Coastline newsletter / 2009 edition

ISSUE 24 Mar2009

Overview of the DOCDEX issues and Opinions discussed at the ICC Banking Commission in March '09 (Part 1)

By Gary Collyer


The ICC Banking Commission met in Dubai on 11 and 12 March. Again there was the usual assortment of issues that made up the Opinion requests. Before looking at the main points of the Opinions, and their conclusions, the first topic for discussion was the recent request for ICC national committees to nominate experts to the DOCDEX service and the cases that had been decided under the DOCDEX process since the last Commission meeting.

In order to update the present listing and to encourage more experts to enrol, ICC national committees had been invited to propose experts from their respective commissions. Those that were already on the DOCDEX listing were required to re-apply for future involvement. A total of 126 experts from 35 countries were nominated. The ICC and the Officers of the Banking Commission are currently reviewing the listing for appropriate applicants.

There had been 10 DOCDEX cases heard and decided upon, all except one related to UCP 600. The other case involved a collection subject to URC 522. One decision had been withdrawn before the final decision had been given.

The make up of the parties in the UCP cases were as follows:

Issuing bank -v- Beneficiary (2 cases), Issuing bank/Confirming bank -v- Nominated bank (3 cases), Issuing bank -v- Nominated bank (2 cases), Applicant/Issuing bank -v- Nominated bank (1 case) and Issuing bank/Nominated bank -v- Beneficiary (1 case).

All the cases, except one, were decided on a unanimous basis and in all cases the position of the issuing bank was found to be invalid and the decision given in favour of the other party.

There were 15 Opinions discussed at the meeting. During the course of the meeting, one of the requests for Opinion was withdrawn and the issues surrounding that withdrawal will be discussed in the next newsletter. This was the first meeting where national committees had been invited to offer their own analysis and conclusion to the query. Of the 15 Opinions, 12 emanated from 3 ICC national committees.

The first Opinion to be discussed focussed on whether it would be acceptable for insurance documents to be signed by a broker. The initiators advised that issuance and/or signing by a broker was a common occurrence and that some banks were accepting such documents whilst others were refusing. It was also pointed out that some insurance company personnel hold the position of 'broker' within the company. An example of one such document was provided for review.

Article 28 does not refer to insurance documents being issued or signed by brokers. The conclusion that was offered was that an insurance document may be issued and/or signed by a broker provided that the broker indicates that they are acting in the capacity of agent or proxy for an insurance company or underwriter. If the broker is an employee of the insurance company and has a title of 'broker' then they must sign for or on behalf of the insurance company.

See Opinion TA.673 (rev) for the full transcript of the above opinion.

The next Opinion to be discussed covered the situation where the maturity date of an already accepted draft or incurred deferred payment undertaking was to be extended and all parties had agreed. The initiator requested confirmation that the rights and protections of UCP 600 would continue to prevail for all parties once an extension to the maturity had occurred. The issue also touched on whether a replacement draft or new deferred payment undertaking would be required.

Whether a new draft or deferred payment undertaking would be required will be subject to the requirements of the law applicable to the place where the draft was accepted or the deferred payment undertaking incurred. If there are no specific requirements, the draft could be re-accepted with the new maturity date or a deferred payment undertaking could be amended to reflect the new maturity date.

If the involved banks complied with the above, and in line with the definition of honour in article 2, the obligation of the issuing bank to reimburse the nominated bank, according to sub-article 7 (c), extends to the new "agreed" maturity date.

See Opinion TA.674 (rev) for the full transcript of the above opinion.

The ICC Secretary General had previously issued a note stating that the Banking, Transport and Commercial Law & Practice Commissions could not agree on whether banks should refuse bills of lading containing wording to the effect that the carrier reserves the right to deliver the goods without the submission of an original bill of lading and that no Opinion could be issued. On this basis, previous requests for Opinions had been withdrawn at the meetings. However, the ICC Banking Commission were now faced with a query that was a little more direct and made reference to the fact that if the bill of lading was negotiable release of the cargo would be against surrender of one original. If the bill of lading was non-negotiable then the goods may be released without the surrender of an original bill of lading. The credit in question stated that bills of lading that indicate on their face that goods may be released without presentation of an original bill of lading were not acceptable.

The bill of lading presented under the LC was issued to order and blank endorsed. The issuing bank refused due to the clause in the presented bills of lading. The wording for this bill of lading is quoted below:

