Parties

Initiator: Bank T

Respondents: (1) Bank I; (2) Bank H

Background and transaction

The issuing bank (Respondent 2) issued a transferable credit subject to UCP 500 stating that the credit was transferable by the second advising bank (Respondent 1). The second advising bank transferred the credit. The original credit was payable at the counters of the issuing bank. The Initiator presented the second beneficiary's documents at the counter of Respondent 1, which presented the first beneficiary's documents to the issuing bank, which refused the presentation due to discrepancies.

Issue(s)

Whether a transferring bank that has not confirmed the credit and whose location is not the place of payment is liable for its handling when it transfers a credit without amending the percentage of the insurance to provide for the amount of cover in relation to the value of the invoice of the first beneficiary

As a consequence, the issuing bank refused the presentation due to the insurance coverage being less than 110 per cent of the value of the invoice presented and substituted by the first beneficiary and for the absence of an inspection certificate

Whether a claimed acceptance of an amendment made after the presentation of documents can influence the acceptance or refusal of documents

Documents received by the issuing bank (Respondent 2) included those originally presented by the second beneficiary, plus those that were substituted by the first beneficiary.

Initiator's claim

The Initiator claims that the transferring bank (Respondent 1) is liable to pay the amount of the second beneficiary's complying documents plus interest, due to the negligent transfer of the L/C and the fact that documents presented by the second beneficiary were in compliance with the transferred L/C.

Respondent 1's reply

Being the second advising bank and transferring bank under a credit stating that it is payable at the counters of the issuing bank, and having so stated this fact to the second beneficiary, Respondent 1 claims not to have any obligation. It further states that goods were consigned to the issuing bank and that the second beneficiary accepted the amendment after goods were sent and documents presented.

Respondent 2's reply

Respondent 2 claims that UCP 500 (article 48) does not exclude a transfer from being made by a bank that is not a nominated bank. It also claims that it is authorized to refuse documents not complying with the terms of the credit.

Documents submitted by the parties

Documents submitted by the Initiator

1. Request from the Initiators of 24 January 2008 to the ICC International Centre for Expertise Paris, requesting a DOCDEX Decision in accordance with ICC DOCDEX Rules, ICC Publication No. 811, stating inter alia:

a) that a copy of the Request and all documentation was sent to the Respondents;

b) the Initiator's Summary of the Dispute;

2. copies of the credit and several documents relating to the credit and the dispute.

Documents submitted by Respondent 1

1. Answer to the Initiator's Request

2. copy of the credit and the relevant AWB

Documents submitted by Respondent 2

1. Answer to the Initiator's Request

2. copy of the credit and the relevant correspondence

Analysis

The credit clearly states that it is not to be confirmed by either the advising or second advising bank and that it is payable at the counters of the issuing bank. It further states that documents must be received by the issuing bank within 21 days of shipment. The bank nominated to transfer was the second advising bank (Respondent 1).

The second advising and transferring bank (Respondent 1) stated in its advice that the credit was payable with the issuing bank and that documents presented to it would be forwarded to the issuing bank and that payment would be effected only on receipt of good funds from the issuing bank.

If the conditions of the credit are imprecise, or if the transferring bank was unsure of its obligation under UCP, it should have refused to transfer the credit according to sub-article 48 (c).

It is evident that the transferring bank did not use the possibility stated in sub-article 48(h), second paragraph, to require a higher percentage for the insurance, which was necessary for the CIF delivery as stated in the L/C. It should be noted that this Incoterm is contrary to the documents stipulated, which clearly required an air transport document. Both the issuing bank and the advising and second advising bank were not careful enough in issuing and advising a credit with contradictory clauses, but in the absence of clarity in the requirement for insurance, any document evidencing insurance, given the reference to air freight, should be acceptable.

The documents received by the issuing bank did not represent the presentation of the second beneficiary, but that of the first beneficiary. Documents received by the issuing bank (Respondent 2) included those originally presented by the second beneficiary, plus those that were substituted by the first beneficiary. The issuing bank was not in a position to make a judgement on whether or not the presentation of the second beneficiary was complying or discrepant.

The only possible circumstances in which the issuing bank could have received a presentation from the second beneficiary would be if there was no substitution of documents. However, all parties agreed that substitution did occur.

The issuing bank's argument for refusal concerning a missing inspection certificate which was requested in the amendment is not valid. The second beneficiary had already dispatched the goods and presented documents before the amendment was received requesting the presentation of an inspection certificate. It was not even proved that the beneficiary subsequently accepted the amendment.

Conclusion

The fact that the issuing bank (Respondent 2) regards the presentation made by the first beneficiary as discrepant is due to the negligence on the part of the transferring bank (Respondent 1) in failing to make the necessary changes requiring a higher percentage for the insurance in order to maintain the insurance value at 110 per cent of the invoice value of the original credit (before transfer of the credit reduced the invoice value).

The issuing bank's argument is based on the presentation as received by it, i.e., including documents presented by the first and second beneficiaries, but this (DOCDEX) case was not brought to examine this. It is only to examine the issue of whether the presentation of the second beneficiary should be paid and whether the second beneficiary should be recompensed for delay in such payment

Therefore, the responsibility lies with the transferring bank to pay against this presentation, plus interest. When the transferring bank decided to transfer the L/C, it took on the responsibility to make the changes necessary (sub-article 48(h)). If it did not wish to take on the responsibility, it could have chosen not to transfer the L/C. Negligence on the part of the transferring bank is established and absolves the issuing bank from any reimbursement requirement, despite the fact that the L/C was unconfirmed on the part of the second advising and transferring bank.

The fact that the Initiator is not a party to the credit does not change our conclusion, as he is protected as the presenter, representing the second beneficiary. The presenting bank's right to be covered is - as also stated by the issuing bank - not related to the presenting bank's financing of the presentation made by the second beneficiary.

Respondent 1 has no reason to deny liability and must pay the claimed amounts.

The appointed Experts reached a unanimous Decision.