I may not go as far Jeremy or Mr. Pavel to consider it as a discrepancy. However, would surely like to protect the interest of my customer and my bank. I feel, that this is one area where bankers can play an essential role in educating their customers.
I agree with Jeremy, a bill of exchange drawn in the manner suggested in the query is invalid under the laws of most countries (if not all). Under the Indian, U.K & US bill of exchange law it is a pre-requisite that the “draft be payable at demand or at a fixed or future determinable time” the payment date should be determinable from the data content of the draft itself without reference to an external source or document.
Imagine a 9/11 situation, I would hate to be the banker holding a bill of exchange (which I have discounted) the maturity date of which is determinable from a document(s) lost in the terrorist attack.
The ruling in Regent Corp. USA v. Azmat Bangladesh Ltd., where the drafts were payable X no of days after BL date the court ruled that the drafts were non-negotiable, because the date of payment (a prime requirement in a draft) was not certain. This date was not specific enough because the determination of the due date could not be found in a 'calendar or common reference book' such as an almanac.
regards, Khalid
Tenor of Draft
Tenor of Draft
Hatem,
Following your numbering, I respond as follows:
1. Based on para’s 8.147-8 of ‘Documentary Credits’ (3rd edition) by (Judge) Raymond Jack, (barristers) Ali Malek & David Quest I am in no doubt an English court would consider ‘draft’ to mean ‘bill of exchange’ and to require it to meet the terms of the Bills of Exchange Act, 1882 in order to be treated as facially compliant (at least where the credit is subject to English law). Based on the Act, there is also no doubt in my mind the draft described in the initial query does not meet its terms.
However, I can see that where a bank issues a credit available with another (nominated) bank, i.e. that is subject to a foreign governing law, the issuing bank will need to bear in mind that what might meet the requirements of the foreign governing law, and therefore be facially complying under the credit, may not meet the requirement of the issuing bank’s jurisdiction’s law. Thus a discrepancy, raised by the issuing bank, may have to be withdrawn in the light of the provisions of the (foreign) governing law.
As to materiality, my impression is that it is well established this is not a judgement for bankers to make.
Lastly, as to UCP, the point is that a provision of the credit -not UCP- has been breached.
2. I believe that the maturity can only be established if the bill of lading date is expressly quoted. If the draft is expressed to be payable ’90 days after date’ and the stated date of drawing is the ‘date’ of the bill of lading then that’s fine.
3. This is a good illustration of the lack of relevance of good faith and the dangers of literal compliance.
4. See 1 above. Given the b/e is a ‘financial’ document, that -in its accepted form at least- has potentially a life independent of the credit (conferring rights, outside the credit, against the acceptor to a holder for value or in due course), I see no conflict in applying the law in determining the compliance of a b/e but not applying it to other documents.
5. See 1 & 4 above. I would also argue that by distinguishing a draft drawn on the applicant and impliedly requiring the application of Article 21 to such documents, Article 9 recognises that drafts will be examined in accordance with the relevant law.
6. If I’ve understood your argument, I disagree for the reasons given above.
7. My response would be that I have complied with Articles 13 & 14 of UCP, as a provision of the credit (presentation of a draft) has been breached and I am rejecting on that basis.
8. Re IIBLP, the point I was making is that my impression is that the approach I believe must be followed might be deprecated by some, such as the IIBLP (or at least some of its leading lights). In other words, it/they may well favour something along the lines of what you are advocating.
9. But you’re not the judge!
Laurence,
I shall reserve judgement on whether attaching a copy of the bill of lading to the draft and stating it is an integral part of the draft would be sufficient.
Tiger Lee (not to be confused with Tiger Lilly [who she?]),
See my point 4 above.
Khalid,
Just one comment; I do not see that ‘protect[ing] the interest of [your] customer and [your] bank’ is relevant. To me the issue is: do the documents comply or not? If they do not, they must be rejected. If they do, they must be taken up.
Cordial regards to all, Jeremy
Following your numbering, I respond as follows:
1. Based on para’s 8.147-8 of ‘Documentary Credits’ (3rd edition) by (Judge) Raymond Jack, (barristers) Ali Malek & David Quest I am in no doubt an English court would consider ‘draft’ to mean ‘bill of exchange’ and to require it to meet the terms of the Bills of Exchange Act, 1882 in order to be treated as facially compliant (at least where the credit is subject to English law). Based on the Act, there is also no doubt in my mind the draft described in the initial query does not meet its terms.
However, I can see that where a bank issues a credit available with another (nominated) bank, i.e. that is subject to a foreign governing law, the issuing bank will need to bear in mind that what might meet the requirements of the foreign governing law, and therefore be facially complying under the credit, may not meet the requirement of the issuing bank’s jurisdiction’s law. Thus a discrepancy, raised by the issuing bank, may have to be withdrawn in the light of the provisions of the (foreign) governing law.
As to materiality, my impression is that it is well established this is not a judgement for bankers to make.
Lastly, as to UCP, the point is that a provision of the credit -not UCP- has been breached.
2. I believe that the maturity can only be established if the bill of lading date is expressly quoted. If the draft is expressed to be payable ’90 days after date’ and the stated date of drawing is the ‘date’ of the bill of lading then that’s fine.
