Parties

Initiator: Bank B

Respondent: Bank H

CASE 1

- Documentary credit subject to UCP 500

- Issuing bank: Respondent

- Advising bank: Initiator

- Amount: USD 795,000

- Validity: 05 September 01 in the country of the Initiator

- Availability: by negotiation by any bank, draft at sight

- Drawee: a branch of the Respondent located in another country

- Form: irrevocable

- Confirmation: without

- Description of goods: prime cold rolled steel sheet in coils

Size (MM) Quantity (MT)
0.90 X 1250 X C 2500
1.10 X 1250 X C 300
1.50 X 1250 X C 200
TOTAL 3000
Unit price: US$ 265/MT.

- Documents required:

(i) 3/3 original clean "shipped on board" ocean bill of lading made out to order of the Respondent;

(ii) Signed 3/3 original of commercial invoice;

(iii) Detailed packing list issued by the beneficiary;

(iv) Copy of fax advising applicant of ... ;

(v) Beneficiary's certificate certifying that original mill's test certificate, one original certificate of origin issued by the Chamber of Commerce and Industry of Country A, and one set of non-negotiable documents have been sent to the applicant by DHL within five working days from B/L date. Such a courier copy shall be presented for negotiation.

- Additional conditions (among others):

(i) Charter party B/L and third party documents are acceptable

(ii) 10 pct less in quantity and amount allowed

Reimbursing bank: the drawee bank

Summary of the case

(i) On 14 June 2001, the Respondent issued the irrevocable documentary credit as above.

(ii) On 18 June, the Initiator confirmed the credit to the beneficiary notwithstanding that the credit instruction was "without".

(iii) On 16 August, the beneficiary tendered the documents to the Initiator which found them to comply with the credit and took them up.

(iv) On 22 August, the Initiator dispatched documents to the respondent - after having credited the beneficiary's account value date 22 August - and made a reimbursement claim to the reimbursing bank.

(v) After several reminders, the reimbursing bank informed the Initiator that it received instructions by the Respondent not to reimburse.

(vi) On 31 August, the Respondent, following the protest of the Initiator, sent a refusal notice at 11:49:02 citing the following discrepancies:

a) "Product measurement unit 'MM' missing on invoice, B/L, and packing list"

b) "Beneficiary's certificate issue date of August 15th, 2001 is different from the dispatch date August 16th, 2002 on copy of courier receipt."

(vii) The same 31 August the Respondent sent another message to the Initiator at 12:53:14 requesting to forward to the beneficiary a message it received from the applicant containing the allegation that the bill of lading was forged.

(viii) On 4th September the Initiator sent a remedied set of bill of lading, commercial invoice and packing list to the Respondent containing the measurement unit "MM".

(ix) In the following correspondence, both the Initiator and the Respondent maintained their own positions concerning the conformity of documents.

Issues to be determined

(As requested by Initiator and Respondent)

1. Was the Respondent entitled to refuse the B/L, commercial invoice and packing list, which the Initiator dispatched on August 22, 2001, on the grounds of the discrepancy listed under vi - a) above (UCP sub-Article 37(c))?

2. Was the Respondent entitled to refuse the beneficiary's certificate, on the grounds of the discrepancy listed under vi - b) above?

3. Was the Respondent entitled to refuse the new set of B/L, commercial invoice and packing list which the Initiator dispatched on September 4, 2001 (UCP Article 42)?

4. Was the telex message to the Initiator of August 31, 2001, at 12:53:14 a proper notice under Article 14 UCP, entitling the Respondent to refuse the B/L?

5. Should the alleged forgery of the B/L and the discrepancies in the documents be settled by a court in the jurisdiction of the country where the L/C was issued?

