Parties

Initiator: Bank I

Respondent: Bank R

Applicant: Company A

Beneficiary: Company B

Facts of the case

- Bank I (Initiator and issuing bank) issued an irrevocable documentary credit no. 123456 ("Credit") for USD 170,000.00 in favour of Company B and advised it to Company B through Bank R (Respondent and negotiating bank). The Credit was issued subject to UCP 500, available with any bank by negotiation with sight drafts to be drawn on Bank I. In addition to the draft, the Credit called for the following documents:

. Signed commercial invoice in 3 copies indicating the L/C No. and contract No.;

. Full set clean on board ocean bills of lading made out to order of Bank I marked "Freight Prepaid" and notify Company A showing its full name and address;

. Full set of Insurance Policy for 110 pct of the invoice value, showing claims payable in Country C, in currency of the draft, blank endorsed covering all risks;

. Packing list/weight memo in 3 copies indicating quantity, gross and net weight of each package;

. Certificate of quality, quantity/weight in 3 copies issued by the Apparel Industry Association of Country K;

. Beneficiary's certified copy of cable/telex/facsimile dispatched to Company A within 2 days after shipment date advising name of vessel, shipment date, quantity, weight, value of shipment goods and this L/C No.;

. Beneficiary's certificate confirming their acceptance or non-acceptance of the amendments issued under the Credit, quoting the relevant amendment number; such certificate is not required if no amendment has been issued under the Credit.

- Following issuance, Bank I issued one amendment to the Credit as follows:

. Certificate of quality, quantity/weight in 3 copies issued by manufacturer instead of Apparel Industry Association in Country K. Other terms and conditions remain unchanged.

- Bank R remitted documents for the full Credit amount to Bank I for payment. Bank R certified on its letter of remittance that the documents were compliant with the terms and conditions of the Credit and that it had endorsed the negotiated amount on the reverse of the original Credit. Bank R also indicated it had attached the following documents with its remittance letter to Bank I:

- All documents were sent in one mailing.

- Following examination and within the timeframe required under Article 14 of UCP, Bank I refused the documents, claiming the following discrepancy:"Certificate of quality should be presented in 3 copies instead of 1 copy as L/C required"

- Bank I further indicated on its refusal message that it was holding documents at Bank R's disposal.

- Bank R replied, disputing the discrepancy raised by Bank I, claiming that it had forwarded 1 original and 2 copies of the certificate of quality, quantity/weight to Bank I and demanded immediate payment.

- An argument ensued where Bank I maintained it only received the original certificate of quality, quantity/weight whereas Bank R insisted it had sent an original and 2 copies of said certificate. Bank R further alleged that Bank I had released the documents to Company A, since the goods were distributed in the market.

- A subsequent message from Bank R contended that even though 2 copies of the certificate of quality, quantity/weight were not sent to Bank I, Bank I should have no problem in making payment as the copies were not important. Bank R further threatened to take legal action against Company A and other parties.

- Bank I responded and reiterated that the documents presented by Bank R were not in compliance with the terms of the Credit and it was not up to an issuing bank to decide whether the missing copies of the certificate of quality, quantity/weight were important.

- Bank I submitted a request to the ICC's International Centre for Expertise ("Centre") and applied for a DOCDEX decision.

- Bank R did not respond to the Centre's invitation for an answer.

Issue

Is it justified for Bank I, the issuing bank, to refuse payment when two copies of the certificate of quality, quantity/weight called for in the Credit were not presented?

Analysis

The Credit originally called for a certificate of quality, quantity/weight in 3 copies issued by the Apparel Industry Association of country K. The Credit was amended to call for the same certificate to be issued by the manufacturer without changing the number of copies required for the certificate.

As per sub-Article 20(c)(ii) of the UCP, credits that require multiple document(s), such as "duplicate", "two fold", "two copies" and the like, will be satisfied by the presentation of one original and the remaining number in copies except where the document itself indicates otherwise.

Paragraph 33 b) of the ISBP states "Invoice in 4 copies" will be satisfied by the presentation of at least one original and the remaining number as copies of an invoice. This interpretation should be applied to documents other than invoices.

Based on the exchange of communication between Bank I and Bank R, Bank R did not dispute the requirement for the presentation of the 2 copies of the certificate of quality, quantity/weight. Rather, it claimed initially the copies were sent, and later said even if the copies were not sent they were not material for payment by Bank I.

In reaching their conclusion, the Panel of Experts took the following into consideration:

- It is not the experts' role to speculate whether Bank I had, in fact, received the 2 copies of the certificate of quality, quantity/weight in addition to the original.

- Based on the DOCDEX procedures, the experts are required to render their decision impartially and exclusively on the basis of the Request from Bank I, the Answer from Bank R if provided, and supplementary information if requested by the Centre, the Credit and the UCP.

- Bank R had changed its argument from its initial claim that it had sent one original and two copies of the Certificate of quality, quantity/weight to Bank I to claim that copies are not important documents.

- The document remittance letter of Bank R listed the exact number of copies of each document presented under the Credit. Under the column CERT, Bank R indicated that 3 certificates were enclosed with the document remittance letter, which supported Bank I's claim that it received 3 certificates, one original certificate of quality, quantity/weight, one beneficiary's certificate of shipment advice and one beneficiary's certificate confirming acceptance of the amendment.

- As per Article 2 of the UCP, Bank I, as issuing bank, is to make payment against stipulated document(s).

- As per Article 9, the liability of an issuing bank arises when stipulated documents are presented to the nominated bank or to the issuing bank.

- It is not a bank's role to determine whether copies of documents are material for the presentation if they are not presented. Bank R's argument would mean that it is not necessary to present copies of any documents when multiple documents are called for in a letter of credit. However, in this particular situation, an issuing bank could decide to use its discretion to make two photocopies of the original certificate of quality, quantity/weight although it has no obligation to do so.

Decision

The discrepancy raised by Bank I is valid within the framework of UCP, and the refusal is justified.

This decision is a unanimous decision by the Panel of Experts.