3. This is a good illustration of the lack of relevance of good faith and the dangers of literal compliance.
4. See 1 above. Given the b/e is a ‘financial’ document, that -in its accepted form at least- has potentially a life independent of the credit (conferring rights, outside the credit, against the acceptor to a holder for value or in due course), I see no conflict in applying the law in determining the compliance of a b/e but not applying it to other documents.
5. See 1 & 4 above. I would also argue that by distinguishing a draft drawn on the applicant and impliedly requiring the application of Article 21 to such documents, Article 9 recognises that drafts will be examined in accordance with the relevant law.
6. If I’ve understood your argument, I disagree for the reasons given above.
7. My response would be that I have complied with Articles 13 & 14 of UCP, as a provision of the credit (presentation of a draft) has been breached and I am rejecting on that basis.
8. Re IIBLP, the point I was making is that my impression is that the approach I believe must be followed might be deprecated by some, such as the IIBLP (or at least some of its leading lights). In other words, it/they may well favour something along the lines of what you are advocating.
9. But you’re not the judge!
Laurence,
I shall reserve judgement on whether attaching a copy of the bill of lading to the draft and stating it is an integral part of the draft would be sufficient.
Tiger Lee (not to be confused with Tiger Lilly [who she?]),
See my point 4 above.
Khalid,
Just one comment; I do not see that ‘protect[ing] the interest of [your] customer and [your] bank’ is relevant. To me the issue is: do the documents comply or not? If they do not, they must be rejected. If they do, they must be taken up.
Cordial regards to all, Jeremy
Tenor of Draft
Hello Gladiator J,
QUOTE
“See 1 above. Given the b/e is a ‘financial’ document, that -in its accepted form at least- has potentially a life independent of the credit (conferring rights, outside the credit, against the acceptor to a holder for value or in due course), I see no conflict in applying the law in determining the compliance of a b/e but not applying it to other documents”.
UNQUOTE
We refer to you statement above to explain why you use law to examine the drafts and not other documents. Here are our comments:
1 Under which article of the UCP that EXPRESSLY requires a banker to examine the drafts with local law?
(a) If that is the case, then CDCS should include Bill of Exchange Act 1882 of UK and maybe the local versions of it. Then we may have 150 kinds of BOE Act to be included in CDCS study text.
(b) What if a draft is compliant in the local law of the negotiating bank’s domicile but discrepant in local law of the issuing bank’s domicile? Is the negotiating bank entitled to reimbursements under such circumstances?
2 In the same way, the transport and insurance documents, like drafts, are all negotiable documents, representing title of chattel or rights, and would also be transferred from one holder to another. They may also be detached from the drafts.
3 Then, following your line of argument, treating negotiable instruments different from other ordinary commercial documents, would you use transport laws to examine transport and insurance documents, which are not ordinary commercial documents that are non-negotiable and not representing title or rights?
4 We feel that the transport and insurance documents are discriminated. All negotiable instruments should be treated equal. We do not believe that the drafts are more equal.
5 Now the tiger would take some necessary action. Please correct it if it is wrong. From your defence, it appears that law is your baby and that is why you are tempted to use law to examine drafts. And when challenged, you make up a reason for it, which is not so convincing.
6 If what you say is correct, then a banker has to study law.
7 Lastly, bear in mind that only licensed people, such as barristers, lawyers and, judges, can use law in their profession. If you are not a lawyer, can you use law in your banker profession? Is this allowed in the Gray’s Inn? You may face very serious consequences by using law without any licence.
8 For your information, when we, as a DC consultant and expert witness, are asked by law firms to give opinions on legal matters such as “reasonable time”, we have to clarify in our expert’s report that it is out of our scope of competence and if instructed nonetheless, we only give our opinions from the DC perspectives, but not from legal perspective to keep us safe.
By the way, are you going to ICC Banking Commission meeting at end of April 2002? The tiger would like to shake hand with you, although we often disagree on certain issues.
www.tolee.com
[edited 4/3/02 4:43:45 PM]
QUOTE
“See 1 above. Given the b/e is a ‘financial’ document, that -in its accepted form at least- has potentially a life independent of the credit (conferring rights, outside the credit, against the acceptor to a holder for value or in due course), I see no conflict in applying the law in determining the compliance of a b/e but not applying it to other documents”.
UNQUOTE
We refer to you statement above to explain why you use law to examine the drafts and not other documents. Here are our comments:
1 Under which article of the UCP that EXPRESSLY requires a banker to examine the drafts with local law?
(a) If that is the case, then CDCS should include Bill of Exchange Act 1882 of UK and maybe the local versions of it. Then we may have 150 kinds of BOE Act to be included in CDCS study text.
(b) What if a draft is compliant in the local law of the negotiating bank’s domicile but discrepant in local law of the issuing bank’s domicile? Is the negotiating bank entitled to reimbursements under such circumstances?
2 In the same way, the transport and insurance documents, like drafts, are all negotiable documents, representing title of chattel or rights, and would also be transferred from one holder to another. They may also be detached from the drafts.
