Parties

Initiator: Company D (Beneficiary)

Respondent: Bank J (Issuing Bank)

Background and transaction

The Initiator was the beneficiary of a payment guarantee (subject to URDG 758) issued by the Respondent on 03.05.2011. Said guarantee was extended three times, on 28.10.2011 until 31.05.2012, on 31.05.2012 until 16.07.2012 and finally on 18.06.2012 until 15.08.2012.

On 09.08.2012, the Initiator demanded payment for the full amount. The Respondent did not reject this demand, which was made in accordance with guarantee requirements and included the statements indicated in the guarantee text. Based on official written notification of their customer (Applicant) that the Initiator breached the provisions of the Delivery Contract (the Contract), the Respondent asked on 12.09.2012 for further proof and explanation concerning fulfillment of contractual obligations by the Initiator arising from the Contract.

A) Initiator's Claim

In a request dated 09.08.2012, the Initiator presented a timely demand to the Respondent via a SWIFT message issued by their bankers (as indicated by the Respondent in the guarantee) for the full value of the guarantee. The demand included written confirmation that materials which were ordered in conformity with the terms of the Contract were supplied to the Applicant of the guarantee and that payment had not been received from the Principal (applicant) at due date. The guarantee (as issued and amended) stated that payment would be effected:

(1) "irrespective of the validity and the legal effects of the above mentioned contract and waiving all rights of objection and defense arising from the principal debt..."

(2) "..upon receipt of your (beneficiary's) written request for payment and your (beneficiary's) written confirmation (in English) stating that:

• you (beneficiary) have supplied the Principal with the materials ordered in conformity with the terms of the contract and

• you (beneficiary) have not received payment from the Principal at the due date, in the amount claimed under the guarantee."

The guarantee allowed for presentation of the demand by SWIFT under the condition that the sending bank confirmed at the same time that the originals of the required documents were legally binding upon the beneficiary and had been forwarded to the Respondent.

B) Respondent's Answer

The Respondent received the required documents on 10.09.2012 and did not reject the Initiator's demand for payment in accordance with URDG provisions. The Respondent (on 12.09.2012) requested an explanation of the fulfillment of contractual obligations by the Initiator arising from the Contract, and stated that the documents did not include the required proof and documentary evidence from the Initiator that the materials were delivered to the Applicant, as provided for by the bank guarantee. The Respondent further advised that:

• The Applicant informed them that the Initiator failed to comply with its obligations set forth in the Contract, in particular with the date of delivery, and,

• Serving their customer's interests, the Respondent did not have reasonable grounds for paying due to the stated failure by the Initiator to fulfill the obligations set forth in the Contract.

Issues

The Initiator sought a DOCDEX decision to decide on the Initiator's right to obtain payment under the guarantee.

Documents submitted

The Initiator submitted copies of the following documents:

• A fact sheet summarizing the situation in the view of the Initiator

• The guarantee

• Each of the 3 amendments

• SWIFT claim dated 09.08.2012

• Letter claim

• Respondent's letter dated 12.09.2012 asking for further proof.

The Respondent submitted the following documents:

• Original response letter dated 04.04.2014

• Copy of underlying Contract

• Copy of a letter dated 22.11.2012

• Letter (original) dated 30.07.2012

Analysis

URDG 758 article 5 defines a guarantee as: "is by its nature independent of the underlying relationship and the application, and the guarantor is in no way concerned with or bound by such relationship. A reference in the guarantee to the underlying relationship for the purpose of identifying it does not change the independent nature of the guarantee. The undertaking of a guarantor to pay under the guarantee is not subject to claims or defences arising from any relationship other than a relationship between the guarantor and the beneficiary."

URDG 758 article 6 specifies that guarantors deal with documents and not with goods, services or performance to which the documents may relate.

URDG 758 sub-article 15 (a) states that: "A demand under the guarantee shall be supported by such other documents as the guarantee specifies, and in any event by a statement, by the beneficiary, indicating in what respect the applicant is in breach of its obligations under the underlying relationship." The request from the Respondent for further proof and explanation concerning fulfillment of contractual obligations by the Initiator arising from the contract is beyond the requirement of this sub-article.

According to URDG sub-article 19 (a) the guarantor shall determine, on the basis of a presentation alone, whether it appears on its face to be a complying presentation.

Furthermore, in accordance with URDG 758 sub-article 20 (a), the guarantor shall examine a demand within 5 business days following the date of presentation unless otherwise stated in the guarantee.

The guarantee in question did not state any period for examination or payment, thereby requiring the Respondent to take a decision on the demand by 16.08.2012, at the latest (or 17.08.2012, in case 15.08.2012 was a national holiday). The Respondent did not respond until 12.09.2012.

URDG 758 sub-article 24 (d) states that in case of rejection the guarantor shall give a single notice to that effect to the presenter of the demand stating:

• That the guarantor is rejecting the demand and

• Each discrepancy for which the guarantor rejects the demand

URDG sub-article 24 (f) contains a preclusion clause stating that a guarantor failing to act in accordance with paragraph (d) of said article shall be precluded from claiming that the demand and any related documents do not constitute a complying demand.

After receipt of the required demand under the guarantee, the Respondent had not rejected the documents demand after elapse of five business days following the day of presentation as required by URDG 758 sub-article 20 (a).

Conclusion

According to the documents submitted in the case, the Panel of Experts unanimously made the following decision under the ICC DOCDEX Rules:

1. The claim lodged by the Initiator was in strict compliance with the terms and conditions of the guarantee and met the requirements of URDG 758 sub-article 15 (a).

2. The Respondent did not reject the demand in due time as per URDG 758 articles 20 and 24, and was therefore bound by the preclusion clause of URDG 758 sub-article 24 (f).

3. The Respondent was not entitled to raise objections out of the underlying contract and could not demand proof of fulfilment of contractual obligations in addition to the requirements set out in the guarantee. Any such issues had to be dealt with outside the guarantee.

4. The Initiator was therefore entitled to receive payment under the guarantee and the Respondent had the duty in these circumstances, and under URDG 758, to effect payment of the demand to the Initiator.