Article 35 and SWIFT approval of discrepancies

[GSham]

In accordance with article 35, if a nominated bank determines that a presentation is complying and forwards the documents to the issuing bank, an issuing bank must honour or reimburse that nominated bank, even when the documents have been lost in transit between the nominated bank and the issuing bank.

If the documents are discrepant, and the issuing bank has, prior to receipt of the documents, given approval by authenticated SWIFT to the nominated bank to negotiate despite the discrepancies, but subsequently the documents are lost in transit between the nominated bank and the issuing bank, does the abovementioned provision in article 35 still apply?
[edited 6/27/2011 8:04:09 AM]

[NigelHolt]

It must do.

[GSham]

Jeremy, I guess your point is that a discrepant presentation, having been approved by the issuing bank via authenticated SWIFT, should be treated as a complying presentation in the context of UCP and therefore article 35 applies to it as well.

While we are on the subject of issuing bank approving discrepancies prior to receipt of the documents, I would like to hear your view on the following: Is there ground for the issuing bank to reject the same presentation upon receipt of the documents due to the same discrepancies it had earlier approved via SWIFT, using articles 14(a), 14(b) and 16(a) as the basis? I am of the view that the issuing bank does not have the right to renege on its earlier approval of the discrepancies via authenticated SWIFT, but I am faced with opposing view and therefore would like to hear from you and other experts.

Thanks,
Gabriel

[NigelHolt]

Gabriel,

That in essence was my point. However, I would have maintained the position was exactly the same under UCP500, even though UCP500 Article 16 did not contain the second paragraph now found in UCP600 Article 35, i.e. that if an issuing bank communicates it agrees to the honour / negotiation by the nominated bank of discrepant documents it must honour even if they are lost in transit.

With respect to your second point, I cannot see how anyone could seriously argue that an issuing bank could subsequently rescind an authority it had given to a nominated bank to honour / negotiate and if such an argument were made to me it would frankly provoke ridicule, if not contempt, on my part. By definition, by giving the authority the issuing bank foregoes its rights under the sub-Articles you quote in respect of the discrepancies already waived and that should be patently obvious to anyone of even moderate intelligence working in our field.

Regards, Jeremy

[GSham]

Jeremy

I fully agree with you. For the fact that it has already accepted the discrepancies via authenticated SWIFT, the issuing bank is no longer entitled to rejection of the presentation due to the same discrepancies. It is "estopped" from asserting anything to the contrary of what has been established by its own deed.

Regards
Gabriel