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Note:Rabobank, seeking reimbursement of US$ 1,400,000 for payment on a letter of credit issued by the Bank of China's Zhejiang Branch for the purchase of timber sued for summary judgment against Issuer.

Issuer claimed the Certificate of Origin presented by Rabobank was non-compliant. Issuer also contended it was precluded by order of a Chinese court for making payment under the credit.

The High Court of the Hong Kong Special Administrative Region Court of First Instance, Stone, J., denied Rabobank's request for summary judgment. The court noted:

"The discrepancy point - whether the Certificate of Origin could be regarded as having been issued by the Malaysian Chamber of Commerce - perhaps is not as straightforward as at first blush it may appear. Certainly, there cannot be many instances of the ICC Banking Commission, to whom this matter was referred, arriving at diametrically opposite decisions on the point within seven months of each other (the latter being in [Rabobank's] favour), as occurred here, and in these unusual circumstances I should not be inclined to exclude [Issuer's] expert evidence ... of whether a banker acting reasonably would accept the Certificate on its face as being in compliance with the requirements of the Credit."

In what it termed the 'illegality issue', the court considered Issuer's assertion that "it should not safely be assumed that [Rabobank] is claiming as negotiating bank, and accordingly that discovery was required upon the issue of whether [Rabobank] was merely acting qua collecting bank." Counsel for Issuer had claimed Issuer did not have "any internal documentation of [Rabobank] in relation to this transaction."

Accordingly, the court concluded that the matter should proceed to a trial.

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