I would like your advise on this one;
In the case of an assignment between the beneficiary of a SBLC and the assignee, procedurally, the beneficiary will inform his own banker of the assignment, and they in turn will inform the issuing bank.
As per Art 39, UCP600, the issuing bank need not acknowledge nor is is bound by such a notice, since it is not involved in the actual assignment. All the issuing bank is required to do is to pay as per payment instructions when a complying presentation is made by the beneficiary.
I would like to know whether the above argument could be used to conclude that the issuing bank does not need the assignee’s agreement to cancel the SBLC.
Is there a need to obtain consent of assignees in order to C
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AndrewMarango
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Is there a need to obtain consent of assignees in order to C
Why would the issuing bank be informed of the assignment?
Regards
Daniel
Regards
Daniel
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AndrewMarango
- Posts: 2
- Joined: Fri Apr 05, 2019 5:15 pm
Is there a need to obtain consent of assignees in order to C
in order for them to conduct screening for sanctioned parties and also identify the assignees who are entitled to the proceeds assigned and whose rights may be affected by any amendment or cancellation
Is there a need to obtain consent of assignees in order to C
Andrew,
I assume we are talking about the assignment of the right to receive the proceeds of any demand as opposed to the assignment of the right to make demand.
I cannot see any basis for your statement that per UCP600 Article 39 the issuing bank need not acknowledge nor is bound by such a notice, as the article in question says nothing about the subject; what it does make reference to is ‘ the provisions of the applicable law’. On the contrary, I would expect the issuing bank to be bound legally by the notice (it certainly would be under English law) unless there were some legal bar –under the applicable law- to it being bound. (Laws of course vary from jurisdiction to jurisdiction.)
Nonetheless, I would agree that –in principle- an assignee of the right to receive the proceeds of any demand does not have the rights of a beneficiary with respect to amendments or cancellation of the standby.
With respect to notice, clearly a bank cannot give effect to an assignment unless it has received notice of it and I would not imagine any law would hold a bank liable to an assignee unless it had been given notice. However, I would not expect notice to be given for the purpose of ‘sanctions screening’ -a subject about which I would imagine the beneficiary and assignee would be ignorant- and furthermore cannot see that ‘sanctions regulations’ would be relevant anyway unless the ‘sanctions regulations’ in question were enforceable under the law applicable to the credit.
Regards
[edited 5/31/2011 3:45:40 PM]
I assume we are talking about the assignment of the right to receive the proceeds of any demand as opposed to the assignment of the right to make demand.
I cannot see any basis for your statement that per UCP600 Article 39 the issuing bank need not acknowledge nor is bound by such a notice, as the article in question says nothing about the subject; what it does make reference to is ‘ the provisions of the applicable law’. On the contrary, I would expect the issuing bank to be bound legally by the notice (it certainly would be under English law) unless there were some legal bar –under the applicable law- to it being bound. (Laws of course vary from jurisdiction to jurisdiction.)
Nonetheless, I would agree that –in principle- an assignee of the right to receive the proceeds of any demand does not have the rights of a beneficiary with respect to amendments or cancellation of the standby.
With respect to notice, clearly a bank cannot give effect to an assignment unless it has received notice of it and I would not imagine any law would hold a bank liable to an assignee unless it had been given notice. However, I would not expect notice to be given for the purpose of ‘sanctions screening’ -a subject about which I would imagine the beneficiary and assignee would be ignorant- and furthermore cannot see that ‘sanctions regulations’ would be relevant anyway unless the ‘sanctions regulations’ in question were enforceable under the law applicable to the credit.
Regards
[edited 5/31/2011 3:45:40 PM]
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GlennRansier_olsABN
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- Joined: Fri Apr 05, 2019 5:18 pm
Is there a need to obtain consent of assignees in order to C
Interesting questions. Assuming assignment of proceeds only (versus a transfer) the assignee has no rights under a LC including the right to have all information. They are merely due payment "if and when" a payment is made against a LC.
