Parties

Initiator: Company T

Respondents: Bank C (the advising/presenting bank)
Bank N (the confirming bank

Background

This DOCDEX request is a follow-up action to DOCDEX Decision No. 271, which may be consulted for further background.

Issues

Initiator's claim

The advising/presenting bank is liable to the Initiator because it was aware, within the validity of the credit, that the goods had been delivered by way of a marine bank guarantee, and the advising/presenting bank has failed to protect the Initiator's interests.

The confirming bank is also liable to the Initiator because, during the validity of the credit, the confirming bank knew that the issuing bank had issued a marine bank guarantee on 23 January 2007, facilitating the applicant to take delivery of the goods without production of the original bills of lading, that led to nullification of the documentary process.

Respondents' replies

The advising/presenting bank provided a reply which reiterated its position that:

• a second advising bank is not a nominated bank authorized to determine compliance of documents and bears no payment obligation under the credit;

• it is not liable for the actions taken by the issuing bank and confirming bank; and

• it does not agree that the DOCDEX Decision is legally binding on it.

The confirming bank provided a reply which states that:

• the presented documents were discrepant as endorsed by DOCDEX Decision No. 271, so it bore no obligation to pay under the credit;

• the presented documents were returned to the beneficiary;

• banks deal with documents only and do not deal with services or performance to which the documents may relate; and

• it does not agree that the DOCDEX Decision is legally binding on it.

Decision

1. Is the advising/presenting bank liable to the Initiator under the credit?

The advising bank, which also performed the role of a presenting bank, did nothing wrong under UCP 500 and in fact performed its duty diligently. Note that the key responsibility of a presenting bank is to present the documents to the confirming bank and follow-up the payment accordingly. Any actions taken by the confirming bank and/or issuing bank, whether the presenting bank had notice or not, are totally outside its control and the advising/presenting bank is not responsible for such actions. Accordingly, the Panel of Experts holds the view that the Initiator's allegations against the advising/presenting bank are unsustainable.

2. Is the confirming bank liable to the Initiator under the credit?

Similarly, the confirming bank cannot be held responsible for any actions taken by the issuing bank irrespective of the fact that the confirming bank may or may not have notice of such actions. However, this view is based on the assumption that the confirming bank fully complied with UCP 500 by holding all the presented documents, including the original bills of lading, at all times after its receipt from the presenting bank, and did return the same to the presenting bank. Had the presented documents been released by the confirming bank to any party before they were returned to the presenting bank, the confirming bank would have been in breach of sub-article 14 (d) of UCP 500 and would have been precluded from rejecting the documents under sub-article 14 (e) of UCP 500.

Conclusion

1. DOCDEX Decision No. 271 is affirmed and the issuing bank is liable to pay under the credit;

2. The advising/presenting bank is not liable to the Initiator under the credit; and

3. The confirming bank is not liable to the Initiator unless it has breached sub-article 14 (d) of UCP 500. Whether the confirming bank has breached sub-article 14 (d) is a question of fact which goes beyond the DOCDEX jurisdiction.

This decision is a unanimous decision by the DOCDEX Panel of Experts.