Determination of the issues and decisions taken

(with reference to the same numbers in "Issues to be determined")

1. It is the unanimous decision of the Panel that the B/L, commercial invoice and packing list complied with the terms and conditions of the credit issued by the Respondent and UCP 500. The panel holds that the invoice complied, on its face, with UCP sub-Article 37(c) which states: "The description of the goods in the commercial invoice must correspond with the description in the Credit". This was the case because the referred to sub-Article does not require such description to be a mirror image of the description in the L/C (See ISBP, ICC publication no. 645, paragraph 62). The invoice actually showed the exact measurement details requested in the goods description in the credit as follows: "SIZE: 0.90 X 1250 X C, 1.10 X 1250 X C, 1.50 X 1250 X C", and therefore the mere absence of the "MM" designation on an apparent column heading is not sufficient to argue that merchandise other than that covered by the credit was shipped. For this reason the Panel holds that the invoice was conforming.

The second sentence in UCP sub-Article 37(c) states: "In all other documents, the goods may be described in general terms not inconsistent with the description of the goods in the Credit", and this occurred with reference to the packing list and the B/L. For the same reason as above, the Panel states that the absence of the "MM" designation does not render inconsistent the B/L and the packing list.

2. It is the unanimous decision of the Panel that the Respondent was not entitled to refuse the beneficiary's certificate on the ground that "beneficiary's certificate's issue date of August 15th 2001 is different from the dispatch date August 16th 2001 on courier's receipt copy". The L/C required this document to certify that " ... documents have been sent to the applicant by DHL within 5 working days from the B/L date. Such a courier copy shall be presented for negotiation." While the tense of the sentence - i.e., "have been sent" - suggests the certificate to be dated after sending the documents, the August 15th dating on the certificate and the DHL courier copy, indicating dispatch on August 16th satisfy the requirement in the L/C because the B/L date was 15th August.

3. It is the unanimous decision of the Panel that the "remedied" set of B/L, commercial invoice and packing list (now containing the "MM" mention) was not necessary, having already stated in numeral 1 that the initial presentation complied with the terms and conditions of the credit and the relevant UCP Articles. The Panel, however, considers it important to point out that the second set also complied with terms and conditions of the credit. "Remedied" documents (now stating the "MM" missing mention) were presented to the Initiator prior to the expiry date of the credit and dispatched to the Respondent on 4th September 2001, i.e., one day before the expiry date of the credit (5th September 2001). Therefore, they were presented within the validity of the Credit. Additionally, the B/L was presented within the 21-day period stated in UCP sub-Article 43(a), no other (shorter) limit being stipulated in the credit.

4. It is the unanimous decision of the Panel that the B/L complied, on its face, with the terms and condition of the credit. UCP Article 15 ("Disclaimer on effectiveness of documents") states that "banks assume no liability or responsibility for the ... genuineness, falsification or legal effect of any document(s) ... or for the good faith or acts ... of the ... carriers, the forwarders ... or any other person whomsoever." Therefore, although the Respondent sent a SWIFT message MT799 to the Initiator on August 31, 2001 requesting to forward to the beneficiary a message received by the applicant stating "We duly inform you that the B/L which was presented to negotiating bank is not authentic. This information was obtained from the fax message of the shipowner and chartering party. We are holding all evidence to prove that the said bill of lading is forged. We are seriously thinking of taking legal actions in formal manner." Absent an obvious (patent) fraud detectable on the face of the B/L, Article 15 applies. It is to be stressed that under UCP 500 banks have no responsibility to investigate or adjudicate allegations of fraud or other events. As a consequence, issuing and confirming banks are obliged to honour complying documents, unless legally enjoined from honour or already notified by a court, which was not the case for this transaction. The Panel holds that, as only courts have power of judgment over fraud and its effects on third parties (nominated banks) acting under nomination of the issuing bank, any information/message alleging fraud is not sufficient to suspend the irrevocable undertaking of the issuing bank. The Panel wishes to point out that the above mentioned SWIFT message, dated August 31, 2001, is a SWIFT message not related to the notice of refusal already sent by the Respondent on that same date, and therefore it is not applicable to the documentary credit process. The Panel feels there is no additional decision to be taken on the fact that the SWIFT message sent at 12:53:14 mentions "the B/L is not authentic" as per information "obtained from the fax message of the shipowner and chartering party". The Panel holds that, absent a court order enjoining the issuer from honour, an issuer is obligated to honour complying documents and reimburse a nominated party who has acted under its nomination. An issuer who takes responsibility to dishonour based on alleged fraud does so at its own risk, outside the UCP, and is subject to the legal recourse by a nominated party or the beneficiary.

