record(s) 1 to 10 of 58
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UCP Articles 1, 2, 3, 4, 13, 21

Is DOCDEX available in connection with any dispute related to standby letters of credit? Is a copy of a CMR compliant if a discrepancy contained therein cannot be ascertained from the SLC and the documents alone? Is a copy of a compensation invoice compliant if it appears to be signed by the beneficiary? What are the implications of the amount "0" on a compensation invoice?

Parties
Initiator: Bank I (1) and Bank I (2)

Respondent: Bank R

Initiator's summary of case
The respondent issued two standby letters of credit (SLCs) by order of the same applicant which are expressly subject to the UCP 500 and available by payment at sight at the counters of the respondent, in favour of different beneficiaries. Each of the two initiators, upon request of the respondent, advised one of the SLCs to the respective beneficiary. Each of the beneficiaries presented, through the respective advising bank, several demands under the respective SLC. Since the respondent rejected such demands as non-compliant, each of the beneficiaries requested the respective initiator to trace payment and to respond to the objections made by the respondent.

The initiators claim that, after discussing the discrepancies and sending additional and corrected documents by order of the beneficiaries, the respondent contends that the following discrepancies still remain:

With regard to the CMR, it is indicated in the SLC, among others, that it must be signed by the addressee indicated in the purchase order. Consequently, it is necessary to obtain the purchase order and verify, on the purchase order, the name of the addressee.

2.1 One of the copies of the compensation invoices concerns cost of return of goods; consequently, it is necessary to furnish the compensation invoice issued by the applicant concerning the said goods.

2.2. The copy of the compensation invoice is not correct. The amount on this document should have been zero. Otherwise, in the event that the amount is identical to that shown on the copy of the commercial invoice and in respect of the drawing, the buyer would owe nothing.

2.3 The initiators regard these reclamations as ill-founded because these SLCs, being subject to the UCP 500, (1) are separate transactions from the sales or other contracts on which they may be based, and banks are in no way concerned with or bound by such contracts, even if any reference whatsoever to such contracts is included in the credit, (2) the purchase order was not an integral part of any of these SLCs and (3) these SLCs did not call for special requirements concerning "la facture de compensation", which therefore should be accepted as presented.

Respondent's summary of case
The respondent refused to request, or submit to, a DOCDEX Decision, with the argument that disputes concerning SLCs lie outside the DOCDEX Rules.

From the copies of the additional documents submitted by the initiators with the request for a DOCDEX Decision, there are reflected the three aforementioned reclamations, and, as further reasonings of the respondent (1) that the purchase order in possession of the respondent shows an addressee different from any signee of the CMR and (2) that a compensation means extinction of two reciprocal obligations related to a sum of money.

Issues and reasons
Before the issues under dispute can be examined, the question has to be decided whether or not DOCDEX is available in connection with any dispute related to SLCs. According to Article 1.1. of the DOCDEX Rules, DOCDEX is available in connection with any dispute related to a documentary credit incorporating the Uniform Customs and Practice for Documentary Credits (UCP). The two SLCs in question are expressly subject to the UCP 500. Article 1 of UCP 500 refers to "all Documentary Credits (including to the extent to which they may be applicable, Standby Letter(s) of Credit) where they are incorporated into the text of the Credit". Article 2 UCP 500 defines "the expressions 'Documentary Credit(s)' and 'Standby Letter(s) of Credit' (hereinafter referred to as 'Credit(s)')" and throughout the rest of the UCP 500, the term "Credit" is used.

Thus, Article 1 describes SLCs as one form of documentary credits, while Article 2 UCP 500 differentiates again between documentary credits and SLCs in order to define them for the purposes of the UCP 500 as "Credits". In its relevant part, Article 1 UCP 500 is substantially identical to Article 1 UCP 400, which reflects a decision taken by the Banking Commission on March 14, 1977 that a particular SLC "fell within the definition of a documentary credit given by para. (b) of the General Provisions and Definitions contained in Uniform Customs and Practice" (the UCP 290; see ICC Publication No. 411 p. 10 and ICC Publication No. 371, p. 11).

Thus, the reference to "a documentary credit" in Article 1.1. DOCDEX Rules includes a reference to SLCs.

The issues that the initiators have requested we determine are dealt with separately below. In the light of documents having been presented under the standby credits, it is clear that it was unwise to have issued, advised and accepted such standby credits which, inter alia, were not as complete and precise as the respondent and initiators would like to understand them.

1.The SLCs in question required inter alia "UNE COPIE DU DOCUMENT DE PRISE EN CHARGE (CMR) ADRESSE AU DEMANDEUR, PRECISANT LE NUMERO DU CAMION, SIGNE PAR LE DESTINATAIRE INDIQUE A LA COMMANDE"

None of these SLCs indicates that the "COMMANDE" (purchase order) is attached thereto or that it requires the presentation of a purchase order. With respect to the copies of CMRs presented under these SLCs, the initiators and the respondent do not seem to disagree that the addressee designated in the purchase order(s) does not appear to have signed the CMRs.