Notifying the issuer of the assignment is not necessarily mandatory as the assignment is between the bank issuing of the assignment (should be a nominated bank) and the assignee. If an issuer is notified that does not necessarily make them liable to honor the assignment given by another. If an issuer is notified and the assignee is a prohibited entity under the laws of the issuer they may well have to withhold the payment. Given this, it is not a bad idea to run the proposed assignee name to the issuer prior to agreeing to assign proceeds.
Notifying the issuer of the assignment is not necessarily mandatory as the assignment is between the bank issuing of the assignment (should be a nominated bank) and the assignee. If an issuer is notified that does not necessarily make them liable to honor the assignment given by another. If an issuer is notified and the assignee is a prohibited entity under the laws of the issuer they may well have to withhold the payment. Given this, it is not a bad idea to run the proposed assignee name to the issuer prior to agreeing to assign proceeds.
Is there a need to obtain consent of assignees in order to C
Glenn,
As what is sauce for the goose is sauce for the gander …
At the risk of ‘hair splitting’ I would not agree that -assuming assignment of proceeds only- the assignee has no rights under a credit. I would argue they have one right: to receive the proceeds of any payment (subject to prior claims, revocation by operation of law etc), as I think you do implicitly recognise.
Also, in case what you say causes any confusion, it is of course the beneficiary that assigns the right to receive proceeds and therefore there is not any question of the bank that receives the notice ‘issuing’ an assignment (it will –at most- only ‘issue’ an acknowledgement or letter of intent) or ‘agreeing to assign proceeds’ (it will at most -if it has the right under the law applicable to the credit or the express terms of the credit, which in most instances it will not- agree or disagree to the assignment).
Should the bank that receives the notice be legally barred from making payment to the assignee then I agree that it makes sense to notify the assignee (however it is worth emphasising that, of itself, this does not necessarily invalidate legally the assignment particularly as any legal bar could be subsequently lifted before payment is made under the credit). However, if the bank that receives the notice is the nominated bank whether or not the issuing bank is entitled to make a payment under the law applicable to the issuing bank seems to me immaterial (with the possible exception of where someone chooses to notify the issuing bank as well of the assignment).
Regards, Jeremy
As what is sauce for the goose is sauce for the gander …
At the risk of ‘hair splitting’ I would not agree that -assuming assignment of proceeds only- the assignee has no rights under a credit. I would argue they have one right: to receive the proceeds of any payment (subject to prior claims, revocation by operation of law etc), as I think you do implicitly recognise.
Also, in case what you say causes any confusion, it is of course the beneficiary that assigns the right to receive proceeds and therefore there is not any question of the bank that receives the notice ‘issuing’ an assignment (it will –at most- only ‘issue’ an acknowledgement or letter of intent) or ‘agreeing to assign proceeds’ (it will at most -if it has the right under the law applicable to the credit or the express terms of the credit, which in most instances it will not- agree or disagree to the assignment).
Should the bank that receives the notice be legally barred from making payment to the assignee then I agree that it makes sense to notify the assignee (however it is worth emphasising that, of itself, this does not necessarily invalidate legally the assignment particularly as any legal bar could be subsequently lifted before payment is made under the credit). However, if the bank that receives the notice is the nominated bank whether or not the issuing bank is entitled to make a payment under the law applicable to the issuing bank seems to me immaterial (with the possible exception of where someone chooses to notify the issuing bank as well of the assignment).
Regards, Jeremy
Is there a need to obtain consent of assignees in order to C
An assignee of the proceeds is not a party to the LC. An amendment need the beneficiary's acceptance in order to bind the beneficiary. The assignee's acceptance is not required. When the beneficiary accepts an amendment that cancels the LC, the LC is cancelled from that point onwards. If the assignee has performed but fails to receive payment as a result of the cancellation of the SBLC, that is to be settled outside the LC.