Responsability of advising Bank to pay an acceptance at du

[ThierryDoucet]

Is the advising bank responsible to pay at due date of a draft to beneficiary eventhough it has not received funds? Or may he pay at receipt of funds from the acceptant bank one or two days after maturity?

[NigelHolt]

Without liability/responsibility:

I assume:
1. by ‘advising bank’ you mean ‘nominated bank’;
2. a (time/term/usance) draft has been drawn on, and accepted by, the issuing bank, rather than the nominated bank (and therefore –logically- that the credit is expressed to be available by negotiation);
3. the nominated bank has not confirmed the credit nor negotiated documents by giving a payment undertaking as envisaged by Position Paper No. 2.

On this basis the nominated bank does not have any obligation to effect settlement, until receipt of funds from the issuing bank.

[edited 12/12/2003 9:28:42 AM]

[larryBacon]

I agree with Jeremy's analysis, with the sole exception of silent confirmation by the nominated bank, which imposes a duty to pay on the due date.

Laurence

[PavelA]

Adding my comments to those above:

I suppose that the L/C was available by acceptance with the issuing bank. It might have been also available by acceptance with the nominated – advising bank. I also suppose that the L/C was not confirmed.

Jeremy in his second point suggested that because the draft was presumably accepted by the issuing bank, the L/C was available by negotiation. However according to UCP 500 if the L/C is available by negotiation (in this case it must be available with the nominated bank), the issuing bank must pay the draft drawn on it rather than to accept and pay the draft.

If the L/C was available with the issuing bank by acceptance, the advising bank is not responsible for the payment of the draft at maturity. It will pay to the beneficiary only after the receipt of the funds.

If the L/C is available by acceptance with the advising – nominated bank, it actually means that the draft is to be drawn on this advising – nominated bank. If this bank accepts the draft drawn on it, it must surely pay it at maturity according to the B/E law. If the nominated bank did not act according to the nomination (as the L/C was not confirmed) and therefore did not accept the draft, it is not responsible for its payment. However if the draft was not accepted by the nominated bank, the beneficiary could draw a new draft – on the issuing bank, which would be then responsible for its acceptance and payment at maturity (provided the presented documents complied with the L/C terms and conditions).

With best regards,

Pavel Andrle

[NigelHolt]

Pavel,

Hope you had a good Christmas.

Re your 2nd comment (‘Jeremy in his second point …’), I agree with you regarding what the UCP says. However, this does not change the fact that were a credit available by negotiation, say with drafts at 60 days sight on the issuing bank, the issuing bank would not have to pay the drafts until their maturity (being 60 days after receipt of complying dox per para 48a of Pub 645). I mention this in case it is thought you are suggesting the issuing bank would have to pay them straight away, given the absence of reference to ‘acceptance’ in sub-Art 9a(iv) (this, of course, having no bearing on the matter).

Happy New Year, Jeremy

[PavelA]

Thank you for your point. Yes, if the L/C is available by negotiation and the time draft drawn on the issuing bank is to be presented, the issuing bank must pay the draft at maturity.

I also wish you and all other DC PRO Forum participants Happy New Year 2004!

With best Regards,

Pavel Andrle