Parties

Initiator: Bank S

Respondent: Bank A

Background

Respondent's (issuing bank's) credit, issued via SWIFT MT 700, was restricted to its own counters. Field 47A (Additional Conditions) of MT 700 stated: "Payment will be effected against documents with no discrepancies and the arrival advising report from shipping company which expiry date is as same as that of this L/C." The Initiator (presenter) negotiated and presented documents, including a document entitled "arrival advising report", signed by the shipping company, to the Respondent. The Respondent dishonoured 12 calendar days after receipt, stating the presented "arrival advising report" document was not the document required by the credit, as it could only be issued after arrival of the vessel. The Respondent further stated that the Initiator had no standing, as the credit was restricted to the Respondent's counters. The Respondent alleged fraud in the documents.

Summary of representations

Initiator

1. Documents comply;

2. Letter of credit requirement for "the arrival advising report from shipping company which expiry date is as same as that of this L/C" does not state the document can only be created after the arrival of the vessel in the port of discharge;

3. If #2 is to be read in that manner, it is ambiguous and ambiguity must be construed against the Respondent (issuer); therefore, the presented document complies;

4. Respondent (issuer) is precluded from dishonour by UCP 600 sub-articles 14(b), 16(b), 16(c), 16(d) and 16(f);

5. Initiator may present the beneficiary's documents to the Respondent, and the issue of negotiation is between the Initiator and the beneficiary;

6. Allegations of fraud are outside of the scope of the UCP.

Respondent

1. Documents are discrepant, as the credit clearly requires the arrival advising report to be issued after arrival of the vessel in the port of discharge;

2. The credit language is not ambiguous;

3. The arrival advising report presented by the beneficiary was not the document required by the credit;

4. Notice of dishonour was given timely following the failure of the arrival advising report to be presented by the expiry date; therefore, preclusion does not apply;

5. The Initiator has no status, as the credit was restricted to the Respondent's counters;

6. The documents are fraudulent.

Documents submitted by Initiator

1. statement of Initiator plus eight attachments, enumerated below;

2. SWIFT MT 700 message dated 3 August 2007;

3. copy of Company K bill of lading dated "Laden On Board the Vessel 1 August 2007";

4. copy of document entitled "ARRIVAL ADVISING REPORT" dated 3 August 2007, bearing signature and stamp above a line stating Company K;

5. copy of SWIFT MT 420 dated 21 August 2007 from Initiator to Respondent, requesting status of bills;

6. copy of SWIFT MT 999 dated 22 August 2007 from Respondent to Initiator stating: "PLS BE INFORMED THAT WE ARE WAITING FOR THE ADVISING REPORT FROM THE SHIPPING COMPANY AT DISCHARGING PORT. WE WILL RETURN DOCS TO YOU AND CLOSE OUR FILE ON L/C EXPIRY DATE (AUG.25.2007)";

7. copy of SWIFT MT 420 dated 27 August 2007 from Initiator to Respondent requesting status of bills;

8. copy of SWIFT MT 999 dated 27 August 2007 from Respondent to Initiator stating: "REFER TO OUR MT999 DD:AUG.22.2007 PLS BE INFORMED THAT WE HAVE NOT RECEIVED THE ADVISING REPORT FROM THE SHIPPING COMPANY AT DISCHARGING PORT WHICH MUST BE PRESENTED ON L/C EXPIRY DATE (AUG.25.2007). WE RETURN A/M DOCS. TO YOU THROUGH XXXX EXPRESS (NO. XXXXXXXX) ON AUG.27.2007. PLS CHECK AND RECEIVE IT. WE HAVE CLOSED OUR FILE";

9. Attachment consisting of multiple documents totaling 11 pages:

(1) copy of SWIFT MT 799 dated 29 August 2007 from Initiator to Respondent;

(2) copy of SWIFT MT 999 dated 30 August 2007 from Initiator to Respondent;

(3) copy of SWIFT MT 799 dated 30 August 2007 from Respondent to Initiator;

(4) copy of SWIFT MT 799 dated 31 August 2007 from Initiator to Respondent;

(5) copy of SWIFT MT 799 dated 03 September 2007 from Respondent to Initiator;

(6) copy of SWIFT MT 799 dated 04 September 2007 from Initiator to Respondent;

(7) copy of SWIFT MT 799 dated 05 September 2007 from Respondent to Initiator;

(8) copy of SWIFT MT 799 dated 06 September 2007 from Initiator to Respondent;

(9) copy of SWIFT MT 799 dated 10 September 2007 from Respondent to Initiator;

(10) copy of SWIFT MT 799 dated 11 September 2007 from Initiator to respondent;

(11) copy of SWIFT MT 799 dated 14 September 2007 from Initiator to Respondent.

Documents submitted by Respondent

1. copy of L/C in SWIFT MT 700 format;

2. copy of SWIFT MT 799 dated 27 August 2007 refusing and returning documents;

3. copy of SWIFT MT 799 dated 29 August 2007;

4.copy of SWIFT MT 799 dated 30 August 2007;

5. copy of "ARRIVAL ADVISING REPORT" dated 3 August 2007 signed by Company K;

6. copy of exchange of emails dated 27 June 2008 between ICC Commercial Crime Bureau and Respondent stating in part: " ... there were several similar suspect bills of lading were presented to us in year 2007. All shipments were unable to confirm. The owner of the vessel was also unable to confirm the vessel movement to us." (The DOCDEX panel takes note that this exchange occurred approximately ten months after the presentation and Respondent's rejection of documents.)

