Article

Procedural History:

The Beijing High Court brought a verdict for the second trial in favor of the Appellant that Appellee should pay the Appellant the loss of goods and interest reversal based on the deposit interest rate. But overruled the Appellant’s claim that the Appellee should be responsible for the loss of export rebates and interest reversal based on the loan rate. The Appellant applied for a retrial.

Facts:

  1. The Retrial Petitioner sold apples overseas from May. 2007 to Jun. 2007. And the payment method of the sale was negotiable L/C. The Petitioner presented the documents to the Respondent in accordance with the L/C, but didn't receive the payment of the goods.
  2. After investigation and verification, the L/C wasn’t banker’s L/C. The Respondent changed the non-banker’s L/C to the banker’s L/C, which resulted in the Petitioner’s loss of good, interest reversal and the loss of export rebates.

Legal Issue(s):

Whether the Respondent should bear the loss of export rebates and the loss of loan interest.

Legal Rule(s):

Sec. 2, Art. 106, General Principles of The Civil Law of The People's Republic of China: Citizens and legal persons who through their fault encroach upon state or collective property or the property or person of other people shall bear civil liability. Civil liability shall still be borne even in the absence of fault, if the law so stipulates.

Disposition – for each legal issue:

The Court dismissed the petition for retrial, and overruled that the Respondent should bear the loss of export rebates and the loss of loan interest.

Holding & Reasoning for each issue:

According to the Sec. 2, Art. 106, General Principles of The Civil Law of The People's Republic of China, the precondition of a citizen or legal person who shall bear the civil liability was the causal relationship between the wrongful conduct and the damage. In this case, the reason why the Petitioner could not withdraw the full amount of the L/C was that the L/C issuer-Lloyd Trade and Savings Committee violated the commitment that to purchase the complying documents. The Respondent as transmitting bank and advising bank, negligently advised that the issuer was Ukraine Dnepr Credit Bank by mistake. The wrongful conduct of the Respondent lead to the Petitioner misunderstood that the issuer was a bank with good credit, which resulted in the loss. The Respondent should bear the liability equivalent to its misbehavior. While L/C was a transaction of documents independent of the underlying transaction, so the responsibility that party of L/C should take for misbehavior should be limited to the direct loss of L/C. The loss of export rebates and the loss of loan interest were beyond the L/C, so the Respondent should not bear the liability of those losses.

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The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of the ICC or Coastline Solutions.