Payment Not Made As Per Presenting Bank's Instructions

[Finance]

Our client received a letter of credit from their buyer.

The LC was advised to our client via a different bank. However the client made presentation of documents to via our bank. We sent the documents under the LC to the confirming bank.

Our cover letter clearly instructed the confirming bank to make payment to our correspondent account.

The confirming bank made payment to the bank that had advised the LC to the client, rather then us.

I believe that this is a serious violation of standard practice, but i would appreciate any opposing views.

Finance

[picant]

Hi Pal,

you are right, the bank made a wrong payment then it may bear consequences.
I think that all will be settled friendly, but you may ask for refund of out of pocket fees and some commissions.
I wonder that the other bank might be able to credit someone, normally payment between banks is made by MT202
quoting bank's reference only.
However all may happen.
Other comments appreciated
Ciao

[dinesh2476]

Dear Experts,

Article 7(C).

''An issuing bank undertaking to reimburse a nominated bank is independent of the issuing bank undertaking to the beneficiary''

say for e.g. Since documents contains discrepancies,The documents were forwarded on approval basis to issuing bank by the presenting bank. Issuing bank effected payment through beneficiary bypassing presenting bank.

Can the issue be solved only on the relationship ground?. Can the presenting bank sue issuing bank for his actions?

I have point in my mind that if it is clean case, presenting bank has the rights to claim as they might acted on LC request( LC payment, negotiation). Now the given scenario, IB aware that since it is discrepant documents, there won't be any upfront proceeds as per LC request from presenting bank. Still the said article applicable here.

Thanks&Regards
Dinesh

[picant]

Hi Pals,

try to recall the documents and wait.

Ciao

[dinesh2476]

Dear Picant,

Please correct me if i am wrong.

Here i am raised a question whether the below article applies to all cases OR only for clean cases.

Article 7(C)

''An issuing bank undertaking to reimburse a nominated bank is independent of the issuing bank undertaking to the beneficiary''

Thanks &Regards
Dinesh

[picant]

Hi Pal,

I have anote about this art.7, it means that beneficiary cannot invoke the relationship or undertaking of issuing bank towards nominated bank ,if for istance, goods are not as ordered or other matters that may arise.
So, in case of seizing funds it is not possible to seize the remittance of the issuing bank to nominated bank.
In your case, IMHO, documents unpaid belonged to presenting bank, if delivered to applicant they must be paid to the presenting bank, naturally with clean documentary credit, where it is used a simple receipt or draft......
Other comments appreciated.
Ciao