Parties

Claimant 1: Bank A (Remitting Bank)

Claimant 2: Company O (Principal)

Respondent: Bank I (Presenting Bank)

Background and transaction

September/October/November 2013: Claimant 1 received fifty export collection presentation forms from Claimant 2. Each export collection presentation form attached various documents including 3/3 original bills of lading.

30 September - 03 December 2013: Claimant 1 sent the documentary collections on behalf of its customers to the Respondent. The documentary collection schedules, which accompanied each set of documents, contained the following instructions:

• Documents were to be released against payment at sight; and

• The Documentary Collections were subject to Uniform Rules for Collections, 1995 Revision, ICC Publication No. 522.

In accordance with URC 522 Article 4 (b) (vi), the list of documents included a numerical count of each document enclosed. In particular, in each instance the list specified: "3 originals and 3 copies of Bills of Lading".

October 2013 onwards: MT420 SWIFT tracers were transmitted by Claimant 1 to the Respondent seeking the status of all unpaid Documentary Collections. No responses were forthcoming from the Respondent.

13 December 2013: A SWIFT message was sent by Claimant 1 to the Respondent requesting confirmation that the Respondent was still holding documents relating to unpaid Documentary Collections. No response was received.

14 January 2014: A SWIFT message was sent by Claimant 1 to the Respondent advising that Claimant 1 had been informed that the goods had been delivered to the buyer for all unpaid collections. Claimant 1 requested immediate payment for all outstanding collections.

20 January 2014: The Respondent advised Claimant 1 by SWIFT message that it was still holding the original documents.

25 January 2014: In an email received by Claimant 1 on 25 January 2014 (but dated within the text of the email as 23 January 2014), the Respondent alleged, for the first time, that it only received 2 of 3 original Bills of Lading under each documentary collection. This conflicted with the collection instruction sent by Claimant 1, which stated that 3 of 3 original Bills of Lading were sent.

Whilst these allegations were denied in the strongest terms, the Claimants submitted that it was irrelevant in any event. The Respondent had an obligation pursuant to URC 522 sub-article (12) (a) to inform Claimant 1 "without delay" if it considered a deficiency existed between the documents received compared with those listed in the collection instruction from Claimant 1. The Claimants submitted that by no reasonable measure could the Respondent's notifications be said to have occurred without delay.

While the phrase "without delay" is not defined within the URC, it was the Claimant's submission that on any analysis, a delay of greater than 3 months could not be considered 'without delay'. ICC Opinion 470/TA.801rev refers.

Further, each collection instruction stipulated that documents were to be released against payment at sight. The Respondent was obliged to hold all 3 original bills of lading pending payment by the drawee, or alternatively, seek appropriate instructions as to the further handling of the documents from Claimant 1 as per URC 522 sub-article 26 (c) (iii).

The Respondent denied the request from Claimant 1 to return all 3 original bills of lading, claiming that it was not in possession of 3 originals. The failure to return a complete set of originals, coupled with the failure to notify Claimant 1 of any deficiencies in the documents in a reasonable time was seen as a breach of the rules under which the collections were handled. The Claimants submitted that the Respondent was liable for the full value of the outstanding collections and that ICC Opinion 470/TA.801rev referred.

The Claimants sought a declaration that the Respondent had breached its obligations under URC 522 and was consequently liable to pay the value of the outstanding documentary collections.

Issues

1. Whether the Respondent had breached the provisions of URC 522 sub-article 12 (a) and was therefore precluded from claiming non-receipt of 3 original Bills of Lading given it did not provide advice 'without delay'?

2. Where, in the event the Respondent is requested to return the documents, but was unable to do so, whether the Respondent was liable for the unpaid collections?

Documents submitted

List of electronic attachments:

Attachment 1 - Export Collection Presentation Form - Sample

Attachment 2 - Claimant 1 Documentary Collection Schedule - Sample

Attachment 3 - Claimant 1 MT420 Swift Tracer to Respondent - Sample

Attachment 4 - Claimant 1 SWIFT to Respondent dated 13 Dec 2013 seeking confirmation that Respondent holding all documents.

