Regarding Phil’s question: ‘On what basis can a document checker sit there and say that this is a discrepancy?’, my personal reply, without responsibility/liability, is:
1. I have a great deal of sympathy for Phil’s position. However, when taking up documents a bank must also take into a/c the possibility of challenge from its principal (issuing bank, applicant etc as appropriate). If that challenge is made successfully the bank loses its right of recourse/has to make refund. Here there is the possibility that the principal could challenge the compliance of the documents on the basis that the credit stipulated one (i.e. a combined) certificate.
2. In the Equitable Trust court case (1927) that established the doctrine of strict compliance in English law, Lord Sumner said:
‘There is no room for documents which are almost the same or which would do just as well.’
Also, in the Comm’l Bking Co of Sydney case (1973) Lord Diplock stated:
‘The banker is not concerned as to whether the documents for which the buyer has stipulated serve any useful commercial purpose or as to why the customer called for tender of a document of a particular description’.
While I recognise the meaning of strict compliance has been clarified by the English courts over the years (i.e. it does not equal ‘literal compliance’), I would nonetheless feel that two certificates would fall foul of Lord Sumner’s words (i.e. the possible fact that the two certificates ‘would do just as well’). Also, per Lord Diplock’s words, that it would not be appropriate for a bank to speculate as to whether or not two separate certificates would do the job of one combined certificate. Therefore, as the Credit appears to require one (i.e. a combined) certificate I would feel safer -legally- rejecting than taking-up. However, as I said before, I would not assume I was ‘home & dry’ for certain.
[edited 1/21/02 3:39:39 PM]
If two separate documents namely, CERTIFICATE OF QUALITY and
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hatemshehab
- Posts: 220
- Joined: Fri Apr 05, 2019 5:19 pm
If two separate documents namely, CERTIFICATE OF QUALITY and
The role of the documents checker is very critical in L/C operations. We have earlier pointed out how much these poor people are required to work often single handedly to come up with a final conclusion of giving birth a baby payment or opt for an abortion. However, while we should demand that the document checker be armed with the necessary skills and competencies for such a critical operation, we should also remember that the document checker (the bank) is playing a fiduciary role in the L/C operation. He is, and should be, inclined to apply his professional skills and knowledge in favour of the all parties. This is a basic function of letters of credit operations that parties’ resort to banks is based on the expectancy of fiduciary role.
Having said that, how would the document checker decide the sufficiency of the two separate certificates, how would he explain to the applicant about the unacceptability of this separate certificate by other parties, be it governmental bodies or private authorities or any other party involved in the underlying transactions. The requirement of a combined certificate did come either from a mutual agreement of both the buyer and seller, or perhaps solely from the buyer upon filling in the application to open the L/C, or even from a misunderstanding of what is exactly required: a combined or separate certificate of quality and quantity. Therefore, we should at the same time require that parties to the transaction do their homework, as we require from the document checker. How on earth the document checker can be sure of what is the real intension of the parties on this particular document. Why the beneficiary did not request for an amendment in the first place? The document checker exclaims!
I think the presentation as such documents is at the risk of the beneficiary and the document checker cannot be expected to go deep into the underlying contract. Therefore, there should be a demarcation of borders for the territories of each party.
I still have sympathy for the beneficiary who might be encountered with a rejection of documents but at the same time there might be other parties who might suffer arrogant procedures from an unvarnished-thinking employee in a government department who might be reluctant to accept such a separate certificate, which in reality makes no difference.
It is obvious that the participants in this forum while recognizing that this presentation might not have material impact they at the same time recognized that there might be other consideration from parties to such rejection. In a situation of doubt the best thing is to weight all possibilities correctly and take a final decision, which will reflect the fiduciary role that you are, expected to play. Therefore I would rather opt for a rejection.
Having said that, how would the document checker decide the sufficiency of the two separate certificates, how would he explain to the applicant about the unacceptability of this separate certificate by other parties, be it governmental bodies or private authorities or any other party involved in the underlying transactions. The requirement of a combined certificate did come either from a mutual agreement of both the buyer and seller, or perhaps solely from the buyer upon filling in the application to open the L/C, or even from a misunderstanding of what is exactly required: a combined or separate certificate of quality and quantity. Therefore, we should at the same time require that parties to the transaction do their homework, as we require from the document checker. How on earth the document checker can be sure of what is the real intension of the parties on this particular document. Why the beneficiary did not request for an amendment in the first place? The document checker exclaims!
I think the presentation as such documents is at the risk of the beneficiary and the document checker cannot be expected to go deep into the underlying contract. Therefore, there should be a demarcation of borders for the territories of each party.
I still have sympathy for the beneficiary who might be encountered with a rejection of documents but at the same time there might be other parties who might suffer arrogant procedures from an unvarnished-thinking employee in a government department who might be reluctant to accept such a separate certificate, which in reality makes no difference.
It is obvious that the participants in this forum while recognizing that this presentation might not have material impact they at the same time recognized that there might be other consideration from parties to such rejection. In a situation of doubt the best thing is to weight all possibilities correctly and take a final decision, which will reflect the fiduciary role that you are, expected to play. Therefore I would rather opt for a rejection.
