Parties to the query

Claimant: Negotiating Bank

Respondent: Issuing Bank

Detailed description

A credit was issued by the Respondent, subject to the UCP 600, available with the Claimant by mixed payment. The payment terms were split into three tranches, with the final tranche for 10% of the credit amount being the subject of this case.

The Respondent initially refused the final tranche based upon a discrepancy which was disputed by the Claimant.

It was stated that the documentary requirement for claiming the final 10% was ambiguous as to whether an acceptance certificate and a bank guarantee or an invoice and a bank guarantee were required.

The applicant of the credit also obtained a court injunction preventing the Respondent from effecting payment. Once the injunction was lifted, the Respondent effected the full payment of 10% of the credit amount.

The Claimant asserted that the Respondent should have reimbursed since the credit stated that an invoice and a bank guarantee only were required.

Decisions were sought on whether the discrepancy was valid, and whether the Respondent was obligated to pay delayed interest and handling fees.

Analysis

The UCP 600 sub-article 14 (a) states that a bank 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.

The ISBP 645 Preliminary Consideration (v) states: “The applicant bears the risk of any ambiguity in its instructions to issue or amend a credit. An issuing bank may, unless the applicant expressly instructs to the contrary, supplement or develop those instructions in a manner necessary or desirable to permit the use of the credit or any amendment thereto. An issuing bank should ensure that any credit or amendment it issues is not ambiguous or conflicting in its terms and conditions.”

Field 47B of the MT700 indicated that, in order to obtain payment for the final tranche of 10%, the beneficiary was required to present an acceptance certificate and a performance bank guarantee. However, confusion arose because it was also stated that the Respondent would pay only against an invoice and guarantee.

Usage of the word “only” and the missing requirement for an acceptance certificate gave rise to ambiguity as to the requirements for payment.

Whilst the beneficiary presented only an invoice and a performance bank guarantee, the risk of misinterpretation must be borne by the Respondent.

The UCP 600 sub-article 7 (c) states that an issuing bank undertakes to reimburse a nominated bank that has honoured or negotiated a complying presentation and forwarded the documents to the issuing bank. In this respect, the Claimant was eligible for payment, with the result that the Respondent was liable for loss of interest for the delay in payment.

Decision

Under the provisions of the UCP 600 and the ISBP 745, the Respondent bore responsibility for ambiguous instructions. Hence the Respondent should have honoured presentation of the invoice and bank guarantee alone. The Respondent was also liable for the delay in payment, although the subject of interest and handling charges is outside the scope of the UCP 600.