TA.965rev - Five Powers War Clause
The credit required an insurance policy covering all risks, including Institute War, Strike, Riots and Civil Commotion Clauses, and expressly stipulated that there must be no exclusions in respect of the risks required by the credit. The insurance policy indicated that war risks were covered but also contained the words "Five Powers War Clause", without reproducing or explaining the content of that clause. External research by the submitting party indicated that the clause is generally understood to exclude losses arising from war involving certain major powers.
The query asks whether the reference to the "Five Powers War Clause" contradicts the required war risk coverage or restricts the insurance cover contrary to the terms of the credit and, consequently, whether the presentation is discrepant. The central issue is whether a bank can treat the reference as an exclusion when its operative wording does not appear in the insurance document itself.
The credit required insurance covering specified risks without exclusions, and the presented insurance policy referred to the Five Powers War Clause but did not reproduce its wording or explain its effect.
The Opinion concludes that the presentation is not discrepant. Under UCP 600 sub-article 14 (a), banks examine documents on their face. Although the credit prohibited exclusions affecting the required cover, the reference to the clause did not itself establish that any such exclusion applied. Determining its meaning would require external information or knowledge of insurance practice, neither of which forms part of documentary examination.
The important consideration is what the insurance document evidences, rather than what an examiner may know about the clause.
TA.966rev - Advising a credit directly despite Field 57A
A documentary credit identified BANK A as the nominated and confirming bank and stated BANK A's country as the place of expiry, but Field 57A identified BANK B as the bank through which the credit was to be advised. BANK A did not wish to advise the credit through BANK B. The beneficiary, who had a direct relationship with BANK A, asked BANK A instead to advise the credit directly. BANK A considered that it was required to follow the issuing bank's authenticated routing instruction unless it received an amendment or further authenticated instruction.
The beneficiary argued that UCP 600 article 9 permits, rather than requires, the use of another bank for advising and that BANK A could therefore advise the credit directly while informing the issuing bank. The query asks whether BANK A is permitted under UCP 600 to advise the credit directly to the beneficiary notwithstanding the identification of BANK B in Field 57A.
The credit identified BANK A as the nominated and confirming bank, but field 57A instructed that it be advised through BANK B. The beneficiary requested direct advice from BANK A, which considered that an amendment or further authenticated instruction was necessary.
The Opinion concludes that UCP 600 does not prevent BANK A from advising the credit directly. Article 9 does not require a nominated or confirming bank to utilise the bank identified in field 57A.
Although BANK A would normally inform the issuing bank of its decision, this represents prudent operational practice rather than an obligation imposed by UCP 600. Any separate requirements arising from bilateral arrangements or messaging practice remain outside the scope of the Opinion.
TA.967rev - Identification of a container number
The credit required the bill of lading to indicate the container number and seal number. On an attached page forming part of the bill of lading, an alphanumeric reference, "HASU4556268", appeared immediately alongside "1 40' HC CONTAINER SAID TO CONTAIN...", while the corresponding seal number was expressly identified by the prefix "SEAL:". The issuing bank considered the bill of lading discrepant because the container number was not expressly identified as such.
The nominated bank disagreed, arguing that the alphanumeric reference was identifiable as the container number from its format, position and relationship with the surrounding wording, and that the credit did not require the words "container number" to appear as a label. The query therefore asks whether the bill of lading sufficiently indicates the container number and complies with the credit despite the absence of an express field heading or prefix.
The credit required a bill of lading indicating the container and seal numbers. The container number appeared on an attached page, alongside the container description, but without an express identifying label.
The issuing bank raised a discrepancy, arguing that the number had not been clearly identified.
UCP 600 sub-article 14 (d) requires documentary data to be read in context. The alphanumeric reference was identifiable as the container number from its position and relationship with the surrounding information. Neither UCP 600 nor the credit required a particular label.
The conclusion reinforces the importance of examining documents as a whole rather than imposing requirements that the credit does not contain.
TA.968rev - War risk exclusions and the route of transport
The credit required an insurance certificate covering marine/air risk and war risk "without any exclusion", together with all-risks cover. The insurance document stated that war risks were covered under the applicable Institute War Clauses but expressly excluded specified territories and sea areas, including parts of Ukraine and Russia and certain waters. Shipment was by air, and the confirming bank argued that the geographical exclusions were irrelevant because the actual flight route did not pass through the excluded areas. The issuing bank refused the presentation because the insurance document contained exclusions relating to the required war risk cover.
The query principally asks whether the insurance document complies notwithstanding those exclusions and whether the issuing bank must reimburse the confirming bank. It also asks whether the relevance of territorial exclusions should be assessed according to the actual or apparent route for air, sea or land transport, and what alternative credit or insurance wording could avoid such a discrepancy while accommodating standard market exclusions.
The credit required war risk insurance without any exclusion. Unlike TA.965rev, the insurance document expressly identified geographical exclusions applicable to the stipulated war risk cover.
The Opinion concludes that the issuing bank's refusal was valid. The express prohibition modified the application of UCP 600 sub-article 28(i), and the document did not evidence the required coverage.
The fact that shipment was by air, apparently avoiding the excluded territories, did not change the conclusion. Banks are not required to reconstruct transport routes or determine whether an exclusion would become operative during a particular journey.
The Opinion also highlights the importance of appropriate credit drafting. Where particular exclusions are unacceptable, the credit should identify them rather than impose a general prohibition that may prove commercially unworkable.
Observations
Taken together, these Opinions reinforce the requirement to examine what the presented documents actually evidence, applying the terms of the credit and international standard banking practice without introducing additional requirements or relying upon external assumptions.
The different conclusions in TA.965rev and TA.968rev reflect what the respective insurance documents actually state. In TA.965rev, the effect of the referenced clause is not apparent from the document, whereas in TA.968rev, the exclusions affecting the required cover are expressly stated.
www.tradefinance.training