Documents were presented under a credit subject to UCP 600 and were taken up by the confirming bank.
One week after initial presentation, the confirming bank informed the beneficiary that they had received a notice of refusal from the issuing bank citing a discrepancy.
The confirming bank admitted to having missed the discrepancy whist still taking up the documents but stated that as they had pointed out the discrepancy within the ‘grace period', the discrepancy was valid and that, according to UCP 600, they were not expected to pay.
Whilst the beneficiary agreed that a discrepancy existed, they still expected payment under the confirmation without reserve.
The confirming bank had taken up the documents and it is assumed that, in accordance with the terms and conditions of the credit, when sending the documents to the issuing bank, it also sent a SWIFT message to the issuing bank for reimbursement.
The reference by the issuing bank to a ‘grace period' is of no consequence as such a term is neither mentioned nor allowed under UCP 600.
In view of the fact that the confirming bank had initially determined that a complying presentation had been made, the confirming bank was required to effect payment without any requirement for a reserve from the beneficiary. Once it had taken up the documents, it was precluded under UCP 600 sub-article 16 (f) from subsequently claiming that the documents do not constitute a complying presentation.
For clarification purposes, the Opinion highlighted that when used, the phrase "taken up the documents" is understood to mean that a bank has determined that the documents are in compliance with the terms and conditions of a credit and has informed the presenter of that fact.