ICC Digital Library Forum

In a previous posting Jeremy stated that it was standard practice for his bank when acting as issuing bank, to advise presenters that discrepant documents would be passed to the applicant upon receipt of waiver, without further reference to the presenter. I write from memory, but if I have misinterpreted anything, hopefully Jeremy will set the record straight.

Jeremy and others will no doubt be interested in the recent judgement of Mr. Justice Steel in the Commercial Court (UK) case of Crédit Industriel et Commercial (CIC)v China Merchants Bank (CMB).

A number of issues were brought before the court in this case, but I would like to focus on one - CMB issued a notice of rejection stating "should the discrepancies be accepted by the Applicant, we shall release the documents to them without further notice ... . Documents held at your risk for your disposal."

Mr. Justice Steel held that the rejection notice did not comply with UCP 500 Article 14 (d) (ii) as the documents were neither returned to CIC, nor held to their order."

I welcome comment from Jeremy and others on this ruling which vindicates the views previously expressed by T.O. Lee, myself & others. Where T.O. must earn his rice & noodles, I must earn my BACON, so I will be abroad for a few days & unable to respond until my return.

Laurence

Laurence,

I have been pouring over the CIC v CMB judgement for a number of weeks and, as a result, beg to differ with your views.

To me, the crux of the matter is that CMB did not, I believe, seek to vary the terms of Article 14 in the credit issued. Therefore, they had to comply with Article 14 but failed to do so. Given this, I have no problem with the judgement. To me, all it does is to emphasise the need to modify Article 14 in the credit (which is what I have previously been suggesting), i.e. at the time of issue, if one wishes to be in a position to take-up and release the documents, after one has sent a notice of refusal, on receipt of a waiver.

Jeremy

[edited 7/4/02 3:55:44 PM]
[edited 7/4/02 4:52:53 PM]

Agree with Jeremy, The case we were discussing before was to include such statement at the time of issuance of the credit and not at the time of sending the rejection notice. The main reason to do that was to avoid such situation.

Rather amusingly CMB actually refused to hand over the documents to an employee of CIC who flew over there to discuss the matter. This was also used by CIC as evidence that docs weren't truly held at their disposal.

I agree with Jeremy too.

Abdulkader,
If I remember correctly, this is the same issue that had been previously raised by Gary Collyer. Isn’t it? The issuing banks is protected by putting a clause in the credit which states that it (the issuing bank) may seek a waiver of discrepancies from the applicant and once obtained, doc’s would be released to him and effect payment notwithstanding any prior communication with the negotiating bank that doc’s are held at its disposal unless the issuing bank is instructed otherwise prior to the release of doc’s.

Dimitri

The court case you mentioned shows that it might turn out to be dangerous to add a clause as the one mentioned to a rejection notice. So it is better not to write it. However, it is a fact of live that most banks actually hand over documents to the applicant as soon as he accepts the documents despite discrepancies without first referring back to the presenter and asking him whether they are allowed to do so. All these banks know or should know that they might get into trouble doing so but I have never experienced or heard of a real problem actually happening.
Kind regards
Heinz

Dimitri,

Yes, it is.

Abdulkader

For anyone interested, a copy of the judgment may be found at http://www2.bailii.org/~jury/cases/ under the ‘section’ 11 June 2002. As for relevant ICC opinions, see my DCI article on the subject.