Parties

Initiator (beneficiary) Company K

Respondent (issuing bank) Bank P

Background and transaction

This case concerns an unpaid claim made by the Initiator under a standby letter of credit issued by the Respondent. The credit was available by payment at sight with a nominated bank against presentation by the beneficiary of a declaration.

The case

The standby letter of credit was claused: "This stand-by letter of credit comes into force provided you confirm us that our L/C no. ABC456 expired unutilized."

The Respondent has questioned whether the credit ever became valid, as this requirement was never fulfilled. However, amendment no. 1 stated the following at the very beginning: "PLEASE REPLACE EXISTING TEXT OF L/C WITH THE FOLLOWING". The Experts understand that requirement to mean that all existing text of the original credit - including the requirement for a confirmation that the issuing bank's L/C no. ABC456 expired unutilized - was to be replaced by the text of the amendment. And the text of the amendment did not include a clause similar to the clause in the original credit requiring a confirmation that the issuing bank's L/C no. ABC456 expired unutilized, and consequently that clause no longer existed after amendment no. 1 had been issued.

By issuing amendment no. 1, and later amendment no. 2, the issuing bank showed that it considered the credit as being in force, and that was further confirmed by the fact that in later correspondence, by a SWIFT message dated 4 March 2003 from the Respondent to the nominated bank, the former requested a cancellation of the credit.

Amendment no. 1 did include another clause or condition for its coming into force: "This amendment is coming into force only in case of written consent of beneficiary is presented through your bank."

The Respondent has questioned whether amendment no. 1 ever came into force, as this clause, in the Respondent's view, was never fulfilled. The Experts, however, are of the opinion that the Initiator gave notification to the nominated bank of its acceptance of the amendment by tender of its claim dated 13 February 2003 in which the exact wording of amendment no. 1 was used.

The Experts refer in this connection to sub-Article 9(d)(iii) of UCP 500, which says: "The terms of the original Credit (or a Credit incorporating previously accepted amendment(s)) will remain in force for the Beneficiary until the Beneficiary communicates his acceptance of the amendment to the bank that advised such amendment. 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 the 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."

From the documentation presented to the Experts via the ICC International Centre for Expertise by the Initiator and the Respondent, the Experts conclude that the Initiator presented the required declaration to the nominated bank, that the declaration was in conformity with the credit and that it was presented within the validity of the credit.

This conclusion is based on the following:

Attachment no. 5 to the Initiators request for a DOCDEX decision is a copy of a SWIFT message dated 14 February 2003 from the nominated bank to the Respondent. This SWIFT message is a word-for-word copy of attachment no. 8 to the Initiator's request for a DOCDEX Decision, and attachment no. 8 is the Initiator's request for payment dated 13 February 2003, which included the declaration required by the credit as worded in amendment no. 1. The SWIFT message, apart from copying the Initiator's request for payment, also gave information on how and by whom the request for payment was signed. The Experts therefore take it for granted that the Initiator's request for payment itself was in the nominated bank's possession at the time it wrote its SWIFT message of 14 February 2003 to the Respondent.

According to amendment no. 1, the expiry date was 21 February 2003.

On 11 February 2003, the Respondent issued a second amendment which required a wording for the beneficiary's declaration slightly different from the wording required by amendment no. 1.

The Respondent claims that there is evidence that the Initiator had accepted amendment no. 2. If that was so, the declaration presented by the Initiator would be discrepant, as it was made out following the wording of amendment no. 1 and did not take the wording of amendment no. 2 into account.

The Respondent has mentioned two SWIFT messages dated 20 February 2003 and 11 March 2003 respectively from the nominated bank to the Respondent as evidence that the Initiator had accepted amendment no. 2. The Experts do not agree that these two messages form evidence that the Initiator had accepted amendment no. 2, and even if they had evidenced the Initiator's acceptance of amendment no. 2, the Experts would not have taken such evidence into consideration, as both messages were dated after the Initiator's claim under the credit had been made.

Conclusion

The Experts are of the opinion that the claim made by the Initiator dated 13 February 2003 was in order and presented to the nominated bank within the validity of the credit. Consequently, the Respondent is liable to pay.

We refer to sub-Article 9(a) of UCP 500 which stipulates that "An irrevocable Credit constitutes a definite undertaking of the Issuing Bank, provided that the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and that the terms and conditions of the Credit are complied with: if the Credit provides for sight payment ... to pay at sight ... ".

Miscellaneous

As this has been pointed out in the Respondent's answer, it should be mentioned that the Respondent's instructions in the credit and in the amendment were not adhered to by the nominated bank, which seemed to ignore the Respondent's instructions in more than one instance.

A nominated bank's manner of acting under its nomination has, however, no influence on an issuing bank's liability towards the beneficiary of the credit, and the Experts have consequently concentrated on determining whether the beneficiary has fulfilled the requirements for him to claim under the credit.

This is a unanimous decision.