ICC Digital Library Forum

An issuing bank refused a presentation (discrepancy - C/P BL presented not authorized by the credit) and claimed refund from the paying confirming bank.

The paying bank did not object issuing bank's refusal but didn't refund the amount drawn inspite of issuer's reminders in that regard.

Does the issuing bank have the right to debit in the meantime the applicant account until receipt of funds from the paying bank (based on art 18a and b) ? What action could the issuing bank take if refund is not made at all?

thanks in advance
Regards
Antoine

the article 18 referred to herein is under UCP500
sorry
Antoine

I think, but I may be wrong that the relationship (reimbursement, debit, etc...) between Applicant and IB is not ruled by UCP ???
Daniel

UCP500 Article 14diii and UCP600 Article 16g provide for a right of refund but do not authorize any particular remedy. An agreement between the banks affecting the account or applicable law should be considered, as they might permit or limit debit as a self help remedy. Regards, Jim Barnes

In my opinion, to debit or not to debit applicant's account under the scenario stated herein is outside the domain of UCP. This is a matter between the issuing bank and its client (the applicant). Such relationship is normally governed by the underlying agreement worked out between the issuing bank and the applicant prior to the issance of the credit. Generally speaking, the issuing bank should not debit the applicant if documents are descrpant and rejected.

Sultan Rajab Ali
National Bank of Kuwait SAK,
Kuwait

In that case, what are the risks referred to in article 18 (a) that the applicant should bear?
Regards
Antoine

I don't see why an issuing bank - acting yet as per its client's instructions - should bear the consequences of the nominated bank's mistake. I think it's not fair.
Logically, there must be no need for a specific authority (by law or by separate agreement) to debit the account of the applicant who ultimately must bear all the risks as per article 18 should the instructions of the issuing bank not be carried out correctly by the nominated bank.
Regards
Antoine

See Credit Agricole Indosuez v. Generale Bank in the 'Legal Docket' for an answer to your question.