3 Then, following your line of argument, treating negotiable instruments different from other ordinary commercial documents, would you use transport laws to examine transport and insurance documents, which are not ordinary commercial documents that are non-negotiable and not representing title or rights?
4 We feel that the transport and insurance documents are discriminated. All negotiable instruments should be treated equal. We do not believe that the drafts are more equal.
5 Now the tiger would take some necessary action. Please correct it if it is wrong. From your defence, it appears that law is your baby and that is why you are tempted to use law to examine drafts. And when challenged, you make up a reason for it, which is not so convincing.
6 If what you say is correct, then a banker has to study law.
7 Lastly, bear in mind that only licensed people, such as barristers, lawyers and, judges, can use law in their profession. If you are not a lawyer, can you use law in your banker profession? Is this allowed in the Gray’s Inn? You may face very serious consequences by using law without any licence.
8 For your information, when we, as a DC consultant and expert witness, are asked by law firms to give opinions on legal matters such as “reasonable time”, we have to clarify in our expert’s report that it is out of our scope of competence and if instructed nonetheless, we only give our opinions from the DC perspectives, but not from legal perspective to keep us safe.
By the way, are you going to ICC Banking Commission meeting at end of April 2002? The tiger would like to shake hand with you, although we often disagree on certain issues.
www.tolee.com
[edited 4/3/02 4:43:45 PM]
Tenor of Draft
T.O.,
Following your numbering, my response, without liability/responsibility is:
1. I recognise that there is not any article of the UCP that EXPRESSLY requires a banker to examine the compliance of drafts in accordance with local law. However, I do not see this as being relevant.
(a) I agree it would be difficult for the CDCS to cover specific local law considerations.
(b) I covered this in the 2nd para of my point 1, i.e. the nominated bank would be entitled to have made payment/receive reimbursement in the situation you outline. It is a fact of credit life that what is a complying presentation in one jurisdiction is not necessarily a complying presentation in another jurisdiction and -I believe- it is the law of the nominated bank’s jurisdiction that counts.
2. To me what distinguishes a b/e from other documents, such as insurance dox & bladings is:
A. There are detailed requirements in UCP [for insurance dox & bladings*].
B. They [insurance dox & bladings*]do not (potentially) confer rights against the relevant bank or the beneficiary.
C. The b/e is a financial (in the sense that they are used in banking transactions) document, unlike an insurance doc or blading.
3. No, because it is not reasonable or expected for a banker to have knowledge of transport or insurance law, unlike negotiable instrument law.
6. I would find it very surprising if any banker did not study the law that applied to their field of operations, in this instance documentary credits.
7. I find this a most curious statement. Surely, we all consider -and take actions based on what we believe to be- the law in our day-to-day, as well as professional, lives?
Having said all the above, even if it is all arrant nonsense, the fact remains that -based on my reading of ‘Documentary Credits’- like it or not the English courts require banks to examine drafts presented under credits and in accordance with the Bills of Exchange Act, 1882, period (as I understand our American cousins are wont to say).
Finally, I regret I will not be à Paris en Avril, so I’m afraid we won’t be able to shake paws. Perhaps some other time?
Yours gladiatorialy, Jeremy
* Added 5Ap02
[edited 4/5/02 9:26:34 AM]
Following your numbering, my response, without liability/responsibility is:
1. I recognise that there is not any article of the UCP that EXPRESSLY requires a banker to examine the compliance of drafts in accordance with local law. However, I do not see this as being relevant.
(a) I agree it would be difficult for the CDCS to cover specific local law considerations.
(b) I covered this in the 2nd para of my point 1, i.e. the nominated bank would be entitled to have made payment/receive reimbursement in the situation you outline. It is a fact of credit life that what is a complying presentation in one jurisdiction is not necessarily a complying presentation in another jurisdiction and -I believe- it is the law of the nominated bank’s jurisdiction that counts.
2. To me what distinguishes a b/e from other documents, such as insurance dox & bladings is:
A. There are detailed requirements in UCP [for insurance dox & bladings*].
B. They [insurance dox & bladings*]do not (potentially) confer rights against the relevant bank or the beneficiary.
C. The b/e is a financial (in the sense that they are used in banking transactions) document, unlike an insurance doc or blading.
3. No, because it is not reasonable or expected for a banker to have knowledge of transport or insurance law, unlike negotiable instrument law.
6. I would find it very surprising if any banker did not study the law that applied to their field of operations, in this instance documentary credits.
7. I find this a most curious statement. Surely, we all consider -and take actions based on what we believe to be- the law in our day-to-day, as well as professional, lives?
Having said all the above, even if it is all arrant nonsense, the fact remains that -based on my reading of ‘Documentary Credits’- like it or not the English courts require banks to examine drafts presented under credits and in accordance with the Bills of Exchange Act, 1882, period (as I understand our American cousins are wont to say).
Finally, I regret I will not be à Paris en Avril, so I’m afraid we won’t be able to shake paws. Perhaps some other time?
