Parties

Initiator: Bank D

Respondent: Bank T

Background and transaction

The principal presented six sets of documents through the Initiator, the remitting bank, for collection under URC 522 at the collecting bank (the Respondent) totalling USD 511,331.16. The collection instructions stated that documents were to be released by the collecting bank against payment. The presented documents each included a full set of bills of lading made out to order (except for one set showing the buyer as consignee).

The collections - despite several tracers - were never paid nor were the documents returned by the collecting bank to the remitting bank. According to information from the shipping company, the buyer has taken delivery of (some) goods.

Issues

Whether the collecting bank (Respondent) was liable to pay the amount of the presented documents when it neither paid nor provided an advice of non-payment for the documents. It appears that the Respondent accepted the terms and conditions of the collections, as stipulated on the collection schedules. The collections were expressly subject to URC 522.

Initiators' claim

The Initiator claims that the Respondent has failed to follow the collection instructions either:

a) by not remitting payment to the remitting bank and/or;

b) by releasing the collection documents to drawee without payment and/or;

c) by failing to return the collection documents to the remitting bank.

Respondent's reply

The Respondent argued that payment related to the goods covered by the collection was paid direct to the principal by advance payment according to earlier accepted usage between the contract parties - the Principal and the Drawee.

Documents submitted by the parties

Documents submitted by the Initiator

- Request from the Initiator of 12 November 2008 to ICC International Centre for Expertise, Paris, requesting a DOCDEX Decision in accordance with ICC DOCDEX Rules, ICC Publication no. 811, stating inter alia

1. that a copy of the request and all documentation was sent to the Respondent; and

2. the Initiators' Summary of the Dispute;

- Copies of six sets of documents (including bills of lading) forwarded for collection, including the relevant collection instructions;

- Statements of outstanding

- Copies of SWIFT messages (tracers) from the remitting bank (Initiator) to the collecting bank (Respondent).

Documents submitted by the Respondent

1. The Respondent's answer to the Initiator's request for a DOCDEX Decision;

2. Affidavit issued by the drawee;

3. Copies of wire transfers; and

4. Statement of advance payments made by the drawee

Analysis

The principal has entrusted their bank (Initiator) with the handling of various documentary collections.

The Initiator forwarded the documents, accompanied by its collection instructions, to the Respondent. The collection instructions clearly indicated that the collections were made subject to URC 522, and stated that "documents are to be delivered to the drawee against payment".

Sub-article 1 (c) of URC 522 states: "If a bank elects, for any reason, not to handle a collection or any related instructions received by it, it must advise the party from whom it received the collection or the instructions by telecommunication or, if that is not possible, by other expeditious means, without delay."

There is no evidence in this case that the Respondent has sent such a message and/or returned the documents. Under sub-article 1 (a), therefore, the Respondent is bound by URC 522 as a whole.

The Respondent's reference to any earlier practice between the buyer and seller, with regard to handling their trade relationship and payments, contradicts sub-article 4 (a) (i) "All documents sent for collection must be accompanied by a collection instruction indicating that the collection is subject to URC 522 and giving complete and precise instructions. Banks are only permitted to act upon the instructions given in such collection instruction, and in accordance with these Rules."[Emphasis added]

It is not evident from the documents whether the Respondent has released the bills of lading or in any other way has assisted the buyer to have access to the goods. The experts wish to underline that the non-return of documents presented makes the Respondent liable for the respective payments.

There is no evidence that the collecting bank was in any way authorized by the remitting bank to release the documents to the drawee without payment being effected under the collections. It is understood that the collecting bank argues that the Drawee had already made the relevant payment for the goods/documents by advance payments via money transfers, allegedly a well-established practice between the drawee and the principal. However, even if these payments were done, they were effected outside the scope of these collection transactions and do not have any impact on the liabilities/responsibilities of the collecting bank in relation to the respective collections. Unless the express authority was asked for and obtained by the collecting bank from the remitting bank, the former had no right to release the documents to the drawee without payment under the collections.

The URC is not solely a tool benefiting the principal; it is also an important instrument to protect the other parties (i.e. banks), especially when a financing has been made.

Conclusion

By accepting the collections received, the Respondent (collecting bank) has agreed to perform the collection in accordance with URC 522 and the conditions stated in the collection instructions.

By not returning the documents, or by releasing the documents without payment, the Respondent acted contrary to URC 522, contrary to the collection instructions and contrary to international banking practice. The Respondent is therefore liable for payment (plus appropriate interests and costs).

The appointed Experts reached a unanimous Decision.