Should a confirming/paying bank advise the issuing bank that an assignment of proceeds has been signed at its counters by the beneficiary (without disclosing the name of the assignee or any of the terms of the AOP), before giving its approval on the AOP, for the purpose of preserving its and/or assignee's right of getting paid in case of direct presentation of documents by the beneficiary to the issuing bank ?
Regards
Antoine SAMAHA
Article 49 Assignment of Proceeds
Article 49 Assignment of Proceeds
Assignment of proceeds matters are very much a question of ‘local’ law. For example, my understanding is that in England generally a nominated, advising, confirming or issuing bank can neither ‘approve’ or ‘disapprove’ an assignment by the beneficiary (assignor) of the proceeds of a credit to a 3rd party (assignee), the parties to the assignment being the assignor and assignee and not the bank(s). Whatever, it is my bank’s practice, as nominated bank, to notify the issuing bank of the receipt of a notice of assignment in case the beneficiary presents documents direct to the issuing bank.
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hatemshehab
- Posts: 220
- Joined: Fri Apr 05, 2019 5:19 pm
Article 49 Assignment of Proceeds
The assignee should be aware of this risk if he really wants to hedge against the possibility of the presenting documents directly to the issuing bank. It is not really the duty of the confirming bank but rather the assignee’s, however it may rely within the context of due diligence that the confirming bank should so inform the issuing bank of the conclusion of assignment of proceeds under the L/C.
The beneficiary having signed an assignment of proceeds, may later on approach the issuing bank of payment to bypass such assignment. The issuing bank should also so inform the confirming / nominated bank of such action to ensure that all charges are settled and that liability under this particular L/C is extinguished. The issuing bank being not aware in advance of AOP may not be able at this moment to comply with such a request by the confirming bank. This might of course involve a lot of complications if the confirming bank is a financing party to the assignee against these proceeds-to-come under the L/C. The assignee may have to sue the beneficiary for bad faith and breach of contractual relationships under AOP.
To avoid all these possibilities, the AOP authorization may include a provision that the beneficiary undertakes to waive its right to proceeds under such L/C if he submits documents directly to the issuing bank and that he authorizes the confirming bank to so inform the issuing bank of such AOP and waive its rights to claim proceeds forthcoming therefrom.
The beneficiary having signed an assignment of proceeds, may later on approach the issuing bank of payment to bypass such assignment. The issuing bank should also so inform the confirming / nominated bank of such action to ensure that all charges are settled and that liability under this particular L/C is extinguished. The issuing bank being not aware in advance of AOP may not be able at this moment to comply with such a request by the confirming bank. This might of course involve a lot of complications if the confirming bank is a financing party to the assignee against these proceeds-to-come under the L/C. The assignee may have to sue the beneficiary for bad faith and breach of contractual relationships under AOP.
To avoid all these possibilities, the AOP authorization may include a provision that the beneficiary undertakes to waive its right to proceeds under such L/C if he submits documents directly to the issuing bank and that he authorizes the confirming bank to so inform the issuing bank of such AOP and waive its rights to claim proceeds forthcoming therefrom.
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PGauntlett
- Posts: 153
- Joined: Fri Apr 05, 2019 5:25 pm
Article 49 Assignment of Proceeds
As an Issuing Bank (where I have nominated a bank overseas to pay) I wouldn't be interested in seeing a notice of assignment. If docs were received directly from the beneficiary I would rather pay them in blissful ignorance rather than get into a potential dispute over the enforceability of any assignment that may be in place (I realise that it would be prudent to advise nominated bank that docs received direct).
An assignment in these circumstances is really only a 'comfort' for the assignee and if he is concerned that the beneficiary might be less than honest he should seek a more concrete arrangement such as having the l/c trasferred to him.
Phil Gauntlett (a rare posting for me, these days!)
An assignment in these circumstances is really only a 'comfort' for the assignee and if he is concerned that the beneficiary might be less than honest he should seek a more concrete arrangement such as having the l/c trasferred to him.
Phil Gauntlett (a rare posting for me, these days!)