5. It is the unanimous decision of the Panel that the alleged forgery was not sufficient to be a reason of interference with the ordinary flow of the credit operation and that the discrepancies alleged on the documents were groundless and that no new documentation had to be presented. Absent an order from a court with proper jurisdiction, an issuing bank is obligated under UCP to take up complying documents and reimburse a nominated bank which has acted in accordance with its nomination. To do otherwise would expose the issuing bank to liability for wrongful dishonour and legal action outside the UCP. Cancelling a reimbursement authorization does not relieve an issuing bank from its reimbursement obligation (UCP 500, Article 19).

Additionally, but not directly related to this case, the Panel also states that when a court order exists it cannot be ignored (local law will prevail over the obligations and responsibilities of a bank, as detailed in UCP), and that an effort by banks to educate the judicial systems within their countries in the principles of the UCP will be useful to help courts judge cases properly, as has been previously quoted by ICC for similar cases. (See Opinions listed with numbers 10, 14, 33, 34, 62, 282 in "ICC Banking Commission Collected Opinions 1995-2001", ICC publication no. 632). As there is no exhibit supporting the event of a court injunction to stop payment or an equivalent judicial act toward the issuing bank, the Panel holds that the Respondent took a decision outside the UCP provisions and therefore under its own responsibility. Whether the alleged forgery of the B/L is or is not to be settled by the court in the jurisdiction of the country where the L/C was issued is outside the scope of a DOCDEX Decision.

Last, considering that the L/C was "confirmed" by the Initiator notwithstanding the fact that such action was not requested by the Respondent, the Panel wishes to state, being consistent with the above-mentioned facts, that such "confirmation" had no particular effect in this decision, because the credit was available by negotiation with any bank and the Initiator negotiated conforming documents. Therefore, as per UCP sub-Article 10(d), the Initiator was entitled to be reimbursed by the Respondent. Confirmation concerned exclusively the relationship between the Initiator and the beneficiary, including any related risk as a part of the initiator's autonomous decision.

Conclusion

This Panel unanimously holds that the rejection of documents was groundless and that the documents complied with the credit terms and conditions and UCP 500. The task of determining the grounds, and then the effect, of the alleged forgery is outside its competence.

Statement of the Chair

The decision in Case 1 of DOCDEX/229 was unanimous.

CASE 2

- Documentary credit subject to UCP 500

- Issuing bank: Respondent

- Advising bank: Initiator

- Amount: USD 1,670,000

- Validity: 21st September 01 in the country of the Initiator

- Availability: by negotiation with any bank - draft at sight

- Drawee: a branch of the Respondent in another country

- Form: irrevocable

- Confirmation: confirm

- Latest date of shipment: 31st August 2001

- Goods description: two lots of Prime Hot Rolled Steel Billet detailed in size and quantity

- Documents required:

A)

i) 3/3 clean on board bill of lading made out to order and marked freight collect, etc.

ii) Commercial invoice in one original and 3 copies, etc.

iii) Packing list in one original and three copies, etc.

iv) One copy of certificate of origin issued by Chamber of Commerce in Country R

v) Two different beneficiary's certificates each of them duly specified and detailed.

B)

In case of non performance of a vessel by August 31, 2001, the following documents may be presented in lieu of the above.

i) Original FCR issued by FIATA-registered agent, in place N

ii) Bill of sale issued by the seller

iii) Acknowledgement issued by FIATA-registered agent in place N

iv) Commercial invoice in one original and three copies, etc.

v) Packing list in one original and three copies, etc.

vi) One copy of certificate of origin issued by Chamber of Commerce in Country R

vii) One original and two copies SGS quality and quantity certificate

viii) Two different beneficiary's certificates each of them duly specified and detailed

Additional conditions (among others):

i) Charter party B/L and third party documents are acceptable except invoice and draft;

ii) 10 pct less or more in size, total quantity and total amount allowed;

iii) Atmospheric rust on the B/L acceptable;

iv) Presentation within 21 days from the B/L date;

v) This L/C will be confirmed by ... (the Initiator) and the confirmation charges will be at beneficiary's account.

