A German textile manufacturer has successfully petitioned a UK court to establish that an English trade finance provider failed to establish an arguable case to justify that a letter of credit (L/C) it issued could be interpreted as, in practice, revocable given that it was made as an irrevocable instrument expressly on UCP 600 terms.

In an analysis of the case, London based lawyers at Herbert Smith Freehills suggest the court's judgment continues a trend of decisions considering the UCP 600 in which the courts have consistently favoured an international focus on the question of interpretation.

Case outline

Textile manufacturer Heytex Bramsche entered into a contract to sell fabric to Dubai-based Jibran Technical Services and engaged UTC Trade Capital, a provider of capital and credit including by issuing L/Cs to back up payment commitments and obligations, to issue an expressly irrevocable L/C for around EUR 200,000 (US$208,000) in favour of Heytex, as beneficiary. The L/C incorporated the standard UCP 600 terms.

UTC argued it need not honour the L/C for several reasons, including that it considered the documents were not compliant with the terms because they were not signed by "all sides" in the transaction.

Consistency as far as possible

The court rejected this argument while citing and agreeing with the legal opinions in several other cases that there is a need to consider L/Cs as a whole and, whenever possible, to read the contractual terms consistently with the UCP.

Finding that "there is no real or substantial dispute in respect of the debt" upon which Heytex brought its winding up petition against UTC, the German textile firm succeeded against the L/C issuer.

The judgment of the England and Wales High Court (Chancery Division) in the case of Heytex Bramsche GmbH v Unity Trade Capital Ltd, which cites legal opinions in several other cases involving UCP 600, can be found here.

Herbert Smith Freehills' summary and analysis of the case can be found here.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.