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Note: Kailuan (Hong Kong) International Co Ltd (Buyer) obtained a commercial letter of credit to pay for coking coal. When Sino East Minerals Ltd (Seller) presented documents to the negotiating bank under the LC, it noted two discrepancies, namely that one of the three original bills of lading was not endorsed, and all the bills of lading included a “shipped on deck” notation. Seller informed Buyer and requested a waiver, which Buyer refused. Buyer insisted on amended documents, to which Seller agreed, warning that such procedure would delay presentation beyond the agreed upon day for presentation. Buyer responded that an amendment of the day of presentation would be considered, but eventually failed to respond to the request.

Presentation was made after the latest date for presentation, but before expiry of the LC and presumably the issuer refused to honor. When Buyer failed to find suitable buyer for the coal, it terminated the contract and demanded damages from Seller. Arbitration proceedings were commenced. The final arbitral award was rendered in favor of Seller and denied Buyer any damages.

Buyer sued in the US New York Federal Court to vacate the arbitral award, basing its petition on allegations that the arbitral tribunal “exceeded its authority by issuing an award that contradicts clear terms of the contract and impermissibly modifies others, while also deciding issues that were never presented to the Tribunal”. The United States District Court, S.D. New York, Castel, J., denied the petition.

[KCM]

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