Parties

Initiator: Company B

Respondent: Bank I

Background and transaction

On 26 May 2011, the Respondent issued an irrevocable standby letter of credit in favour of the Initiator as beneficiary for an amount of EUR 3,074,930 ("the credit"). The credit was sent by the Respondent via SWIFT message to the Initiator's bank and was subject to UCP 600.

1. The credit covered delivery of a DCV system for an airport in City G, Country P and was available against presentation of the following documents:

a. Initiator's written declaration confirming that the applicant has not fulfilled his contractual obligations under the DCV system contract and that the Initiator is entitled to payment for the amount of EUR 3,074,930

b. copy of the unpaid commercial invoice; and

c. photocopy of CMR issued to Port L, City G as consignee, indicating place of final destination City G".

2. The Initiator states that it delivered and installed the DCV system and issued its invoice for the amount of EUR 3,074,930 on 26 March 2012, but that the applicant did not make the payment. The Initiator then demanded payment under the credit, making the demand through the Initiator's bank by SWIFT message on 24 April 2012 and also by letter couriered by the Initiator's bank on the same day and accompanied by:

a. drafts at sight in duplicate;

b. Initiator's written declaration that the applicant has not fulfilled its contractual obligations under the DCV system contract and that the Initiator is entitled to payment for the amount of EUR 3,074,930;

a. copy of the unpaid commercial invoice; and

b. 14 photocopies of CMR.

3. It is not disputed that the letter and enclosures from the Initiator's bank were received by the Respondent on 25 April 2012. On 4 May 2012, the Respondent sent an advice of refusal giving the following reasons:

a. CMR WITH CARRIER P - LACK OF NAME OF CARRIER IN FIELD 23;

b. CMR WITH CARRIER S - INCOMPLETE NAME OF CARRIER FROM FIELD 16 IN FIELD 23; and

c. CMR WITH CARRIERS T, K, S, M - LACK OF COUNTRY BY NAME OF CARRIER IN FIELD 16.

4. No issue is raised by the Initiator as to the Respondent's advice of refusal not being in compliance with UCP 600 article 16. The Respondent has stated that, as 1 May 2012 and 3 May 2012 were holidays, the last day for checking documents and advising of discrepancies fell on 4 May 2012. Hence the Respondent's refusal notice sent on 4 May 2012 is in compliance with UCP 600.

Issue to be determined

The issue before the Appointed Experts is whether the Respondent, as issuing bank of the credit, was justified in refusing the documents presented to it on 25 April 2012 for the reasons stated in its advice of refusal dated 4 May 2012.

Initiator's claim

The Initiator asserts that the Respondent, as the issuing bank, has refused payment on the credit without legal cause. In respect of the three grounds stated in the Respondent's advice of refusal, the Initiator asserts, in respect of each discrepancy:

a. CMR WITH CARRIER P - LACK OF NAME OF CARRIER IN FIELD 23: that it is unnecessary under UCP 600 that the name of the carrier be included twice in the transport document and notes that the name of the carrier - Carrier P - is listed in field 16 of the CMR document;

b.CMR WITH CARRIER S - INCOMPLETE NAME OF CARRIER FROM FIELD 16 IN FIELD 23: that it is unnecessary under UCP 600 that the name of the carrier be included twice in the transport document; and

c.CMR WITH CARRIERS T, P, S, M - LACK OF COUNTRY BY NAME OF CARRIER IN FIELD 16: that UCP 600 does not require the inclusion of the name of the country of the carrier in the transport document.

Respondent's reply

1. The Respondent asserts that the presented documents are discrepant under UCP 600 and International Standard Banking Practice for the Examination of Documents under Documentary credits 2007 revision. Specifically, in respect of the three grounds stated in the Respondent's advice of refusal, the Respondent asserts:

a. CMR WITH CARRIER P - LACK OF NAME OF CARRIER IN FIELD 23: that the complete lack of the carrier's name in field 23 (which only shows an illegible signature) is a discrepancy under UCP 600 article 24 and ISBP Publication 681, paragraph 161, as the lack of indication of the carrier's name in field 23 means that one is unable to identify the issuer of the document;

b. CMR WITH CARRIER S - INCOMPLETE NAME OF CARRIER FROM FIELD 16 IN FIELD 23: that (regarding Carrier S) the incomplete carrier's name quoted in field 23 is not consistent with established practice and rules of using an entity's name. The Respondent asserts that an entity should use its official name. The Respondent further asserts that (whilst field 16 is not obligatory) when there is a description in field 16, the official name as used in field 16 should be identical with the one used in field 23 of the CMR. Again, the Respondent asserts that this is a discrepancy under UCP 600 article 24 and ISBP Publication 681, paragraph 161; and