Yours gladiatorialy, Jeremy
* Added 5Ap02
[edited 4/5/02 9:26:34 AM]
Tenor of Draft
Hello Gladiator J,
Many thanks for your response, although we are not yet convinced. Shall we stop right here? From our experience in previous encounters with you, we should not be able to achieve anything even if we choose to continue. So let the other members to decide for themselves who should be out of the arena, the Gladiator (Russell Crowe in 2001? Kirk Douglas in 19XX? Jacky Chan in 2003?) or the Tiger (not trained by Mr. Woods who marries Lilly).
We would like to say that, although it is not necessary to use law to examine documents, at least we have to respect and know the trade practices of other trades. Otherwise we can never do our document examination jobs right.
However, when a court decision becomes available, that is different from international standard banking practice, then we have two alternatives: either to follow the legal decision in our examination of documents from that time on or for ICC Banking Commission to issue a Decision Paper to guide bankers how to deal with the problems/issues, for example the ICC Banking Commission Decision Paper on “original” documents.
We respect you more for behaving like an English gentleman, calm and polite even when being chasen by a tiger,that only hunts strong animals, like bulls (Michael Jordan?) and has no interest in squirrels.
www.tolee.com
[edited 4/4/02 4:43:18 PM]
Many thanks for your response, although we are not yet convinced. Shall we stop right here? From our experience in previous encounters with you, we should not be able to achieve anything even if we choose to continue. So let the other members to decide for themselves who should be out of the arena, the Gladiator (Russell Crowe in 2001? Kirk Douglas in 19XX? Jacky Chan in 2003?) or the Tiger (not trained by Mr. Woods who marries Lilly).
We would like to say that, although it is not necessary to use law to examine documents, at least we have to respect and know the trade practices of other trades. Otherwise we can never do our document examination jobs right.
However, when a court decision becomes available, that is different from international standard banking practice, then we have two alternatives: either to follow the legal decision in our examination of documents from that time on or for ICC Banking Commission to issue a Decision Paper to guide bankers how to deal with the problems/issues, for example the ICC Banking Commission Decision Paper on “original” documents.
We respect you more for behaving like an English gentleman, calm and polite even when being chasen by a tiger,that only hunts strong animals, like bulls (Michael Jordan?) and has no interest in squirrels.
www.tolee.com
[edited 4/4/02 4:43:18 PM]
-
hatemshehab
- Posts: 220
- Joined: Fri Apr 05, 2019 5:19 pm
Tenor of Draft
1. It is noteworthy that a careful review of the terms and conditions of credit should be observed prior to deciding that the “draft” under question is discrepant. On this respect I would draw attention on the following statement that might have been incorporated in the credit
“We hereby agree with the beneficiary that all drafts drawn under and/or documents presented hereunder will be duly honoured by us provided the terms and conditions of the credit are complied with”
In this context what triggers payment is either a draft accompanied by documents or documents alone. The credit having specified the content of those documents or not is the responsibility of the issuing bank. The beneficiary, to his best belief, presented documents that appear to be in order and therefore has literally complied with L/C terms and conditions. It is unfair to expect something from the beneficiary when at the same time bankers recognize the fact that if the contents of the document is not addressed then the issuing bank for example cannot raise any objection if the presented document when presented, did not satisfy the expectations of the issuing bank or the applicant for any reason whatever it may be.
Although I do recognize that bankers take for granted that a draft is a bill of exchange and should be examined in accordance with the regulations of the bills of exchange acts in their respective countries or in accordance with international conventions and I do agree that such is the prevailing practice, however this particular case triggered my thinking on this practice because I feel such a discrepancy should not abolish the payment under L/C.
2. There is nothing in UCP that suggest that drafts are to be construed or examined in line with commercial papers regulations, all the banks does such things unconsciously. Perhaps if this is reflected in the international standard banking practice when officially finalized by the ICC would give a clear guidance to this ambiguous area.
3. In the dictionaries that I have searched in the word "bill" is recognized to mean the Bill of Exchange “the negotiable commercial paper”. In the Concise Oxford Dictionary of Current English it is referred to as a “ demand made on a person’s confidence, or a written order for payment, but not as synonym of a bill of exchange. In the same dictionary the word bill is referred to as “Bill of Exchange; a written order to pay a sum of money on a given date to the drawer or to a named payee”. This is a very explicit definition of a bill of exchange is. In the United Nations Convention of on International Bills of Exchange the word draft is never used and on the contrary the word bill if used alone means Bill of Exchange. Is this a coincident?
So dear Jeremy, if you decide to refuse the draft under the English bill of exchange act you have to prove the credit has called for a bill of exchange not something else. I mean not a demand for payment, a deed or even a document that is called draft like other document called in the credit entitled for example packing list without any detailed specification of its contents.
4. At this point I think we should take a deep breath and ask ourselves a shocking question. If the draft is not a bill of exchange in the true sense of the word then what the hell do we have here, are we suggesting that this is something else. My answer may be. If this is a demand that is not governed by the bill of exchange act then this conclusion give rise a serious situation. Should the issuing bank refrain from its acceptance? Should the negotiating bank refrain from discounting it? What if we have the following scenario? What if this draft accepted and discounted before its maturity date and the applicant argued that the discount was not lawful as the document was not negotiable and therefore the acceptance and the discount process was not legally binding on him especially if the underlying security agreement between the applicant and the issuing bank refers explicitly to a bill of exchange in the true sense of the word? I have one security agreement, which refers to drafts as an equivalent to a bill of exchange.
