Note

The Initiator and Respondent 1 submitted documents related to this decision.

Respondent 2 did not file any response.

The case had previously been submitted and answered through DOCDEX (Decision No. 336 dated 23rd September 2014) initiated by Respondent 1.

Parties

Initiator: Company M (Beneficiary)

Respondent 1: Company W (Applicant)

Respondent 2: Bank C (Guarantor)

Background and transaction

The Initiator was the beneficiary to a demand guarantee that was issued by Respondent 2, showing Respondent 1 as applicant. The demand guarantee was subject to URDG 758 and issued on 21st January 2013.

Expiry date in the guarantee was stated to be 20th November 2013. In addition the guarantee included the following condition: "Any demand for payment and documents required under this Guarantee must be received by us within 14 (fourteen) working days after its expiry at our address stated above." 14 working days after 20th November 2013 was 10th December 2013. (There were no relevant public holidays between 20th November 2013 and 10th December 2013, i.e. the only days to be excluded are the Sundays and Saturdays during that period).

The Initiator and Respondent 1 entered into two contracts; one covering engineering, procurement and construction, the other covering the equipment supply. For the latter, Respondent 1 was to provide a bank guarantee covering 30 per cent of the contract price.

On 21st January 2013, a guarantee was issued by Respondent 2, and advised through an advising bank. The guarantee ended with a note stating guarantors name, guarantee number, issue date, guarantors phone and fax number, their website and a named contact person.

On 4th December 2013, being the 10th working day after 20th November 2013, the Initiator made a demand under the guarantee.

The demand was sent via the advising bank, which, as required in the guarantee, verified the signatures on the notice of the demand. On the same day the advising bank sent a notice of demand via SWIFT to Respondent 2.

On 5th December 2013, the advising bank couriered the demand and supporting documents to Respondent 2 via DHL.

On 11th December 2013, (i.e. more than 14 working days after 20th November 2013) the demand and supporting documents were delivered to Respondent 2.

On 13th December 2013, Respondent 2 made a notice of refusal to the Initiator via the advising bank. The reason given was that the documents were received after the period of presentation according to the guarantee.

On 3rd January 2014, the advising bank replied to Respondent 2 that they had been informed that the demand was made "well before the demand expiry date of the guarantee." Furthermore they noted that since the address of Respondent 2 did not contain a postal code in the guarantee, the courier company was unable to "deliver the demand in the most expeditious manner;" i.e. the delivery of the demand was delayed because of the incomplete address provided by Respondent 2. Respondent 2 replied repeating the notice of refusal dated 13th December.

On 23rd June, Respondent 1 initiated a DOCDEX request against the Initiator (DOCDEX Decision No. 336 dated 23rd September 2014).

Till this date the demand remained unpaid.

Issues

1. Whether or not the demand was validly made.

2. Whether or not Respondent 2 was responsible for the delay in the transmission of the demand and supporting documents.

3. Whether or not URDG 758 article 28 applied to Respondent 2.

4. Whether or not Respondent 2 was obligated to pay to the Initiator the value of the demand.

Documents submitted

A. Documents submitted by the Initiator

1. The formal request for a DOCDEX Decision.

2. Guarantee.

3. The demand and supporting documents.

4. The notice of refusal made by Respondent 2 dated 13th December 2013.

5. DHL Delivery slip - including the DHL track list.

6. Reply from the advising bank to Respondent 2 dated 3rd January 2014.

7. Reply from Respondent 2 to the advising bank.

B. Documents submitted by the Respondent A

1. Answer to the Initiators request.

2. Copy of DOCDEX Decision number 336.

3. Guarantee.

4. The demand and supporting documents.

5. DHL Delivery slip.

Analysis

This demand guarantee was issued subject to the ICC Uniform Rules for Demand Guarantees "URDG 758".