"SHIPPED, as far as ascertained reasonable means of checking, in apparent good order and condition unless otherwise stated herein, the total number or quantity of Containers or other packages or units indicated in the box entitled "Carrier's Receipt" for carriage always subject to all Terms and Conditions hereof(INCLUDING ALL THOSE TERMS AND CONDITIONS ON THE REVERSE HEREOF AND THOSE TERMS AND CONDITIONS CONTAINED IN THE CARRIER'S APPLICABLE TARIFF) from the Place of Receipt or the Port of Loading, whichever is applicable, to the Port of Discharge or Place of Delivery, whichever is applicable. When the Place of Receipt box has been completed, any notation on this Bill of Lading of "on board", "loaded on board" or words to like effect, shall be deemed to be on board the means of transportation performing the carriage from the Place of Receipt to the Port of Loading. Where the bill of lading is non-negotiable, the Carrier may give delivery of the Goods to the named consignee upon reasonable proof of identity and without requiring surrender of an original bill of lading. Where the bill of lading is negotiable, the Merchant is obliged to surrender one original, duly endorsed, in exchange for the Goods. The Carrier accepts a duty of reasonable care to check that any such document which the Merchant surrenders as a bill of lading is genuine and original. If the Carrier complies with this duty, it will be entitled to deliver the Goods against what it reasonably believes to be a genuine and original bill of lading, such delivery discharging the Carrier's delivery obligations. In accepting this bill of lading, any local customs or privileges to the contrary notwithstanding, the Merchant agrees to be bound by all Terms and Conditions stated herein whether written, printed, stamped or incorporated on the face or the reverse side hereof, as fully as if they were all signed by the Merchant. IN WITNESS WHEREOF the number of original Bills of Lading stated on this side have been signed and wherever one original Bill of Lading has been surrendered any others shall be void."

The conclusion to this query is in two parts. First, that the bill of lading being issued to order and blank endorsed was a negotiable bill of lading and therefore the bill of lading did not state that the goods would be released without the presentation of an original bill of lading. Second, that the wording regarding the release of the cargo appeared in text that was considered to be terms and conditions of carriage. The conclusion to the opinion includes '[T]he wording appearing on this particular bill of lading, and as quoted under "QUOTE" commencing with "[W]here the bill of lading is non-negotiable, the Carrier ....." is considered to be terms and conditions of carriage and will not be examined according to sub-article 20 (a) (v)'.

The document was not considered to be discrepant for this specific form of bill of lading.

See Opinion TA.675 (rev) for the full transcript of the above opinion.

This was a lengthy query and revolved around a number of sets of documents being presented and forwarded to the issuing bank. All documents had been received within the required period (21 days after the date of shipment). The nominated bank sent the documents under cover of various schedules stating "we enclose documents complying with L/C terms and conditions" and they also sent separate MT754 messages stating "documents received within validity and terms (21 days)". The schedules were dated after the expiry date. Despite the statements on the schedules and the content of the MT754 messages, the issuing bank refused due to "late presentation". The issuing bank also attempted to raise further discrepancies around one month after the documents had been presented.

Both the national committee and the Banking Commission agreed that the documents were not discrepant and the issuing bank was responsible for making payment under the LC terms.

See opinion TA.676 (rev) for the full transcript of the above opinion.

Over the years a number of LCs have been issued containing some weird and wonderful clauses. The next Opinion request contained some of the more bizarre. Two credits that had been received included the following conditions "[D]ocuments must be correct on first presentation. Correction of documents is not permitted", "[N]egotiating bank must certify that documents were correct on first presentation" and "[P]rovided documents on first presentation in strict conformity with the LC terms, you are authorized to reimburse yourselves with ....". The national committee requested confirmation that the clauses went beyond the authority of the issuing bank and are without effect to the beneficiary and the nominated bank. The Banking Commission agreed that such clauses represent bad LC practice and issuing banks should desist from incorporating such wording in their credits. However, if the wording appears in the credit and the beneficiary makes shipment under the credit and presents documents, the nominated bank will be required to comply with the condition.

See Opinion TA.677 (rev) for the full transcript of the above opinion./i>

The next request focussed on a bill of lading and the identification of the carrier. The bill of lading showed the name of a company in the letterhead, but did not specifically indicate the name of the carrier on the face of the bill of lading. However, on the reverse of the bill of lading, first line under definition, it states the name of the carrier which is the company appearing at the top of the face of the bill of lading. The initiator requested confirmation that the carrier can be presumed to be the company named on the bill of lading. The answer from the Banking Commission was that banks are not required to examine the terms and conditions of carriage and this would include such examination to determine the name of the carrier.

See Opinion TA.678 (rev) for the full transcript of the above opinion.

The last opinion to be covered in this Newsletter focussed on specific wording appearing in a bill of lading in relation to the interpretation of the requirements for an on board notation. The bill of lading stated:

"When the place of receipt of the goods is an inland point and is so named herein, any notation of "on board", "shipped on board" or words to like effect on this BL, shall be deemed to mean on board the truck, trail car, aircraft or other inland conveyance... from the place of receipt of the goods to the port of loading"

and the question posed was 'is a separate on board notation required under this bill of lading'?

The conclusion given by the Banking Commission was that if the bill of lading evidenced a place of receipt that was different to the port of loading then a dated on board notation would be required to include the name of the vessel and the port of loading.

See Opinion TA.679 (rev) for the full transcript of the above opinion.

The next Newsletter will contain the remaining Opinions that were discussed and approved at the ICC Banking Commission meeting in Dubai.

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The course content is written Professor James Byrne of The Institute of International Banking Law & Practice in association with Gary Collyer, Technical Adviser to the ICC Banking Commission.

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