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
If two separate documents namely, CERTIFICATE OF QUALITY and
Hatem,
I agree that the L/C checker should apply his professional skills and knowledge for the benefit of the transaction of the L/C rather than the individual parties involved, but it is only human to assume that he will have a bias in favour of his own bank.
What are the criteria for judging the provenance and extent of such skills and knowledge ? Is it confined to UCP, or as suggested by Jeremy, day-to-day banking experience, or some higher level incorporating for example knowledge of at least the standard documents likely to be used in L/Cs, an appreciation of the viewpoint of the applicant and beneficiary, legal cases etc ?
Laurence
I agree that the L/C checker should apply his professional skills and knowledge for the benefit of the transaction of the L/C rather than the individual parties involved, but it is only human to assume that he will have a bias in favour of his own bank.
What are the criteria for judging the provenance and extent of such skills and knowledge ? Is it confined to UCP, or as suggested by Jeremy, day-to-day banking experience, or some higher level incorporating for example knowledge of at least the standard documents likely to be used in L/Cs, an appreciation of the viewpoint of the applicant and beneficiary, legal cases etc ?
Laurence
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hatemshehab
- Posts: 220
- Joined: Fri Apr 05, 2019 5:19 pm
If two separate documents namely, CERTIFICATE OF QUALITY and
Dear Laurence,
All resources of knowledge and silks you have pointed are valued by me and should be as well valued by every sensible banker aiming to excel in his position. It should most importantly be the watchword of the management of the banks who strive to leverage their business performance.
In my days in the banking profession I used to put a great weight for knowledge and research although I was at some point of time forced to take a breath at conjunction for being pushed to achieve business targets. Therefore while I note that the document checker has an equal responsibility towards all parties to the letter of credit I understand that there might be a bias towards his customers rather than the beneficiary, the nominated bank or the confirming bank. To tell you the truth, I have encounter many cases where banks were more for the applicant rather than playing a fiduciary role in the transaction, but this is again at the risk of the bank and if anything goes wrong, in case of objection or a litigation takes place, the bank will be in hot water.
In my training workshops, I do encourage participants to read, read and read. I do encourage bankers to get the suitable training to augment their knowledge and skills in different facets of the banking business, however, on individual level, the cultural cycle has turned into another direction. Generally I do not feel that people really do their homework as they are supposed to do, they do not read and the search for knowledge has faded severely. Many a times I encounter doers rather than thinkers.
On the other side, banks, in general, are more concerned with business targets rather than competency based functions. Training is not a priority and therefore bankers are required to function without weapons, bare handed and in many cases they become inclined to copy rather than innovate.
It is a two-way traffic. I do not want to sound gloomy but if the desire to perform is not accompanied by actual performance, then the desire is not to perform. This almost applies to many other things.
All resources of knowledge and silks you have pointed are valued by me and should be as well valued by every sensible banker aiming to excel in his position. It should most importantly be the watchword of the management of the banks who strive to leverage their business performance.
In my days in the banking profession I used to put a great weight for knowledge and research although I was at some point of time forced to take a breath at conjunction for being pushed to achieve business targets. Therefore while I note that the document checker has an equal responsibility towards all parties to the letter of credit I understand that there might be a bias towards his customers rather than the beneficiary, the nominated bank or the confirming bank. To tell you the truth, I have encounter many cases where banks were more for the applicant rather than playing a fiduciary role in the transaction, but this is again at the risk of the bank and if anything goes wrong, in case of objection or a litigation takes place, the bank will be in hot water.
In my training workshops, I do encourage participants to read, read and read. I do encourage bankers to get the suitable training to augment their knowledge and skills in different facets of the banking business, however, on individual level, the cultural cycle has turned into another direction. Generally I do not feel that people really do their homework as they are supposed to do, they do not read and the search for knowledge has faded severely. Many a times I encounter doers rather than thinkers.
On the other side, banks, in general, are more concerned with business targets rather than competency based functions. Training is not a priority and therefore bankers are required to function without weapons, bare handed and in many cases they become inclined to copy rather than innovate.
It is a two-way traffic. I do not want to sound gloomy but if the desire to perform is not accompanied by actual performance, then the desire is not to perform. This almost applies to many other things.
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
If two separate documents namely, CERTIFICATE OF QUALITY and
Hatem,
one of the malaises of the modern world is a tendency towards laziness. You cannot get the best food from a package. You cannot get the best performance without professional training. You cannot get out more than you put in, but banks and other enterprises alike seek to do so. If squeezed by difficult market conditions, training is the first thing to have its budget cut, but arguably, this is more likely to add value to a company.
Laurence
one of the malaises of the modern world is a tendency towards laziness. You cannot get the best food from a package. You cannot get the best performance without professional training. You cannot get out more than you put in, but banks and other enterprises alike seek to do so. If squeezed by difficult market conditions, training is the first thing to have its budget cut, but arguably, this is more likely to add value to a company.
Laurence