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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
Relating to: UCP 500
Some 20 claims and sub-claims by the Initiator concerning, among others, whether the words "in trust" are permitted under the UCP; whether there was a delayed payment by the First Respondent; whether a DOCDEX panel can review the amount of a claim for damages; whether UCP 500 article 15 can be invoked to render a text superfluous if it was required by the credit; and whether sub-article 14(c) applies to advising banks
Articles
UCP 500 article 15, sub-articles 14(c) and 14(d)
Parties
Initiator: Company M
Respondents: Bank G (First Respondent)
Bank B (Second Respondent)
Bank S (Third Respondent)
Background and transaction
1. On 6 June 2004, the Third Respondent issued upon the application of Company G, a documentary credit in favour of the Initiator (the "credit"). Governed by UCP 500, the credit was advised by the First Respondent and stated to be available by negotiation with the First Respondent. The text of the credit required clarification, which was made by the Third Respondent in due course. This issue is not disputed.
2. The credit allowed partial shipments and required the usual shipping documents. Amongst these documents, one deserves special mention as it is referred to in the dispute: the credit required the presentation of "Declarations of B/L (Bank S text)" (field 46A). The payment modalities of the credit need also to be noted. Issued for an amount of USD 471,600, the credit was payable in two stages: (i) 90 per cent of each consignment value payable upon the presentation of the required shipping documents, and (ii) 10 per cent payable against the applicant's certification stating the receipt and acceptance of the goods.
3. On 21 June 2004, the First Respondent advised the credit to the Initiator through Bank T.
4. On 7 July 2004, the Initiator presented the documents under the first presentation to the First Respondent through Bank T, acting as presenting bank.
5. On 12 July 2004, the First Respondent gave notice of refusal of the documents to the presenting bank and indicated that the documents were held at the disposal of the Initiator.
6. On 30 July 2004, the presenting bank transmitted to the First Respondent the Initiator's request that the documents held by the First Respondent be sent to the Third Respondent to be released to the applicant only against payment. This was done by the First Respondent the same day.
7. On 10 August 2004, the Third Respondent acknowledged receipt of the documents on an approval basis and indicated that they were held at the disposal of the First Respondent pending the instructions of the applicant. [It is not clear as to whether or not the Third Respondent provided a refusal notice.]
8. On 19 August 2004, the Third Respondent instructed the First Respondent to pay 90 per cent of the amount as per the terms of the credit. Payment was made by the First Respondent the same day.
9. On 1 January 2005, the Third Respondent instructed the First Respondent to pay the outstanding 10 per cent upon receipt of the Initiator's signed receipts.
10. On 17 January 2005, the First Respondent received the Initiator's signed receipts and made the payment the next day through the presenting bank.
11. On 17 September 2004, the Initiator presented the documents under the second presentation to the First Respondent through the same presenting bank.
12. On 22 September 2004, the First Respondent gave notice of refusal of the documents to the presenting bank and indicated that the documents were held at the disposal of the Initiator.
13. On 13 October 2004, the presenting bank transmitted to the First Respondent the Initiator's request that the documents held by the First Respondent be sent "in trust" to the Third Respondent to be released to the applicant only against payment. This was done by the First Respondent the next day.
14. On 20 October 2004, the Third Respondent instructed the First Respondent to pay 90 per cent of the amount as per the terms of the credit. Payment was made by the First Respondent the next day.
15. On 1 January 2005, the Third Respondent instructed the First Respondent to pay the outstanding 10 per cent upon receipt of the Initiator's signed receipts.
16. On 17 January 2005, the First Respondent received the Initiator's signed receipts and made the payment the next day through the presenting bank.
17. On 15 December 2004, the Initiator presented the documents under the third presentation to the First Respondent through the same presenting bank.
18. On 21 December 2004, the First Respondent gave notice of refusal of the documents to the presenting bank and indicated that the documents were held at the disposal of the Initiator.
19. On 29 December 2004, the presenting bank transmitted to the First Respondent the Initiator's request that the documents held by the First Respondent be sent to the Third Respondent to be released to the applicant only against payment. This was done by the First Respondent the same day.
20. On 11 January 2005, the Third Respondent instructed the First Respondent to pay 90 per cent of the amount as per the terms of the credit. Payment was made by the First Respondent the next day.
