Note

As there was no response received from the Respondent, the summary of the background was based solely upon the dispute summary and documents provided by the Initiator.

Parties

Initiator: Company F (Applicant)

Respondent: Bank B (Issuing Bank)

Background and transaction

The Initiator was the applicant of three documentary credits.

On 6 July 2011, the Respondent, via SWIFT MT700, issued the credits through an advising bank covering the supply of equipment and spare parts, and made subject to UCP 600, incorporating the wording "UCP LATEST VERSION" in field 40E.

On 12 July 2011, the beneficiary sent a letter to the advising bank requesting that the 3 documentary credits be cancelled. The letter included the following wording: "We are making a firm request that the above letter of credit (copy as attached) issued by the Initiator via the Respondent shall be cancelled indefinitely as our transaction is null and void." (It was not clear from the documentation when the advising bank received this letter).

On 13 and 14 July 2011, the Respondent issued "arrival notice" for the three documentary credits. These documents indicated that documents under the three documentary credits had been negotiated with due date 10 October 2011.

On 20 July 2011, the Respondent accepted the documents presented by the advising bank (ref. letter dated 5 April 2012 from the Respondent to the Initiator).

On 25 August 2011, the Initiator requested the Respondent to cancel the 3 documentary credits. The request included the following wording:"We wish to cancel the following three (3) Letter [sic] of Credit issued and the payment to the beneficiary with immediate effect."

On 26 August 2011, the Initiator sent a letter to the advising bank - with the cancellation letter attached - including the following wording:"... attach please find the original copy of the Consent Letter from the beneficiary. I was advised by our banker, the Respondent, that they have informed the advising bank of the cancellation of the below three (3) Letter [sic] of Credit issued on behalf of the Initiator. We appreciate your attention and prompt action on our request."

On 2 September 2011, the Respondent informed the advising bank of the Initiator's request to cancel the documentary credits. The SWIFT message stated: "The above mentioned refers. Applicant has requested to cancel all the above-mentioned documents payment, which is due on October 10, 2011. Kindly obtain beneficiary's consent and reply us by tested SWIFT accordingly."

On 26 September 2011, the advising bank sent a SWIFT message to the Respondent. The SWIFT message stated:"We refer to the above-mentioned LC, Bene agreed to cancle [sic] the above three LC's. Therefore, we have cancelled and remove the LC from our records. Pls advise applicant accordingly."

On 27 September 2011, the Respondent called the Initiator confirming that the documentary credits had been cancelled. Subsequently this was evidenced by an e-mail sent internally between people working for the Initiator, which stated:"Issuing bank called me minutes ago to confirm the three L/Cs are cancelled. Thanks everyone for the helps."

On 16 November 2011, the Respondent sent a fax to the Initiator attaching a SWIFT message from the advising bank to the Respondent with the following wording:"We refer to our MT799 dated 26 Sep 2011, pertaining to the cancellation of the above LCs. Please be advised that the beneficiary has requested to cancel the cancellation of the A/M 3 LCs. Please liasie [sic] with Applicant and remit proceeds to us without further delay..."

On 29 November 2011, the Initiator sent a letter to the Respondent with the following wording:"We refer to our letter of 25 August 2011 instructing the cancellation of the said letters of credit. Please be advised that our earlier order of cancellation still stands."

On 29 November 2011, the Respondent sent a SWIFT messages to the advising bank including the following wording:"Kindly be advised that the Applicant has refused for the request to cancel the cancellation of the above-mentioned irrevocable LC. Please refer to UCP 600 Article 10 (a). We have cancelled all our records and advise the Applicant accordingly after receiving your MT799 dated 26 September 2011 with Beneficiary's consent and agreement to cancel the LC. "

On 8 December 2011, the advising bank sent a SWIFT to the Respondent referring to the three drawings with the following wording:"The above bills have been accepted by yourselves to mature on 10 October 2011. Hence you are liable to pay us at maturity, to date we have yet to receive payment from you. Please effect payment immediately as per our instruction. We reserve the rights to claim interest on delayed payment."

On 19 March 2012, the Respondent paid the advising bank.

On 5 April 2012, the Respondent send a letter to the Initiator, which included the following wording:"As such upon receiving a demand from the advising bank, our bank has, on your behalf, made payment to the advising bank on 19.3.2012 under the said Letter of Credits."

The Respondent further requested that the Initiator pay the sum plus interest from 20 March 2012 till the date of payment.

On 12 April 2012, the Initiator sent a letter to the Respondent arguing that there were a mutual termination of all three documentary credits, i.e. that all involved parties to the documentary credits had agreed to the cancellation of the documentary credits. They further argued that none of the parties could any longer demand performance under the documentary credits, and that the payment made by the Respondent to the advising bank was without mandate and authorization from the Initiator.

Documents submitted

A. Documents submitted by the Initiator

1. The formal request for a DOCDEX Decision.

2. A cover letter to the panel of experts.

3. Dispute summary and Initiators Claim.

4. Copy of documentary credits.

5. Letter from the beneficiary to the advising bank requesting cancellation of the documentary credits (dated 12 July 2011).

6. Respondent's arrival notice of documents under documentary credit number 123 (dated 14 July 2011).

7. Respondent's arrival notice of documents under documentary credit number 456 (dated 14 July 2011).

8. Respondent's arrival notice of documents under documentary credit number 789 (dated 13 July 2011).

9. Initiator's letter requesting cancellation of the documentary credits (dated 25 August 2011).

10. Letter from the Initiator to the advising bank (dated 26 August 2011).

11. SWIFT from the Respondent to the advising bank, requesting the cancellation of the three documentary credits (dated 2 September 2011).

