ICC Digital Library Forum

IRELAND IS UNIQUE IN CERTAIN AREAS

Many thanks to Mr. Bacon in pointing out the historic background of the term "water of life". We are glad to amend our remarks on Guinness Stout, which is now changed to "a tonic to remind us of Dublin". Mr. Bacon would be glad to hear that the best tasting Guinness is the one I had in the bar on top of the Guinness Stock House in Dublin. The bartender poured the stout into the glass by two instalments, to let the first instalment settled down before the second instalment was made. This makes all the difference. Another reason, as I was told in the Guinness tour, is that the water used to brew the Guinness in Dublin is from the River Liffey.

I also realised that the Irish Pound used in Dublin is different from the English Pound used in London.

COMMON LAW AND CIVIL LAW PERSPECTIVES

In Common Law, a Judge may adjudicate based on the literal interpretation and bound by precedent cases whilst in Civil Law, he may refer to the intent of the parties or the legislators and precedent cases are taken as reference only, not binding.

So it is only natural that Mr. Bacon, as a banker from Ireland (Common Law), would prefer to take the literal meaning.

Laws in Canada and Hong Kong are both Common Law but that does not bind us to take the Civil Law views.

ICC HAS PREVIOUS RECORD TO INTERPRET BY INTENT RATHER THAN BY LITERAL MEANING

In fact, the controversial judicial decision in the GLENCORE case from London is based on the literal meaning of sub Article 20 (b) of the UCP 500 on original documents. The ICC Banking Commission finally takes the intent approach in interpretation of this sub Article by issuing its Decision Paper on Originals.

That is our rationale to interpret Article 41 by intent of the UCP 500 Working Party led by Mr. Charles del Busto, and supported by the late Master Bernard S. Wheble.

We believe that in the future revision of the UCP 500, Article 41 should be inclined to let discrepancies trigger on "sudden death" in Article 41.

One interesting question to ask Mr. Bacon as well as other Irish bankers: Would you refuse the second instalment of your Guinness if a fruit fly (with a name "Discrepancy") lands on the first instalment after it is made?

Is your answer the same after finishing ten glasses of Guinness and one bottle of Jameson?

We are from http://www.tolee.com

[edited 4/2/02 10:03:06 PM]

If we use the same example of Mr. Lee assuming that the presentation is also timely, would the issuing bank be bound to accept the documents if it contains material discrepancies? What if the applicant is willing to accept the documents however the interest of the issuing bank is to kill the DC? Couldn’t we argue that the intention of UCP sub-article 14 c is to protect the interest of the issuing bank against the applicant? If we apply the intention of the above example we could also find ourselves bound to accept any presentation under partial shipment/drawing credit.

Is it the intention of UCP articles to unilaterally protect the interest of the applicant? Article 41 is to observe and protect timely shipments and or timely presentations and not any presentation.

Article 41 refers to shipments and drawings with restricted meanings. This restriction is so because of the phrase” within given periods” and “within the period allowed” has been inserted. The phrases has been repeated twice to qualify the words “shipment & drawing” therefore the structure of sentence does not leave any room for non-restriction of meaning or ambiguity. interpretation is encouraged if we have shade meanings or general terms but if we have specific meanings then interpretation may be misleading.

Since the issue has attracted so much of arguments, which I really enjoyed, I would wonder if it is possible that the ICC Commission would pay attention to this critical issue. This is not undermine any interpretation or any personal opinion but solely because this subject has attracted many responses.

PREVIOUS RECTIFICATION OF ICC OFFICIAL INTERPRETATIONS

If Mr. Shehab's interpretation is right, which may be a possibility, then Artcile 41 may have an unintended i-bug/blue worm similar to:

sub Article 23 (a) (iii) (b) on "intended vessel" where the ICC Banking Commission has to reverse its official interpretation after strong disagreements presented by us and a Korean representative Mr. Thomas Song.

sub Article 34 (f) (ii) concerning "insured value" to be 110% on CIF value where ICC has changed its official interpretation and finally determined that 110% represents the minimum value only and the insured value may be exceeded. It needs not be exactly 110% as previously determined.

DC HAS TO FACILITATE TRADE RATHER THAN TO HINDER IT

So if the original literal meaning has i-bugs/blue worms, its interpretation has to be changed in order to make sound commercial sense. After all DC is a tool to facilitate trade rather than to hinder it.

We are from http://www.tolee.com

[edited 4/2/02 9:58:32 PM]

In answer to the original post, please refer to ICC Opinion R371.