21. On 16 March 2005, the Third Respondent instructed the First Respondent to pay the outstanding 10 per cent upon receipt of the Initiator's signed receipts less penalties.
22. On 22 March 2005, the First Respondent received the Initiator's signed receipts and made the payment the same day through the presenting bank less penalties.
Issue(s)
The Request submitted by the Initiator consists of 20 claims (including sub-claims). The Answer submitted by the First Respondent addresses each of those claims. For sake of clarity, the First Respondent's answers are set out below each of the Initiator's claims. The Second Respondent has filed a statement rejecting both the DOCDEX jurisdiction and the claims set out in the Request. The Third Respondent has not participated in the proceedings.
Claim A1:
The "Bank S text", figuring among the required documents under the credit, was not appended to, or included in, the text of the credit when advised by the First Respondent. The Initiator contends that UCP 500 article 15 prohibits requiring the presentation of this document. Accordingly, the Request asserts that the rejection of the presented documents because, among other discrepancies, the "Bank S text" was not notarized is wrongful. As a result, the Initiator claims £50,000 by way of damages under UCP 500 article 15.
First Respondent's answer:
The advice of the credit stated (at field 46A(6)) that the "Bank S text" was "to follow by fax". A copy of a fax providing the "Bank S text" sent by the First Respondent to the presenting bank was produced with the Answer. Neither the Initiator nor the presenting bank informed the First Respondent that they did not receive the fax announced in the advice of credit text. Further, the Initiator presented in its first presentation a copy of the "Bank S text", albeit not notarized. The Answer contends that UCP 500 article 15 is irrelevant for the purpose of this claim.
Claim A2.1:
The Initiator contends that the First Respondent did not approach the applicant as requested by the Initiator to ask for a waiver of the discrepancies and failed to transmit the documents to the Third Respondent as the Initiator contends having repeatedly urged. The Request submits that this is in breach of UCP 500 sub-article 14(c). Further, when the First Respondent agreed to transmit the documents to the Third Respondent, it used the words "in trust" which, the Initiator submits, is not permitted under UCP. The Initiator accordingly holds the First Respondent liable for failure to comply with its instructions and for the consequences of the applicant collecting the cargo before the Initiator was paid. As a result, the Initiator claims £50,000 by way of damages
The First Respondent acknowledges the receipt of the Initiator's request to transmit the documents to the Third Respondent, lists and comments on (at some length we would say) the various exchanges that followed with the Initiator and concludes that it has acted diligently and in conformity with UCP 500 sub-article 14(c) and cannot be held liable for any damages contended by the Initiator.
Claim A2.2:
The Initiator contends that the First Respondent has breached UCP 500 sub-article 14(c) by failing to comply with instructions received from the Third Respondent to release the documents tendered by the Initiator. The Initiator refers again to the allegedly inappropriate use of the words "in trust" and claims £50,000 by way of damages for this "illegal action".
The First Respondent denies the claim and rejects having received from the Third Respondent instructions to the effect alleged in the claim.
Claim A2.3:
The Initiator contends that the First Respondent has breached UCP 500 sub-article 14(c) in failing to comply with instructions received from the Third Respondent to release the documents tendered by the Initiator. The Initiator refers again to the allegedly inappropriate use of the words "in trust", holds the First Respondent liable for the consequences of the applicant collecting the cargo before the Initiator was paid the amount of the credit and claims £50,000 by way of damages for this "illegal action".
The First Respondent denies the claim and repeats its arguments developed under the preceding claims.
Claim A3 (including sub-claims A3.1, A3.2 and A3.3):
The Initiator contends that neither it nor the presenting bank has agreed to the First Respondent transmitting the presented documents to the Third Respondent "in trust". For each of the identical sub-claims, the Initiator claims for each sub-claim £15,000 (£45,000 in all for claim A3) by way of damages.
The First Respondent denies the claim, produces a copy of a SWIFT message sent by the presenting bank informing the First Respondent of the Initiator's agreement on the transmittal of the documents to the Third Respondent "to be released only against payment" and repeats its arguments developed under the preceding claims.