7. copy of extract of Register Of Ships dated 11.07.2007;

8. Attachment consisting of multiple documents totaling 16 pages, consisting of letters of credit issued by the Respondent and cover letters presenting documents from other banks to the Respondent - none of these documents appear to belong to the transaction in question from the Initiator:

(1) copy of L/C in SWIFT MT 700 format;

(2) copy of another bank's cover letter presenting documents to Respondent. (NOTE: this is not from the Initiator of this action);

(3) copy of L/C in SWIFT MT 700 format dated 17 April 2007;

(4) copy of another bank's cover letter presenting documents to Respondent. (NOTE: this is not from the Initiator of this action);

(5) copy of L/C in SWIFT MT 700 format dated 04 July 2007;

(6) Copy of another bank's cover letter presenting documents to Respondent. (NOTE: this is not from the Initiator of this action);

(7) copy of L/C in SWIFT MT 700 format dated 26 April 2007;

(8) copy of another bank's cover letter presenting documents to Respondent. (NOTE: this is not from the initiator of this action);

(9) copy of L/C in SWIFT MT 700 format undated;

(10) copy of another bank's cover letter presenting documents to Respondent. (NOTE: this is not from the Initiator of this action).

Issues to be determined

1. Whether the documents comply with the terms and conditions of the credit;

2. If the documents comply, whether the issuing bank is precluded from dishonour due to failure to give notice in accordance with UCP 600;

3. Whether the Initiator, having alleged to have negotiated the documents, is entitled to reimbursement on a straight credit restricted to the issuing bank;

4. Whether the allegation of fraud is sufficient to permit issuing bank to dishonour.

Decisions on the issues

1. The Respondent alleges that the arrival notice must be issued at the port of destination and reflect the actual arrival date of the vessel. This is not clear from the requirement stated in the credit: "PAYMENT WILL BE EFFECTED AGAINST DOCS WITH NO DISCREPANCIES AND THE ARRIVAL ADVISING REPORT FROM SHIPPING COMPANY WHICH EXPIRY DATE IS AS SAME AS THAT OF THIS L/C." The beneficiary presented a document entitled "ARRIVAL ADVISING REPORT" signed by the same company signing the bill of lading.

It is international standard banking practice, consistent with several ICC Opinions expressed in TA 629, R 340, R 554, and, as further explicitly explained in paragraph 2 of International Standard Banking Practices for the Examination of Documents under UCP 500 and unchanged in International Standard Banking Practices for the Examination of Documents under UCP 600 (ISBP, ICC Publications No. 645 and 681 respectively), that ambiguity in the credit must be held against the issuer of the credit. While the Experts have noted that each ICC Opinion is specific to the facts of a particular case, three Opinions dealing consistently with lack of specificity and clarity reflect a clear principle of correct application of the UCP and international standard banking practice. ISBP paragraph 2 states: "The applicant bears the risk of any ambiguity in its instructions to issue or amend a credit."

The responsibility must beplaced on the applicant and the Respondent (issuing bank) to issue the credit properly. They cannot be allowed to shift this responsibility to other parties. Thus, the problem the Respondent faces, the provisions being of its making, is that the provisions ought to be construed against the Respondent. If there is any ambiguous or unclear term in a letter of credit, a beneficiary is entitled to follow international standard banking practice and to take a reasonable construction thereof.

If the Respondent intended that the arrival notice be a document that was issued after the vessel arrived at the port of destination, it should have stated this in the credit. It did not do so.

2. UCP 600 sub-article 14(b) states: "A nominated bank acting on its nomination, a confirming bank, if any, and the issuing bank shall each have a maximum of five banking days following the day of presentation to determine if a presentation is complying. This period is not curtailed or otherwise affected by the occurrence on or after the date of presentation of any expiry date or last day for presentation."

UCP 600 sub-article 16(c) states: "When a nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank decides to refuse to honour or negotiate, it must give a single notice to that effect to the presenter."

UCP 600 sub-article 16(d) states: "The notice required in sub-article 16(c) must be given by telecommunication or, if that is not possible, by other expeditious means no later than the close of the fifth banking day following the day of presentation."

UCP 600 sub-article 16(f) states: "If an issuing bank or a confirming bank fails to act in accordance with the provisions of this article, it shall be precluded from claiming that the documents do not constitute a complying presentation."

The issuing bank is precluded from dishonour due to failure to give notice in accordance with UCP 600.

3. Respondent's allegation that the Initiator cannot be a negotiating bank as indicated in UCP 600 because the credit did not permit it to take such a role is correct. However, that does not preclude the Initiator acting as a bank presenting the beneficiary's documents to the issuing bank, and does not change the Respondent's responsibilities under UCP 600 as stated in number 2 immediately above. The decision of the Initiator to provide financing to the beneficiary is an agreement between those two parties and does not impact the obligation of the Respondent to honour the documents. The issuing bank is precluded from dishonour due to failure to give notice in accordance with UCP 600. The Respondent (issuing bank) should honour and effect payment in accordance with the instructions of the party presenting the documents.

4. The Respondent's allegations of fraud in the presentation are directly addressed by UCP 600, article 34: "A bank assumes no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any document, or for the general or particular conditions stipulated in a document or superimposed thereon; ...". Fraud is a matter for the court and is outside of the jurisdiction of DOCDEX.

Conclusion

The presented documents were not discrepant and the Respondent was not entitled to reject them. Even if the documents had been discrepant, the Respondent failed to give proper notice under UCP 600 article 16 and is therefore precluded from claiming the documents are not in order.

The tendered documents comply. The Respondent should honour the tendered documents.

The conclusion of the DOCDEX Panel is unanimous.