Parties to the query

Claimant: Beneficiary

Respondent: Issuing Bank

Detailed description

A credit was issued by the Respondent, subject to the UCP 600 and available by deferred payment, in favour of the Claimant.

Sixteen separate sets of documents were submitted by the Claimant, via a presenting bank, to the Respondent.

The first six presentations, despite not being refused by the Respondent, were not paid on the respective maturity dates.

A copy of one of the provided bills of lading showed that the bill of lading was issued to the order of the Respondent and was apparently endorsed by them on the reverse (showing “deliver to order of” the applicant). A copy of a certificate issued by the International Shipping and Maritime Survey related to the vessel and bill of lading evidenced that the goods were released to the consignee.

For the other five presentations, the provided copy of each bill of lading showed that the bills of lading were issued to the order of the Respondent. However, the copy of the reverse side of the bills of lading was not provided nor was any other evidence that the goods were released or to whom.

Under the remaining ten presentations, it was alleged that the Respondent released documents to the applicant despite the presentations being discrepant.

The Respondent also evidently endorsed the bills of lading relating to seven of the presentations, and copies of certificates issued by either International Shipping and Maritime Survey, SNO Salim Transit Bahri or Shico Shipping and Trading in respect of the vessel and bills of lading evidenced that the goods were released to the consignee. For the other three presentations, the provided copy of the bills of lading showed that the bills of lading were issued to the order of the Respondent, although there had been no indication of release of the goods.

All ten presentations were refused for the same discrepancy that the control of quality certificate was issued by the beneficiary instead of CIQ. One presentation was also stated to be “late”. The notice of refusal was sent by the Respondent to the presenting bank via an unauthenticated SWIFT MT999 message and stated that such message should be considered as SWIFT MT 734. It further stated that documents were held at the disposal of the presenting bank at the counters of the Respondent.

It was queried as to whether the Respondent should honour the first six presentations in accordance with the provisions of the UCP 600, and whether it should honour the remaining ten presentations as it had failed to act in accordance with the requirements of the UCP 600 article 16.

Analysis

With respect to the first six presentations, the Claimant affirmed that the related documents were compliant. However, since copies of the documents and other relevant information had not been submitted, there was no way of verifying such claim.

If it had been possible to verify that each presentation was complying, then based on the UCP 600 sub-article 7 (a) (iii), the Respondent would have been obligated to honour, i.e. to incur a deferred payment undertaking and pay at maturity (as the credits were available by deferred payment).

No evidence was provided that the Respondent refused the documents claiming that the presentations were discrepant. There was also no submitted evidence that the Respondent accepted the documents and incurred respective deferred payment undertakings to pay on the respective maturity dates.

In any event, as there was no evidence that the Respondent refused documents in line with the UCP 600 sub-article 14 (a) and sub-articles 16 (a), (c) and (d), it would have been precluded from claiming that the documents did not constitute a complying presentation under the UCP 600 sub-article 16 (f).

On this basis, and according to the UCP 600 sub-article 7 (a) (iii), the Respondent would have been obligated to honour, i.e. to incur respective deferred payment undertakings and pay on the respective maturity dates.

Furthermore, the Respondent was evidently, in at least in one circumstance, instrumental in releasing the goods to the applicant. The endorsement of the Respondent and release of an original bill of lading was needed to allow the release of the cargo to the applicant. The evidence to show that such endorsement took place was provided.

With respect to the remaining ten presentations, the stated discrepancies were not contested by the presenting bank (or the beneficiary).

The Claimant contended that the Respondent had released the refused presentations to the applicant without instructions (approval) from the presenting bank and, therefore, failed to act in accordance with the provisions of the UCP 600 article 16.

The Respondent sent notices of refusal to the presenting bank by SWIFT message MT999. A SWIFT MT999 is not an authenticated message, however the UCP 600 sub-article 16 (d) requires the notice to be given by telecommunication or, if that is not possible, by other expeditious means. This requirement does not automatically mean that such telecommunication notice must be authenticated. Nevertheless, the SWIFT message MT999 is a free format message, i.e. it is used for various purposes.

The SWIFT message MT734 has been designed for provision of refusals of discrepant presentations, and it is titled as “Advice of Refusal”. The use of this particular SWIFT message is therefore sufficient indication of a refusal, i.e. such notice of refusal does not need to include further statement to the effect that the bank is refusing to honour or negotiate the presentation.

However, when another SWIFT message type is used, i.e. MT799 or MT999, the notice must clearly state that the bank is refusing the presentation. The Respondent stated in the respective messages that they considered the messages as MT734. Such statement is not sufficient in that it does not indicate that the sender is actually refusing the documents.

As the notices of refusal provided by the Respondent did not provide any clear indication of refusal to honour or negotiate, the notices did not fulfil the requirement of the UCP 600 sub-article 16 (c) (i).

Nevertheless, it was considered that the notice of disposal of the refused documents stating that the Respondent held the documents at their counters, at the disposal of the presenting bank, did comply with the UCP 600 sub-article 16 (c) (iii).

The Respondent was evidently instrumental in allowing the goods to be released to the applicant as full sets of original bills of lading were issued to the order of the Respondent. There was also evidence that the Respondent endorsed the bills of lading to the order of the applicant.

The ICC Opinion R331 (relating to a credit subject to the UCP 500, but still relevant under the UCP 600) stated that if a bank had endorsed a bill of lading, presumably to the applicant, it had not held the documents at the disposal of the presenter, i.e. in the same form and substance as received. This was endorsed in the ICC Opinion R413, also relating to a credit subject to the UCP 500, but still relevant under the UCP 600, wherein it was stated that the issuing bank should only consent to endorsing the bill of lading on the basis that there is an underlying agreement from the applicant that he will accept the documents, under the credit, as presented.

The ICC Opinion 414 stated that the issuing bank should not endorse the document to the applicant without an express authorization from the applicant to accept the documents, received from the remitter, as presented.

The ICC Opinion 671 states that failure by an issuing bank to hold documents at the disposal of the presenter or to return them to the presenter precludes the issuing bank from claiming the documents are not in compliance with the terms and conditions of the credit, under the UCP 600 sub-article 14 (e).

The ICC Opinion TA744 states that by apparently endorsing one original bill of lading in favour of the applicant, the issuing bank had not acted in accordance with the requirements of the UCP 600 sub-article 16 (c) (iii).

Decision

For the first six presentations, the Respondent was obligated to honour without further delay and was responsible for any delay interest from the respective maturity dates until the actual date of full payment.

For the remaining ten presentations, the Respondent did not refuse documents in line with the UCP 600 sub-article 14 (a) and sub-articles 16 (a), (c) and (d) and, consequently, according to sub-article 16 (f), it had been precluded from claiming that the documents did not constitute a complying presentation and was obligated to pay on the respective maturity dates.

As the Respondent evidently endorsed the bills of lading related to a number of the presentations, such acts meant that the Respondent was unable to return the refused documents in the same condition as received. Therefore, these acts constituted a breach of requirements of the UCP 600 sub-article 16 (c) and resulted in the preclusion given by sub-article 16 (f).

The Respondent was obligated to honour without further delay and was responsible for any delay interest from the respective maturity dates until the actual date of full payment.