Parties

Initiator: Company S (Principal)

Respondent: Bank P (Presenting Bank)

Note

Only the Initiator had submitted documents related to this decision.

This decision was rendered without the participation of the Respondent.

Background and transaction

In November 2013, the Initiator and the Respondent entered in a contract regarding the sale of steel.

Part of the contract value was payable "Cash Against Documents." The remaining was pre-paid against proforma invoice.

On 21 January 2014, the Initiator sent the collection documents to the remitting bank instructing them to send a collection to their customer via the Respondent.

The remitting bank sent a documentary collection subject to URC 522 to the Respondent on 23 January 2014.

• Quote from the collection instruction: "Documents to be delivered against payment".

• Other instructions were given in the collection instruction as below:

a) Payment instruction,

b) Collection charges payment,

c) Interest payment

On 21 February 2014, the Initiator was informed by the buyer (the drawee to the collection) that they had already received the documents, and that the goods were received as well.

Till this date the collection remained unpaid. Payment tracers had been sent to the Respondent both by the Initiator and the remitting bank. The answer had been that they would investigate the matter.

Documents submitted

A. Documents submitted by the Initiator

1. The Sales contract between the Initiator and the buyer.

2. Supplementary Agreement - outline the payment terms.

3. The commercial invoice.

4. Bill of lading.

5. The collection instruction from the Initiator to the remitting bank.

6. The collection instruction from the remitting bank to the Respondent.

7. Copy of DHL waybill showing that the collection has been sent from the remitting bank to the Respondent.

8. Letter from the remitting bank to the Initiator acknowledging receipt of the collection.

9. A letter from the Initiator to the Respondent, explaining the situation and tracing payment.

10. Communication between the Initiator, Respondent and collecting bank regarding the non-payment of the collection.

B. Documents submitted by the Respondent

There were no documents submitted by the Respondent.

Issues

The Initiator requested the Centre to give a decision on whether or not the Respondent was obligated to pay the collection, as the documents had been released to the Drawee, and they had obtained delivery of the goods using the bill of lading being part of the collection.

Analysis

This collection was subject to the ICC Rules for Collection "URC 522" as stated in the cover letter accompanying the documents, and issued in accordance with URC 522 article 4.

Article 1 of URC 522 reads:

"a) The Uniform Rules for Collections, 1995 Revision, ICC Publication No. 522, shall apply to all collections as defined in Article 2 where such rules are incorporated into the text of the "collection instruction" referred to in Article 4 and are binding on all parties thereto unless otherwise expressly agreed or contrary to the provisions of a national, state or local law and/or regulation which cannot be departed from.

b) Banks shall have no obligation to handle either a collection or any collection instruction or subsequent related instructions.

c) If a bank elects, for any reason, not to handle a collection or any related instructions received by it, it must advise the party from whom it received the collection or the instructions by telecommunication or, if that is not possible, by any other expeditious means, without delay."

This provision offers the collecting bank the option of declining to handle a collection providing it informs the remitting bank without delay.

The collection, being payable at sight, required the collecting bank to deliver documents against payment thereof (Article 2).

By releasing documents to the drawee without receiving payment, the Respondent had acted outside the authority and instructions given by the remitting bank.

In a collection operation the owner of the documents is the seller (i.e. the Principal to the Collection) and the remitting bank acts on its behalf. As a consequence, non-paid documents remain in the care of the presenting bank and the remitting bank has the right to request return of documents thereby obligating the presenting bank to accommodate such request.

The presenting bank acted contrary to the provisions of URC 522 as quoted above and was liable for payment of the collection value plus appropriate interests and costs, if any.

Conclusion

The Respondent acted contrary to the provisions of URC 522 and, as such, was liable for payment of the collection as set out above.

This decision was rendered unanimously.