"Great expectations" translated into French: " Les Grandes Espérances".
I agree with Svetlana. I think that it does not matter on what basis and when the DPU has been issued to be "protected". Let us trust the BC.
Daniel
Art 7c and Documents for approval
Art 7c and Documents for approval
Dear all,
As stated my Mr. Smith the most important thing is that the conclusion from the Banking Commission will be clear and easily applied.
Mr. Reissiner elaborated out that UCP makes it clear that the nominated bank takes its position by purchasing / pre-paying the draft and / or documents before sending the documents to issuing bank
But that is clearly not what is said in article 2.
Negotiation is clearly stated as advancing funds not before sending the documents but advancing funds to the beneficiary on or before the banking day on which reimbursement is due from the issuing bank.
This is quite a different thing.
Article 7 c dealing with the operational issues of financing under deferred payment and acceptance credits states that reimbursement under a credit available by acceptance or deferred payment is due at maturity, whether or not the nominated bank prepaid or purchased before maturity.
The UCP does not mandate when the nominated has to prepay or purchase as far as I can see.
Why should we support a prohibition of this financing after the documents have been taken up by the issuing bank.
This is a valuable service to the exporter given the high level of discrepancies in presentations.
Svetlana
As stated my Mr. Smith the most important thing is that the conclusion from the Banking Commission will be clear and easily applied.
Mr. Reissiner elaborated out that UCP makes it clear that the nominated bank takes its position by purchasing / pre-paying the draft and / or documents before sending the documents to issuing bank
But that is clearly not what is said in article 2.
Negotiation is clearly stated as advancing funds not before sending the documents but advancing funds to the beneficiary on or before the banking day on which reimbursement is due from the issuing bank.
This is quite a different thing.
Article 7 c dealing with the operational issues of financing under deferred payment and acceptance credits states that reimbursement under a credit available by acceptance or deferred payment is due at maturity, whether or not the nominated bank prepaid or purchased before maturity.
The UCP does not mandate when the nominated has to prepay or purchase as far as I can see.
Why should we support a prohibition of this financing after the documents have been taken up by the issuing bank.
This is a valuable service to the exporter given the high level of discrepancies in presentations.
Svetlana
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GlennRansier_
- Posts: 132
- Joined: Fri Apr 05, 2019 5:19 pm
Art 7c and Documents for approval
This has been a topic for a long time and it would be nice to believe that a nominated bank could act whenever it desires but… For those nominated banks who have not acted upon their nomination by creating a Def. Payment Undertaking when they determined the documents in compliance and forwarded the documents to the issuer then it must be understood that the issuer will have sole responsibility to honour at maturity. As it is now only an issuer's obligation, they have the right to only pay the beneficiary (and possibly offset those funds) and/or prepay the beneficiary.
The bank that merely forwards the documents is considered a "presenting bank" and as such, generally they have no legal rights in the transaction.
While some presenting banks prefer to await the issuer's acceptance of documents and beneficiaries do ask presenting banks to discount after issuer’s acceptance, the question that arises is: What would be the presenting bank’s standing if they initially advised the issuer they had not acted upon their nomination but then subsequently, prior to maturity, decided to become a committed bank? Understanding that country law differs there may be different responses. However, I believe that in most cases you would be in a weak position in demanding reimbursement from an issuer. Most likely it would be considered a side agreement/contract between a presenter and the beneficiary. The issuer would rely upon the presenting bank's document cover letter to reflect that the presenting bank had not undertaken its nomination so that any future action without the agreement/consent of the issuer would probably be considered a separate contract outside of the LC.
The bank that merely forwards the documents is considered a "presenting bank" and as such, generally they have no legal rights in the transaction.
While some presenting banks prefer to await the issuer's acceptance of documents and beneficiaries do ask presenting banks to discount after issuer’s acceptance, the question that arises is: What would be the presenting bank’s standing if they initially advised the issuer they had not acted upon their nomination but then subsequently, prior to maturity, decided to become a committed bank? Understanding that country law differs there may be different responses. However, I believe that in most cases you would be in a weak position in demanding reimbursement from an issuer. Most likely it would be considered a side agreement/contract between a presenter and the beneficiary. The issuer would rely upon the presenting bank's document cover letter to reflect that the presenting bank had not undertaken its nomination so that any future action without the agreement/consent of the issuer would probably be considered a separate contract outside of the LC.
Art 7c and Documents for approval
I think Glen makes some very goods points with which, unsurprisingly, I agree.
Svetlana, your interpretation of the definition of ‘negotiation’ (if I understand it correctly; apologies if I do not) is the same as I encountered yesterday in discussions with other bankers, but I am convinced it is wrong.
