Parties

Initiator: Bank A (negotiating bank)

Respondent: Bank E

Note: documents related to this decision have been submitted only by the Initiator. This Decision is rendered without the Respondent's participation.

Background

• Two documentary credits subject to UCP 600, issued on 31 July 2008 and 11 September 2008 by the same issuing bank under instruction of the Respondent in its capacity as applicant bank;

• Availability for both credits: by negotiation with any bank;

• Amount: USD 2,905,000 +/- 1 pct and USD 1,380,000 +/- 2 pct;

• Drafts for both credits: at 90 days after sight;

• Place and date of expiry: Shanghai, 20 September 2008 and Shanghai, 30 October 2008;

• Form: irrevocable;

• Confirmation: "without";.

• Partial delivery allowed for both (although no specific mention in the second credit);

• Documents required (among others):

First credit

"5. ORIGINAL WAREHOUSE WARRANT DATED NOT LATER THAN 10 AUG 2008"

Second credit

"5. ORIGINAL WAREHOUSE WARRANT ISSUE BY (Name and address) DATED NOT LATER THAN SEP. 30 2008"

Summary of the case

• On 7 August, 17 and 22 September, the Initiator negotiated three sets of documents and sent the documents to the issuing bank for reimbursement.

• On 12 August, 23 and 24 September, the issuing bank sent a message to the Initiator accepting each set of documents and confirming their reimbursement on the due date.

• After a period of time (no document submitted by the Initiator), the Respondent alleged that the warehouse warrants presented under the two credits had been previously presented to the Initiator for negotiation under other usance credits issued by other banks. Consequently, the Initiator should have notice of the re-presentation of the same warehouse warrants. Based on this allegation, the Respondent contended that the Initiator had negotiated the documents in bad faith and was therefore not entitled to be reimbursed by the issuing bank.

Queries posed by the Initiator

1. Does a negotiating bank assume any duty to keep track of all warehouse warrant numbers presented under different credits and at different times in order to ensure that no warehouse warrant has ever been presented to it under any other credit?

2. Would a negotiating bank's unawareness of the original warehouse warrants, which have been presented to it under different credits at different times, constitute bad faith or notice of fraud in the relevant credit negotiation?

3. Provided the presented documents constitute a complying presentation and have been duly accepted by the issuing bank, is the negotiating bank entitled to be reimbursed by the issuing bank pursuant to sub-article 7 (c) of UCP 600, even though the relevant warehouse warrants may have been previously presented under other credits that the negotiating bank was not aware of?

Analysis

General statement: as per article 1 of "ICC Rules for Documentary Instruments Dispute Resolution Expertise", the DOCDEX service is available in connection with any dispute related to --

"a documentary credit incorporating the ICC Uniform Customs and Practices for Documentary Credits (UCP) and the application of the UCP and/or the ICC Uniform Rules for Bank-to-Bank reimbursement under Documentary Credits (URR)".

Therefore this panel is not competent to determine the responsibility for issues other than those related to the above said sets of rules and International Standard Banking Practices for Documentary Credits (ISBP).

There is no provision in UCP, in these credits or international standard banking practice, which requires a negotiating bank to keep track of each and every document presented under a credit. UCP 600 article 34 states: "A bank assumes no liability or responsibility for the form, sufficiency, genuineness, falsification or legal effect of any document ... ". Moreover the Initiator states that it acted absent any notice of a possible fraud concerning these credits.

There is no provision in UCP dealing with good/bad faith or notice of fraud. Good or bad faith or whether an act is fraud is applicable is a matter of fact to be proved and decided upon by a court on a case-by-case basis, under the applicable law.

The evidence submitted by the Initiator in order to claim its right to be reimbursed is a set of three messages wherein the issuing bank accepted the three sets of documents presented to it. On the grounds of this evidence, UCP 600 sub-article 15 (a) applies. This rule states: "When an issuing bank determines that a presentation is complying it must honour." Consequently, the issuing bank - applying UCP 600 sub-article 7 (c) ("An issuing bank undertakes to reimburse a nominated bank that has honoured or negotiated a complying presentation and forwarded the documents to the issuing bank") - undertook expressly to reimburse the nominated bank at 90 days sight.

Conclusion

On the grounds of the analysis, this Panel decides that the issuing bank must reimburse the Initiator on the due dates.

Whether or not the Initiator was aware, at the time of negotiation, that the same warehouse warrants had been presented to it under other credits, and whether or not it is alleged to have acted in bad faith if it was aware, is outside the competence of this Panel. However, this Panel would re-iterate the comments made in the second paragraph under "Analysis" above.

Statement of the chair

This Decision is rendered unanimously.