Dear All ,
I understand the issue in general as :
Recourse is ultimately a matter between the bene and the nominated bank and the advise /offer letter of the Bank which reflects their agreement sort of overrules whatever may be implied by the ICC definations.
More specifically , Hasan asked
Dear L/C experts,
it is mentioned in some papers and books that "negotiation" is with recourse but "payment" is without recourse. could you please show an article in UCP 600 about this case?
My two bits for whatever it is worth:Under sight payment
the nominated bank is under instructions to pay the bene by debit to the IB or after reciveing claim from the RB. It is acting as an agent following instructions:
Thus , bene submits credit compliant docs to Nominated Bank . Nominated bank debits IB's a/c with it ( or claims and recieves reimbursement from RB) . Nominated bank pays bene and dispatches docs to IB.Thus , the nominated bank is never out of pocket. It never pays from its own funds. Therefore logically it cannot/neednot have any recourse to bene.
This is the resaon why in some countries banks refuse to act as nominated banks under payment LCs unless they are confirming that particular LCs. Under negotiation,
Nominated bank has authority to exchange drafts and/ or documents for money:
Thus, bene submits credit compliant docs to nominated bank. Nominated bank pays bene and dispatches docs to IB. IB recieves docs and authorizes Negotiating bank to debit IB a/c with it or claim remibursement from a RB.
Here , Negotiating bank is paying out of pocket.. and IB in turn owes money to negotiating bank only after it has recieved the docs from them.
(BTW This is the reason why Negotiating bank must wait for IB to recieve docs under a negotiation LC before it can claim /recieve funds) Since Negotiating bank has exchanged docs for money it has a right to recourse to the bene if it cannot then get paid by the IB.
Other related issues:
- Confirming bank does not have recourse to bene once it has paid against credit compliant docs..irrespective of whether LC is on payment, negotiation on sight, nego on term, acceptance or under deferred payment basis.
- Discounting/purchase etc can be with or without recourse depneeding on the arrangement between bene and nominated bank.
- Lastly, if there is a fraud by bene bank will always have legal recourse to bene in all cases.
PS: Idt ..
I did get a chance to discuss this issue with Gary Collyer one to one some years back and the FAQs you have posted are pretty much the same views with UCP 600 terminology...