Attachment 5 - Claimant 1 SWIFT to Respondent dated 14 Jan 2014 again seeking confirmation on status of documents.

Attachment 6 - Respondent SWIFT MT499 to Claimant 1 dated 20 Jan 2014 confirming they are holding Original Documents.

Attachments 7 - Respondent email to Claimant 1 on 25 Jan 2014 alleging only 2 of 3 Original BL received.

Analysis

Issue 1:

The DOCDEX Form 1 referred to documentary collection instructions, which were sent by Claimant 1 to the Respondent over the period from 30 September to 03 December 2013.

A single documentary collection sample (collection instruction and commercial/financial documents) was attached to Form 1 as being representative of the documentary collections. The sample documentary collection instruction expressly stated it was subject to URC 522.

URC 522 sub-article 1 (a) states: "...shall apply to all collections as defined in Article 2 where such rules are incorporated into the text of the "collection instruction"...".

URC 522 sub-article 2 (a) defines a collection as: "the handling by banks of documents ... in accordance with instructions received, in order to:

... ii. deliver documents against payment ...".

Information shown on the collection instruction from Claimant 1 appeared to follow URC 522 sub-article 4 (b): "a collection instruction should contain the following items of information as appropriate." And, more specifically, sub-article 4 (b) (vi): "List of documents enclosed and the numerical count of each document."

The sample collection instruction listed the documents enclosed, their numerical count with regards to originals and copies of each. URC 522 obligates banks to act if a collection instruction lists documents and their numerical count.

URC 522 sub-article 12 (a) states: "Banks must determine that the documents received appear to be as listed in the collection instruction and must advise by telecommunication or, if that is not possible, by other expeditious means, without delay, the party from whom the collection instruction was received of any documents missing, or found to be other than listed. Banks have no further obligation in this respect."

Based on supporting copies of documents provided with FORM 1, it would appear that the first correspondence from Respondent to Claimant 1 was a SWIFT MT499 dated 20 January 2014 in which they "... confirm that we are still holding the original documents ...". The SWIFT message made no reference to an inconsistency between documents received and the collection instructions as is required by URC 522 sub-article 12 (a) therefore the Respondent would be precluded from claiming otherwise in future correspondence.

Issue 2:

The DOCDEX Form 1 referred to documentary collection instructions that were sent by Claimant 1 to Respondent over the period from 30 September to 03 December 2013.

A single documentary collection sample (collection instruction and commercial/financial documents) was attached to Form 1 as being representative of the documentary collections. The sample documentary collection instruction expressly stated it was subject to URC 522.

The collection instruction sent by Claimant 1 to Respondent stated: "Release documents against payment."

The presenting bank must make presentation for payment without delay as stated in URC 522 article 6: "In the case of documents payable at sight the presenting bank must make presentation for payment without delay. ..."

The presenting bank must also send advice of non-payment and/or non-acceptance as defined in URC 522 sub-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. ..."

The remitting bank must act upon such notification as stated in URC 522 sub-article 26 (c) (iii): "... On receipt of such advice the remitting bank must give appropriate instructions as to the further handling of the documents (emphasis added). If such instructions are not received by the presenting bank within 60 days after its advice of non-payment and/or non-acceptance, the documents (emphasis added) may be returned to the bank from which the collection instruction was received without any further responsibility on the part of the presenting bank."

All banks that are a party to a collection under URC 522 are responsible for the documents entrusted to their care by the principal. In case of non-payment and/or non-acceptance and, if so requested by the collecting and/or remitting bank, the entire set of documents - unless otherwise instructed- must be returned by the presenting bank to the collecting or remitting bank as the case may be.

Should Claimant 1 instruct the Respondent to return the collection documents, the Respondent must return the documents as listed on the collection instruction. If the Respondent is unable to do so, they are liable for payment of the collection instruction.

Conclusion

The Respondent was in breach of URC 522 sub-article 12 (a) and was therefore precluded from claiming that any document was missing.

The collection instruction was to release documents against sight payment. In view of the fact that payment was not forthcoming, the Respondent must comply with the request from Claimant 1 to return the full set of documents in the same condition as received.

As the Respondent was unable to return the full set of documents, they must pay the collection.