Analysis and Insights on ISP98 Rule 3.07

DCW Editorial Note: This previously unpublished material reflects the thinking and writing of Professor James E. Byrne over the period of multiple years up to his passing in July 2018 in an effort to review and note usage of ISP98 during the first 20 years of the rules’ existence. Several leading bankers, lawyers, and corporate users of ISP98 offered constructive review and contributed valuable input to this material.

Throughout this 25th anniversary year of ISP98, DCW will be presenting additional writings of Professor Byrne on various rules. For more on the life and legacy of Professor Byrne, see DCW’s special tribute issue on the IIBLP website.

1. Generally.

Rule 3.07 articulates the implications of the principle that each presentation is separate from other presentations under the same or another standby. (1) It enshrines the beneficiary’s right to cure a non-complying presentation, provided that it is done in a timely manner. (2) It addresses the impact of a non-complying presentation or withdrawal of a presentation on a standby that prohibits partial drawings or multiple presentations. (3) It disavows application of the UCP notion of an ‘instalment’ credit to ISP98 standbys under which the credit would cease to be available if a drawing is not made on each instalment. (4) It rejects the notion that wrongful dishonour of a presentation itself constitutes repudiation of the standby. (5) and rejects the notion that honour of a non-complying presentation with or without notice of the discrepancies constitutes a waiver of the requirement with respect to the same or similar discrepancies in other presentations.

2. Background of Rule 3.07.

The principle underlying Rule 3.07 is that each presentation is to be treated as separate from other presentations, whether it constitutes a re-presentation or another presentation under the same or a different standby. Rule 3.07 codifies the principle that actions with respect to a presentation should neither be affected by a prior presentation nor a subsequent presentation.

Rule 3.07 also states the accepted principle that a beneficiary may cure a non-complying presentation even if partial or multiple presentations are prohibited.

Additionally, it also rejects the UCP rule on “instalment” credits. The UCP instalment rule is one of the most troublesome UCP provisions for standbys. In UCP400 Art. 45 (Drawings and/or shipments by instalments) (1983 Version) the rule was expanded to encompass “instalment drawings” as well as “instalment shipments” in a mechanical fashion to correspond with the first reference in the UCP to standbys. This approach was continued in the version then-current when ISP98 was drafted, UCP500 Art. 41 (1993 Version) (Instalment Shipments/Drawings), and has been continued in UCP600 Art. 32 (2007 Version) (Instalment Drawings or Shipments).[[1]] Due to this change in wording, UCP encompasses a series of drawings under a UCP standby. This change has proven most unfortunate. The UCP article is therefore varied in standbys at the insistence of knowledgeable beneficiaries. Rule 3.07(a) makes such variations unnecessary by providing that failure “to make any one of a number of scheduled or permitted presentations does not waive or otherwise prejudice the right to make another timely presentation or a timely re-presentation whether or not the standby prohibits partial or multiple drawings or presentations”.

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