Parties

Initiator: Company J

Respondent A: Bank C

(Bill Processing Unit in Country M of Advising Bank C in Country H)

Respondent B: Bank E

(Issuing bank in Country G)

Summary of representations

The Initiator presented documents under an irrevocable documentary letter of credit (L/C) issued by Bank E, that was advised through a first advising bank (Bank C) and a second advising bank in the country of the beneficiary. The second advising bank is not a party to this DOCDEX decision. The L/C was available by payment with any bank in Country C.

The L/C was issued on 24 July 2007 and made subject to UCP 600, which entered into force on 01 July 2007.

The second advising bank presented the documents of the beneficiary to Respondent A for payment. It certified on the covering schedule that all terms and conditions of the credit have been complied with.

Respondent A refused to honour the documents by sending a timely SWIFT MT 734, indicating the following (discrepancy): "AZO free cert Attachment not signed" and stated: "Documents are held at your risk and disposal."

Respondent A forwarded the documents to Respondent B (the issuing bank) which in turn also refused to take up the documents, based on the discrepancy indicated. A waiver from the applicant to the credit could not be obtained.

The Initiator claims that the Bill Processing Unit of the advising bank (Respondent A) was merely a "middle bank" with no obligation whatsoever in respect of the examination of the documents and the determination of a discrepancy.

An answer was only submitted by Respondent B, which declared it as a joint response of Respondent A and Respondent B.

The Respondent's claim that the Bill Processing Unit is simply the processing entity for the issuing bank, acting with that bank's full and delegated authority and that this is clear from the terms of the L/C.

Issues to be determined

1. Does the Bill Processing Unit of the advising bank (Respondent A) have an obligation or responsibility to examine the documents, to determine a discrepancy and subsequently seek a waiver from the applicant bank or the applicant?

2. Is Respondent A correct in refusing the documents due to the discrepancy that the attachment of the AZO certificate is not signed?

Analysis of the Issues

Issue 1

Does the Bill Processing Unit of the advising bank (Respondent A) have an obligation or responsibility to examine the documents, to determine a discrepancy and subsequently seek a waiver from the applicant bank or the applicant?

The credit was issued by means of a SWIFT MT710 message and contained in the application header the information "CFSL reissuance". The SWIFT standards do not specifically cater for transactions where there is a service provider. Therefore, the only method by which a service provider may take care of such transactions is to show the issuing bank as issuing bank in field 52D and simultaneously as the applicant bank in field 51D, although theoretically a bank can either be the applicant bank or the issuing bank only.

The credit also contained the following information: "Whether presented on a L/C payment or approval and payment, all drafts (if any) and documents listed herein must be forwarded to: [Address of the Bill Processing Unit of Respondent A] for payment in a single courier/mailing. Payment will be effected in the same currency of the drawing under this credit upon receipt of documents by [Bill Processing Unit of Respondent A] in compliance with the terms of the credit in accordance with your remittance instruction."

"In the event documents presented hereunder are determined to be discrepant, we may forward the documents and seek a waiver of discrepancies from the applicant or applicant bank. Should such waiver be obtained, we may release the documents and effect settlement, notwithstanding any prior communication to the presenter that we are holding documents at the presenter's disposal, unless we have been instructed otherwise by the presenter prior to our release of the documents. Such release shall not constitute a failure on our part to hold the documents at the presenter's risk and disposal, and if the waiver is not obtained, we will return the documents to the presenter as soon as reasonably practicable upon the presenter's instructions. We shall have no liability to the presenter in respect of such release."

The message furthermore contained the following information: "The issuing bank hereby undertakes that each presentation made in compliance with the terms and conditions of this credit will be duly honoured."

From the wording contained in the credit, it is clear for a beneficiary that the presentation of the documents must be made to the Bill Processing Unit of Respondent A. It was also clear that the documents would be checked for compliance by Respondent A, and that in case of a discrepancy it would seek a waiver from the applicant or applicant bank.

The Initiators claim that the Bill Processing Unit of Respondent A had no authority to determine discrepancies and to send a refusal notice is an incorrect claim based upon the structure and wording of the L/C.

The Experts would like to add that the existence of Service Providers acting as an advising ("re-issuing bank") and nominated bank has been recognized by ICC's Banking Commission in the approved ICC Opinion numbered TA. 631rev, wherein the conclusion stated: "such notice of refusal can be given by Bank B (note: the Bill Processing Unit of Respondent A) on behalf of Bank A (note: the issuing bank) or as a refusal of Bank B in their capacity as nominated bank."

The Experts would like to further point out that the wording in the credit to the effect that "we are holding documents at the presenter's disposal" is UCP 500 language and not that of UCP 600.

Issue 2

Is Respondent A correct in refusing the documents due to the discrepancy that the attachment of the AZO certificate is not signed?

The L/C contained, under additional conditions, a requirement as follows: "4. Any attachment(s) to required documents must be duly signed by issuer."

Examining the document, one notices that there is a signature on the first page of the document and that the document indicates "Test results: Please see attachment". The second page of the document is headed "ATTACHMENT" and lists the test results. This page bears no signature.

However, a closer look at the document shows additional information. The additional information consists of the fact that the first page of the document states "page 1 of 2" and the second page ("the attachment") states "page 2 of 2". Therefore, the conclusion is that the document presented is a document that consists of two pages and is a single document that does not have, despite reference to it, an attachment.

As the document is a single one consisting of two pages, paragraph 27 of ISBP 681 is applicable which states: "If a signature or endorsement is required to be on a document consisting of more than one page, the signature is normally placed on the first or last page of the document, but unless the credit or the document itself indicates where a signature or endorsement is to appear, the signature or endorsement may appear anywhere on the document."

The credit did not require that each page of a document consisting of more than one page must be signed. Therefore, the signature on the first page of the document is sufficient.

Based on the analysis above, the Experts came to the conclusion that Respondent A and Respondent B were incorrect in refusing to honour the presentation, as there is no discrepancy in respect of the method the AZO certificate has been signed.

Decision

Based on the analysis of the issues, the Experts came to the conclusion that the Bill Processing Unit of Respondent A had authority to deal with the documents as a nominated bank, but that the refusal of the documents was incorrect and that the payment is due by the Respondents against the documents, which were in compliance with the terms and conditions of the credit, UCP 600 and international standard banking practice.

The decision is unanimous.