Search "R371" in ICC Opinions section of DC-PRO.

"Conclusion/Analysis
Analysis and conclusion

a) the credit stipulated a shipment schedule, which in accordance with Article 41 requires that each shipment be effected in accordance with the schedule. Failure to ship one or more of the shipments within the guidelines would invalidate the credit for any further shipment(s) unless otherwise stated in the credit or covered by a subsequent amendment. Whilst the issuing bank authorized payment of the first set of documents, it is not clear whether or not it "reinstated" the credit for the further shipments. The acceptance of the 2nd and 3rd shipments and, in particular the third, can only infer that the issuing bank and/or the applicant approved the further shipments under the credit.

b) if the credit made no mention of a requirement for the CMR to be signed and stamped by the shipper or that the presented CMR be marked "copy for shipper", the document would not be considered to be discrepant, as no such stipulations are made in Article 28 of UCP 500. The mere fact that a document such as a CMR may have a box for signature by the shipper does not infer that it should be completed unless so specified in the credit.

R371 - UCP500 Articles 41 and 28"


[edited 8/22/01 11:09:40 AM by sean (Moderator): Inclusion of text from the official opinion]

It is very interesting to see the long way Mr. T.O.LEE made from his comments in “PRESENTATION AND SHIPMENT PERFORMANCE ARE TWO SEPARATE ISSUES” section making the whole issue a bit “messed up” towards "DRAWINGS" IN ARTICLE 41 TO MEAN "PRESENTATIONS FOR PAYMENT" where he finally realizes that to discuss the whole issue on the “shipment side” only was not correct. Anyway even at the end of this long and admirable exercise he is still not correct – drawing does not mean presentation. Drawing MEANS ACCEPTED PRESENTATION (PRESENTATION COMPLYING OR TAKEN UP )
So if we realize this basic point at the first place, then it is a quite basic to figure out the “right intention” of the article 41. It is enough just to quote some of it`s wording :” if ……….any instalment is NOT DRAWN and/or SHIPPED…………the Credit ceases to be available…” So a document checker is pretty all right even now without any exceptional clarification suggested by Mr. T.O.LEE as if the previous shipment and complying or accepted presentation (drawing) has not been made, he can refuse any successive presentations just on this basis!

Pavel Andrle

DIFFERENT OPINIONS AND DISAGREEMENTS ARE WELCOME

We welcome different opinions and disagreements, such as those from Mr. Pavel Andrle in the DC Pro (although not in a tone that pleases us) as well as in workshops conducted by us, to enable us to learn together for better understanding of the DC operations and the UCP.

OPINIONS ARE SHAPED NOT FORMED RIGHT FROM THE START

To respond to the criticism from Mr. Pavel Andrle, when we participated previously in the DC Pro discussions on this instalment shipments issue, we had not yet thought of the different issues related to Article 41 of the UCP 500. Hence driven or led by the opinions and comments from other participants, we might change our focus, jumping from one issue to another (such as from SHIPMENTS to DRAWINGS) as the discussions unfold themselves.

EASY TO CRITICISE AT A LATER STAGE

It is easy to make a summary and to criticise at a later stage after reading all the different opinions from different participants expressed on different issues.

However, it is not fair to say to any one of the early participants: "Why shouldn't you say or have realised this right in the beginning?". We have to realise that opinions have to be SHAPED gradually and not formed right at the beginning of any discussions on a subject that nobody has ever tackled before.

To participate in a DC Pro discussion is similar to exploring a "no man land". Hence questions like: "Why shouldn't you exit the cave right from the hole marked "exit" and why should you waste a lot of time trying to head towards the dead ends?" are not appropriate, particularly when one is entering the cave guided by a map drawn by those early cave explorers.

IMMATURE OPINIONS CAN ALSO CONTRIBUTE

We have to realise that even opinions that are later proved to be inappropriate/immature/incorrect should have their contributions to the DC Pro discussions. They have achieved one thing - to stimulate the right opinions to come out later in response to them. We all learn by making mistakes. This is OK provided we do not make the same mistake twice.

In a healthy discussion, by looking at the same issue, there will ALWAYS be many different perspectives. Before the ICC Banking Commission has published its official opinions, nobody should claim publicly that his opinion is the rightest one.