Claim B1:
The Initiator contends that the First Respondent transmitted the documents presented under the second presentation to the Third Respondent on 2 October, which led to the applicant collecting the cargo on 4 October notwithstanding the fact that neither the Initiator, the presenting bank or the "first negotiating bank" had any relation with the Third Respondent nor had instructed the First Respondent to do so. The Initiator claims £100,000 under this claim by way of damages.
The First Respondent denies the claim, contests the dates provided in the claim and denies any liability for the consequences of the applicant's collecting the cargo.
Claim B2:
The Initiator contends that the First Respondent has breached UCP 500 sub-article 14(c) in transmitting the documents "in trust" to the Third Respondent. As a result, it claims £100,000 by way of damages.
The First Respondent denies the claim and repeats its arguments outlined in its answer to the preceding claims.
Claim B3 (including sub-claims B3.1, B3.2, B3.3 and B3.4):
The Initiator contends that the First Respondent has "lied" as to the whereabouts of the documents and made misrepresentations in a number of communications made after 4 October 2004 (the date at which the Initiator alleged that the applicant collected the consignment). The Initiator claims a total of £60,000 by way of damages under this head of claim.
The First Respondent denies the claim, denies any involvement in the collection of the cargo by the applicant and repeats its arguments outlined in its answer to the preceding claims.
Claim B4:
The Initiator refers to UCP 500 sub-article 14(c) and to "passed DOCDEX decisions and leading court cases of letter of credits [sic]" as to the meaning of "in trust", contends that the First Respondent's action is "illegal" and claims £100,000 by way of damages.
Claim B5:
The Initiator claims late payment interest amounting to £550 because the First Respondent did not pay 90 per cent of the value of the second consignment upon the applicant's issuing on 28 September a letter to the First Respondent instructing it to make such payment.
The First Respondent denies the claim and contends that it was holding the documents presented under the second presentation at the disposal of the Initiator.
Claim B6:
The Initiator contends that the messages issued by the First Respondent after 4 October were meant to avoid the consequences of the delayed payment. The Initiator asserts again its earlier arguments on the basis of the alleged misuse by the First Respondent of the terms "in trust". As a result, the Initiator claims £50,000 by way of damages.
The First Respondent denies the claim and contends that it has acted in accordance with the instructions transmitted to it by the presenting bank.
Claim C1:
The Initiator contends that the First Respondent acted contrary to the Initiator's instructions dated 7 December 2004 asking that the documents should not be sent "in trust". As a result, the Initiator claims £200,000 by way of damages.
The First Respondent denies the claim and contends that it has acted pursuant to the presenting bank's instructions received on 29 December 2004 directing the First Respondent to transmit the documents to the Third Respondent.
Claim C2:
The Initiator contends that the First Respondent has breached UCP 500 sub-article 14(c) in failing to comply with instructions received on 18 December 2004 from the Third Respondent. As a result, the Initiator claims £200,000 by way of damages.
The First Respondent denies the claim and rejects the interpretation submitted by the Initiator as concerns the Third Respondent's SWIFT message dated 18 December 2004.
Claim C3:
The Initiator contends that the First Respondent has breached UCP 500 sub-article 14(c) in cumulating a number of roles in the credit: nominated bank, advising bank and a "justice role" pursuant to which it has allegedly rejected the Third Respondent's instructions to waive discrepancies. As a result, the Initiator claims £50,000 by way of damages.
The First Respondent denies the claim and rejects any conflict in the above roles.
Claim C4:
The Initiator claims the payment of £590 as compensation for late payment interest that it had to pay for the period spanning the instructions issued by the Third Respondent directing the payment of the credit and the effective payment.
The First Respondent denies the claim and repeats its answer under claim C2.
Claim C5:
The Initiator contends that the First Respondent's use of the words "in trust" as well as its fax dated 1 December 2004 to the Initiator are "lies". As a result, the Initiator claims £75,000 by way of damages.
The First Respondent denies the claim and reiterates its answer under claim B3.
Claim C6 (including sub-claims C6.1 and C6.2):
The Initiator holds the First Respondent liable for the penalty deductions made under the Credit and claims USD 373.33 by way of compensation.
The First Respondent denies the claim.
Documents submitted by the parties
A. Documents submitted by the Initiator
(i) List of claims together with summary of arguments against First, Second and Third Respondent.
