DOCDEX Decisions

Parties

Initiator: Bank F

Respondent: Bank A

Together: ( the "parties")

Background and transaction

1. On 7 June 2007, the Respondent issued irrevocable documentary credit No 12345 (the "credit") in the sum of EUR 155,000 on behalf of Company G, Country I (the "applicant") in favour of Company P in Country N (the "beneficiary"). The credit was available with and confirmed by the Initiator. It was stated to expire on 31 October 2008 in Country N and was available with the Initiator by a combination of sight and deferred payment. The latest shipment date was 31 October 2007, which was subsequently extended to 5 December 2007. The goods were to be shipped from Country N/Country F to Country I. Partial shipments were allowed.

2. The credit was available as follows:

i. EUR 23,250 payable at sight against an invoice (representing an advance payment).

ii. EUR 93,000 payable at 30 days from the date of the required CMR;

iii. EUR 23,250 payable against presentation of "Positive Commissioning Certificate" signed by Company G and end user (Company P), but not later than 30 September 2008;

iv. EUR 15,500 at 12 months after CMR date.

3. The credit required presentation of the following documents:

i. Signed commercial invoice in triplicate;

ii. Packing list in duplicate;

iii. International Consignment Note CMR evidencing freight payable at destination, despatch to the Applicant.

4. Detailed transaction steps

i. 21 June 2007 - an invoice for EUR 23,250 was presented to the Initiator and was paid by the Respondent on 26th June 2007;

ii. 19 October 2007 -the Initiator received a commercial invoice for EUR 48,000, a packing list and an international consignment note CMR. Payment was effected by the Respondent on 12 November 2007;

iii. 30 November 2007 - the Initiator received a commercial invoice for EUR 45,000, a packing list and an international consignment note CMR, which were refused by the Respondent on the grounds of non-conformity. An official opinion was sought in this connection from the ICC Commission on Banking Technique and Practice, in respect of the non-conformity of the presented CMR, which non-conformity was supported.

iv. 30 May 2008 - the Initiator received three invoices amounting to EUR 23,250, EUR 7,500 and EUR 8,000 respectively. The documents were sent to the Respondent on 3 June 2008, and on 9 June 2008 the Initiator received a notice of refusal claiming non-conformity of the documents on the basis of the following discrepancies:
- Late presentation;
- Invoice evidencing "payment out of this documentary credit".

Issues

The Initiator seeks a DOCDEX decision to decide:

1. Whether the drafted "Analysis and conclusion" of Opinion TA.657 is effective in the light of the full knowledge of all the details of the dispute;

2. The validity of the refusal by the Respondent to honour drawings in the sum of EUR 23,250, EUR 8,000 and EUR 7500 on the grounds of the following discrepancies:
- late presentation;
- invoice evidencing "payment out of this documentary credit".

Initiator's claim

In its request dated 15 October 2008, the Initiator asserted the following:

1. In its notice of refusal the Respondent did not claim that the "Positive Commissioning Certificate" had not been presented and, as a result of the said omission, it is deemed to have agreed that the document was not required in case payment was claimed after the date of 30 September 2008.

2. The requirement contained in Field 48 of the SWIFT MT700 regarding presentation of documents within 15 days after the date of the CMR can only be linked to the documents listed in Field 46A and can only relate to the deferred payment of EUR 93,000. Accordingly, the first discrepancy is not valid.

3. In the invoices amounting to EUR 23,250, EUR 7,500 and EUR 8,000, the beneficiary included the words: "Out of this documentary credit", which were interpreted by the Respondent as indicating that the amount was claimed outside the credit. The Initiator asserts that this is not the case and should be interpreted as indicating that the amount was claimed under the credit and that, accordingly, the discrepancy is not valid.

Respondent's reply

In its response dated 11 November 2008, the Respondent claimed the following:

1. The advance payment of EUR 23,250 was paid by the Respondent on 26 June 2007 against presentation of an invoice after receipt of the authorization of the applicant, which was required because the invoice contained the words: "Out of this documentary credit".