If we consider that the draft is not a bill of exchange then there would be an assumption that there should be no acceptance under the credit and therefore the issuing bank or the negotiating bank should deem that the credit is in a sense a deferred payment credit that proceeds should not be advanced before the maturity date.
5. Jeremy, if we accept the argument that draft is not a bill of exchange , then an attachment like a bill of lading to the draft is acceptable. This attachment is of no value if the draft is construed as a bill of exchange and that since it does not specify a definite date then it is by itself defective, based on the concept of self-sufficiency.
6. The more I go deep into the subject, the more I am inclined to raise queries to those who decide to refuse such a draft and perhaps run the risk of being sued for wrongful dishonour. Did you consider the place of jurisdiction in case there is litigation and the applicable law? Is the place of jurisdiction is determined by the place where the bill is drawn or in the place of payment?
7. If the argument of Jeremy is true that this draft is a bill of exchange, then perhaps he should consider this interpretation. The draft or the bill of exchange under question failed to state a specific date of payment and therefore is it is not payable under bill of exchange act. So far fine. Consequently, the bill of exchange is deemed to be payable on demand or at sight. Hence the draft/bill of exchange is considered to be in consistent with L/C terms and conditions and perhaps with other documents if they state otherwise. The earlier reasoning of the refusal notice suggested by Jeremy was based on a wrong reasoning that the draft was not in accordance with the bill of exchange act under English law, that’s why I argued that this refusal notice was not in accordance with article 13 and 14 of UCP 500 since we are supposed to check documents in accordance with these rules and not under applicable national law.
8. Jermey, what is the use of article 15 in your credits subject to UCP 500? I think you should reconsider it and parhaps exclude it from the credit since it states that "banks assume no liability or responsibility for the form, sufficiency,..., legal effect of any docyment(s) . If you are going to exmaine the draft with a legal eye then how would you in line this with article 15?
9. Last, I agree that I am not a judge, however please note that my name is derived from a stem which means to decide decisively and the noun means judge, my family name means meteor, which stands for brilliancy in Arabic, because this falling star illuminates. The combination means a brilliant judge. I forget to tell you this in Holland.
best regards Partner Gladiator
“We hereby agree with the beneficiary that all drafts drawn under and/or documents presented hereunder will be duly honoured by us provided the terms and conditions of the credit are complied with”
In this context what triggers payment is either a draft accompanied by documents or documents alone. The credit having specified the content of those documents or not is the responsibility of the issuing bank. The beneficiary, to his best belief, presented documents that appear to be in order and therefore has literally complied with L/C terms and conditions. It is unfair to expect something from the beneficiary when at the same time bankers recognize the fact that if the contents of the document is not addressed then the issuing bank for example cannot raise any objection if the presented document when presented, did not satisfy the expectations of the issuing bank or the applicant for any reason whatever it may be.
Although I do recognize that bankers take for granted that a draft is a bill of exchange and should be examined in accordance with the regulations of the bills of exchange acts in their respective countries or in accordance with international conventions and I do agree that such is the prevailing practice, however this particular case triggered my thinking on this practice because I feel such a discrepancy should not abolish the payment under L/C.
2. There is nothing in UCP that suggest that drafts are to be construed or examined in line with commercial papers regulations, all the banks does such things unconsciously. Perhaps if this is reflected in the international standard banking practice when officially finalized by the ICC would give a clear guidance to this ambiguous area.
3. In the dictionaries that I have searched in the word "bill" is recognized to mean the Bill of Exchange “the negotiable commercial paper”. In the Concise Oxford Dictionary of Current English it is referred to as a “ demand made on a person’s confidence, or a written order for payment, but not as synonym of a bill of exchange. In the same dictionary the word bill is referred to as “Bill of Exchange; a written order to pay a sum of money on a given date to the drawer or to a named payee”. This is a very explicit definition of a bill of exchange is. In the United Nations Convention of on International Bills of Exchange the word draft is never used and on the contrary the word bill if used alone means Bill of Exchange. Is this a coincident?
So dear Jeremy, if you decide to refuse the draft under the English bill of exchange act you have to prove the credit has called for a bill of exchange not something else. I mean not a demand for payment, a deed or even a document that is called draft like other document called in the credit entitled for example packing list without any detailed specification of its contents.
4. At this point I think we should take a deep breath and ask ourselves a shocking question. If the draft is not a bill of exchange in the true sense of the word then what the hell do we have here, are we suggesting that this is something else. My answer may be. If this is a demand that is not governed by the bill of exchange act then this conclusion give rise a serious situation. Should the issuing bank refrain from its acceptance? Should the negotiating bank refrain from discounting it? What if we have the following scenario? What if this draft accepted and discounted before its maturity date and the applicant argued that the discount was not lawful as the document was not negotiable and therefore the acceptance and the discount process was not legally binding on him especially if the underlying security agreement between the applicant and the issuing bank refers explicitly to a bill of exchange in the true sense of the word? I have one security agreement, which refers to drafts as an equivalent to a bill of exchange.
