Parties

Initiator: Bank I

Respondent Company J

Statement

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

Background

• Documentary credit subject to UCP latest version, issued on 25 April 2008 in favour of Respondent;
• Amount: USD 875000 +/- 5 pct.;
• Available with any bank by negotiation;.
• Draft: at 150 days sight;
• Place and date of expiry: country of the advising bank on 11 July 2008;
• Latest date of shipment 20 June 2008;
• Confirmation: "without".

Summary of the case

• On 18 August 2008, the expiry date of the credit was amended to 30 September 2008 and the latest date of shipment was amended to 15 September 2008.

• On 12 September 2008, a date stated by the Initiator to be within five banking days after the presentation of documents, the Initiator sent a refusal message (SWIFT MT734) to the negotiating bank where field 77J shows "AA. CHARTER B/L PRESENTED and field 77B shows "WE ARE HOLDING DOCS AT YOUR DISPOSAL".

• On 22 September 2008, the negotiating bank sent a SWIFT MT799 message to the Initiator stating that the documents were sent on 4 September and no payment had yet been received. The negotiating bank also requested the Initiator "to contact the applicant and to inform whether they will accept the discrepancy or not".

• On 1 October 2008, the Initiator returned the documents to the negotiating bank by DHL, under SWIFT MT799 advice, to the negotiating bank.

The Initiator reported that subsequently the Respondent objected that:

a) the MT734 was a mere notice of discrepancies and not an advice of refusal because the sentence "we refuse to honour" was not included in the message in accordance with UCP 600 sub-article 16 (c) (i);

b) the MT734 was simply stating "Charter party B/L presented" instead of stating specific discrepancies including what was inconsistent with the credit;

c) Initiator acted incorrectly not applying UCP sub-article 14 (g), which states that documents not requested are to be disregarded or returned to the presenter.

Moreover, the Initiator reports that the Respondent sued the Initiator in a court in Country C which ruled against the Initiator.

Questions asked by the Initiator

A. Based on the documents submitted, did the MT734 comply with UCP 600 sub-article 16 (c)?

B. In particular, are the requirements of UCP 600 sub-article 16 (c) (ii) met?

C. Does specific wording "We refuse to honour" or similar, need to be stated on an MT734 in order to satisfy UCP 600 sub-article 16 (c) (i)?

Analysis
Country C court ruling
As per article 1.1 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 Practice 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.) [ ... ] Its objective is to provide an independent, impartial and prompt expert decision (DOCDEX Decision) on how the dispute should be resolved on the basis of the terms and conditions of the documentary credit [ ... ] and the applicable ICC Rules [ ... ]"

Therefore, this Panel will not make any comment on the judgment, as it is beyond their scope. The Panel will restrict itself to responding to the specific questions raised under "Questions asked by the Initiator" above.

The submitted copy of the B/L shows a statement (under the heading at the top right hand corner) saying: "To be used with charter parties" and a second statement in a box at the bottom left side corner of the B/L stating "Freight payable as per CHARTER PARTY dated 22 August 2008". These statements indicate that the transportation of goods is made on a charter party vessel. The credit, on the other hand, calls for "Full set of clean on board ocean bills of lading made out to the order of Bank I marked 'freight prepaid' and "notify applicant" without any indication elsewhere in the credit that a charter party B/L is acceptable. This B/L is to be examined applying article 20 of UCP 600. As per UCP 600 sub-article 20 (a) (vi) ("contain no indication that it is subject to a charter party"), this document is not acceptable. This Panel holds that the discrepancy is valid. The expression used by the Initiator "Charter B/L" instead of "Charter Party B/L" in the MT734 does not affect the validity of the discrepancy (in any case, the documents submitted to the Panel do not indicate that the omission of the word "party" to be an issue at stake).

UCP 600 sub-article 16 (c) (ii) provides that the refusal notice "[must state] each discrepancy in respect of which the bank refuses to honour or negotiate". By saying that the transport document presented is not acceptable for the reason stated above, the Initiator states that the presentation is discrepant. This discrepancy justifies the refusal. This Panel holds that UCP 600 sub-article 16 (c) (ii) is met.

The MT734 is named "Advice of Refusal" and its scope says: "Advises the refusal of documents that are not in accordance with the terms and conditions of a documentary credit". Banks using such a message in a documentary credit process cannot, by definition, have any intention other than to refuse the documents presented. As the ensuing refusal to honour or negotiate is implicit, the use of the MT734 meets the requirements of UCP 600 sub-article 16 (c) (i). Banks are not required to expressly state their refusal to honour or negotiate when using the MT734. Moreover, this Panel wishes to underline that, according to UCP 600 sub-article 16 (c), the advice of refusal is to be sent to the "presenter" which, in the great majority of cases, is a bank that is expected to be perfectly aware of the meaning of the message. Instead, in order to comply with UCP 600 sub-article 16 (c) (i), an express statement of refusal to honour or negotiate is needed when a SWIFT message other than an MT734 is sent to a bank (i.e., an MT799) or, in those cases when a refusal message other than a SWIFT message is sent directly to the beneficiary, by a bank where the beneficiary acted as presenter.

Conclusion
On the grounds of the above analysis, this Panel concurs that the Initiator acted correctly and in line with the provisions of UCP 600 sub-article 16 (c).

Statement of the chair
This Decision is rendered unanimously.