article 36

[asamaha]

Bank A issues a standby subject to UCP in favour of Bank B covering credit facilities to be granted to company X payable against a claim by swift.

Bank B sends its claim by authenticated swift to Bank A on date of expiry, but Bank A was closed on that date due to a strike in the banking sector.

Is Bank A under the obligation to pay upon resuming its business after the expiry date?

Regards
Antoine

[AlbertB]

Dear Antoine,

It depends how the LC was structured (availability and place of expiry, etc.) My question is how we interpreted “payable against a claim by SWIFT”, is such claim considered a “presentation”? (Don’t go beyond UCP by looking at ISP98 or e-UCP). I believe it is a controversial issue.

Regards,
Albert

[edited 5/12/2010 9:23:10 PM]

[asamaha]

The standby is available with the issuing bank and payable on first demand made in writing or by swift. The standby is sent directly to the beneficiary i.e. Bank B.

Regards
Antoine

[GlennRansier_]

I do have my opinions but this is a legal and a relationship question. In general, if you allow for a SWIFT drawing, eUCP is the appropriate rules to cover this electronic presentation.

[NigelHolt]

Antoine,

Based on the wording of Art. 36, I think the answer to your question is definitely 'no'. This is why ISP98 is better from a beneficiary's perspective.

Regards, Jeremy
[edited 5/16/2010 2:22:59 PM]

[NigelHolt]

An after thought Antoine. My reply pre-supposes that the issuing bank was not able to receive the SWIFT transmitted demand by reason of the strike.

I say this as I would have thought that if the SWIFT demand was received by the issuing bank on the expiry date (and one can debate I imagine what constitutes, in law, receipt of a SWIFT message by a bank) notwithstanding the strike then -provided it complied- the issuing bank would be obliged to honour it on resumption of business.

In other words, I assume the last paragraph of Art. 36 does not apply to a presentation that has actually been received by the issuing (or confirming) bank on or before expiry either before the strike started or during the strike.

[DanielD]

I think that people have never considered seriously article 36. It was an academic issue. But things have changed. These days, exclusion of art. 36 would make sense for some. And, as the gap must be filled, I would try to obtain something in the line of art. 24 a iii of URDG 758 instead.
Daniel

[HOANGTHIANHTHU_invalid]

Sorry but no.

Regards/N.H.Duc

[JimBarnes]

Putting aside what rule to apply and how to apply it, should the answer be that the beneficiary's rights are forfeited? Should the applicable rule be unclear so that the issuing bank would have respectable defenses, but would be exposed to respectable claims against it by the beneficiary or the applicant, no matter what it does? I can tell you that the ISP drafters answered these questions "no".

Here it appears that the issuing bank can claim a UCP600 force majeure interruption of its business on the expiry date. Like Jeremy, I don't know if that interruption had as a consequence non-presentation of the SWIFT demand on the expiry date. It may not matter. Arguably, the last sentence of Article 36 forbids honor under a credit that expired during "such" interruption no matter what the consequence was on the particular attempted presentation.

I read URDG article 26 as requiring that the claimed force majeure interrupt the issuer's business as it relates to the particular presentation. If it does, then timing requirements are automatically extended.

Regards, Jim