BE A GENTLEMAN, NOT A GLADIATOR

It is also not appropriate to use emotional, sarcastic, judgemental, all capitalised or bold typed words in a humiliating or otherwise unfriendly tone to address to the opinions of another participant whom he has not yet met, even if that participant may think that he is the only one who is right or he is the wisest one of us all. Please let the viewers decide this for themselves. The name of the game in DC Pro is not winning or competition but effective exchange of opinions in a friendly and harmonised environment.

NO RIGHT OR WRONG, LONG OR SHORT OPINIONS

In a free discussion forum like the DC Pro, one should not participate with an attitude that "my opinion is right and yours is wrong". To respect the game, and all the participants, there should be only two kinds of opinions - the same opinions or different opinions, not too long opinions or short opinions as one participant considers.

We are from http://www.tolee.com

[edited 4/2/02 9:48:01 PM]

Dear Mr. Pavel Andre

I’m very disturbed by the tone we have come to in DC Pro. I have viewed your responses in different subjects and could only smell enmity and hostility towards opposite opinions. I hope that my conclusion is proved wrong.

DC Pro is an unprecedented feature for trade finance practitioners to learn from each other by expressing their opinion on different subject matters. This cannot be achieved if we assume homology in opinions. Just imagine if we all said yes to the original query, there would have been no discussion at all, and there would have been no need for your contribution since you agree with what others have said. This will surely deprive you from the ecstasy of seeing your name come as an active participator in DC Pro, isn’t it?

We must admit many of human beings are brought up in sadistic environments that they become reluctant to accept other opinions. But with the wave of freedom to expression at least in the WEB one should train himself the opposite.

No one in this life is impeccable and if anyone thinks so it will be nothing but altercation.

While I respect your opinions, I sincerely wish that you have a second thought on your approach towards others disputing your opinions with a positive and friendly manner.

Hatem Shehab

[edited 8/20/01 7:06:15 PM]

LET US ALL CALM DOWN

We should be the one who may get hurt, being a target of the unfriendly comments from a member we have never met, Mr. Pavel Andrle. But we do not think we would get hurt because viewers are intellegent people. So we remain calm after a few challenges. We hope Mr. Shehab would do the same.

Perhaps a little feedbacks from Mr. Pavel Andrle would settle down everything. Long silence from him would only make things worse, such as a second more serious response from Mr. Shehab. Would someone care to play the role of a mediator here? How about the active members?

Anyway, thanks to Mr. Shehab for his care about the DC Pro discussion environment and us, particularly we have never met other than in the DC Pro Discussion forum or as a registered viewer in our DC website. We are glad to accept the invitation to present Int'l Trade Finance Risk Management workshops for the Institute of Banking in the Kingdom of Saudi Arabia arranged by Mr. Shehab, although he disagrees with us on some issues in the DC Pro. We also admire his courage to speak up when he finds something goes wrong.

We are from http://www.tolee.com

[edited 8/21/01 8:31:31 PM]

If the Credit stipulates shipments of 2 instalments and if any instalment is not drawn or shipped then the credit would cease to be available. In this case an instalment was shipped and documents were presented to draw under the credit. In respect of this presentation it transpired that the a ‘short shipment’ discrepancy arose. However, at the end of the day this instalment drawing was settled and drawn under the Credit, notwithstanding the discrepancy. The Credit remains available for the second instalment.

I found most of the comments very interesting on this question. I think the best lesson to be learned from this discussion item is not to look at changing the rules but to focus on Credits being issued which are complete and precise while at the same time avoiding excessive detail.

I agree with TO Lees comments concerning the healthy but heated arguments. I have found such comments very enlightening in understanding issues from the perspective of other experienced practitioners from so many diverse geographic and cultural backgrounds.

I understand and accept the criticism. Having read some of T.O.LEE`s contributions I have seen them as being meant to be rather "educational" and "decisive" materials given by 100% correct international expert to be carefully studied by all other participants then "opinions" which might be right or incorrect in some respects as we judge our own opinions. I have realised from his comments above that I was wrong and Mr. Lee does not declare himself being "100% expert" in literal sense but rather specifying his background so we might know.

I apologise to him and all other participants who might find my language above as inappropriate or even offensive. I very much appreciate this Forum and see it as excellent opportunity to discuss important issues relating to our work. I very well know that I am very often wrong and I am not afraid to be so. The overall purpose of this forum, as I see it, is that we all contribute and gain at the same time.

My contributions have not been meant to be unfriendly or even hostile. Rather direct and constructive, maybe a bit exaggerating. A bit challenging. I am sorry than in the heat of the debate I used a little more strong words than should be the case.

With respect to all participants,

Pavel Andrle