12. SWIFT from the advising bank to the Respondent agreeing to cancel the documentary credits (dated 26 September 2011).

13. E-mail correspondence between 8 September 2011 and 27 September 2011 between persons working for the Initiator.

14. Fax from the Respondent to the Initiator, attaching the SWIFT from the advising bank to the Respondent dated 15 November 2011 (dated 16 November 2011).

15. Letter from the Initiator to the Respondent informing that their cancellation still stands (dated 29 November 2011).

16. SWIFT from the Respondent to the advising bank informing that the Initiator has refused the request to cancel the three documentary credits (dated 29 November 2011).

17. SWIFT from the advising bank to the Respondent requesting payment (dated 8 December 2011).

18. Letter from a company handling the commercial contract and purchase orders between the Initiator and the beneficiary to the Initiator regarding rescind of the commercial contract (dated 5 January 2012).

19. Letter from the Respondent to the Initiator requesting payment (dated 5 April 2012).

20. Letter from the Initiator to the Respondent disputing the payment to the advising bank (dated 12 April 2012).

21. Copy of ICC Official Opinion R522/TA166.

B. Documents submitted by the Respondent

There were no documents submitted by the Respondent.

Issues

1. Could the beneficiary revoke it's consent to the cancellation of the credits?

2. Could the advising bank demand payment from the Respondent related to the three credits following the cancellation and removal of the credits from its records?

3. Was the Respondent entitled to demand reimbursement from the Initiator for the payments made under the credits?

Analysis

The Panel of Experts found that the case history as presented by the Initiator had logic breaches that were not explained in the documentation. Also, the mentioned bills of exchange were not included in the documentation - neither was the forwarding schedule from the advising bank nor the answer to the latter by the Respondent informing that the documents appeared to constitute a complying presentation. The analysis and conclusion were solely based on the facts presented by the Initiator.

UCP 600 article 10(a) reads: "Except as otherwise provided by article 38, a credit can neither be amended nor cancelled without the agreement of the issuing bank, the confirming bank, if any, and the beneficiary."

The advising bank (the presenter) accepted that the three documentary credits be cancelled on 26 September 2011. The SWIFT message from the advising bank to the Respondent requesting the cancellation included the following wording:

"Applicant has requested to cancel all the above mentioned documents payment which is due on October 10, 2011. "

From this wording it was evident that it was the payments (due 10 October) that were subject for the request for cancellation. The response from the advising bank accepting the request to cancel included the following wording:

"We refer to the above mentioned LC, Bene agreed to cancle [sic] the above three LC's. Therefore we have cancelled and remove the LC from our records. Pls advise applicant accordingly. "

From that it follows that the advising bank had acknowledged that it was the payments due under the documentary credits that were being cancelled. A bank does not remove a documentary credit from their records if the payment is still due.

Further, the Respondent stated in its SWIFT message dated 29 November 2011, that: "We have cancelled all our records and advise the applicant accordingly after receiving your MT799 dated 26 September 2011 with beneficiary's consent and agreement to cancel the LC."

This means that the advising bank was informed about the cancellation by the Respondent.

The initiator made reference to Official ICC Opinion R522/TA166, which included the following wording: "Notification by the advising bank to the issuing bank of receipt of the consent to cancel would constitute formal "irrevocable" agreement by the beneficiary."

This supported the fact that the beneficiary did, in fact, intend to cancel the three credits. (Note that although the ICC Opinion was issued subject to UCP 500, it was valid also under UCP 600.)

From the perspective of the advising bank, any acceptance to cancel the documentary credits should be carefully balanced against the agreement with, and obligation towards, the beneficiary. It is not common to cancel a credit where payment is still due under it. Because of that, and since the request first came from the beneficiary (on 12 July 2011), it must be concluded that the acceptance to cancel the three credits was given under careful consideration.

The advising bank stated on 26 September 2011: "Bene agreed to cancel". In addition, the cancellation of the three credits by the beneficiary resulted also from its request to cancel the cancellation.

As per the Respondent, it clearly indicated in its SWIFT message of 29 November 2011 that the request to cancel the cancellation came on 16 November 2011 i.e. 51 days after the request to cancel was accepted by the advising bank.

From the case as presented there seem no doubt that the 3 payments were in fact cancelled, as the cancellations were accepted by the Initiator, the Respondent, the advising bank and the beneficiary.

Conclusion

1. Once the consent to cancel the payments under the three credits had been passed on to the Respondent (being obligated under the three credits), then the payments were effectively cancelled, and the beneficiary could no longer revoke its consent to the cancellation.

2. Once the three payments under the credit had effectively been cancelled (i.e. the request to cancel had been accepted by all the parties including the advising bank), then the Respondent was no longer obligated to pay under the three credits, and the advising bank could no longer demand payments under the three credits.

3. Once the three payments under the credit had effectively been cancelled (i.e. the request to cancel had been accepted by all the parties including the Respondent), then the Initiator was no longer obligated to pay under the three credits, and the Respondent could no longer demand reimbursement from the Initiator. In deciding to pay, the Respondent had done so on its own initiative and risk.

In conclusion: The three payments under the three documentary credits had been cancelled, and no one was obligated to pay on the due date.

This was a unanimous decision.