(ii) Copies of advising of letter of credit and amendment letters and respective correspondence.
(iii) Documentation for every consignment (three) together with flow-chart for every consignment.
B. Documents submitted by the Respondent
(i) Answer for First Respondent and statement filed on behalf of Second Respondent.
(ii) Copies of communication between the parties, including L/C, advising and amendment messages, letters/faxes received and sent as concerns all steps of the transaction and the dispute.
(iii) Copies of internal communication, including instructions to other departments of the First Respondent (e.g., for payment instructions)
Analysis
The Panel of Experts appointed in the matter of DOCDEX case 257 wishes to indicate at the outset that a number of claims set out in the Request, and the First Respondent's answers thereto deal with issues that are outside the scope of the ICC Rules for Documentary Instruments Dispute Resolution Expertise (the "DOCDEX Rules") as outlined in Article 1 of the Rules. As such, the Panel of Experts is not empowered to deal with them and indicates so in its decision below as concerns each of those claims. This position is dictated by the limits of jurisdiction conferred upon the Panel of Experts by the DOCDEX Rules and should not be construed as prejudicing in any way the decision that judicial, arbitral or other fora might take with regard to those claims should the Initiator decide to pursue them in the future before such fora.
The Panel of Experts also wishes to note with regret the use in the Request of unnecessarily confrontational terms. The Panel wishes to stress that these terms have had no influence on its decision.
In analyzing the claims and stating its decision thereon, the Panel of Experts shall use the reference numbering outlined in Issue(s) above.
The First Respondent has produced with its Answer a copy of the fax sent to the Initiator through the presenting bank to which a copy of the "Bank S text" was appended. There is no submission that the copy is forged. It should therefore be taken as a true copy. Further, the Initiator has presented under the credit the required "Bank S text", albeit not notarized, which proves that it was in possession of the template. It is difficult to see how this fact squares with the Initiator's claim which, accordingly, is bound to fail. Assuming, however, for the sake of argument, that the First Respondent had not sent the "Bank S text", the Panel of Experts considers that, in such a case, the Initiator would still be required to present all the documents required in the credit, including the "Bank S text" specifically and conspicuously referred to in field 46A(6) of the credit. Because the credit indicated next to the "Bank S text" requirement that the text is "to follow by fax", the Initiator would be expected to enquire as to why no text was faxed to it following the advice of the credit. Were the First Respondent not to send the fax announced in the credit, the Initiator could legitimately envisage to present any document under UCP 500 article 21, provided such document would indicate on its face "declaration to B/L (Bank S text)" whether or not notarized. The fact of the matter, however, is that the Initiator did not follow this course and has instead submitted the "Bank S text" in line with the template faxed by the First Respondent, without notarizing it as required on the face of the "Bank S text". The First Respondent is therefore right in rejecting the document as discrepant.
UCP 500 article 15 cannot be invoked to render superfluous a document specifically required in the credit. It is therefore irrelevant for the purpose of this claim.
The DOCDEX Panel of Experts is not empowered to comment on the quantum of damages claimed by the Initiator, as this task falls outside the DOCDEX rules.
The First Respondent was instructed to act, and has at all times in the matter of the credit acted, as advising bank. UCP 500 sub-article 14(c) applies only to issuing banks. It has no bearing on the rights and obligations of other banks including advising and nominated banks. Claim A2.1 is accordingly unfounded.
There seems to be some disagreement between the Initiator and the First Respondent as to the receipt by the First Respondent of some messages requesting the First Respondent to transmit the presented documents to the Third Respondent. The Panel of Experts considers that whether or not the messages in dispute were actually received by the First Respondent is of no bearing on the issue at stake. Once the nominated bank has timely issued its notice of refusal of the presented documents in conformity with UCP 500 sub-article 14(d) - and there is no suggestion that it did not do so in the case in hand -, it is under no further obligation under the UCP.
