FEATURE - The Institute of International Banking Law & Practice

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FEATURE able to refuse to honor. However, the issuing bank should be able to demand proof of the transfer. The issuing bank could not escape its obligation if the transfer is proven. Moving discussion to ICC Opinion TA639rev, the panel focused on its first query relating to UCP600 Article 35. The Opinion references letters of credit with clauses that modify this article to allow the issuing bank to require copies of all documents to be presented and examined for compliance prior to reimbursing a nominated bank. Delegates were asked if anyone has changed their processes, such as keeping copies of documents, because of credits containing such language that modifies this article to require copies before honoring or negotiating. Some delegates indicated their bank issues credits that modify or delete Article 35. For instance, one bank’s import LCs contain hardcoded language which modifies Article 35. One panelist posed the following question for delegates to ponder: If documents are lost under an export LC and a US-based presenting bank is about to send copies to the issuing bank, does the examiner recheck those document copies again for compliance as the OFAC list may have changed in the time since they were first checked Others said they had hoped this article would have been written similar to ISP98 (Rule 6.13) in that the issuing bank should be able to defer honor until the issuing bank receives the copies. As it is now worded, UCP600 Article 35 is ambiguous. Some panelists observed that the article does not say that the issuing or confirming bank has the right to ask for copies. Discussion then shifted to the query contained in ICC Opinion TA636rev regarding treatment of International Air Transportation Association (IATA) codes in ISBP Paragraph 141. The query asked if the same could be applied to the carriers’ IATA codes. The ICC conclusion states that although IATA airport codes are “widely used and understood by banks globally”, the majority of carriers would not be known by a two-letter code. Therefore, this cannot be applied to carriers’ IATA codes and carrier names should be spelled out in full. Some panelists questioned this aspect of the Opinion, pointing out the inconsistency of allowing codes for airports but not codes for carriers. Moreover, others stated that this ICC conclusion also does not reflect the reality of how air waybills are issued. ICC Opinion TA.644 covers how to handle shipping information where the credit does not require a transport document. At the time of this Annual Survey discussion, part of the ICC Conclusion stated: “Sub-article 14(h) allows for the beneficiary and banks to disregard such conditions to the extent that there is no necessity to provide evidence of compliance. Should the beneficiary, nevertheless, elect to insert such data on any other stipulated document, then they must ensure that it does not conflict with the data in the credit [as per sub-Article 14(d)].” One panelist believes that this Opinion was written very casually and cautioned delegates that they should not assume a court would reach the same conclusion. In his view, this Opinion is unfortunate for commercial credits and will be a burden for standbys issued subject to UCP600. Another panelist specifically alerted beneficiaries within the audience that if certain information in not required, then they should not give such information gratuitously. Further, it is very clear that if data in an extraneous document breaches compliance matters, then it must be considered. The panel also briefly discussed ICC Opinions TA.641 (documentary requirement showing place of 20 Documentary Credit World May 2008
FEATURE delivery) and TA.625rev (apparent name of carrier and agent for the carrier inconsistency). Standby Issues Use of ISP98 has increased dramatically, according to BYRNE, which includes a rise in usage in other countries besides the United States. After polling experts around the world in 2007, the IIBLP decided there is no compelling reason to revise ISP98. Instead, it will expend more effort on education, creation of standard forms, and a revision of the Official Commentary on ISP98. The IIBLP also has been working with Coastline Solutions to develop a tenhour online training program for ISP98 anticipated for release in September 2008. ISP98 Model Forms are currently being developed. They will include a standard standby and one that can be used as a counter standby. The forms will be freely available online. Panelists next took on a scenario which has been the subject of recent discussion: If an LC requires a statement signed by “authorized signer”, does the statement have to show the words “authorized signer” below the signature Opinions among panelists and delegates were divided. One panelist believes the words “authorized signer” convey having a status and are needed. Another disagreed because outside of LC practice, an “authorized signer” means nothing as a status and no lawyer or judge would distinguish between “authorized signer” and “signer”. In this regard, there seems to be a conflict between law and letter of credit practice because of the mindset. One possible solution is that the issuing bank can include in the default statement that the signer is an authorized signer. The panel then discussed ICC Opinion TA.646 which was to be posed to the ICC Banking Commission at its April 2008 meeting. This standby-related Opinion concerns a Spanish company which modified its name from “ABC, S.L. (sociedad unipersonal)” to “ABC, S.L.” According to the text of the Query, “It is merely a formal change since final ownership remain the same; therefore, the new denomination is not a successor of the old denomination (and ISP98, Rule 6.12 [Additional Document in Event of Drawing in Successor’s Name] would not fully fit).” Does the company need to have all their standby letters of credit amended And if not, could an issuing bank cite a discrepancy if an unpaid invoice does not include “(socieded unipersonal)” next to “ABC, S.L.” The Conclusion to the Opinion states: “The removal of ‘sociedad unipersonal’ from the letterhead of the beneficiary should not detract from the fact that it is the same beneficiary that is making a claim under the standby letter of credit. However, and to avoid any possible confusion, where there are copy invoices presented and one or more of these indicate differing styles of letterhead of the beneficiary, it should be suggested to the beneficiary that they provide a statement on their notice of default (or claim) that with effect from dd/mm/yyyy the shareholding status of the company denoted by ‘sociedad unipersonal’ has changed but the name of the company remains as that of the beneficiary under the standby letter of credit.” The Conclusion went on to add: “[W]ith regard to ISP98, the content of rule 6.12 … may also be applicable.” When polled, some bankers in attendance stated that they would want to amend all the credits. Panelists expressed doubt that the Opinion is useful. Noting that Spanish banks could tell this was the same entity, one panelist considers it strange that the query was asked. (It would be different if these entities were international.) This panel discussion concluded with the observation that a rise in the May 2008 Documentary Credit World 21
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