2. The amount of EUR 48,000 was paid by the Respondent 30 days from the date of the CMR after receipt of the authorization of the applicant, as the invoice contained the words: "Out of this documentary credit", and the CMR did not bear the seal of Company P under Field 22.

3. The Respondent refused to pay the balance of EUR 45,000 because the relative invoice contained the words: "Out of this documentary credit" and the CMR stated under Field 16, a carrier (Company S) different from that shown under Field 23 (Company C) "that didn't result to be Company S's agent" and bore amendments that had not been countersigned and did not show the weight indication. These discrepancies were not waived by the applicant.

4. The Respondent refused to pay the sum of EUR 23,250 payable against "Positive Commissioning Certificate signed by Company G and end user (Company P) but not later than 30 September 2008" because the relative invoice contained the words: "Out of this documentary credit". This discrepancy was not waived by the applicant.

5. The Respondent refused to pay the sum of EUR 15,500 payable 12 months from the CMR date because the relative invoice contained the words: "Out of this documentary credit". This discrepancy was not waived by the applicant.

6. Furthermore the Respondent asserted the following:

• The words "out of this documentary credit" meant that the invoices were not applicable to the credit. There could therefore be no logical argument which might suggest that they could have the opposite meaning, namely "under the letter of credit and out of the total amount of the letter of credit".

• Sub-article 14 (a) of UCP 600 states that the examination of documents must be carried out "on the basis of the documents alone", and sub-article 16 (a) states that when a bank "determines that a presentation does not comply, it may refuse to honour or negotiate". [Experts note: It is presumed that as this is a credit subject to UCP 500, that the Respondent is referring to UCP 500 sub-article 14 (b)].

• Sub-article 16 (b) states that the issuing bank "may in its sole judgement approach the applicant for a waiver of the discrepancies". That was what happened in respect of the payments for EUR 23,250 and EUR 48,000 but not for the subsequent ones. [Experts note: It is again presumed that the Respondent is referring to UCP 500 sub-article 14 (c)].

• With regard to the discrepancies affecting the CMR, in its SWIFT message dated 1 April 2008 the Initiator "agreed to the discrepancies", but at the same time informed the Respondent that it had applied to the ICC in Country N for an official opinion.

No specific comment was made by the Respondent in response to the Initiator's assertion relating to the discrepancy described as "late presentation".

On the strength of the above, the Respondent is of the opinion "that the discrepancies have been validly opposed to the Initiator" and formally requests a DOCDEX Decision in accordance with the ICC Documentary Credit Dispute Expertise Rules, article 3.2.3.

Documents submitted by the parties

Documents submitted by the Initiator (all of which are copies).

(i) Appendix 1 - SWIFT Copy of the documentary credit No, 12345 received by Initiator;

(ii) Appendix 2 - SWIFT Copy of the amendment No 1 received by Initiator;

(iii) Appendix 3 - Copy of the ICC draft dated 5 May 2008 Document 470/TA.657. Conclusion and analysis to the query of ICC Country N edited by Department of Policy and Business Practices;

(iv) Appendix 4 - Invoice No 6789 JM issued by Company P on 21-05-2008 total amount of EUR 155,000 indicating "Payment: As per irrevocable documentary credit number12345 dated 070607 for EUR 155,000. Out of this documentary credit Number 12345: EUR23,250 against positive commissioning certificate signed by Company G and end-user (Company P) but not later than 30SEPT2008, so payable on 30SEPT2008";

(v) Appendix 5 - Invoice No 6789 JM issued by Company P on 21-05-2008 total amount of EUR155,000 indicating "Payment: As per irrevocable documentary credit number 12345 dated 070607 for EUR155,000. Out of this documentary credit number 12345: EUR7,500 out of EUR 15,500 at 12 months after CMR date being 28.11.2007 for the Weigh bridges so on 28.11.2008 payable";

