Parties to the query

Claimant: Beneficiary

Respondent: Issuing Bank

Detailed description

The Respondent issued a standby credit, subject to the ISP98, in favour of the Claimant.

The applicant under the credit went into administration, and administrators were appointed to liquidate the applicant.

Documents were submitted by a presenting bank, on behalf of the Claimant, to the Respondent.

Subsequently, the Respondent issued a notice of dishonour to the presenting bank, citing four identified discrepancies.

At a later date, the Respondent sent a message to the presenting bank stating that the applicant did not accept the discrepancies, and separately returned the documents to the presenting bank.

The Claimant responded by stating that the time taken to send the notice of dishonour was unreasonable and that the Respondent was, therefore, precluded from rejecting the documents.

The returned documents were received by the presenting bank and, in order to avoid further delay in payment, the Claimant removed the invoices that had apparently caused the stated discrepancies. The remaining documents, which were exactly the ones returned by the Respondent without any replacement or modification, were re-submitted by the presenting bank.

The Respondent consequently sent a new notice of dishonour to the presenting bank raising three new discrepancies which had not been mentioned previously.

Once again, at a later date, the Respondent sent a message to the presenting bank stating that the applicant did not accept the discrepancies, and separately returned the documents to the presenting bank.

The Claimant argued that the alleged discrepancies were not valid, and that the Respondent was not allowed to raise new discrepancies.

It was also queried as to whether the Respondent had issued timely rejections of documents for both presentations, and if the Claimant had made a complying re-presentation.

Analysis

The ISP98 rule 5.01 (a) outlines the timelines for examination under which a notice of dishonour is considered to be reasonable or unreasonable.

The examination of the documents for the initial presentation did not take more than three banking days (which is the standard for “reasonable”), and was actually completed on the second banking day.

The ISP98 rule 5.01 (b) (i) provides that a notice of dishonour is to be given by telecommunication, if available, and, if not, by another means which allows for prompt notice.

The ISP98 rule 5.01 (b) (ii) goes on to state that if the notice of dishonour is received within the time permitted for giving such notice, then it is deemed to have been given by prompt means. This, as outlined in the Official Commentary on the ISP98, allows for notice by courier, provided such notice is received within the time permitted for such notice.

For this case, the notice of dishonour was sent by courier rather than telecommunication, but it was processed within a reasonable period of time, meaning that the Respondent was not precluded from rejecting the initial presentation. Accordingly, the Respondent was not obligated to honour the initial presentation.

Based on exactly the same logic as the initial presentation, the examination and dishonour of the re-submitted documents was considered to be reasonable.

With respect to the raising of new discrepancies in the re-submission, the ISP98 rule 3.07 (a) states that a previous non-complying presentation does not waive or prejudice the right to make another timely presentation. However, the aforementioned Official Commentary clearly stipulates that the examiner cannot omit some discrepancies only to raise them later. Accordingly, any discrepancy present when the documents were first examined but not raised, may not be raised later.

For this case, the Respondent could not raise new discrepancies in the re-presented documents.

Decision

It was concluded that the timing of both presentations was not unreasonable.

For the second presentation, the Respondent was not allowed to raise new discrepancies. On this basis, the second presentation was compliant, and the Respondent was obligated to honour the re-presentation.