If we consider that the draft is not a bill of exchange then there would be an assumption that there should be no acceptance under the credit and therefore the issuing bank or the negotiating bank should deem that the credit is in a sense a deferred payment credit that proceeds should not be advanced before the maturity date.
5. Jeremy, if we accept the argument that draft is not a bill of exchange , then an attachment like a bill of lading to the draft is acceptable. This attachment is of no value if the draft is construed as a bill of exchange and that since it does not specify a definite date then it is by itself defective, based on the concept of self-sufficiency.
6. The more I go deep into the subject, the more I am inclined to raise queries to those who decide to refuse such a draft and perhaps run the risk of being sued for wrongful dishonour. Did you consider the place of jurisdiction in case there is litigation and the applicable law? Is the place of jurisdiction is determined by the place where the bill is drawn or in the place of payment?
7. If the argument of Jeremy is true that this draft is a bill of exchange, then perhaps he should consider this interpretation. The draft or the bill of exchange under question failed to state a specific date of payment and therefore is it is not payable under bill of exchange act. So far fine. Consequently, the bill of exchange is deemed to be payable on demand or at sight. Hence the draft/bill of exchange is considered to be in consistent with L/C terms and conditions and perhaps with other documents if they state otherwise. The earlier reasoning of the refusal notice suggested by Jeremy was based on a wrong reasoning that the draft was not in accordance with the bill of exchange act under English law, that’s why I argued that this refusal notice was not in accordance with article 13 and 14 of UCP 500 since we are supposed to check documents in accordance with these rules and not under applicable national law.
8. Jermey, what is the use of article 15 in your credits subject to UCP 500? I think you should reconsider it and parhaps exclude it from the credit since it states that "banks assume no liability or responsibility for the form, sufficiency,..., legal effect of any docyment(s) . If you are going to exmaine the draft with a legal eye then how would you in line this with article 15?
9. Last, I agree that I am not a judge, however please note that my name is derived from a stem which means to decide decisively and the noun means judge, my family name means meteor, which stands for brilliancy in Arabic, because this falling star illuminates. The combination means a brilliant judge. I forget to tell you this in Holland.
best regards Partner Gladiator
Tenor of Draft
T.O.,
I mean no offence, but I will usually change my position when confronted with logical substantiated argument.
Regarding substantiation, I believe English case law demonstrates a bank document examiner -at least in England- needs to know the relevant law (that applies to doc credits) when examining documents and that, not only is (s)he not expected to know the trade practices of other trades, even if (s)he does (s)he cannot apply them when examining dox (unless gained through day-to-day doc cr op’ns).
While I can understand a document checker outside a particular jurisdiction not taking into account, when determining facial compliance on an unrelated transaction, a court decision within the particular jurisdiction, I cannot conceive that those operating within the particular jurisdiction would wilfully ignore (the implications of) a court decision regarding the determination of facial compliance. (I believe the Court of Appeal decision in Kredietbank Antwerp v Midland Bank plc (1999) is illustrative of the importance of this.) However, this is what you seem to be suggesting.
Overall, it would seem our views are totally irreconcilable.
Hatem,
I’m afraid I do not have the time to respond in length, so apologise if the following seems somewhat abrupt (following your numbering):
1. – 5. ‘Draft’ = ‘bill of exchange’: see -inter alia- Unpublished Opinion “When has a bank negotiated against documents and when has it paid against documents?” and Opinion R205 “Drafts on the applicant, original documents and time limits under sub-Article 44(a)”.
6. I readily recognise that an accepting bank’s obligations under a draft could be subject to a different law to that bank’s obligations under the credit instrument. However, facial compliance of the draft must logically be determined by the governing law of the credit, even if the governing law of the draft -on acceptance- will be different.
7. UCP cannot override mandatory national law. Where mandatory national law conflicts with UCP mandatory national law wins every time.
If I understand ‘Documentary Credits’ by Jack et al correctly, English law requires examination of a draft per the BEA 1882. The rejection would not because a particular UCP article has been breached, but –for example, per the first sentence of sub-Article 13a- the terms and conditions of the credit have not been complied with, i.e. presentation of a draft (which the document described in the query is not per the BEA 1882).
8. As I’m sure you appreciate, article 15 (among others) is merely stating a banker’s duty is limited to determining facial compliance. One can have a facially compliant draft that has no legal effect because, for example, the signature is forged.
9. Well there’s a thing!!!!!!!!!
Lastly, on literal following of a credit’s provisions (point 3 of your previous posting), if a credit called for shipment from ‘any European port’ would you accept a blading that stated shipment had been made from ‘any European port’? I sincerely hope not.
Yours swinging my net & trident*, Jeremy
* One can take a metaphor only so far. Perhaps this point has been reached here!!!
[edited 4/5/02 4:54:41 PM]
I mean no offence, but I will usually change my position when confronted with logical substantiated argument.
Regarding substantiation, I believe English case law demonstrates a bank document examiner -at least in England- needs to know the relevant law (that applies to doc credits) when examining documents and that, not only is (s)he not expected to know the trade practices of other trades, even if (s)he does (s)he cannot apply them when examining dox (unless gained through day-to-day doc cr op’ns).
