

A copy of the 1st Respondent's request by fax dated 17 August 2000 to the Initiator for a waiver of discrepancies shows that the 1st Respondent found the documents discrepant, and a copy of a fax, into which is copied a message which seems to have been written by the 2nd Respondent, and which refers to an advice of refusal, indicates that the 1st Respondent sent an advice of refusal to the 2nd Respondent on 22 August 2000.

In his request for a waiver of discrepancies the 1st Respondent mentions six discrepancies:

1. Insurance policy not countersigned by the insured (therefore insurance not transferable). The policy presented has a field headed "Not transferable unless countersigned" and there is no signature in this field. As the credit requires an insurance certificate/policy in negotiable form, the Experts consider this to be a valid discrepancy.

2. Invoice, packing list, certificate of origin and insurance policy show a splitting of the quantities by container, which makes 154 pallets and 44 pallets, whereas per bill of lading the same splitting should read 144 pallets and 54 pallets. Copies of invoice and packing list were not included with the Initiator's request and the Experts are therefore unable to comment on matters related to these documents. In one of two certificates of origin, container X and Y are stated to hold a total of 44 pallets, whereas these containers, according to the B/L, hold 54 pallets, and the remaining four containers hold 144 pallets. The insurance is covered by two separate policies, which show "44 pallets" and "154 pallets" respectively. The Experts agree that the documents are inconsistent.

3. Certificate of origin for 44 pallets shows a gross and net weight that is 2 kg higher than on the other documents. The certificates of origin show gross weight 23,600.8 kilos and 42,357.2 kilos respectively, total 65,958 kilos. As the gross weight on the bill of lading is stated as 65,956 kilos, there is a difference of 2 kilos between the information on these documents.

4. Goods description for the invoice amounting to USD 2,203,812.84 shows a value of USD 203,812.84 only. This discrepancy, if any, cannot be determined from the documents presented to the Experts.

5. Handwritten corrections on insurance policies are not approved by the issuer. On both insurance policies are stated that they cover "all risks, war risks" as per the terms of the credit. Immediately after the statement "COVERING ALL RISKS, WAR RISKS" the following has been added in hand writing: "CEWIII" on both policies and neither of them shows approval by the issuer. This would be deemed to be a discrepancy.

6. On bills of lading the goods description includes the wording "goods according to proforma invoice A and B" instead of "Medical Products only". The goods description in the credit is: "GOODS ACCORDING TO PROFORMA INVOICE A AND B" but as the credit requires that the B/L shows a goods description as "MEDICAL PRODUCTS ONLY", the addition of a reference to the proforma invoice numbers would not be acceptable.

Decision

From the copies of the Initiator's responses to the 1st Respondent's request for a waiver of the discrepancies it appears that the Initiator refuses to accept the documents and claims repayment of the amount debited his account.

From the information we have received it seems clear, that according to UCP sub-Article 14(d)(iii) the 1st Respondent is within his rights to claim repayment with interest from the 2nd Respondent, on the condition, however, that he has acted in accordance with the provisions of Article 14 as far as advising the 2nd Respondent of his refusal of the documents is concerned. The relationship between the Initiator and the 1st Respondent is not covered by the UCP, so the 1st Respondent's liability towards the Initiator in this situation will depend on the contract between these two parties, i.e. the terms and conditions of the 1st Respondent for issuing the credit according to the Initiator's request.

The content of the contract between the 1st Respondent and the Initiator is unknown to the Group of Experts, so our following opinions are based on what we consider to be international standard banking practice for such contracts.

When an applicant requests a bank to issue a credit under the UCP, the applicant takes upon himself the obligation of covering the issuing bank for any payment the issuing bank makes under its credit because of its liability as issuing bank to pay against documents which comply with the terms and conditions of the credit.

If documents which do not comply with the terms and conditions of the credit are presented, the issuing bank is not liable to pay, and if payment to a presenting bank has already been made - and if the issuing bank has followed the provisions of Article 14 - it is entitled to claim refund of its payment with interest (UCP sub-Article 14(d)(iii)).

Under such circumstances it would be very unusual not to relieve the applicant of his liability to pay to the issuing bank, and it would be very unusual to refuse the applicant, whose account has been debited the value of the discrepant documents, the right to claim a refund.

According to the Initiator's request and to the enclosed copies of documents, the Initiator has taken the goods in his possession. This is not relevant under the UCP, as according to Article 4 all parties concerned deal with documents, and not with goods, services and/or other performances to which the documents may relate. Whether or not it is relevant in the dispute between the Initiator and the 1st Respondent will depend on the contents of the contract between these two parties.