Pursuant to Article 13 UCP 500, the respondent has to examine all documents stipulated in the SLCs with reasonable care, to ascertain whether or not they appear, on their face, to be in compliance with the terms and conditions of the SLCs, and has to deem (non-documentary) conditions which do not state the document(s) to be presented in compliance therewith, as not stated and has to disregard the same.

Because the addressee indicated in the purchase order was not named in such SLCs and the respective purchase order(s) was neither attached thereto nor required to be presented thereunder, this condition lies outside the terms and conditions of these SLCs and the applicable rules of the UCP 500 regarding documentary conditions.

Banks are in no way concerned with or bound by sales or other contracts on which SLCs may be based (Article 3 UCP 500). Therefore, on the basis of the UCP 500, the respondent may not step outside the terms and conditions of these SLCs, but must determine, on the basis of the documents stipulated therein alone, whether or not they appear on their face to be in compliance with such terms and conditions (Article 14(b) UCP 500). This will determine whether the respondent may take up such copies of CMRs.

2. These SLCs required, inter alia "- UNE COPIE DE LA (DES) FACTURE(S) IMPAYEE(S) ... - UNE COPIE DE LA (DES) FACTURE(S) DE COMPENSATION COMMERCIALE IMPAYEE(S) CORRESPONDANTE(S) A LA MARCHANDISE DE LA (DES) FACTURE(S) RECLAMEE(S)".

Besides any copy of unpaid (commercial) invoice(s), therefore, copy(ies) of unpaid unpaid invoice(s) relating to the goods of the commercial invoice(s) to which the drawing relates, were to be presented without any further specifications in such SLCs as to their data contents, issuers or signatories. Since copies of one or more commercial invoices which have not been paid must be presented under the first quoted item, the compensation invoice(s) to be presented at the same time must be distinct from the commercial invoice(s) and therefore are documents would fall under Article 21 UCP 500. That is why such compensation invoices must be accepted by the respondent as presented, provided that they appear to relate to the goods of the respective commercial invoice(s) and that their data content is not inconsistent with any other stipulated document presented.

2.1 Several copies of the compensation invoices presented concern "frais repatriement de marchandise" (cost of return of goods) and appear to be signed by the respective beneficiary. In standby letter of credit operations, the banks deal with documents, and not with goods, services and/or other performances to which the documents may relate (Art. 4 UCP 500). These SLCs do not stipulate that the invoices (copies of which are to be presented together with any drawings) need to be issued or signed by or for and on behalf of any specific person. Therefore, copies of compensation invoice(s) appearing to be signed by the beneficiary comply with the terms and conditions of these SLCs.

2.2 With respect to the stipulation quoted under no. 2 supra, in such SLCs copies of compensation invoices were presented showing a certain figure opposite "valeur de la facture proforma" and the same figure opposite "valeur de la facture" and by deducting the latter from the former figure one arrives at a "difference" of "0".

According to Article 21 UCP 500, the data content of such compensation invoices must not be inconsistent with any other stipulated document presented. If the sum shown in such compensation invoice is zero and if the drawing is for the amount of the copy of the commercial invoice presented in connection therewith, then there is no inconsistency between the data contents of the compensation invoice and the copies of the commercial invoice(s) or with the drawing

Decision
Under the terms and conditions of the SLCs in question and the UCP 500, to which they are subject,

1. A copy of a CMR is compliant, if any discrepancy thereof cannot be ascertained from the terms and conditions of the standby letter of credit and the documents alone,

2. A copy of a compensation invoice concerning costs of return of goods is compliant, if it appears to be signed by the beneficiary, and

3.A copy of a compensation invoice showing as the resulting amount "0" is not inconsistent with a drawing in an amount identical to the amount shown in the copy of the respective commercial invoice presented therewith.

This Article clearly indicates that all the obligations described in the Article are against "Stipulated document(s), provided that the terms and conditions of the credit are complied with".

Sub-Article 9(a) clearly indicates that the undertaking of the issuing bank is subject to stipulated documents being presented.

One of the stipulated documents in this credit was the inspection certificate that the applicant should present directly to the issuing bank. This document was not presented and therefore there is no obligation under the credit for payment to be effected, and the rejection of documents by the issuing bank was valid under UCP and by international standard banking practice.

Matters for additional consideration
The beneficiary claims that the issuing bank as an alternative to making payment under the credit should pay for loss and damages incurred by the beneficiary on account that the consignee was able to take delivery of part of the merchandise shipped under the credit.

Based on the provisions of UCP the issuing bank has no obligation to pay for such loss.

"In Credit operations all parties concerned deal with documents and not with goods, services and/or other performances to which the documents may relate."

The obligation of the issuing bank was only in respect of the credit as issued and amended and the stipulated documents presented thereunder. As the documents were validly rejected, the obligation does not arise and the issuing bank has no liablity.

Further considerations
ICC has consistently been against the practice of issuing credits which include a requirement for presentation of documents which are not under the control of the beneficiary, as it weakens the value of the documentary credit as a guarantee for payment.

ICC has warned beneficiaries against accepting to perform under documentary credits that require presentation of documents which are not under the full control of the beneficiary, and warnings have also been made against accepting documentary credits that require transport documents to be issued and handled in a way that allows the consignee to take possession of the merchandise before the applicant has received the documents through the banking system.