In order to ‘purchase’ the drafts and/or documents one has to (1) advance or (2) AT THE TIME OF PURCHASE (which obviously cannot occur once the issuing bank has honoured the documents)- give the beneficiary an agreement (logically in writing) that one -as nominated bank- will advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank (again logically) if requested to do so by the beneficiary. In other words, the definition of negotiation simply does not allow a bank to advance funds when it likes after it has handled the documents; it must have first given an agreement to do so, this agreement constituting its act of 'purchase'.
Regards, Jeremy
[edited 10/15/2009 9:29:29 AM]
Svetlana, your interpretation of the definition of ‘negotiation’ (if I understand it correctly; apologies if I do not) is the same as I encountered yesterday in discussions with other bankers, but I am convinced it is wrong.
In order to ‘purchase’ the drafts and/or documents one has to (1) advance or (2) AT THE TIME OF PURCHASE (which obviously cannot occur once the issuing bank has honoured the documents)- give the beneficiary an agreement (logically in writing) that one -as nominated bank- will advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank (again logically) if requested to do so by the beneficiary. In other words, the definition of negotiation simply does not allow a bank to advance funds when it likes after it has handled the documents; it must have first given an agreement to do so, this agreement constituting its act of 'purchase'.
Regards, Jeremy
[edited 10/15/2009 9:29:29 AM]
Art 7c and Documents for approval
Dear Jeremy,
It is good to debate and to have different points of view and it is encouraging that in the end we agree that the main point is that the rules and decisions of the ICC need to give crystal clear direction on this point.
At the moment it is clear, that there is a lack of clarity.
Regardless of theory it is very much a common practice for a nominated bank under a negotiation LC at sight (drafts if any typically drawn on issuing bank) to actually wait until the documents have gone through the full cycle and only crediting the beneficiary on final reimbursement or receipt of proceeds/reimbursement/payment/funds from issuing bank.
This we all agree is not what is envisaged or defined as ‘negotiation’ but I wanted to address typical actions under negotiation LC available at sight.
The issue of advancing funds to the beneficiary by the nominated bank after acceptance of docs/drafts under usance negotiation LC by issuing bank is also very common practice.
This is of course relating to negotiation LC with time drafts eg. 90, 180 days etc (typically drawn on issuing bank).
Clearly, in this instance it is possible for the purchase and advance of the nominated bank to occur, that is for the negotiating bank to advance funds in this instance to the beneficiary on or before the banking day on which reimbursement is due from the issuing bank.
Svetlana
It is good to debate and to have different points of view and it is encouraging that in the end we agree that the main point is that the rules and decisions of the ICC need to give crystal clear direction on this point.
At the moment it is clear, that there is a lack of clarity.
Regardless of theory it is very much a common practice for a nominated bank under a negotiation LC at sight (drafts if any typically drawn on issuing bank) to actually wait until the documents have gone through the full cycle and only crediting the beneficiary on final reimbursement or receipt of proceeds/reimbursement/payment/funds from issuing bank.
This we all agree is not what is envisaged or defined as ‘negotiation’ but I wanted to address typical actions under negotiation LC available at sight.
The issue of advancing funds to the beneficiary by the nominated bank after acceptance of docs/drafts under usance negotiation LC by issuing bank is also very common practice.
This is of course relating to negotiation LC with time drafts eg. 90, 180 days etc (typically drawn on issuing bank).
Clearly, in this instance it is possible for the purchase and advance of the nominated bank to occur, that is for the negotiating bank to advance funds in this instance to the beneficiary on or before the banking day on which reimbursement is due from the issuing bank.
Svetlana
Art 7c and Documents for approval
There has recently been an English court case that apparently deals with the question of whether or not a bank can perform a nominated bank role after it has forwarded documents to the issuing bank without the issuing bank’s further agreement. It is:
FORTIS BANK S.A. / N.V STEMCOR UK LIMITED v INDIAN OVERSEAS BANK Neutral Citation Number: [2009] EWHC 2303 (Comm) and Case No: 2009-34
A copy of the judgment can be found at:
http://www.bailii.org/cgi-bin/markup.cg ... od=boolean
Commentaries can be found at:
http://www.jonesday.com/pubs/pubs_detai ... ubID=S6719
http://www.freshfields.com/email/newspa ... tem=1583#B
FORTIS BANK S.A. / N.V STEMCOR UK LIMITED v INDIAN OVERSEAS BANK Neutral Citation Number: [2009] EWHC 2303 (Comm) and Case No: 2009-34
A copy of the judgment can be found at:
http://www.bailii.org/cgi-bin/markup.cg ... od=boolean
Commentaries can be found at:
http://www.jonesday.com/pubs/pubs_detai ... ubID=S6719
http://www.freshfields.com/email/newspa ... tem=1583#B
Art 7c and Documents for approval
I think this is more of a UCP600 interpretation issue than a "what is practice" issue and that many of you are reading restrictions into UCP600 that aren't there.