While I can understand a document checker outside a particular jurisdiction not taking into account, when determining facial compliance on an unrelated transaction, a court decision within the particular jurisdiction, I cannot conceive that those operating within the particular jurisdiction would wilfully ignore (the implications of) a court decision regarding the determination of facial compliance. (I believe the Court of Appeal decision in Kredietbank Antwerp v Midland Bank plc (1999) is illustrative of the importance of this.) However, this is what you seem to be suggesting.
Overall, it would seem our views are totally irreconcilable.
Hatem,
I’m afraid I do not have the time to respond in length, so apologise if the following seems somewhat abrupt (following your numbering):
1. – 5. ‘Draft’ = ‘bill of exchange’: see -inter alia- Unpublished Opinion “When has a bank negotiated against documents and when has it paid against documents?” and Opinion R205 “Drafts on the applicant, original documents and time limits under sub-Article 44(a)”.
6. I readily recognise that an accepting bank’s obligations under a draft could be subject to a different law to that bank’s obligations under the credit instrument. However, facial compliance of the draft must logically be determined by the governing law of the credit, even if the governing law of the draft -on acceptance- will be different.
7. UCP cannot override mandatory national law. Where mandatory national law conflicts with UCP mandatory national law wins every time.
If I understand ‘Documentary Credits’ by Jack et al correctly, English law requires examination of a draft per the BEA 1882. The rejection would not because a particular UCP article has been breached, but –for example, per the first sentence of sub-Article 13a- the terms and conditions of the credit have not been complied with, i.e. presentation of a draft (which the document described in the query is not per the BEA 1882).
8. As I’m sure you appreciate, article 15 (among others) is merely stating a banker’s duty is limited to determining facial compliance. One can have a facially compliant draft that has no legal effect because, for example, the signature is forged.
9. Well there’s a thing!!!!!!!!!
Lastly, on literal following of a credit’s provisions (point 3 of your previous posting), if a credit called for shipment from ‘any European port’ would you accept a blading that stated shipment had been made from ‘any European port’? I sincerely hope not.
Yours swinging my net & trident*, Jeremy
* One can take a metaphor only so far. Perhaps this point has been reached here!!!
[edited 4/5/02 4:54:41 PM]
Tenor of Draft
OFFICIAL DEFINITIONS OF BILLS OF EXCHANGE
The most reliable or authoritative if you will, definition of a bill of exchange should come from the Bills of Exchange Act 1882 of UK, Article s. 3(1) states:
“A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer”.
In the United Nations Convention on International Bills of Exchange and International Promissory Notes, Article 3 states:
A bill of exchange is a written instrument which:
(a) Contains an unconditional order whereby the drawer directs the drawee to pay a definite sum of money to the payee or to this order;
(b) Is payable on demand or at a definite time;
(c) Is dated;
(d) Is singed by the drawer.”
In both case, the word “draft” is not there as pointed out by Hatem (whose name is used in many shops in Dubai as well. Now we understand what it means after the explanation from Gladiator H from Arabia or Jordan to be precise).
COMMON SENSE UNDERSTANDING
Although we are not lawyers, yet from our common sense understanding, a draft should be deemed to be (if not is) one kind of bills of exchange. Paper currency note should be (if not is) another form of bills of exchange from the words written on its face. Money is a (dollar) “bill” for “exchange” (of goods, services and/or performances). But in the UN Convention, it deals with bills of exchange and promissory notes separately.
As we are not lawyers, it is not our jobs to argument the nature of drafts here, whether it is a bill of exchange or not. Better leave this to the scholars. Even if one wins in the Discussion Forum, he or she may not be right, unless he or she is an expert in bills of exchange or drafts.
BACK TO CENTRE OF ARENA NAMED “DC PRO”
Since the invincible Gladiators J and H seem to drift towards of the exits for the spectators, and would very soon be out of bounds, it is the duty of one of the tigers to pull them back to the centre of the arena so that those spectators who pay to get in (with due respect to those who don't, such as hackers, just joking and we don't mean the seven day trials) the arena named DC PRO would get their value for the money to have a better view.
In the recent ICC Banking Commission opinions (searchable from DC Pro),
(a) A draft is considered not a document required by the Applicant.
(b) It plays no part in the underlying transaction between the seller and the buyer. Only some issuing banks may insist on asking for it in the DC.
(c) In some DCs, a draft is not required, such as in deferred payment Credits.
(d) It is not even listed under the stipulated documents fields for “Documents” or “Special Instructions” in SWIFT, telex or mail DC advices.
Therefore it follows that a discrepancy in a draft is not as important as a similar or equivalent discrepancy in the transport or insurance document. This is a fact and also an ICC opinion that Gladiator J cannot deny.
Then why should a banker study a less important law, the bills of Exchange Act and yet disregard a law more important to the underlying transaction, the transport and insurance laws? “Gladiator J, is such behaviour logical?” roared by the tiger.
