Parties

Initiator: Company S

Respondent: Bank M

Background and transaction

On 14 July 2009, the Respondent issued a guarantee for PLN 110,000 in favour of Initiator valid until 6 October 2009. The guarantee was issued subject to URDG 458. Having not received payment from the applicant, the beneficiary (Initiator) made a claim under the guarantee using the option to do so through its bankers. The claim was made by SWIFT on 30 September 2009. The documents in respect of the claim were delivered by DHL to the Respondent on 1 October 2009. The claim was rejected on 2 October 2009.

Issues

Was the demand under the guarantee compliant?
Was the refusal of the claim in accordance with the requirements of URDG?

Initiator's claim

The Initiator contests that its claim under the guarantee was compliant. It claims that the Respondent had incorrectly rejected the claim on 2 October 2009 because the title of the beneficiary differed from the guarantee. Initiator's contention was that SAM = Societe Anonyme [Country M].

The Initiator contended that on 9 October 2009 the Respondent then claimed not to have received all the required documents before the expiry of the guarantee.

Respondent's reply

Respondent's contention is that it had not received a valid claim within the validity of the guarantee.

Documents submitted by the parties

Documents submitted by the Initiator:
(i) Copy of guarantee issued by the Respondent;
(ii) Copy of email correspondence purporting to refer to encashment of bank guarantee;
(iii) Copy of DHL tracking information;
(iv) Copy of banker's letter dated 27 October 2009 to XX Company enclosing copy documents;
(v) Copy of banker's attestation of beneficiary's signature on claim;
(vi) Copy of MT 199 dated 30 September 2009 to Respondent advising claim received;
(vii) File copy of MT799 dated 2 October 2009 from Respondent rejecting claim;*
(viii) File copy of MT799 dated 6 October 2009 regarding beneficiary's title;
(ix) File copy of MT799 dated 9 October 2009 advising file closed due to non-receipt of all documents under guarantee;
(x) File copy of MT799 to Respondent advising documents delivered by DHL;
(xi) File copy of MT799 dated 12 October 2009 sent by Respondent repeating that claim was not in compliance with the guarantee;
(xii) Copy of letter sent by Initiator to Chambre de Développement Economique de Country M.

Documents submitted by the Respondent:
(i) Copy of guarantee issued by the Respondent;
(ii) Copy of MT 199 sent by Initiator's bankers to Respondent on 30 September 2009 advising claim received;
(iii) Copy of beneficiary's claim under guarantee;
(iv) Copy of banker's attestation of beneficiary's signature on claim;
(v) Copy of unpaid invoice for EUR 34,585.88;
(vi) Copy of transmitted copy of MT799 dated 2 October 2009 from Respondent advising rejection of claim;*
(vii) Copy of MT799 dated 6 October 2009 sent by Initiator's bankers refuting rejection of claim;
(viii) Copy of transmitted copy of MT799 dated 8 October 2009 from Respondent repeating that all documents required under the guarantee had not been received;
(ix) Copy of MT799 to Respondent advising all documents delivered by DHL on 1 October 2009;
(x) Copy of transmitted copy of MT799 dated 9 October 2009 from Respondent reiterating that all necessary documentation not received.

Note: *These two documents differ in content.

Analysis

The terms of the guarantee required presentation of the following documents in the event of a claim:

• Payment demand
• Statement of the beneficiary

The guarantee allowed for presentation of the above documents as a single document or two separate documents.

The guarantee also allowed presentation of claims directly to the guarantor or via the beneficiary's bank by authenticated SWIFT, in which case the beneficiary's bank was to confirm that it was in possession of the original claim documents quoting the exact wording in its SWIFT message and confirming that documents had been sent to the guarantor.

The wording of the claim did not specify the requested amount and did not state that the main debtor had not fulfilled its obligations under the agreement and payment, and the respect in which the main debtor was in breach as required by the guarantee. In any event, the guarantee was issued subject to URDG 458, and article 20 would therefore have applied.

The Panel of Experts did not have an issue with the title of the beneficiary and considered this point, the addition of the legal form of the company, irrelevant.

Article 10 of URDG 458 deals with the time available to the guarantor for examination of a demand under a guarantee and sets out the duty of the guarantor when a demand is refused. The guarantor has to decide within a reasonable time whether to pay or refuse the demand. A reasonable time has been determined by the ICC Banking Commission in Opinion R 624 that this should not exceed three banking days. Opinion R 624 includes within its conclusion: "On the basis that a guarantee under URDG 458 would consist of a demand and possibly a statement as required by article 20, a reasonable time for the processing thereof would be within three banking days of receipt." The notice of refusal in this case was sent in line with the requirements of the URDG. The content of a notice of refusal is not defined in the URDG. In this case, the rejection notice stated that the presentation was incomplete and, although not specifying exactly in which way the presentation was incomplete, the notice met the requirements of the URDG.

Conclusion

The demand under the guarantee was not compliant with the requirements of the guarantee for the following reasons:

• A specific claim for payment was not contained in the beneficiary's demand nor did it specify the requested amount claimed;

• The statement that the invoice had not been paid was not sufficient to meet the requirements of the guarantee as to stating non-fulfilment of its obligation under the agreement and in which respect the breach applied.

The issue regarding the title of the beneficiary was considered irrelevant.

The notification of the refusal of the claim was in accordance with the requirements of URDG 458.

The Panel of Experts was unanimous in its decision in this case.

Additional comment

The decision of the Experts is based on taking into consideration the full transmitted text of the MT799 dated 2 October 2009 submitted by the Respondent. This message includes reference to the rejection of the claim due to incomplete receipt of the required documents.