New ICC Draft Opinions March 2021 (Virtual)


Five queries were received for discussion at the ICC Banking Commission meeting which was held virtually in March 2021, in the sequence TA909-910 & 912-914.


TA911 was held-over pending further information. 


TA914 had also been reviewed by the Guarantee Task Force.



TA.909 - Interpretative Paper on the correct interpretation of the first paragraph of UCP 600 article 35 

It was highlighted that the main reason for releasing the paper was to outline that despite the additional wording that was inserted into the first paragraph of UCP 600 article 35 i.e. "when such messages, letters or documents are transmitted or sent according to the requirements stated in the credit", the interpretation of the word "delay" in the preceding text had not changed, was not intended to be changed, and would prevail for circumstances such as those encountered under COVID-19.


It was concluded that the term "transmission", as used in UCP 600 article 35, has been interpreted in line with international standard banking practice and, as used in UCP 600 article 35, includes failure of transmission for any reason not caused or exacerbated directly or indirectly by the actions of the sender. 


In addition, it was clarified that both the Guidance Paper and the Interpretative Paper refer specifically to the transmission or sending of letters or documents in paper form, and not to electronic records and messages. 



TA.910 - non-payment of drawings under a deferred payment credit

Presentations were made under two deferred payment credits. 


For the first, no refusal notice was made, and the credit was not honoured at maturity. In the interim, a message was received from the issuing bank advising a maturity date, but qualifying such statement by informing that payment was subject to receipt of funds from the applicant. It was clearly stated within the analysis that such an approach is not correct.  


Regarding the second credit, a refusal notice had been issued. However, once again, reference was made by the issuing bank subsequently informing the presenter that payment was subject to receipt of funds from the applicant. Further, the issuing bank sent an ‘applicant acceptance offer' rather than acceptance of the documents, or any indication of an acceptance of any waiver of the applicant, by the issuing bank. The issuing bank messages were not in accordance with defined letter of credit practice. Payment was not forthcoming on the due date. 


It was concluded that the issuing bank was obligated to honour both drawings, but any claim for interest was outside the scope of UCP 600. 



TA.912 - non-payment at maturity of deferred payment credit

An issuing bank accepted a presentation under a term documentary credit and confirmed the maturity date.


Subsequently, the issuing bank was apparently made aware that the transaction was fraudulent. On this basis, if offered a ‘scheduled settlement'. However, as stated in the analysis, the issuing bank was committed to pay in accordance with its advice of maturity. 


Any settlement re-scheduling equates to an amendment and would require the agreement of the beneficiary. 


As such, it was concluded that the issuing bank was obligated to honour the drawing, with any claim for interest outside the scope of UCP 600. 



TA.913 - pre-printed text on an insurance document

Documents were presented that included an insurance certificate with pre-printed text, indicating that "Claims must be advised with 3 months from the date of discovery of loss / damage." 


Whilst the issuing bank honoured the drawing, it separately pointed out that, in its opinion, such text represented a discrepancy, based upon the premise that ISBP 745 paragraph K9 states that an insurance document must not indicate an expiry date. 


The analysis highlighted that although there is a time limit for advising the discovery of loss / damage by which any claim must be made, this does not equate to an expiry date for the claim itself. 


In addition, the pre-printed text formed part of the general terms and conditions, which are not to be examined by banks. 



TA.914 - applicability of URDG 758 to a counter-guarantee

A direct guarantee was issued, and subsequently amended to be a counter-guarantee not subject to ICC rules. However, the resulting guarantee was issued subject to URDG 758. It was queried as to whether or not URDG 758 was applicable to the counter-guarantee. 


As stated in the analysis, URDG 758 sub-article 1 (b) clarifies that where a demand guarantee is issued subject to the URDG, the counter-guarantee shall also be subject to the URDG, unless the counter-guarantee excludes the URDG. In this particular query, no such exclusion was added, and the counter-guarantee was therefore deemed to be subject to URDG 758. 


The guarantor made a claim but it was only 18 days later that the counter-guarantor made a response which stated that its customer had initiated an injunction proceeding in a local court regarding payment, and that they were obliged to wait the decision of the court. 


However, the fact remains that international standard demand guarantee practice requires a guarantor, while complying with an injunction issued by a court with jurisdiction, to resist the imposition of such an injunction absent manifest fraud or, if an injunction has already been obtained, seek to have it lifted. 


It was concluded that the counter-guarantor did not comply with URDG and that it was, therefore, obligated to pay. 


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