I also think that this discussion should focus more on facilitating trade finance than policing claims for reimbursement under UCP600, because the common denominator here is that the issuing bank has decided to honour a presentation received from a nominated bank.
Regards, Jim Barnes
I also think that this discussion should focus more on facilitating trade finance than policing claims for reimbursement under UCP600, because the common denominator here is that the issuing bank has decided to honour a presentation received from a nominated bank.
Regards, Jim Barnes
Art 7c and Documents for approval
Thanks Jeremy for your posting on 4Nov.
After reading the case, one can conclude that
i) so long as the docs are clean at the counter of the bank who negotiates or purchases the bill by paying the bene before the bank receives the proceeds is deem to have already acted as a nominated bank. Even though, the process of purchase is to be executed only after the bank receives the acceptance advice (let's say for a usance LC bill).
ii) if the docs are not clean at the counter of the bank, then the bank cannot later purchase the bill and claim they have acted as one - a nominated bank - under art.7c
Do i miss out anything?
Your comments, pls.
Thanks.
Yat
After reading the case, one can conclude that
i) so long as the docs are clean at the counter of the bank who negotiates or purchases the bill by paying the bene before the bank receives the proceeds is deem to have already acted as a nominated bank. Even though, the process of purchase is to be executed only after the bank receives the acceptance advice (let's say for a usance LC bill).
ii) if the docs are not clean at the counter of the bank, then the bank cannot later purchase the bill and claim they have acted as one - a nominated bank - under art.7c
Do i miss out anything?
Your comments, pls.
Thanks.
Yat
Art 7c and Documents for approval
Yat,
Conclusion i) above reflects the court's judgment, but conclusion ii) does not. The court postponed deciding the claims of both the nominated bank and the beneficiary that the issuing bank was precluded from claiming non-compliance.
Moreover, the court has apparently concluded that the nominated bank's right to reimbursement depends on issuing bank preclusion and not on whether the nominated bank negotiated before or after forwarding the documents.
Regards, Jim Barnes
Conclusion i) above reflects the court's judgment, but conclusion ii) does not. The court postponed deciding the claims of both the nominated bank and the beneficiary that the issuing bank was precluded from claiming non-compliance.
Moreover, the court has apparently concluded that the nominated bank's right to reimbursement depends on issuing bank preclusion and not on whether the nominated bank negotiated before or after forwarding the documents.
Regards, Jim Barnes
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RobReissner
- Posts: 19
- Joined: Fri Apr 05, 2019 5:25 pm
Art 7c and Documents for approval
Dear all,
When my attention was first drawn to the court case Jeremy referred to, I had high hopes it would confirm my view (and also Jeremy's) on the principle of actually acting on your nomination. After reading the full report I was a bit dissapointed in that. I doubt that Fortis, in this case, agreed towards beneficiary to purchase or advance payment upon forwarding the documents to issuing bank. However, as Jim pointed out, the judge apparently reasoned that issuing bank has an obligation to honour and, so, more or less takes the side of nominated bank. I am afraid this case cannot be regarded as representative in the discussion of properly acting on your nomination.
Jeremy,
The Dutch ICC Committee intends to request the Banking Commission to include in their opinion that issuing bank's notice of acceptance can be regarded as an authorisation for nominated bank to exercise its nomination as yet. Mind you, I am still on the same page with you, but at least it would create clarity.
Kind regards,
Rob Reissner
When my attention was first drawn to the court case Jeremy referred to, I had high hopes it would confirm my view (and also Jeremy's) on the principle of actually acting on your nomination. After reading the full report I was a bit dissapointed in that. I doubt that Fortis, in this case, agreed towards beneficiary to purchase or advance payment upon forwarding the documents to issuing bank. However, as Jim pointed out, the judge apparently reasoned that issuing bank has an obligation to honour and, so, more or less takes the side of nominated bank. I am afraid this case cannot be regarded as representative in the discussion of properly acting on your nomination.
Jeremy,
The Dutch ICC Committee intends to request the Banking Commission to include in their opinion that issuing bank's notice of acceptance can be regarded as an authorisation for nominated bank to exercise its nomination as yet. Mind you, I am still on the same page with you, but at least it would create clarity.
Kind regards,
Rob Reissner