Nomination and Authorized confirmation

asamaha · Post by **asamaha** » Fri Jun 27, 2008 1:00 am

But the bank that is authorized to negotiate but not confirm, is authorized according to art 12a to act on its nomination and to undertake to negotiate?

Is this a silent confirmation?

if yes, what are the additional risks -compared to those of an authorized confirmation- that it may encounter should it agree to open a back-to-back LC against a credit silently confirmed by it.

Thanks in advance
Antoine Samaha

DanielD · Post by **DanielD** » Fri Jun 27, 2008 1:00 am

Antoine,

To answer your question we would need a definition of the "silent confirmation" which does not exist so far
Daniel

LarryE · Post by **LarryE** » Tue Jul 01, 2008 1:00 am

It sounds like what we are talking about is a nominated bank (e.g. to negotiate) is requested by the beneficiary to issue an undertaking that they will honor their nomination, provided documents comply, in advance. The difference to me is the engagment and responsibility must be in the undertaking as UCP does not address such an undtaking.

DanielD · Post by **DanielD** » Wed Jul 02, 2008 1:00 am

We could add that the nature of the undertaking and responsability could be very different from the "official" confirmation. For example, the nominated bank could agree to take the country risk but not the risk of discrepancies in the documents or the risk of loss of documents.
Daniel

JimBarnes · Post by **JimBarnes** » Mon Jul 14, 2008 1:00 am

If a nominated bank agrees with the beneficiary, before presentation, to negotiate complying documents, that would be a confirmation under an LC that authorizes confirmation. It would be a so-called silent confirmation under an LC that did not authorize confirmation.

If the nominated bank negotiated a facially complying presentation, it should be entitled to reimbursement as an authorized negotiating bank.

However, if the nominated bank negotiated (per its agreement with the beneficiary) after it received notice of fraud, then it faces an extra risk. Under US law (UCC 5-109), a confirming bank could ignore the notice of fraud (unless also enjoined from honoring its confirmation), but a mere nominated negotiating bank could not. Our law deliberately gives confirming banks greater protection. Other laws are likely to be less clear but likely to yield the same result.

Regards, Jim Barnes

PavelA · Post by **PavelA** » Tue Jul 15, 2008 1:00 am

Very interesting debate! I also think that in relation to article 12 (a) the nominated bank can agree on different payment obligation in favour to the Beneficiary from the "confirmation obligation" as mentioned above. As regards "protection" under the UCP 600 I am of the opinion that the position of the nominated bank and the confirming nominated bank in respect of the reimbursement rights from the issuing bank are the same.

Interesting to note: UCP 600 does not talk about reimbursement obligation of the issuing bank towards confirming bank, only about reimbursement obligation towards nominated bank - see. art. 7.

Kind regards,

Pavel

JudithAutié · Post by **JudithAutié** » Thu Jul 17, 2008 1:00 am

Hi all,
Ok, how about another twist.

Under article 8, a confirming bank must "negotiate without recourse".

Article 12 does not specify that any negotiation by the nominated bank must be made "without recourse".

I consider therefore that a nominated bank can negotiate with recourse, which a confirming bank cannot. (of course the nominated bank would have to specify that to the beneficiary in its agreement to negotiate)

So with that consideration, negotiation by a nominated bank would not equal a confirmation.

Judith

DanielD · Post by **DanielD** » Thu Jul 17, 2008 1:00 am

Judith,
I think M. Boudinot once wrote that if a credit is not confirmed you do not have to pay but if you select to do so, it will be without recourse. That was very wise and simple and it should still be like that.
If the credit is available by acceptance, for example, and if you have confirmed, you are obligated to accept the draft drawn on you by the presenter and to pay it at maturity. If you have not confirmed, you do not have to accept the draft drawn on you by the presenter but if you do, you will have to pay it at maturity as well and of course also without recourse.
So the reasoning for the beneficiary is as follows: if the credit is confirmed, the confirming bank will have to accept my draft and to pay it at maturirty. If the credit is not confirmed, I do not know (uncertainty) if the bank will agree to accept my draft but if it does it will also have to pay it at maturity.
In my opinion things should be clearer that way. Unfortunately it is not the case.
Meilleures salutations
Daniel

asamaha · Post by **asamaha** » Thu Jul 17, 2008 1:00 am

I understand that an authorisation to confirm is different from an authorisation to act on nomination, despite that both IMPOSE on the NB the same obligation to honor or negotiate.
Is it correct?
Regards
Antoine Samaha

ccastanedai · Post by **ccastanedai** » Mon Jul 21, 2008 1:00 am

This may throw some light on what you are asking:
'If the nominated bank is not requested to add confirmation but is willing to communicate to the beneficiary that they will enter into a commitment to pay, accept or negotiate, or to provide a form of silent confirmation, this is a separate agreement outside the scope of the UCP. The agreement should clearly specify the conditions under which the commitment or silent confirmation will come into effect and the obligation(s) of the bank that is giving the commitment or silent confirmation.' Collyer Consulting FAQ under UCP 600 Vol II 12.8

Blasio