(vi) Appendix 6 - Invoice No. 6789 JM issued by Company P on 21-05-2008 total amount of EUR155,000 indicating "Payment: As per irrevocable documentary credit number 012345 dated 070607 for EUR155,000. / Out of this documentary credit number 12345: EUR8,000 out of EUR15,500 at 12 months after CMR date being 12.10.2007, for the ABS hopper scales so on 12.10.2008 payable";

(vii) Appendix 7 -.SWIFT copy of advice of refusal issued by Respondent on 11/06/08 acknowledging receipt of Initiator's document remittance dated 03-06-2008 for EUR23,250/EUR8,000/EUR 7,500 Indicating "DOCS REFUSED OWING THE FOLLOWING DISCREPANCY: LATE PESENTATION / INV. EVIDENCING PAYMENT OUT OF THIS DOC. CREDIT".

Documents submitted by the Respondent (all of which are copies).

(i) ANNEX 1 - Copy of SWIFT issue of documentary credit

(ii) ANNEX 2 - Invoice No. 6789. JM issued by Company P on 15-06-2007 total amount of EUR155000 indicating "Payment: As per irrevocable documentary credit number 12345 dated 070607 for EUR155,000. Out of this documentary credit Number 12345: EUR23,250 as advance payment at sight against invoice";

(iii) ANNEX 3 - Invoice No. 4567. JM issued by COMPANY P on 16-10-2007 total amount of EUR155,000 indicating "Payment: As per irrevocable documentary credit number 12345 dated 070607 for EUR155,000. Out of this documentary credit Number12345: EUR48,000 at 30 days from CMR date for the ABS hopper scales";

(iv) ANNEX 4 - CMR showing field 16 Carrier S as carrier/field 23 Company E as carrier signature/field 4 Country N, 12-10-2007 as place and date of shipment;

(v) ANNEX 5 - Invoice No. 3456 JM issued by Company P on 22-11-2007 total amount of EUR155,000 indicating "Payment: as per irrevocable documentary credit no. 12345 dated 070607 for EUR155,000. Out of this documentary credit Number 12345: EUR45,000 at 30 days from CMR date for the Weigh bridges;

(vi) ANNEX 6 - CMR showing field 16 Company S as carrier/field 23 Company C as carrier signature/field 4 Country F, 28-11-2007 as place and date of shipment. The date "28" is modified without approbation;

(vii) ANNEX 7 - Idem Initiator Appendix 4 - Invoice No. 6789 JM;

(viii) ANNEX 8 - Idem Initiator Appendix 6 - Invoice No. 6789 JM;

(ix) ANNEX 9 - Idem Initiator Appendix 5 - Invoice No. 6789 JM;

(x) ANNEX 10 - SWIFT message regarding rebuttal of discrepancies issued by Initiator on 16/07/2008 and received by Respondent.

Analysis

Whether the drafted "Analysis and Conclusion" of Opinion TA.657 is effective in the light of the full knowledge of all the details of the dispute.

The DOCDEX Panel would like to point out at the outset that draft Opinion TA 657 attached to the Initiator's claim as attachment 3 has been revised during the Banking Commission meeting in Paris on 24 October 2008 and has been adopted and issued on 3 November 2008 as Official Opinion TA 657rev in ICC Document 470/1110 rev final. As a result of that revision, the 2nd discrepancy was considered as not valid. Conversely, no change was made to the conclusion under the 1st discrepancy which was confirmed as leading to the valid refusal of the CMR.

An official Opinion of the ICC Banking Commission addresses the facts and the questions specifically raised in the query. A DOCDEX Panel is not empowered to decide whether an opinion adopted by the Banking Commission is right or wrong. A DOCDEX Panel will decide the case on the basis of the submissions made by the parties and the accompanying documents. In this case, the DOCDEX Panel does not believe that the parties' submissions change the facts based on which official Opinion TA 657rev was adopted.

