Under an unconfirmed def payment LC, a nominated bank informs benef's bank that :
1. it has entered into a discounting agreement with the beneficiary who has assigned the proceeds to (benef.'s bank) and
2. discount would take place after presentation of conform documents and receipt of issuing bank's undertaking of payment on due date.
The documents are then presented for discount thru beneficiary's bank which has received payment and credited beneficiary's account for the net proceeds.
Few days later, the nominated bank informs the beneficiary's bank that the issuing bank has been ordered by the court to hold payment 'due to non arrival of vessel at destination' and that accordingly it reserves the right to claim refund of funds in case the issuing bank is prevented to pay at maturity.
Beneficiary's bank has rejected such position from the nominated bank, arguing that payment was final, clean and unconditional.
The nominated bank responded that discount was not made 'without recourse', and thus it is 'with recourse'.
Is the beneficiary's bank, who is not a party to the discounting agreement, liable for the refund of the funds as it has requested discount when presenting the documents to the nominated bank ?
I welcome your comments
Regards - Antoine Samaha
Discounting & recourse
Discounting & recourse
Antoine,
Personally, and without liability / responsibility, I believe the answer will lie in the applicable law, presumably Lebanese in this case.
If the applicable law were English, I would be certain that the beneficiary’s bank would not have any liability to the nominated bank.
As to the assignment, if it was simply of proceeds, as opposed to all the beneficiary’s rights (against the issuing bank), it was presumably of the proceeds due from the issuing bank to the nominated bank and not of those paid by the nominated bank to the beneficiary (as this would be a nonsense).
Jeremy
Personally, and without liability / responsibility, I believe the answer will lie in the applicable law, presumably Lebanese in this case.
If the applicable law were English, I would be certain that the beneficiary’s bank would not have any liability to the nominated bank.
As to the assignment, if it was simply of proceeds, as opposed to all the beneficiary’s rights (against the issuing bank), it was presumably of the proceeds due from the issuing bank to the nominated bank and not of those paid by the nominated bank to the beneficiary (as this would be a nonsense).
Jeremy
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Discounting & recourse
Benef's Bank played no part in the LC. Therefore the payment it received is clean, & without evidence to the contrary, is irrevocable.
If the Nominated Bank has a case, it is against the benef.
If taken to court, it may hinge on applicable law - i.e. whether or not deferred payment can be discounted with the same legal protection as B/E. English law would say no, but Korean law would follow American & say yes.
Laurence
If the Nominated Bank has a case, it is against the benef.
If taken to court, it may hinge on applicable law - i.e. whether or not deferred payment can be discounted with the same legal protection as B/E. English law would say no, but Korean law would follow American & say yes.
Laurence