In recent times, indications have surfaced highlighting the incorporation of ‘administrative conditions' by issuing banks in their credits. This opinion highlights two such conditions; the requirement for an extra set of photocopied documents, and a requirement that documents should not be stapled together. To exacerbate the problem further, the issuing bank used these ‘conditions' as a reason to treat the presentation as non-compliant.
As highlighted in the Opinion, neither ‘condition' constitutes a valid reason for refusal of documents.
It was further commented that whilst the ICC Banking Commission can neither mandate nor limit the terms and conditions that an issuing bank may choose to include in its credits, these types of condition should not be incorporated by an issuing bank as a means to reduce its own internal ‘administrative' requirements.
In conclusion, it is not acceptable for nominated banks or beneficiaries to fulfil ‘administrative tasks' on behalf of an issuing bank.
A number of presentations were made under a credit to an advising bank which had chosen not to act upon its nomination. The documents were subsequently forwarded to the issuing bank but the issuing bank did not send an advice of refusal of any of the presentations.
It was only after a gap of many weeks that the issuing bank contacted the advising bank, stating that the goods were not as per the specification of the credit.
Eventually, many months later, two presentations were honoured, with the remaining two still unpaid. The issuing bank indicated that they were subject to a court ‘judgment'.
It was concluded that the issuing bank did not comply with UCP 600 sub-articles 14 (b), 16 (c) and 16 (d), and that they must honour.
Furthermore, in view of the fact that banks only deal with documents and not with goods, any refusal under a credit can only be based upon the documents themselves. The handling by the issuing bank did not accord with international standard banking practice and constituted bad practice.
Under a documentary collection subject to URC 522, a remitting bank sent a collection instruction to a collecting bank, stating that documents were to be delivered against acceptance and that the collecting bank should confirm the due date by authenticated message.
In view of the fact that the collecting bank did not provide an acknowledgement of receipt, the remitting bank sent a tracer which requested that the collecting bank ensure that the advice of acceptance should be avalised by the collecting bank. This request had not been mentioned within the original collection instruction.
The Opinion highlights that whilst URC 522 makes no mention of avalisation, any such request should be clear and explicit. It is also pointed out that any interpretation of avalisation is subject to clarification by the applicable governing law.
In due course, the collecting bank stated that they had avalised the acceptance. However, it seems unclear if they actually understood the precise implications of such aval.
It was concluded that as a direct result of the avalisation, the collecting bank must pay at maturity of the accepted draft.
A number of questions were raised concerning a documentary credit subject to UCP 600, in which the transferring bank also acted as the ‘presenting bank'.
1. The transferring bank received two presentations from the second beneficiary, each of which were found to be discrepant. The first beneficiary substituted their invoices and, pursuant to instructions from the second beneficiary, the transferring bank forwarded both sets of documents to the issuing bank. The issuing bank did not provide a notice of refusal and must, as a result, pay.
2. Issuing banks are only allowed to release documents to the applicant by making payment.
3. The transferring (presenting) bank, based upon the fact that it did not confirm the credit nor choose to negotiate, has no obligations apart from those stated in UCP 600 article 9 as advising bank, and in article 38 as the transferring bank.
4. In view of the fact that payment was not forthcoming, any remedy must be pursued outside UCP 600. Suggestions included liaison by the beneficiary with the transferring bank in order for both banks to communicate via their correspondent banking relationship networks, the first beneficiary starting legal recourse against the issuing bank, and the first beneficiary initiating discourse with the applicant under the terms of their commercial contract.
5. The question was also asked as to whether shippers have the right to take hold of cargo when a bill of lading is made out to the issuing bank - such a situation is outside the scope of UCP 600 to resolve.
6. Finally, the query raised an issue as whether issuing banks can be ‘blacklisted' when they do not honour - this is also outside the scope of UCP 600 to resolve.
This query is directly linked to the transaction refenced under TA.917rev, but originated from the counter perspective. As such, the same conclusion was reached.
This query addressed the continuing issue of sanction clauses being added to a documentary credit. As highlighted, this issue has been focussed on many occasions, most particularly in the ICC Banking Commission Guidance Paper on the use of Sanctions Clauses 2014 and its Addendum dated May 2020.
Two examples of sanctions clauses were provided in the query, and it was concluded that both examples were viewed as ‘problematic' as outlined in the Addendum paper mentioned above.
It was further asked if it is acceptable for payment under a documentary credit to be delayed or withheld owing to sanctions. Obviously, as mentioned in the conclusion, the ICC Banking Commission cannot comment on specific sanctions or regulations, but it must be borne in mind that unless mandatory law or regulation prohibits an issuing bank from honouring, it must do so if a complying presentation is made.
Furthermore, a question was raised as to whether or not sanctions clauses referring to "indirect risks" should be avoided. It was concluded that whilst it was not clearly apparent what ‘indirectly' actually meant in the context of the query, terms such as ‘including, but not limited to' or ‘indirectly', which are non-documentary in nature, should not be used.