NOT ALL DOCUMENTS ARE EQUAL
One has the right to study anything that one feels comfortable or interested. Fine, but one cannot use it to examine a less important document and discriminate the more important tansport and insurance documents (from document examination point of view). All documents are equal and if there is one document that should be more equal, then it should be either the transport or insurance document but certainly not the draft.
www.tolee.com
[edited 4/5/02 5:18:13 PM]
The most reliable or authoritative if you will, definition of a bill of exchange should come from the Bills of Exchange Act 1882 of UK, Article s. 3(1) states:
“A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer”.
In the United Nations Convention on International Bills of Exchange and International Promissory Notes, Article 3 states:
A bill of exchange is a written instrument which:
(a) Contains an unconditional order whereby the drawer directs the drawee to pay a definite sum of money to the payee or to this order;
(b) Is payable on demand or at a definite time;
(c) Is dated;
(d) Is singed by the drawer.”
In both case, the word “draft” is not there as pointed out by Hatem (whose name is used in many shops in Dubai as well. Now we understand what it means after the explanation from Gladiator H from Arabia or Jordan to be precise).
COMMON SENSE UNDERSTANDING
Although we are not lawyers, yet from our common sense understanding, a draft should be deemed to be (if not is) one kind of bills of exchange. Paper currency note should be (if not is) another form of bills of exchange from the words written on its face. Money is a (dollar) “bill” for “exchange” (of goods, services and/or performances). But in the UN Convention, it deals with bills of exchange and promissory notes separately.
As we are not lawyers, it is not our jobs to argument the nature of drafts here, whether it is a bill of exchange or not. Better leave this to the scholars. Even if one wins in the Discussion Forum, he or she may not be right, unless he or she is an expert in bills of exchange or drafts.
BACK TO CENTRE OF ARENA NAMED “DC PRO”
Since the invincible Gladiators J and H seem to drift towards of the exits for the spectators, and would very soon be out of bounds, it is the duty of one of the tigers to pull them back to the centre of the arena so that those spectators who pay to get in (with due respect to those who don't, such as hackers, just joking and we don't mean the seven day trials) the arena named DC PRO would get their value for the money to have a better view.
In the recent ICC Banking Commission opinions (searchable from DC Pro),
(a) A draft is considered not a document required by the Applicant.
(b) It plays no part in the underlying transaction between the seller and the buyer. Only some issuing banks may insist on asking for it in the DC.
(c) In some DCs, a draft is not required, such as in deferred payment Credits.
(d) It is not even listed under the stipulated documents fields for “Documents” or “Special Instructions” in SWIFT, telex or mail DC advices.
Therefore it follows that a discrepancy in a draft is not as important as a similar or equivalent discrepancy in the transport or insurance document. This is a fact and also an ICC opinion that Gladiator J cannot deny.
Then why should a banker study a less important law, the bills of Exchange Act and yet disregard a law more important to the underlying transaction, the transport and insurance laws? “Gladiator J, is such behaviour logical?” roared by the tiger.
NOT ALL DOCUMENTS ARE EQUAL
One has the right to study anything that one feels comfortable or interested. Fine, but one cannot use it to examine a less important document and discriminate the more important tansport and insurance documents (from document examination point of view). All documents are equal and if there is one document that should be more equal, then it should be either the transport or insurance document but certainly not the draft.
www.tolee.com
[edited 4/5/02 5:18:13 PM]
-
PGauntlett
- Posts: 153
- Joined: Fri Apr 05, 2019 5:25 pm
Tenor of Draft
There will (hopefully) be a legal view on this (i.e. are drafts part of the 'documents' shortly. Amongst the discrepancies raised by a Chinese issuing bank against a French negotiating bank which the French are contesting (heard in London 2 weeks ago)is: SWIFT issued l/c states 'all docs to be issued in English'. The draft was substantially made out in French and, therefore, rejected by Chinese.
There were several other issues so it's possible that the Judge may sidestep this one if the others proves more conclusive. Judgement is expected in next few weeks.
There were several other issues so it's possible that the Judge may sidestep this one if the others proves more conclusive. Judgement is expected in next few weeks.
Tenor of Draft
Dear Gauntlett,
Is it true that when an issue is on trial in UK, nobody, even the public meida like newspaper or TV, can publish any opinions or comments? Otherwise it would be deemded to be contempt of court?
We got this impression whilst Hong Kong was still under UK jurisdiction (before 1st July 1997).
Hope you would keep an eye on this case and report the outcome here. Thanks.
One of our clients, a negotiating bank in Hong Kong, won a case in September 2000 where the Hong Kong High Court considered that a draft without naming the branch of the issuing bank in China as the drawee was not discrepant although the DC from China stipulated "drafts drawn on us".
www.tolee.com
[edited 4/6/02 3:39:32 PM]
Is it true that when an issue is on trial in UK, nobody, even the public meida like newspaper or TV, can publish any opinions or comments? Otherwise it would be deemded to be contempt of court?
We got this impression whilst Hong Kong was still under UK jurisdiction (before 1st July 1997).
Hope you would keep an eye on this case and report the outcome here. Thanks.
One of our clients, a negotiating bank in Hong Kong, won a case in September 2000 where the Hong Kong High Court considered that a draft without naming the branch of the issuing bank in China as the drawee was not discrepant although the DC from China stipulated "drafts drawn on us".
www.tolee.com
[edited 4/6/02 3:39:32 PM]