Parties

Initiator: Company T

Respondent: Bank N

Summary of representations relevant to the issues determined

The Initiator is the beneficiary of an irrevocable letter of credit. The Respondent is the confirming bank of the same letter of credit.

The Initiator represents that the Respondent has failed to fulfil its responsibilities as a confirming bank under articles 14 and 16 of UCP 600 and therefore is precluded from claiming that the documents do not constitute a complying presentation.

The Respondent contends that the conduct and specific written instructions of the Initiator discharged the Respondent from its duties as a confirming bank.

Preliminary remarks by the Panel

The DOCDEX appointed Experts thoroughly analyzed the extensive documentation provided by the Initiator and Respondent. The appointed Experts have carefully considered all of the information provided, focusing on the ICC DOCDEX Rules, the documents submitted, and the applicable ICC Rules (UCP 600), in order to reach a decision. Both the Initiator and Respondent furnished numerous references to court cases in various jurisdictions. In accordance with ICC DOCDEX Rules (ICC Publication No. 811), Article 7.2, "The Appointed Experts shall render their decision impartially and exclusively on the basis of the Request, Answer(s) and Supplement(s) thereto, and the documentary credit and the UCP and/or URR, or the collection and the URC, or the demand guarantee and the URDG."

Therefore, it is not for the appointed Experts to take into account references to such litigation. This DOCDEX Decision has been rendered in accordance with the ICC DOCDEX Rules.

Specific representations relevant to the issues determined

1. The Initiator presented "draft documents", through its forwarder, to the Respondent.

2. The Respondent advised the Initiator by facsimile and telephone of multiple discrepancies observed in the "draft documents".

3. The goods were shipped on 20 February 2009.

4. The Initiator, its forwarder and the Respondent discuss discrepancies by telephone conference call on February 26 or 27, including at least one discrepancy which could not be corrected: a required document, a beneficiary's certificate, must be presented stating (specific named) documents had been sent directly to applicant within five days after shipment by (named courier), and requiring a copy of the (named courier) receipt. The Respondent could not examine a "draft" of these two documents as they did not yet exist.

5. Subsequently, the Initiator sent a letter dated 27 February to the Respondent stating:

"Further to our telecom February 27 2009, please accept documents from XXX-XXX Inc. (freight forwarders) and forward them as presented. If additional information is require (sic), please do not hesitate to contact the undersigned."

6. Documents were received by the Respondent from the Initiator's forwarder on March 2 and were forwarded to the issuing bank "as presented" on the same date, without examination by the Respondent.

7. The issuing bank timely noted a discrepancy:

BEN'S CERT. SHOWING DATE BEFORE DATE OF (named courier) RECEIPT AND LATER AS L/C REQUIRED
and dishonoured the documents, subsequently returning them.

8. The shipment date was 20 February, the beneficiary's certificate was dated 26 February, the courier receipt evidenced sending of the documents on 27 February - i.e., the documents had not been sent within the required five days.

Initiator questions asked

The Initiator is seeking an opinion as to whether or not the Respondent is obligated under the terms of the letter of credit and the UCP 600 to negotiate and pay the Initiator. It asked two specific questions:

1. "Since the confirming bank has not sent a notice of refusal to the presenter within the time limit of five banking days provided at Art. 14 and 16 of UCP 600, is it entitled to refuse payment of the L/C to the beneficiary?

2. If the discrepancy later identified by the issuing bank had been raised by the confirming bank within the set time limit, would it have constituted a valid discrepancy under the UCP 600."

Determination of the Issues by the Panel

Issue: The Initiator is seeking an opinion as to whether or not the Respondent is obligated under the terms of the letter of credit and the UCP 600 to negotiate and pay the Initiator.

FINDING - Respondent is not obligated.

Reasons for Decision

It is a common practice for beneficiaries of letters of credit to instruct the nominated bank to send documents "as presented", "under approval basis", "without checking documents", etc. Following international standard banking practice, all of these statements mean documents should be sent to the issuing bank without being examined. This is normally instructed by the beneficiary when discrepancies are presented in the documents with no option to be corrected.

