Fraudulent documents

[VijayLal]

Our supplier submitted a Bill of Lading (which later on was found to be fraudulent) against the LC opened by us. There were some apparent discrepencies in the BL which we accepted. Payment was made by our bank to the negotiating bank.
After the payment was released, we found out that the BL submitted by the supplier was issued without any legal authority and was a fraud.

What is the bank's responsibility on this matter? Can we insist on the bank to return the money paid?

Other than the courts, what other recourse do we have?

Shall appreciate your views.

Best regards

Vijay M. Lal

[T.O.Lee]

Generally speaking, the negotiating bank may be a holder in due course if drafts are involved and it is difficult for an issuing bank to claim back the money paid out unless it can prove that the negotiating bank was aware of the frauds at the time of negotiation, but this is unlikely.

From our experience, there may be some slim chances, but we have to see all the documents in order to determine if there is any way out for the issuing bank under such serious situations.

This is due to the issuing bank unable to see the footprints in the bill of lading and the related documents. We bet there must be some footprints there. The question is : Whether or not you can identity them.

We are just back from the Canadian ICC Banking Commission meeting in CBA office.

http://ww.tolee.com

[edited 11/13/01 4:32:54 AM]

[NigelHolt]

My personal views, given without any responsibility or liability on my part, are that:

1. Given the provisions of (sub-) Articles 3, 4, 10di, 14a, 15 (especially) etc I would imagine you would find it very difficult to mount a case (legal or otherwise) against the negotiating bank for recovery of your payment.

2. I would anticipate that -assuming your credit was expressed to be available abroad- that it would be construed as being subject to the law, and the jurisdiction of the courts, of the country in which it was expressed to be available (or the law and jurisdiction of the courts of the negotiating bank’s country if freely negotiable). Therefore, any legal action may well have to be pursued in the negotiating bank’s country.

3. I find it curious you would want to seek to recover funds from the negotiating bank. Surely the loss is the applicant’s? Unless of course you are unable to recover from the applicant for some reason.

[edited 10/31/01 1:58:10 PM: para 2]
[edited 10/31/01 2:02:01 PM: para 1 & 2]

[SikHongYap]

Art.15 will be used by banks to protect themselves in this query.

Once payment have been effected which is obviously a satisfactory condition which imply that the issuing bank examined the stipulated documents which conform to their LC terms and conditions.

Quite surprised, the issuing bank now claimed that they have noted discrepancy(ies) in the BL which left us thinking in our mind what sort of discrepancy(ies) which will arouse their interest.

[larryBacon]

It would appear to me that Mr. Vijay Lal represents an applicant and not an issuing bank. Therefore his redress is to the issuing bank with whom he has contracted to issue the L/C.
His options are :

1. to claim against the issuing bank directly

2. to take them to court

3. to arbitrate - e.g. DOCDEX

[NigelHolt]

Laurence,

I think you’re absolutely right. Clearly, I should read queries more carefully.

Jeremy.