As to the use of the terms "in trust" by the First Respondent in querying whether it should send the documents to the Third Respondent as requested by the Initiator and later confirming this transmittal, the Panel of Experts considers that it is neither permitted nor prohibited under the UCP; it is simply outside the UCP. As such, it triggers no liability, in itself, under the UCP that would warrant the application of a UCP sanction. The Panel of Experts accepts that the terms "in trust" could have been substituted by the more customary wording of "for approval notwithstanding the discrepancies", "for payment" or the like. But, again, the First Respondent clearly indicated in the transmittal letter to the Third Respondent that "the documents may only be handed (...) on condition that" payment be made. The Panel considers that these are the terms that really matter and considers that the First Respondent acted in line with the instructions that it has received and therefore incurs no liability in this respect.
Further, the Panel of Experts considers that the First Respondent's fax of 23 July 2004 asking the Initiator for clarification, its requirement that further instructions be communicated through the presenting bank and its subsequent messages in this respect are in line with the expected comportment of a prudent and diligent bank acting in the First Respondent's position under the credit. No reproach can therefore be made against it under the UCP.
Finally, the consequences of the applicant collecting the cargo before the beneficiary is paid the amount of the documentary credit is an issue that lies outside the UCP and, therefore, outside the jurisdiction of a DOCDEX panel.
The Initiator submitted no evidence as to the First Respondent's receipt of the alleged instructions from the Third Respondent. The only evidence submitted in this respect is an uncorroborated statement sent by the applicant indicating that it has requested the Third Respondent to waive the discrepancies. Regardless, however, of whether such instructions were in effect received by the First Respondent, the Panel of Experts considers that the fact that the applicant or the issuing bank may decide to waive the discrepancies does not, in itself, compel in any way the First Respondent to similarly waive the discrepancies.
For the reasons indicated in our decision under Claim A2.1 above, UCP 500 sub-article 14(c) is irrelevant for the purpose of this claim. Similarly, for the reasons indicated in our decision under Claim A2.1 above, the use by the First Respondent of the words "in trust" has no bearing on the obligations of the First Respondent and its alleged liability under the UCP. Likewise, for the reasons indicated in our decision on the preceding claims, the Panel of Experts cannot comment on the quantum of damages.
For the reasons indicated in our decision under the claims above, UCP 500 sub-article 14(c) is irrelevant for the purpose of this claim. The use by the First Respondent of the words "in trust" has no bearing on the First Respondent's obligations and alleged liability under the UCP, and the consequences of the applicant collecting the cargo before the beneficiary is paid the amount of the documentary credit is an issue that lies outside the UCP and, therefore, outside the jurisdiction of a DOCDEX panel. Likewise, for the reasons indicated above, the Panel of Experts is not empowered to comment on the quantum of damages claimed under this claim.
The Panel of Experts considers that the First Respondent has dutifully acted upon proper transmittal instructions sent to it by the presenting bank. The copy of the SWIFT message dated 30 July 2004 advising the First Respondent of the Initiator's agreement for the documents to be transmitted should be held as a true copy and conclusive evidence absent an allegation of forgery. If it turns out in fact that in issuing the SWIFT message referred to above, the corresponding bank had exceeded its own instructions as sent by the Initiator, it is up to the Initiator to pursue different remedies available to it under applicable law.
The Panel of Experts therefore considers Claim A3 unfounded in the totality of its three sub-headings. For the reasons indicated above, the Panel of Experts is not empowered to comment on the quantum of damages claimed under this claim.
At the outset, the Panel of Experts notes with surprise the reference in the claim to a "first negotiating bank" in the matter of a credit where negotiation was restricted to the First Respondent. It is unclear whether the so-called "first negotiating bank" has actually "negotiated" the credit. The Panel considers that whether or not it has done so, the acts, rights and obligations of this so-called "first negotiating bank" are outside the credit and have no bearing on the issues in dispute.
Similarly, the Initiator's claim that it does "not know who is Bank S", whether or not founded, is irrelevant for the purpose of determining whether the First Respondent is liable under this claim. The First Respondent has produced evidence, deemed by the Panel of Experts to be satisfactory evidence, as to the instructions received from the presenting bank requesting it to transmit the documents to the Third Respondent. It swiftly and dutifully complied with those instructions. The dates shown on the face of the copies of documents submitted by the First Respondent corroborate its contentions and rebut those, uncorroborated beyond self-serving letters, submitted by the Initiator. The consequences of the applicant collecting the cargo before the beneficiary was paid the amount of the documentary credit is an issue that lies outside the UCP and, therefore, outside the jurisdiction of a DOCDEX panel.