From the Initiator's submission it appears that the Initiator is perfectly aware that it was not able to comply with the conditions stated in the credit with regard to:
- document 4 under field 46A of the credit: fax to be sent to applicant and issuing bank
- document 5 under field 46A of the credit: beneficiary's certificate and (named courier) receipt attesting to have sent documents to the applicant.

Moreover, during the conference call referred to, all parties appreciated that there was no remedy possible, unless amendments to the original credit were received.

The Initiator provided evidence of the instructions given by it to the Respondent: to send the documents "as presented". Said instruction was given after consultation with the Respondent.

In concurrence with the data provided by the Initiator, we can only conclude that the Initiator was well aware about the intent of such an instruction. The Initiator sent its final decision to send documents "as presented" to the Respondent in writing.

The Respondent is not obligated to negotiate and pay the Initiator for a presentation of discrepant documents. A confirming bank is obligated to honour or negotiate only against a complying presentation. This is clear from the definitions found in UCP 600 as follows:

UCP 600 article 2:

"Complying presentation means a presentation that is in accordance with the terms and conditions of the credit, the applicable provisions of UCP 600 rules and international standard banking practice."

"Confirmation means a definite undertaking of the confirming bank, in addition to that of the issuing bank, to honour or negotiate a complying presentation."

Subsequently, the Initiator instructed the Respondent to send documents "as presented", allowing the issuing bank to determine whether the documents were complying.

1. Question 1. Since the confirming bank has not sent a notice of refusal to the presenter within the time limit of five banking days provided in articles 14 and 16 of UCP 600, is it entitled to refuse payment of the L/C to the beneficiary?

Issue: Whether the instructions of the Initiator, contained in their letter to the Respondent, are sufficient to discharge the Respondent from its duties as a confirming bank under UCP 600 articles 14 and 16 regarding examination of documents, and giving notice of discrepancies and preclusion as a remedy for failure to act in accordance with the provisions of article 16.

FINDING - The Respondent is not obligated to negotiate the credit and pay the Initiator and is entitled to refuse payment of the L/C to the Initiator.

Reasons for the Decision

The Initiator, following extensive communication by telephone and facsimile with the Respondent, with pre-presentation knowledge of the specific discrepancy for which the documents were dishonoured, gave written instructions to the Respondent: "please accept documents from XXX-XXX Inc. (named freight forwarder) and forward them as presented."

The Respondent is released from its responsibilities under sub-article 14 (a) of UCP 600 by the instructions given by the Initiator to forward the documents as presented. Such instruction is a common international standard banking practice. As a consequence, the Respondent, having followed the written instruction of the Initiator, was relieved from its responsibility to examine the documents and therefore cannot be in violation of article 16.

The Panel of Experts finds that the explicit instruction of the Initiator discharges the Respondent from its obligations to examine and notify discrepancies

2. Question 2. Is the beneficiary's certificate and accompanying courier receipt dated showing sending of the required documents seven days after the bill of lading date a discrepancy?

Issue: The letter of credit requirement was for a beneficiary's certificate and accompanying courier receipt, showing copies of documents had been sent to the applicant within five days after the bill of lading date. Is the courier receipt, showing sending of the documents seven days after the bill of lading date a discrepancy?

FINDING - Yes. The beneficiary's certificate and the accompanying courier receipt are discrepant.

Reasons for the Decision

In field 46A of the SWIFT advised letter of credit, document number 5 was stated as:

1/3 ORIGINAL B/L AND ONE SET OF NON-NEGOTIABLE ABOVE DOCUMENTS TO BE SENT DIRECTLY TO APLLICANT (SIC) WITHIN 05 DAYS BY (named courier) AFTER SHIPMENT (BEN'S CERTIFICATE PLUS (named courier's) RECEIPT ENCLOSED)

The shipment date was 20 February. The Initiator presented a beneficiary's certificate dated 26 February. The Initiator presented a (different named courier) receipt evidencing sending of the documents on 27 February.

The courier receipt showing sending of the documents on 27 February is beyond the five days permitted by the credit and is a discrepancy. Further, in accordance with sub-article 14 (d) of UCP 600 the data in the courier receipt was in conflict with the information in the beneficiary's certificate.

The documents are clearly discrepant.

The Decision of the appointed Experts is unanimous.