ICC Digital Library Forum

Place of Expiry: at the counters of issuing bank
Available with issuing bank by deferred payment
Terms: 90 days after the bill of lading date

Beneficiary's bank send the documents to the issuing bank as it is available by deferred payment with issuing bank. Issuing bank checked the documents and confirmed due date of payment to the beneficiary's bank by authenticated SWIFT.

My question is:
i) Upon receipt of such authenticated message, can the beneficiary's bank discount the bill (as it is available with issuing bank by deferred payment and not with any bank by deferred payment). If so , will they get any protection under UCP and/or Negotiable Instrument Act.

Many thanks for your kind reply,

Regards,

Shahed

The beneficiary's bank's role in the transaction is simply that of an advising bank. It has no nomination under the credit and therefore, in my opinion, has not protection under UCP. Legal protection could vary between jurisdictions.
Your best bet would be either to request the issuing bank to discount the proceeds itself. For future l/cs, and assuming that the issuing bank wants to retain availability at their counters, ask for a credit payable by acceptance of drafts drawn on the issuing bank.
Regards
Carmel

I agree with Carmelborg. There is no nominated bank in this situation so there are no UCP protections.

I do not agree with above. You are protected by UCP, because issuing bank has accepted documents and has to pay on due date. So, if your bank wishes to discount you can do so. If issuing bank does not pay on due date you can claim payment with penalties from him because of delay.

Penalties because of delay? Right and what if the issuing bank do not pay at all because an injunction or judgement.
Daniel

And I forgot: if issuing bank is bankrupt.

There would be no UCP protections.
The issuer has agreed to honor at maturity and that agreement is limited to the beneficiary (or assignee their acknowledged), as the only other party to this type of credit.
However, you could enter into a side agreement with the beneficiary to provide the financing but the agreement would be limited between the two of you and not subject to the LC or UCP.

Shahed,

If the credit is available by DP, as opposed to acceptance, there will not be any bill to discount will there? Nonetheless, the beneficiary’s bankers could purchase the issuing bank’s payment obligation to the beneficiary and seek to gain the protection of the UCP by the beneficiary assigning their rights against the issuing bank to the beneficiary’s bankers. How effective this would be would depend I expect on the law of the issuing bank’s country and because of this the beneficiary’s bankers might also require the beneficiary to undertake to sue the issuing bank on behalf of the beneficiary banker’s in the event of default.

However, if the credit is actually available by acceptance then the beneficiary’s bankers can purchase the bill from the beneficiary and gain rights under the applicable negotiable instruments law (that of the issuing bank’s country I anticipate). Whether it would gain protection under the UCP depends on whether -in the context of sub-Art. 7(a)(i)- the definition of ‘honour’ in Article 2 extends to a party -other than the beneficiary- that is a holder.

Regards, Jeremy

Alexanders,

Sorry but I agree with Glenn and Jeremy.

If the bank making discounting of a DPU is not a nominated bank, it is not protected by UCP 600 sub-article 12 (b).

To get a better protection by common law, a non-nominated bank that wants to discount a DPU incurred by the issuing bank should ask for the issuing bank’s authorization/approval or enter a with recourse financing agreement with the beneficiary.

Regards,
N.H.Duc

Ok! Agree! In this situation beneficiary only has the right to claim delayed payment and penalties.