Parties

Claimant: Company L (Principal)

Respondent 1: Company P (Drawee)

Respondent 2: Bank B (Collecting Bank)

Background and transaction

Claimant's claim against Respondent 1: Claimant sold multiple containerized shipments of poultry to Respondent 1 on a documentary collection basis, subject to the ICC Uniform Rules for Collection (URC 522). Documents were to be released against time drafts to be accepted by Respondent 1 and guaranteed by Respondent 2. 40 drafts were not paid at maturity.

Claimant's claim against Respondent 2: The documentary collections were subject to URC 522. Respondent failed to follow the instructions in the collection order.

All collections orders delivered by the remitting bank to Respondent 2 included:

• Details about the bank from which the collection has been received

• Details about the ordering party

• Details about the drawee

• Details about the bank presenter

• The amount to be collected and the currency

• The terms and conditions under which the payment must be obtained and the conditions of delivery:

- "Please find attached for acceptance and endorsement of your bank and for collection when due, the following Documentary Remittance:"

- "List of documents to be given against acceptance and endorsement:"

- "In case of non-acceptance or non-payment, notify the remitting bank via SWIFT."

• Indications on fees to be collected:

- "Amount of our fees: 0,00"

- "Your charges are to be paid by the drawee, in case of non-payment do not deliver the documents"

• Indications on the payment method:

- "Please pay by Swift XXX or by any other method that suits you."

• The list of attached documents:

- Bill of exchange

- Invoice

- Bill of Lading

- Health certificate

- Certificate of origin

It was claimed that the Respondent 2 did not respect the conditions of delivery mentioned above and delivered the documents related to the forty disputed collections to Respondent 1 without any acceptance of the bills by Respondent 1 and without endorsement from itself. Furthermore it did not respect the delivery conditions mentioned above and failed to notify the remitting bank of non-payment, and non-acceptance of Respondent 1. Respondent 2 did not send any notice of receipt to the remitting bank.

The submission from Respondent 2 disclosed the trading relations between the three companies (Claimant, Respondent 1 and Respondent 2), as below.

Until 2010, the Claimant used to sell poultry to a XXX company which name was YYY. At that time, Mr ZZZ in charge of the XXX market for Claimant had decided to develop business with Respondent 1 for a refrigerated storage area for Respondent 1. Mr ZZZ behaved as a trader giving a supplier credit to his new client by increasing the debt of Respondent 1 without reference to DOCDEX Rules. It was stated by Respondent 2 that the Claimant always acted as a credit supplier. In 2013, the Claimant and Respondent 1 entered into negotiations without informing Respondent 2 in order to solve the issue of the pending invoices.

Respondent 2 never endorsed the received financial documents. It was stated that the Claimant was prevented from endorsing the documents because Respondent 1 had an Authorized overdraft limited to 50 million francs for the activity of trading meat. This amount was never increased and the Claimant apparently perfectly knew about this amount of Authorized overdraft. It was further stated that the Claimant was aware that Respondent 2 was a development bank.

Issues

Whether Respondent 1 had to pay Claimant exclusive of interest at the contractual rate from the due date of each unpaid instalment, according to the provisions of the acknowledgment of payment signed on the14th of April 2012.

Analysis

A thorough review of the documents submitted, the correspondence between the parties and the statements from Respondent 2 indicated the possibility that there may be much more going on than a dispute over the actions of Respondent 1 (apparent failure to pay) and Respondent 2 (alleged mishandling of the disputed transactions) in accordance with the Uniform Rules for Collections, ICC Publication No 522.

The appointed experts found the allegations of Respondents 1 and 2, regarding apparent intentional over shipment of product, disturbing. They found these allegations (and the Acknowledgement of Debt agreement document which was not subject to ICC rules) to be outside of the scope of a DOCDEX Decision.

The Appointed Experts also found it troubling that the title document in 27 of the 40 transactions - the bill of lading - was consigned straight to the buyer, Respondent 1. Because, in many countries, the consignee on the bill of lading may take possession of the goods immediately upon arrival of the vessel, i.e. the documentary collection documents sent to Respondent 2 may not have been necessary for the buyer to take up the goods.

The handling of Documentary Collections, which state they are subject to the URC 522, is within the scope of the DOCDEX rules.

It was found that Respondent 2:

a) Failed to follow the explicit instructions contained on the Collection Order to obtain the acceptance of the bills of exchange by Respondent 1 and to guarantee the payment (aval) of the same at maturity, and,

b) Failed to notify the remitting bank regarding their inability to aval the bills of exchange or request further instructions prior to release of documents, and,

c) Failed to follow URC 522 article 1 (c): "If a bank elects, for any reason, not to handle either 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 other expeditious means, without delay."

d) Failed to follow:

• URC 522 article 4 (a) (i): "All documents sent for collection must be accompanied by a collection instruction indicating that the collection is subject to URC 522 and giving complete and precise instructions. Banks are only permitted to act upon the instructions given in such collection instruction, and in accordance with these Rules."

• URC 522 Article 26 (c) (ii): "The collecting bank must send without delay advice of acceptance to the bank from which the collection instruction was received."

• URC 522 Article 26 (c) (iii): "The presenting bank should endeavour to ascertain the reasons for non-payment and/or non-acceptance and advise accordingly, without delay, the bank from which it received the collection instruction. The presenting bank must send without delay advice of non-payment and/or advice of non-acceptance to the bank from which it received the collection instruction."

Conclusion

Consistent with previous DOCDEX Decisions regarding the handling of documents under a transaction, which subjected itself to the URC 522, it was found that Respondent 2 was responsible for the consequences of failure to follow the instructions and the governing rules. In light of the information stated above, it was not for the Appointed Experts to determine the amount of those consequences.

This was a unanimous decision.