For the reasons indicated above, the Panel of Experts cannot comment on the quantum of damages claimed under this claim.
The Panel of Experts rejects this claim for the reasons indicated in our decision under the preceding claims.
The Panel of Experts considers that the issue of the accuracy of representations made by the First Respondent to the Initiator in various correspondence concerning the transmittal of the documents upon the request of the Initiator to the Third Respondent lies totally outside the UCP. As such, it is a matter for the Initiator to pursue before an appropriate judicial, arbitral or another forum other than a DOCDEX panel which is not empowered to rule thereon.
For the reasons indicated above, the Panel of Experts is not empowered to comment on the quantum of damages claimed under this claim.
The Initiator provides no different basis for its claim under this heading which would warrant any different treatment of its identical claim asserted under A2.1 above. Accordingly, the Panel of Experts reiterates its decision expressed under A2.1 above and rejects this claim. For the reasons indicated above, the Panel of Experts is not empowered to comment on the quantum of damages claimed under this claim.
The credit conditioned the payment of the remaining 10 per cent of the amount on the presentation of the applicant's certification stating its receipt and acceptance of the goods (at field 47A(5)). The Panel of Experts considers that the applicant's statement referred to in the claim (a copy of which is provided only in the Answer, at page 159) does not meet the formal requirements of field 47A(5) of the credit. Instead of mirroring the language required in the credit, the statement indicates the applicant's approval for the release of the documents notwithstanding the discrepancies. As we have indicated above, the First Respondent is still at liberty to decide whether or not to waive the discrepancies. Absent the presentation of a statement in strict conformity with the terms of the credit, the First Respondent is not obliged to pay the 10 per cent withheld amount.
The calculation for any compensation for late payment interest is outside the DOCDEX Rules. The Panel of Experts is therefore not empowered to decide thereon.
Asserting a party's intent behind the terms used in the correspondence is outside the scope of the DOCDEX Rules. The Panel of Experts is therefore not empowered to decide thereon. However, by examining the exchange of correspondence between the First Respondent and the presenting bank, the Panel of Experts finds that the First Respondent has acted diligently in the way expected of a prudent and diligent bank in requesting clear instructions and thereafter swiftly acting thereupon.
Contrary to what is contended in this claim, the Panel of Experts does not read the Initiator's letter dated 7 December 2004 as instructing the First Respondent not to send the documents presented under the third presentation to the Third Respondent. But even if that letter were to have that effect, the Panel considers that it is overridden by the specific instructions sent by the presenting bank to the First Respondent on 29 December 2004, directing it to transmit the documents presented under the third presentation to the Third Respondent.
The Panel therefore rejects this claim in its entirety.
The Panel of Experts considers that, in its true construction, the SWIFT message dated 18 December 2004 addressed by the Third Respondent to the First Respondent cannot be interpreted as a waiver of discrepancies. Even if that message were to be recognized such an effect, the Panel considers that the First Respondent would still have total liberty to choose not to make payment under the credit because of the discrepancies timely notified.
As indicated in the decision under Claim A2.1, UCP 500 sub-article 14(c) is inapplicable to the assessment of the rights and obligations of the nominated bank.
The Panel of Experts makes as concerns this claim the same decision it has made as concerns claim C2 above.
For the reasons therein stated, the Panel rejects this claim in its entirety. The calculation for any compensation for late payment interest is outside the DOCDEX Rules. The Panel of Experts is therefore not empowered to decide thereon.
Assessing a party's intent behind the terms used in the correspondence is an issue that lies outside the scope of the DOCDEX Rules. The Panel of Experts therefore rejects this claim in its entirety.
The Panel of Experts considers that the First Respondent cannot be held liable for the consequences of the use by the applicant of a discretionary power granted to it under the terms of the credit, all of which were accepted by the Initiator. The Panel of Experts therefore rejects this claim in its entirety. The calculation for any compensation for late payment interest is outside the DOCDEX Rules. The Panel of Experts is therefore not empowered to decide thereon.
Conclusion
The Panel of Experts, deciding under the ICC Rules for Documentary Instruments Dispute Resolution Expertise, rejects all the claims listed by the Initiator in its Request.