Reimbursing bank: the drawee bank.

Summary of the case

A) On 6th July 2001, the Respondent issued the irrevocable documentary credit as above.

B) On 11th July, the Initiator confirmed the credit as requested.

C) On 12th July, the Respondent sent an amendment message to the Initiator concerning the substitution of the first one of the two documents listed in A-v) and B- viii) above and the deletion of the SGS certificate (B-vii).

D) On 18th July, the Initiator informed the Respondent that beneficiary accepted the amendment under the condition that all charges were paid by the applicant.

E) On 22nd August, the Respondent informed the Initiator that the applicant rejected paying the charges.

F) On 24th August, the Respondent sent another amendment message consisting of a new date of expiry: 1st October 2001 and latest date of shipment: 10th September 2001. Neither the Initiator nor the beneficiary ever reacted to this amendment.

G) On 3rd September the beneficiary tendered the documents to the Initiator, which found them to comply with the credit and took them up.

H) On 7th and 10th September the Initiator made a reimbursement claim to the reimbursing bank.

I) On 8th September, the Respondent amended the reimbursement instruction by deleting the original clause in the credit, "T/T reim claim allowed", and inserting the new clause "Upon receipt of documents in order we shall remit proceeds to your designating account."

J) On 10th September, the Initiator rejected the amendment to the reimbursement instruction.

K) On 18th September, the Initiator sent the documents to the Respondent after having credited the beneficiary, value date 12th September.

L) On 28th September, the Respondent rejected the documents due to the following discrepancies:

1. "3/3 clean on board bill of lading instead of FCR ( Forwarder's Certificate of Receipt) should have been presented. The date on FCR is August 31st, 2001."

2. "Original FCR not issued by FIATA registered agent in place N"

3. "1 copy of certificate of origin (issued by Chamber of Commerce in Country R) not presented. Certificate of origin is surely counterfeited: Chamber of Commerce in Country R does not have this type of certificate of origin, no serial no. written on certificate of origin. Photocopy type presented i/o copy."

M) On 29th September the Respondent informed the Initiator of the possible forgery of the documents presented.

Issues to be determined

(As requested by Initiator and Respondent)

1. Was the Respondent entitled to refuse the FCR on the grounds of the reasons stated in L) 1 and 2 above ?.

2. Was the Respondent entitled to refuse the certificate of origin on the ground of the reasons stated in L) 3 above ?

3. Should the alleged forgery of the certificate of origin and the discrepancies in documents be settled by a court in the jurisdiction of the country where the L/C was issued?

Determination of the issues and decisions taken

(with reference to the same numbers in "Issues to be determined")

1. It is the unanimous decision of the Panel that the FCR presented did not comply with the terms and conditions of the credit issued by the respondent and the UCP 500.

A) UCP sub-Article 9(d)(iii) states: " ... The Beneficiary should give notification of acceptance or rejection of amendment(s). If the Beneficiary fails to give such notification, the tender of documents to the Nominated Bank or Issuing Bank, that conform to the Credit and to not yet accepted amendment(s), will be deemed to be notification of acceptance by the Beneficiary of such amendment(s) and as of that moment the Credit will be amended." The Panel observed that the presentation of a FCR instead of a B/L - as questioned by the Respondent - is not connected with the sequence of the amendments (concerning substitution of certificates, validity and shipment dates) but with the wording of the original credit. This issue is discussed in the following point C). The beneficiary presented a FCR non-conforming with the terms and conditions of the credit due to the requisite explicitly stated on the L/C ("Original FCR issued by FIATA-registered agent in place N") was not complied with, as no mention of the issuance by a FIATA-registered agent in place N appeared on the FCR. This is regardless of whether the document was or was not a false or forged document (as stated by the Respondent in a subsequent communication). Moreover, the fact that - in line with UCP Article 21 - the FCR is acceptable as tendered (because it is not a transport document) when the source, the wording and the data content are not specified in the credit, does not imply that other possible special conditions expressly stipulated in the credit for this document may be disregarded.

