DCW maintains a list of recently-decided court cases involving commercial letters of credit, demand guarantees, and other trade finance instruments.
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Issuer sued beneficiary alleging sham transaction and breach of warranties; beneficiary and prior sellers lodged indemnification claims.
To support its purchase[[1]] of 260,000 barrels of gasoil (± 5%), Zenrock Commodities Trading Pte Ltd. (Buyer/Applicant) applied for and caused Banque de Commerce et de Placements S.A., (Issuer) based in Geneva, to issue a UCP600 letter of credit for USD 20.5 million in favour of China Aviation Oil (Singapore) Corp. (Seller/Beneficiary). The LC was confirmed by UBS Switzerland A.G. (Confirming Bank). In making its undertaking, Issuer believed Buyer/Applicant would on-sell the gasoil to PetroChina International (East China) Co. Ltd. (Second Buyer) and Buyer/Applicant would assign its expected proceeds from Second Buyer to Issuer. This “self-liquidating” transaction would cover Issuer’s financial exposure under the credit.
Apparently, the lead plaintiff, Banque de Commerce et de Placements S.A., DIFC Branch, (Issuer Dubai Office) had a back-to-back LC with Issuer, as Buyer/Applicant was Issuer Dubai Office’s customer.[[2]] The LC was available with Confirming Bank by deferred payment 45 days from B/L date and called for, among other documents, Seller/Beneficiary’s commercial invoice and original B/Ls.[[3]] In the event Original B/Ls (OBLs) and other documents were unavailable at the time of presentation, Seller/Beneficiary could present its invoice and letter of indemnity (LOI) in a form prescribed by LC field 47A(10).
Letter of credit cases can reveal a great deal about how the industry's practice rules and standards are viewed and interpreted by the courts.
Disputes over Independent Guarantee Fraud, Independent Guarantee Payment, and Improper Dishonor
Beneficiary Bayport Polymers appealed temporary injunction restraining presentation of LC documents.
Issuer First Service Bank moved to dismiss wrongful dishonor complaint brought by World Fuel Services.
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