Parties

Initiator: Bank A

Respondent: Bank I

Background

The Initiator is the advising, confirming and nominated bank in respect of a documentary credit issued by Bank I. The credit is available with Bank A by deferred payment 30 days after the B/L date. The credit was transmitted via SWIFT MT700 and is subject to UCP 600 (issued 12.11.2007 and includes the wording "UCP LATEST VERSION" in SWIFT field 40E).

Bank A has accepted documents presented by the beneficiary for USD 13,401,233.70 and claimed same from Bank I, but Bank I has only reimbursed Bank A for a total of USD 12,988,745.50, i.e., USD 412,488.20 less.

The presentation included two bills of lading dated 6 November 2007 and 13 November 2007 respectively.

The Respondent has replied to the request, providing its arguments. The Experts have not requested any supplemental documents.

Summary of representations

12.11.2007

Bank I issued a documentary credit for USD 14,000,000. The credit had the following goods description: "Covering: One cargo of fuel oil 180 (...) for reselling as bunker by the quantity of 25200-26000 MT (Company X - i.e. applicant's - Option) to be delivered CIF Port Said Port during the second half of November 2007.

Price: CIF Port Said Port: Per M/T equal to Platt's European market scan high CIF quotation for fuel oil 3.5 pct cargoes under the heading 'CIF med Genova-Lavera' on the B/L date.

One immediately previous quotation and one immediately following quotation to apply (3 quotations) plus the premium of USD 28.69 per M/T.

In case the bill of lading [date] falls on non-publication date, then the immediately preceding and immediately following quotation to apply (2 quotations)."

The credit further stipulated (additional condition K under SWIFT field 47A): "The value of the L/C may escalate deescalate [sic] in relation to above price clause without any further amendment on our part."

15.11.2007

Bank A sent the following message to Bank I: "We have notified this documentary credit adding our confirmation."

28.11.2007

Bank I sent the following message to Bank A (via SWIFT MT799): "At our principal's request we draw your kind attention that the value of the consignment effected under L/C is USD 12988745.50 and should be complied with all L/C terms and conditions".

30.11.2007

Bank A responded as follows: "In response to your SWIFT MT 799 sent to us on 28.11.07, please note that we have not received documents to this date and therefore disregard the amount stated in your said SWIFT, which we do not consider as being an amendment. The doc. credit amount is USD 14,000,000 and fluctuates according to the price clause as per additional condition K under TAG 47A. The credit being confirmed by our bank, it is quite obvious that at time of utilization we will examine the documents with great care."

11.12.2007

Bank A dispatched documents to Bank I via courier for a total amount of USD 13,401,233.70, and at the same time claimed the same amount value 13.12.2007 via SWIFT message MT754.

13.12.2007

Bank I sent the following message (SWIFT message MT799) to Bank A: "Re your MT 754 dated 11/12/2007 have instructed (XXX) to credit your A/C with (YYY) for USD 12988145.50 informed by [Company X - i.e. applicant] that B/L date is 13/11/2007 consequently amount calculated based on B/L date, i.e., 13.11.2007 and price clause on credit terms QUOTE CIF med Genova - on B/L date - UNQUOTE. Also due date based on date of shipment which is 13/11/2007".

14.12.2007 - 22.05.2008

Bank A and Bank I exchanged views on the matter, but were unable to reach a common understanding. Their respective main arguments were the following:

Bank I

• Shipment date must be deemed to be 13.11.2007 because of UCP 600 sub-article 31 (b), which reads: "If the presentation consists of more than one set of transport documents, the latest date of shipment as evidenced on any of the sets of transport documents will be regarded as the date of shipment." Consequently, 13.11.2007 should be the date used to determine the price in accordance with the price clause stated in the credit.

• The price clause in the credit (part of the description of the goods) mentioned "B/L date" in singular (rather than B/L dates) - indicating that one single date should be used to determine the price. There was no UCP 600 refusal according to article 16, because the documents were accepted and Bank A transferred a lesser amount.

