Issues

Issue 1: Did the Respondent act in accordance with the provisions of URC 522?

Issue 2: If the answer to issue 1 is "no", is the Respondent bound to pay the outstanding amount?

Issue 3: Is the matter of illegality of the goods relevant to this case?

Parties

Initiator: Company K

Respondent: Bank A

Background and transaction

The Initiator is the principal under a series of 10 collections subject to URC 522 totalling USD 349,391.10 sent by a remitting bank to the Respondent within a period of time spanning July 2009 to February 2010.

All collections are "Documentary Collections" as defined under URC 522 sub-article 2 (d) (i).

The Respondent is the presenting bank, having made presentations to the drawee(s) under each collection. Apart from one partial payment of USD 4,125.00, all collections remain unpaid. Despite several requests from the Initiator, the Respondent has never returned the original documents. As a reason for the non-return, the Respondent is contending "the illegality of the goods".

The Initiator is claiming that the Respondent failed to act in accordance with the provisions of URC 522 and, as a result, should pay the total outstanding amount of USD 345,266.10. This amount excludes interest and damages in the amount of USD 90,703.89.

Issues

Issue 1: Did the Respondent act in accordance with the provisions of URC 522?

Issue 2: If the answer to issue 1 is "no", is the Respondent bound to pay the outstanding amount?

Issue 3: Is the matter of illegality of the goods relevant to this case?

Documents submitted

By the Initiator:

• Initiator's Request;

• Initiator's list of enclosures;

• Initiator's summary Schedule A (principal amount);

• Initiator's summary Schedule B (interest amount);

• Remitting bank's remittance ABC123;

• Respondent's MT999 dated 10/08/09;

• Remitting bank's MT499 dated 02/05/12;

• Remitting bank's remittance EFG456;

• Remitting bank's remittance HIJ893;

• Respondent's MT412 dated 30/09/09;

• Remitting bank's KLM893;

• Respondent's MT410 dated 29/09/09;

• Remitting bank's remittance NOP893;

• Remitting bank's remittance QRS893;

• Remitting bank's remittance TUV893;

• Respondent's MT410 dated 29/10/09;

• Remitting bank's remittanceWXY800;

• Remitting bank's remittance CBA800;

• Remitting bank's remittance FED800;

• Respondent's MT410 dated 02/02/10;

• Remitting bank's MT499 dated 03/06/10;

• Remitting bank's MT499 dated 03/06/10;

• Remitting bank's MT499 dated 04/06/10;

• Respondent's MT499 dated 04/05/12;

• Remitting bank's MT499 dated 25/06/12;

• Respondent's MT499 dated 27/06/12;

• Remitting bank's MT499 dated 29/06/12;

• Remitting bank's MT499 dated 13/07/12;

• Respondent's MT499 dated 18/07/12;

• Remitting bank's MT499 dated 13/08/12;

• Respondent's MT499 dated 23/08/12;

• Remitting bank's MT499 dated 23/08/12;

• Remitting bank's MT499 dated 30/08/12;

• Respondent's MT499 dated 10/09/12;

• Remitting bank's MT499 dated 11/10/12;

• Remitting bank's MT499 dated 26/11/12;

• Remitting bank's MT499 dated 26/11/12;

• Respondent's MT499 dated 06/12/12;

• Remitting bank's MT499 dated 13/12/12;

• Remitting bank's MT499 dated 20/12/12;

• Remitting bank's MT499 dated 20/12/12;

• Remitting bank's MT499 dated 14/01/13;

• Respondent's MT499 dated 11/02/13; and

• Remitting bank's MT499 dated 04/03/13.

By the Respondent:

• Electronic copy of the Respondent's Answer requesting for a DOCDEX decision dated 02/04/13

Analysis

Issue 1

Each collection sent to the Respondent followed the same format and contained the same instructions, which included "deliver documents against acceptance of the draft and simultaneous guarantee for payment by you (aval)".

In its SWIFT correspondence, the Respondent stated "the document [sic] were released on the acceptance of the draft by the drawee without any simultaneous guarantee. In other words, we have accepted drafts on file, but we do not have any simultaneous guarantee on file." This is also confirmed by the Respondent's response by fax requesting the DOCDEX Decision which, in point 2, states: "[The Respondent] did not guarantee payment to the Initiator as the documents were released to the importer against acceptance only."

Under URC 522 sub-articles:

4 (a) (i), "Banks are only permitted to act upon the instructions given in such collection instruction, and in accordance with these Rules";

19 (b), "In respect of documentary collections, partial payment will only be accepted if specifically authorized in the collection instructions"; and

1 (c) when a bank does not wish to handle a collection then it "[...] must advise the party from whom it received the collection or the instructions [...] without delay."

URC 522 sub-article 4 (a) (i) requires strict compliance with the collection instruction. In releasing the presented documents to the drawee(s), the Respondent is deemed to have accepted the collection instruction in its entirety, including the simultaneous guarantee. The Respondent should have refused the collection instruction if it was not prepared to do so, as emphasized in sub-article 1 (c).

The rule against deviation extends also to partial payment, which was not authorized under the collection instruction and which is emphasized in sub-article 19 (b).

In consideration of the foregoing, the Respondent is in breach of its obligations under URC 522.

Issue 2

The Respondent is in breach of its obligations under URC 522 and is therefore liable for the liabilities incurred as a result.

Issue 3

The illegality point is not relevant so far as URC 522 are concerned. The issue is whether the Respondent was entitled to release the documents if it was not prepared to guarantee the payment. Accordingly, whether the drawee(s) could clear the goods from customs has no bearing on the collection operation, as such action was subsequent to the release of documents.

Conclusion

The Decision by the Panel is unanimous. The Initiator is entitled to payment of the outstanding amount of USD 345,266.10.