Parties

Initiator: Bank B, Country S branch

Respondent: Company A, Country S

Background and transaction

On 10 December 2008, Bank B, Country S branch (Initiator) issued a sight letter of credit in favour of Company M, Country T for USD 80,565.00.

The applicant was Company A, Country S (Respondent) and the nominated bank was Bank F. The letter of credit was available for negotiation with the nominated bank and was issued subject to Uniform Customs and Practice for Documentary Credits, ICC Publication No. 600 ("UCP 600").

The letter of credit required presentation of "Original full set of clean on board bill of lading issued by carrier or agent. (Forwarder BL not acceptable)".

On 12 January 2009, the Initiator received documents value USD 79,952.53 from the nominated bank which indicated on its covering schedule: "We certify that the credit terms have been complied with." A SWIFT message sent by the nominated bank to the Initiator on 12 January 2009 also confirmed that it had negotiated a complying presentation.

The Respondent received copies of the documents by fax on 12 January 2009, and on 13 January 2009 informed the Initiator by email that it considered the documents to be discrepant due to the bill of lading being issued by a forwarder. The Initiator responded on 15 January 2009 that the documents were considered as compliant with the letter of credit.

On 15 January 2009, the Respondent informed the Initiator that the carrier, Company D, used another company, Company C, as its agent, and suggested that the Initiator should check with the office of Company D in Country S whether Mr C, who had signed the bill of lading as agent on behalf of the carrier, had been appointed as one of its agents. The Initiator maintained that the documents were in compliance with the terms of the letter of credit, and on 16 January 2009 the Respondent instructed the Initiator to accept the documents and to debit its account.

Issues

a) Whether the bill of lading was compliant with the requirements of the letter of credit; and

b) Whether the Initiator was obliged to investigate the Respondent's claims pertaining to the signature of the bill of lading by Mr C

Initiator's claim

i) The Initiator maintains that the bill of lading was compliant on its face with the requirements of the letter of credit.

(ii) The Initiator was not required to investigate the applicant's claims pertaining to Mr C's signature of the bill of lading.

Respondent's reply

The Respondent did not submit a reply in this matter.

Documents submitted by the Parties

Documents submitted by the Initiator

(i) A copy of the letter of credit;

(ii) A copy of the bill of lading;

(iii) A copy of the SWIFT MT 799 dated 12 January 2009 from the nominated bank to the Initiator certifying documents were in compliance; and

(iv) E-mail exchange between the Initiator and the Respondent regarding the bill of lading.

No answer and no other documents have been submitted by the Respondent.

Analysis

a) Whether the bill of lading was compliant with the requirements of the letter of credit

The letter of credit required presentation of "ORIGINAL FULL SET OF CLEAN ON BOARD BILL OF LADING ISSUED BY CARRIER OR AGENT (FORWARDER BL NOT ACCEPTABLE) ... ".

Field 47A (Additional Conditions) stipulates:

Port of Loading: Any Country T Port

Port of Discharge: Port M, Country M

Accordingly, the bill of lading is to be examined against UCP 600 article 20, as the requirement is for presentation of a bill of lading covering transport by sea from one port to another.

(Reference should also be made to the ICC Banking Commission document titled "Recommendation of the Banking Commission in respect of the requirements for an On Board Notation" (Document 470/1128rev Final - 22 April 2010), which highlights the UCP 600 articles applicable for examination of bills of lading.)

UCP 600 sub-article 20(a) (i) states:

"a. A bill of lading, however named, must appear to:

i. indicate the name of the carrier and be signed by:

• the carrier or a named agent for or on behalf of the carrier, or

• the master or a named agent for or on behalf of the master.

Any signature by the carrier, master or agent must be identified as that of the carrier, master or agent.

Any signature by an agent must indicate whether the agent has signed for or on behalf of the carrier or for or on behalf of the master."

The bill of lading presented under the letter of credit was issued by Mr C, who signed "AS AGENT ON BEHALF OF THE CARRIER".

The bill of lading indicated the name of the carrier as Company D.

The bill of lading is, therefore, in compliance with the requirements of the letter of credit and UCP 600.

It is hereby noted that the nominated bank also considered the bill of lading to be compliant with the requirements of the letter of credit.

b) Whether the Initiator was obliged to investigate the Respondent's claims pertaining to the signature of the bill of lading by Mr C

The letter of credit included the clause "FORWARDER BL NOT ACCEPTABLE".

Under UCP 600 sub-article 14 (a) Standard for Examination of Documents, banks "must examine a presentation to determine, on the basis of the documents alone, whether or not the documents appear on their face to constitute a complying presentation" (emphasis added).

UCP 600 article 2 defines a Complying Presentation as "a presentation that is in accordance with the terms and conditions of the credit, the applicable provisions of these rules and international standard banking practice".

UCP 600 article 15 (a) states:

"When an issuing bank determines that a presentation is complying, it must honour".

Accordingly, there was no obligation for the Initiator to investigate Mr C's status as signatory on the bill of lading.

In respect of both issues a) and b), reference is also made to ICC Official Opinion TA727rev ("Opinion") that was approved by the ICC Banking Commission in March 2011 concerning the meaning of the above clause in terms of UCP 600. Although issued after the events of this case, the position of the ICC that has been expressed in the Opinion would have equal effect in 2009. In the analysis of this Opinion, it was decided that in the context of UCP 600 and letters of credit, the term "freight forwarder bills of lading" has no meaning - whether in respect of them being allowed or not allowed. The clause does not specifically exclude sub-article 14 (l).

A document examiner is not expected to determine the status of the signing company.

Conclusion

a. With respect to the first question, the bill of lading was compliant with the requirements of the letter of credit.

b. With respect to the second question, the Initiator was not obliged to investigate the Respondent's claims pertaining to the signing of the bill of lading by Mr C.

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