Bank A

• The shipment was effected from different ports with different B/L dates, and the price (which was Platt's related) was calculated for each respective quantify according to the respective B/L date and the price clause of the credit.

• UCP 600 sub-article 31 (b) does not apply - as the purpose of this sub-article is to determine the shipment date when there is more than one set of transport documents when part of the same presentation.

• The fact that "B/L date" is in the singular is of no effect because of UCP 600 article 3, which states that "words in the singular include the plural and in the plural include the singular."

• Bank I has failed to refuse the documents in accordance with UCP 600 article 16 - i.e., stating the [alleged] discrepancy in the unit price calculation and amount of the commercial invoice.

• The SWIFT message sent 28.11.2007 cannot be considered as an amendment to the documentary credit.

Issue to be decided

Bank A claimed USD 13,401,233.70, but Bank I paid only USD 12,988,745.50. Was Bank I entitled to deduct the difference, i.e., USD 412,488.20 from the amount claimed?

Analysis

It is argued that, according to UCP 600 sub-article 31 (b), the latest shipment date as shown on the sets of bills of lading (i.e. 13.11.2007) must be used to determine the shipment date and, as a result, to calculate the unit price and amount of the drawing.

The purpose of this sub-article is to determine the "date of shipment", i.e., to be able to verify if goods are shipped timely as expressed in the credit or if the documents are presented within the period allowed for presentation. UCP 600 does not cover a scenario where the price of a certain commodity is based on "B/L date"; consequently, this must be determined by the wording of the credit.

The Panel therefore concludes, based on the wording in the credit, that the date to be used to calculate the price is the actual "B/L date" for each presented set of bills of lading.

B/L date expressed in singular

The rule quoted in article 3 refers to the articles of the UCP 600 and does not necessarily extend to the documentary credit or the documents presented.

The credit calls for shipment from "Any Port" to "Port Said Port/Egypt" and prohibits "partial shipments". By calling for shipment from "any port", the credit effectively opens the possibility that more than one B/L may be presented - showing different B/L dates. Consequently, it should have been recognized by Bank I that the presentation could include more than one set of bills of lading containing different B/L dates.

The wording "B/L date" can therefore not be interpreted in any absolute form, indicating that there must be only one.

No formal refusal according to UCP 600 article 16 was made.

It is clear from the correspondence that Bank I accepted the documents and therefore its obligation under the credit is to honour the drawing. The only disagreement is as to the amount of the drawing. If Bank I was of the opinion that the commercial invoice had been issued for an amount different from that allowed by the terms and conditions of the credit, it should have issued a refusal notice for this reason.

By failing to formally refuse the documents according to UCP 600 article 16, and by paying a part of the amount claimed, Bank I is precluded from claiming that the documents were not in compliance with the credit terms and conditions, and therefore is obligated to reimburse Bank A for the full amount that was drawn.

No amendment made

The permissible amount to be drawn, according to Bank I, was given in a free format text message (SWIFT MT799) and not as an amendment to the credit. Therefore, this message is not to be seen as amending the credit, and compliance of the documents should be determined according to the original text of the credit.

Analyzing the fluctuation clause

The use of fluctuation clauses in documentary credits can often cause problems. Banks are, according to UCP 600 sub-article 14 (a), expected to be able to " ... examine a presentation to determine, on the basis of the documents alone, whether or not the documents appear on their face to constitute a complying presentation". Banks are not expected to check external sources, e.g., Platt's in order to determine compliance.

In this credit the fluctuation clause states "The value of the L/C may escalate deescalate [sic] in relation to above price clause without any further amendment on our part." Such wording must be considered automatic and unlimited and, in any case, the amount to be drawn should not be determined by a statement from the applicant of the credit.

The formula for calculating the amount should, where such is part of the goods description, be determinable from the invoice presented.

The goods description in the invoice corresponds with the goods description mentioned in the credit.

Decision

The documents were credit compliant and the amount drawn was clearly within the amount permitted by the credit. For that reason Bank I is obligated under the credit to reimburse Bank A for the full amount claimed i.e. USD 13,401,233.70.

This is a unanimous decision.