Parties to the query

Claimant: Issuing Bank

Respondent: Applicant

Detailed description

A credit was issued subject to the UCP 600, and the confirming bank submitted documents to the Claimant for payment. The Claimant raised two discrepancies which were rejected in detail by the confirming bank.

Subsequently, the Respondent obtained a preliminary court injunction preventing payment.

The Claimant informed the confirming bank that they still considered the discrepancies as valid and that, in any event, they had received a preliminary court injunction preventing payment, although they were seeking to have the injunction lifted.

Consequently, the court decided that the injunction had to be released, and the Claimant effected payment to the confirming bank.

Questions were raised as to whether the documents were actually compliant or whether the alleged discrepancies were appropriate. Furthermore, it was asked if it was reasonable for the Claimant to desist from discrepancies after reconsideration and find them not material and, if so, whether the Respondent had the right to not reimburse the Claimant for this reason. Finally, it was questioned as to whether the rights of the Claimant and the confirming bank were independent and separate.

Analysis

The initial discrepancy surrounded late presentation and was based upon a differing interpretation of the presentation period stated in the credit between the Claimant and the confirming bank. It was clarified that according to the ISBP 745 Preliminary Consideration (v), the applicant bore the risk of any ambiguity in its instructions to issue or amend a credit. At the time of document submission, the confirming bank had explicitly informed the Claimant of the date on which documents were received by them, with the outcome that the DOCDEX panel considered this alleged discrepancy as not valid.

Regarding the second discrepancy in respect of a possible conflict between dates within documents, it was concluded that under the UCP 600 sub-article 14 (a), banks must examine a presentation to determine, on the basis of the documents alone, whether or not the documents appear on their face to constitute a complying presentation. Upon this basis, the alleged discrepancy was not considered to be valid.

Regarding a ‘reconsideration’ of discrepancies, there was nothing to prevent a bank from changing their mind regarding the existence of a discrepancy. If a subsequent review of the documents found that documents were indeed compliant, and that the earlier discrepancies were invalid, then the issuing bank had an obligation to pay.

In this respect, the responsibility of the applicant to reimburse an issuing bank was not within the scope of the UCP 600 and thus not appropriate for DOCDEX.

Under the UCP 600 articles 7 and 8, the undertakings of an issuing bank and a confirming bank are independent and separate. According to the UCP 600 sub-article 7 (c), an issuing bank undertakes to reimburse a nominated bank that has honoured or negotiated a complying presentation. An issuing bank’s undertaking to reimburse a nominated bank is independent of the issuing bank’s undertaking to the beneficiary.

Decision

It was decided that the submitted documents were compliant and the stated discrepancies were invalid.

Additionally, it was acceptable for the Claimant to change their mind regarding the existence of a discrepancy, leading to the Claimant having an obligation to pay according to the UCP 600 article 7.

An issuing bank’s undertaking to reimburse a nominated bank is independent of the issuing bank’s undertaking to the beneficiary.