c. CMR WITH CARRIERS T, P, S, M - LACK OF COUNTRY BY NAME OF CARRIER IN FIELD 16: that the commonly established practice and rules of CMR issuance and requirements of fulfillment of field 16 require the name, address and country of the carrier to be inserted. The Respondent asserts that the insertion of the relevant country is especially required, bearing in mind that these documents are used in international trade. Again, the Respondent asserts that this is a discrepancy under UCP 600 article 24 and ISBP Publication 681, paragraph 161.

2. The Respondent asserts that in the remittance letter dated 24 April 2012, the Initiator's bank did not state its opinion that the presented documents were in conformity with the credit. Also, the Respondent asserts that the Initiator's bank did not express reservations about the discrepancies quoted by the Respondent. The Respondent finally asserts that the Initiator's bank made payment of EUR 75 on 4 June 2012, as demanded by the Respondent due to discrepant documents, and asserts that this is proof that the Initiator's bank shares its position that the documents were discrepant.

Documents submitted by the parties

A. Documents submitted by the Initiator

a. The Respondent's Request dated 24 August 2012;

b. Appendix no. 1 - copy of standby letter of credit issued by the Respondent on 26 May 2011 by SWIFT;

c. Appendix no. 2 - copy of acceptance certificate signed by the applicant dated 23 March 2012;

d. Appendix no. 3 - copy of invoice issued by the Initiator dated 26 March 2012;

e. Appendix no. 4 - copy of Initiator's demand for payment under the credit sent by SWIFT on 24 April 2012;

f. Appendix no. 5 - copy of Initiator's bank's letter demanding payment under the credit dated 24 April 2012;

g. Appendix no. 6 - copy of sight drafts in duplicate dated 19 April 2012;

h. Appendix no. 7 - copy of Initiator's written declaration dated 18 April 2012;

i. Appendix no. 8 - copies of 14 photocopies of CMR;

j. Appendix no. 9 - copy of Respondent's advice of refusal by SWIFT dated 4 May 2012;

k. Appendix no. 10 - copy of notice of company voluntary arrangement in respect of the Applicant issued by the District Court of City Z dated 26 June 2012;

l. Appendix no. 11 - copy of demand for payment issued by Initiator's attorney dated 10 July 2012; and

m. Appendix no. 12 - copy of Respondent's refusal to pay in a letter dated 18 July 2012.

B. Documents submitted by the Respondent

a. The Respondent's Answer dated 17 September 2012;

b. Enclosure no. 1 - summary of Respondent's claims;

c. Enclosure no. 2 - copy of Initiator's bank's remittance letter dated 24 April 2012;

d. Enclosure no. 3 - copy of MT734 (Initiator's advice of refusal dated 4 May 2012);

e. Enclosure no. 4 - copy of Respondent's remittance letter dated 30 May 2012 returning documents to Initiator's bank;

f. Enclosure no. 5 - copy of MT799 (Respondent informing Initiator's bank of return of documents dated 30 May 2012); and

g. Enclosure no. 6 - copy of cover for amount of Respondent's discrepancy fee received from Initiator's bank.

Analysis

1. The Appointed Experts note that the Initiator does not question the format of the Respondent's refusal notice dated 4 May 2012 nor whether it was sent within the timeframe required by UCP 600.

2. As a starting point, and before stating our analysis of the three stated discrepancies raised by the Respondent, the Appointed Experts note that where a standby letter of credit is issued under UCP 600 and requires the presentation of an unpaid commercial invoice and copies of one or more CMR's, no bank is required to examine such documents according to UCP 600 articles 18 or 24. The required documents are only to be examined to the extent required by the terms and conditions of the credit.

3. The Appointed Experts note that UCP 600 sub-article 14 (d) (Standard for Examination of Documents) specifically states that: "Data in a document, when read in context with the credit, the document itself and international standard banking practice, need not be identical to, but must not conflict with, data in that document, any other stipulated document or the credit." (emphasis added)

4. UCP 600 sub-article 14 (f) further states: "If a credit requires presentation of a document other than a transport document, insurance document or commercial invoice, without stipulating by whom the document is to be issued or its data content, banks will accept the documents as presented if its content appears to fulfill the function of the required documents and otherwise complies with sub-article 14 (d)."