Relationship to DOCDEX Decision No. 336: DOCDEX Decision No. 336 covered the same transaction as this one. The Initiator of DOCDEX Decision No. 336 was Respondent 1 of this DOCDEX Decision. In DOCDEX Decision No. 336 the Respondent (the Initiator to this DOCDEX Decision) for some reason did not respond in a timely manner. Consequently the purpose of the request for another DOCDEX Decision was to allow for the arguments of the Initiator to be taken into account and to reconsider the conclusion of DOCDEX Decision No. 336.

The guarantee stated: "This guarantee shall expire on Nov. 20, 2013" including an additional provision "Any demand for payment and documents required under this guarantee must be received by us 14 (fourteen) working days after its expiry at our address stated above". As there had been no relevant national holidays during that period, this provision had the effect of making the practical expiry date of the guarantee the 14th working day after 20th November 2013, being 10th December 2013.

The guarantee indicated the address of the guarantor, as well as the following statement: "Any demand for payment [...] must be received by us [...] at our address stated above." At the end of the guarantee the contact phone, fax and person was mentioned.

The DHL delivery slip indicated that it was dispatched exactly as stated in the guarantee. However it also mentioned the postal code "241000 xxx." This postal code was wrong. The correct one was "214000 xxx."

The DHL Track list indicated the following:

• 5 December 2013: "Shipment picked up"

• 9 December 2013: "Address information needed; contact DHL"

• 10 December 2013 "Shipment on hold"

• 11 December 2013: "Delivered - signed by: XXX"

URDG 758 sub-article 14(a) reads: "A presentation shall be made to the guarantor:

i. at the place of issue, or such other place as is specified in the guarantee and,

ii. on or before expiry."

URDG 758 sub-article 28(a) reads: "The guarantor assumes no liability or responsibility for the consequences of delay, loss in transit, mutilation or other errors arising in the transmission of any document, if that document is transmitted or sent according to the requirements stated in the guarantee, or when the guarantor may have taken the initiative in the choice of the delivery service in the absence of instructions to that effect."

It was clear that the demand was not received timely according to URDG 758 sub-article 14 (a) - just as the guarantor assumed no liability for transit delays according to URDG 758 sub-article 28 (a).

The Initiator argued that the reason for the delay was the fact that the postal code of the guarantor was not mentioned in the guarantee. As mentioned above, the DHL courier slip did in fact mention a postal code, but one that was wrong. DHL procedures always require a postal code (or, if not existent, clear contact details). Not mentioning a postal code in the address mentioned in the guarantee was not the reason for the delayed delivery (as there was a postal code mentioned on the DHL Delivery slip), but mentioning a wrong postal code might have caused the delay.

In addition to the above the guarantee mentioned both the contact phone number, fax number and contact person of the guarantor. In the absence of a postal code, this information could well have been added to the DHL courier slip.

Demands made under guarantees are only to be made in case of default - and normally the demand must be made directly to the guarantor (often located in another country than the beneficiary to the guarantee) within the validity of the guarantee. The beneficiary should therefore ensure presentation of the demand in a timely manner. Even minor mistakes in the address (as is the case here) may lead to delays in the delivery of the demand.

For the reasons mentioned above, it was the conclusion of the panel of experts that the demand was presented late as per URDG 758 sub-article 14 (a), and that on the basis of URDG 758 article 28, the guarantor could not be held liable for the delay in transit.

Conclusion

1. The demand was made to the guarantor on 11th December 2013. The expiry date of the guarantee was, effectively, 10th December 2013. Consequently the demand was not made in a timely manner.

2. Given the circumstances outlined above it was clearly wrong to state that the postal delay was caused by the missing postal code - as the DHL courier slip did, in fact, mention a (wrong) postal code. Most likely the delay was caused by this mistake. In any event, since a mistake was made when sending the demand to the guarantor, the Initiator could not place the blame for the postal delay on the guarantor.

3. URDG 758 article 28 did apply for this case, and the guarantor (Respondent 2) could not be held liable for the delay in transit.

4. As the demand was not made timely, the guarantor (Respondent 2) was not obligated to pay to the Initiator the value of the demand i.e. CNY 55,229,700.

This decision was rendered unanimously.