The validity of the refusal by the Respondent to honour drawings for EUR 23,250, EUR 8,000 and EUR 7,500 on the grounds of the following discrepancies:

• Late presentation

• Invoice evidencing payment out of this documentary credit

The DOCDEX Panel considers that, while the credit could have benefited from a clearer drafting, the Respondent was wrong in refusing two of the three drawings (EUR 23,250 and EUR 8,000), but right in refusing the third drawing of EUR 7,500.

The credit was a mixed payment credit. Mixed credits typically require that the credit amount be payable in fractions on different maturities. In the case in hand, the Panel would have expected the invoices presented with the CMR and covering the two maturities under the credit (30 days and 12 months from the date of CMR) to have been issued for an amount of EUR 108,500 (aggregate of EUR 93,000 and EUR 15,500) - or part thereof in the event of partial shipment. If that were the case, the Respondent, upon taking up the documents, would have undertaken to make payment on the stated maturities. However, this is not what happened, undoubtedly because of the poor drafting of the credit, including, in particular, field 45A. The beneficiary has elected to make six presentations:

• A presentation for the advance payment, which has been paid and is not the subject of the dispute submitted to DOCDEX;

• A presentation for EUR 48,000 (a first part of the amount of EUR 93,000), which has been paid and is not the subject of the dispute submitted to DOCDEX;

• A presentation for EUR 45,000 (the remainder of the amount of EUR 93,000), which has been refused on the ground of a discrepancy in the CMR. This is not the subject of the dispute submitted to DOCDEX either;

• A presentation for EUR 23,250, which has been refused on the ground of late presentation;

• A presentation for EUR 8,000, which has been refused on the ground of late presentation; and

• A presentation for EUR 7,500, which has been refused on the ground of late presentation.

The last three refused presentations are the subject of the dispute submitted to DOCDEX.

The Respondent has treated each of those six presentations as a separate and distinct presentation. The DOCDEX Panel is of the view that the Respondent should have considered the presentation made for EUR 48,000 as also including the later one made for EUR 8,000 (in effect one single presentation for EUR 56,000), and the presentation for EUR 45,000 as also including the later one made for EUR 7,500 (in effect one single presentation for EUR 52,500). Failure by the Respondent to refuse the presentation made in the sum of EUR 48,000 on the grounds that the invoice was drawn only for EUR 48,000, placed the beneficiary in a situation requiring him to draw an additional invoice for EUR 8,000 and present it later and necessarily separately from the CMR previously presented in order to avail himself of the remaining balance. Accordingly, the Respondent, having accepted the relevant CMR and honouring the first drawing of EUR 48,000, is unable to refuse subsequently the invoice for EUR 8,000, which is linked to the said CMR, on the basis of a situation created by his failure to identify a valid discrepancy at the time of presentation of the CMR.

The same rationale applies for the drawing of EUR 23,250, payable against a positive commissioning certificate. The said drawing was incorrectly refused on the grounds of late presentation although the certificate, which was not presented anyway, is not a transport document.

The situation is different for the third drawing of EUR 7,500. Indeed, that drawing is linked to the presentation for EUR 45,000 that was refused on the ground of a discrepancy in the CMR. The DOCDEX Panel considers that no deferred payment undertaking for EUR 7,500 was therefore created, nor can such amount be claimed at maturity, where no conforming presentation was taken up by the Respondent at the outset. The Respondent's erroneous use of a notice of refusal for late presentation is otiose and cannot turn an non-existent right into an existent one for the Initiator.

As to the statement "out of this documentary credit", appearing in the invoices presented by the beneficiary, the DOCDEX Panel has considered it in the context of both the credit and the presentation made thereunder and decided that, in its true construction, it cannot be read either as a presentation of the invoices outside of the credit or as creating no obligation on the part of the Respondent. The DOCDEX Panel has therefore decided that the invoices are presented under the credit and, as such, cannot be refused solely on the ground of the statement "out of this documentary credit".

Conclusion