Beneficiary Blame Presenting Bank For Not Checking Document

[Md.zakir Hossen]

Beneficiary presents docs to the advising Bank in a freely negotiable Credit.Advising Bank submits the docs to the issuing bank without checking the docs and advising Bank doesn't negotiate the docs.However Issuing Bank refuse to honor the docs as they are not complying.

Now the beneficiary blame the presenting bank for not informing him the discrepancies in the credit and wants to go the court.

Solicited your opinion.

[nesarul]

Dear zakir bhai,
INTERESTING QUESTION.
A BIT TOUGH TO COMMENTS, NO ONE CAN PREDICT ABT COURT JURISDICTION.
TRY TO MAKE COMMENT FOR AUTOPSY.

"COURT" IS A DIFFERENT BALL GAME WITHOUT ABLE TO PREDICT.
BUT THE WORD "COURT" IS ALWAYS DERIVED US TO THINK A BIT MORE. HERE THE FOLLOWING ISSUE MAY WE TAKE INTO CONSIDERATION [BEYOND UCP IN SOME CASES]:
1. WHY DOES PRESENTING BANK INVOLVE IN THIS TRANSACTION.
2. DOES IT SHOW DUE DELIGENT TO PERFORM ITS ROLE.
3. DOES ITS ROLE FUNCTION CREATE OSTENABLE HARM TO OTHERS PARTY INVOLVED IN THIS PARTICULAR TRANSACTION ETC.
EAGERLY AWAITNG FOR FORUM MEMBERS COMMENTS ON THIS ISSUE.
REGARDS
NESAR.

[Rejaul17]

Hi Jakir
This is Qais.
I am confused about your topic. The following questions arises to me:
1. Why the issuing bank will go to the court?
2. What kind of suit will it file? Is it a money suit? ( I guess the issuing bank didn't honour the bill and in that case there is no need to file a money suit.)
I think Article 15 and 16 of UCP-600 and article 10 of URC bear some answer of this matter.

[nesarul]

Deal all,
thanks rejaul bhai to add. your posting is like added the branches to the tree, its added something to me.
I think there are some interesting point to be noted.

the procedure of ICC DOCDEX decision has always been followed court style like It used terms such as: defendent or initiator, responded etc.
I didn't come accross a single DOCDEX cases where issuing bank is defendend or initiator, normaly issuing bank didn't file a suit.
But in our cases, issuing bank is initiator or defended, which is really unusal, so the intention of the issuing bank is really arcane to me.
awaiting for valuable comments from forum members in this interesting case.
regards
nesar

[Sharif]

Dear Concern

I do not understand why the issuing bank wants to go to the court? If the intention is not to honor the doucment as the document do noy comply, the issuing bank can do so without refering to court.
Again here the presenting bank is not bound to identify the discrepency.
Pls comment...
Sharif

[nhduc]

Hi,

Md.zakir Hossen seems to have mistaken. He could have meant the beneficiary (not the issuing bank) who wanted to take a legal action against the nominated bank under the LC for the nominated bank's failure to act its obligation under Article 16 (c), i.e., not giving a notice of refusal stating the discrepancies when it decides to refuse to honour or negotiate the documents.

To have a better view of the scenario, I wish to quote hereunder some related articles of UCP 600:

Article 14 (a): A nominated bank acting on its nomination, a confirming bank, if any, and the issuing bank must examine a presentation to determine, on the basis of the documents alone, whether or not the documents appear on their face to constitute a complying presentation.

Article 16 (c): When a nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank decides to refuse to honour or negotiate, it must give a single notice to that effect to the presenter. The notice must state ... each discrepancy in respect of which the bank refuses to honour or negotiate.

Article. 12 (a): Unless a nominated bank is the confirming bank, an authorization to honour or negotiate does not impose any obligation on that nominated bank to honour or negotiate, except when expressly agreed to by that nominated bank and so communicated to the beneficiary.

Article 12 (c): Receipt or examination and forwarding of documents by a nominated bank that is not a confirming bank does not make that nominated bank liable to honour or negotiate, nor does it constitute honour or negotiation.

I wish to draw your attention to the key point "acting on its nomination" in the above articles. It seems that by saying “a nominated bank acting on its nomination”, the UCP 600 drafting group might expect us - LC users - to recognize the difference between “a nominated bank acting on its nomination” and “a nominated bank not acting on its nomination”.

So, what constitutes the evidence that a nominated bank is acting on its nomination? According to Article 12 (a) and (c), it is the agreement by the nominated bank to act on its nomination which would consist of the following basic actions:

1) Receipt of Documents;
2) Examination of Documents - giving notice of refusal as per Article 16 (c) if any;
3) Forwarding of the documents to the issuing bank or to the confirming bank (if any).

From the scenario described by Md.zakir Hossen, it is possibly understood that the nominated bank just acted a remitting/presenting bank and it did not convey to the beneficiary its consent to “act on its nomination” under the LC. Moreover, that the nominated bank did not examine the documents also helped confirm that it refused to act on its nomination under the LC.

The beneficiary may bring a lawsuit against the nominated bank and he can win the case only when he has some proof evidencing that the nominated bank agreed to act on its nomination under the LC and so communicated to him.

That the nominated bank under free-negotiation LC fails to discover discrepancies in the documents and thus fails to inform the beneficiary of the discrepancies is quite normal in our daily work. However, I have rarely heard the case where the beneficiary takes legal action against the nominated bank, which is not a confirming bank, just because the nominated bank failed to inform it of the discrepancies.

Could anyone tell me if he has ever come cross the same scenario where the beneficiary brought the nominated bank to court and won the case?

Best regards,
Nguyen Huu Duc

[Md.zakir Hossen]

Sorry, serous mistake.Thank you nhduc for removing confusion of the members.Actually I want to Beneficiary to go to the court.
For long days I do not visit the site.