Transferable L/C issued by Iranian Bank and advised through European Bank who have transferred it.
If documents are presented in compliance under the transfer l/c to the European bank, are they liable to pay or is it understood that they will only pay upon receipt of funds from the issuing bank? (Should they not state when transferring the lc that payment will only be effected upon receipt of funds from the issuing bank?)
Ultimate Risk Party under a transferable L/C
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GeraldineDaly
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- Joined: Fri Apr 05, 2019 5:13 pm
Ultimate Risk Party under a transferable L/C
Without liability/responsibility:
If the credit is unconfirmed, the (transferring) nominated bank’s obligations are no different -with respect to documents- on a transferred credit than from an untransferred or non-transferable credit, i.e. it is under no obligation to examine documents or take up complying documents. However, it may not forward the documents to the issuing bank without having taken them up, unless otherwise agreed by the beneficiary(ies). Therefore, I would expect an indication as to whether or not the credit is confirmed to put the matter beyond doubt.
[edited 1/10/03 4:54:02 PM]
If the credit is unconfirmed, the (transferring) nominated bank’s obligations are no different -with respect to documents- on a transferred credit than from an untransferred or non-transferable credit, i.e. it is under no obligation to examine documents or take up complying documents. However, it may not forward the documents to the issuing bank without having taken them up, unless otherwise agreed by the beneficiary(ies). Therefore, I would expect an indication as to whether or not the credit is confirmed to put the matter beyond doubt.
[edited 1/10/03 4:54:02 PM]
Ultimate Risk Party under a transferable L/C
In my view, if the L/C is unconfirmed, as per sub-article 10(c) UCP 500 the nominated bank (which is also transferring bank in our case) has no obligation to pay, to incur a deferred payment undertaking, to accept Draft(s), or to negotiate (to utilize the mandate given by the issuing bank) unless the nominated bank expressly agrees to it and communicates this to the Beneficiary.
As per the same article UCP 500, the nominated bank’s receipt of and/or examination and/or forwarding of the documents does not make that bank liable to pay, to incur a deferred payment undertaking, to accept Draft(s) or to negotiate.
However, as mentioned in the enquiry, many transferring banks make it clear that they will not utilize the mandate mentioned above to prevent any misunderstandings.
If the L/C is confirmed by the transferring (nominated) bank – this bank must take up the complying documents and pay as per L/C terms and conditions.
With Regards,
Pavel Andrle
As per the same article UCP 500, the nominated bank’s receipt of and/or examination and/or forwarding of the documents does not make that bank liable to pay, to incur a deferred payment undertaking, to accept Draft(s) or to negotiate.
However, as mentioned in the enquiry, many transferring banks make it clear that they will not utilize the mandate mentioned above to prevent any misunderstandings.
If the L/C is confirmed by the transferring (nominated) bank – this bank must take up the complying documents and pay as per L/C terms and conditions.
With Regards,
Pavel Andrle