5.The Appointed Experts note that the credit only required photocopies of the CMR to be presented. Accordingly, such photocopies are not to be treated as transport documents as indicated in ISBP Publication 681, paragraph 20, which clearly states: "Copies of transport documents are not transport documents for the purpose of UCP 600 articles 19-25 and sub-article 14 (c). The UCP 600 transport articles apply where there are original transport documents presented. Where a credit allows for the presentation of a copy transport document rather than an original, the credit must explicitly state the details to be shown."

Having noted the above, the Appointed Experts set out below their analysis of the three stated discrepancies.

First discrepancy

The first discrepancy stated by the Respondent was: CMR WITH CARRIER P - LACK OF NAME OF CARRIER IN FIELD 23.

Absent a specific requirement in the credit, no bank is required to carry out a review of the CMR for compliance with UCP 600 article 24.

Even if such a requirement for review was present:

We understand the pre-printed word "transporteur" found in fields 16 and 23 of the CMR to mean the carrier. We are of the opinion that CMR field 16 is used to identify the "transporteur"- in this case, Carrier P - and that CMR field 23 is used as a signature box for the "transporteur".

We are of the opinion that the CMR in question is in compliance as the carrier is identified in field 16 and there is a signature in field 23. Given that the signature box field 23 is for the "transporteur", any signature in field 23 may be taken to be that of the carrier unless otherwise specified therein.

Accordingly, we conclude that the discrepancy raised by the Respondent is not valid.

The second discrepancy

The second discrepancy stated by the Respondent was: CMR WITH CARRIER S - INCOMPLETE NAME OF CARRIER FROM FIELD 16 IN FIELD 23.

Absent a specific requirement in the credit, no bank is required to carry out a review of the CMR for compliance with UCP 600 article 24.

Even if such a requirement for review was present:

Regarding the Respondent's assertion (that the name of the carrier, as stated in field 16, is incomplete in field 23), we agree that field 23 shows only part of the information found in field 16. However, the credit does not state that it requires the full name of the carrier to be stated wherever such name appears. As noted above, the credit only required photocopies of the CMR to be presented, and the credit did not explicitly state any requirement that the carrier's identity be fully stated in the photocopy of the CMR to be presented. In any case, field 23 of the CMR appears from the pre-printed format to be merely intended for placement of the signature of the "transporteur" or carrier; there is no requirement there that the name of the carrier needs to be inserted.

We are of the opinion that, although the words inserted in field 23 are not identical with those inserted in field 16, the words are not in conflict as they do not appear completely different (applying the principle found in UCP 600 sub-article 14 (a) that examination is on the basis of the documents alone and following sub-articles 14 (d) and (f) as cited above), bearing in mind that neither the credit nor UCP 600 requires them to be identical.

Accordingly, we conclude that the discrepancy raised by the Respondent is not valid.

The third discrepancy

The third discrepancy stated by the Respondent was: CMR WITH CARRIERS T, K, P, M - LACK OF COUNTRY BY NAME OF CARRIER IN FIELD 16.

Absent a specific requirement in the credit, no bank is required to carry out a review of the CMR for compliance with UCP 600 article 24.

Even if such a requirement for review was present, we do not accept the Respondent's assertion that the lack of any reference to the country of the carrier in field 16 constitutes a discrepancy. Although field 16's pre-printed words do suggest that the country be inserted, the credit itself does not state that it requires the country of the carrier to be stated in this document.

Accordingly, we conclude that the discrepancy raised by the Respondent is not valid.

The Appointed Experts also address two assertions made by the Respondent, regarding its failure to receive any notice of disagreement of its advice of refusal from the Initiator's bank (as presenting bank) and the payment of the Respondent's discrepancy fee. The Appointed Experts do not believe that silence by the Initiator (as beneficiary under the credit) or the presenting bank constitutes an agreement or acceptance of the discrepancies asserted by the Respondent. Nor does the presenting bank's payment of the discrepancy fee charged by the Respondent mean that the presenting bank agrees with the position taken by the Respondent. In any event, it must be noted that the Respondent's irrevocable undertaking under the credit is given to the beneficiary (in this case the Initiator) and the position - if any - taken by the presenting bank is irrelevant to the obligations owed by the Respondent to the Initiator under the credit.

Conclusion

1. The Appointed Experts find that all three discrepancies asserted by the Respondent are unjustified. The documents presented are in compliance with the requirements of the credit. Accordingly, the Respondent should honour its undertaking to the Initiator.

2. The Appointed Experts reached a unanimous Decision.