B) UCP sub-Article 13(a) states: "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.". The Panel wishes to point out that the Initiator did not check the FCR with the prescribed "reasonable care"; if so, it should have been noticed that the FCR was not in compliance with the terms and conditions of the credit.

The wording of the original credit rules on the issue of the FCR in lieu of the B/L. It stated: "In case of non performance of a vessel by August 31, 2001 the following documents may be presented in lieu of the above ...", but it did not stipulate the document to be presented in order to verify such condition. UCP sub-Article 13(c) states: "If a Credit contains conditions without stating the document(s) to be presented in compliance therewith, banks will deem such conditions as not stated and will disregard them." Consequently, the issuing date of the FCR might have been August 31st, because the related limit did not exist. In any case, it was perfectly logical to present this document before the stated limit day because the "non performance of a vessel by August 31st" could be ascertained even before that specific date. Therefore, the date on the document complied with the terms and conditions of the credit, as the wording in the L/C did not prohibit the FCR to be dated on such date. On the other hand - as already mentioned in point A) above - the document itself did not comply. The Panel wishes to point out that discrepancies were informed by the Respondent to the Initiator on Tuesday, September 28th, i. e., 10 days after the Initiator sent documents to the Respondent. As the date the Respondent received the documents is not shown, the Panel assumes that the maximum of seven banking days stated in UCP sub-Article 14(d) was complied with. Otherwise, the Initiator was entitled to reject discrepancies and the Respondent had to accept documents despite the discrepancy in A) and to reimburse the Initiator.

2. It is the unanimous decision of the Panel that the discrepancies found by the respondent on the certificate of origin were groundless, and therefore the document presented complied with the terms and conditions of the credit issued by the respondent and UCP 500.

A) UCP Article 21 states: "When documents other than transport documents, insurance documents and commercial invoices are called for, the Credit should stipulate by whom such documents are to be issued and their wording or data content. If the Credit does not so stipulate, banks will accept such documents as presented, provided that their data content is not inconsistent with any other stipulated document presented." The credit did not detail specific requirements related to the certificate of origin - such as serial numbers, content, wording or any format, type or characteristics specific for Country R certificates to be shown in this document - but only the condition to have been issued "by [the] Chamber of Commerce in Country R". This condition was complied with by the wording appearing in the signature field of the document saying "Country R Chamber of Commerce & Industry confirms hereby that the goods mentioned above are really Country R origin", and by the stamp accompanying the signature. Therefore the Panel holds it was conforming to the terms and conditions of the credit.

B) Rejecting the certificate on the basis that it was a photocopy instead of a copy - as requested in the credit - is not a valid statement according to ICC document N° 470/871 Rev. July 29th 1999 regarding original documents/copies in the context of UCP 500 sub-Article 20(b). A photocopy of a document meets a credit requirement for a copy.

C) The statement that "the certificate of origin is surely counterfeited" does not express a discrepancy, but is information not related to the checking activity of documents by banks. On the contrary, UCP Article 15 states that "Banks assume no liability or responsibility for form, sufficiency, accuracy, genuineness, falsification or legal effect of any document(s) ...".

3. It is the unanimous decision of the Panel that the alleged forgery was not sufficient to be a reason of interference with the ordinary flow of the credit operation, specifically with reference to the discrepancies a) and c) raised on the certificate of origin. The Panel also unanimously confirms that the discrepancy raised on the FCR ("not issued by a FIATA-registered agent") was a valid reason for the rejection of documents which became effective if the refusal notice was sent to the Initiator within a reasonable time, but no later than the close of the seventh banking day following the day of receipt of the documents by the respondent.

Conclusion

This Panel unanimously holds that the Respondent was entitled to reject documents due to discrepancy No.2 of the Respondent's message of 28th September. It also states that the task of determining the grounds, and then the effect of the alleged forgery is outside of its competence.

Statement of the Chair

The decision in Case 2 of DOCDEX/229 was unanimous.