ICC Opinion TA925rev Finalized

One ICC Opinion, TA925, was discussed at the ICC Banking Commission’s latest quarterly meeting on 12 July 2022 and finalized thereafter. ICC Opinion TA925rev involves payment under confirmation without reserve. An LC beneficiary presented documents which were taken up by the confirming bank. The confirming bank subsequently informed the beneficiary that it received a refusal notice from the issuing bank. The beneficiary sought payment from the confirming bank as its documents had been “taken up without any reserve.”

Although the confirming bank admitted it had overlooked a discrepancy and had “taken up the documents”, it had done so “within the grace period” and offered payment under reserve or payment contingent on the issuing bank’s acceptance of the documents.

In justifying their respective positions, the confirming bank cited UCP600 Article 8 and the beneficiary referred to UCP600 Article 15(b). Each party was “surprised” at the other’s stance in the dispute.

The Query asked the beneficiary’s question: “Could we insist on payment under the confirmation, without reserve, or is the confirming bank allowed to revise their acceptance of the documents?”

After quoting UCP600 sub-articles 14(a), 15(b), 8(a)(i)(a), 8(a)(ii), and 8(b), the Opinion’s Analysis explained that the confirming bank’s message that it had “taken up the documents” meant that it had determined that a complying presentation had been made. As a result of that determination, under UCP600, the confirming bank must honour or negotiate.

The draft opinion concluded: “The confirming bank is required to effect payment without any requirement for a reserve from the beneficiary.” Following discussion with ICC National Committee representatives, a second sentence was added to the ICC Opinion TA925rev Conclusion to clarify that the confirming bank had lost its chance to come back again and assert that the documents were discrepant: “Once it has taken up the documents, it is precluded under UCP 600 sub-article 16 (f) from subsequently claiming that the documents do not constitute a complying presentation.” During discussion of TA925, one ICC NC rep mentioned his familiarity with a very similar scenario involving an issuing bank’s need to pay under a standby LC. ICC Technical Advisors reminded, however, that such situation could not be addressed here. ICC opinions cannot go beyond the query raised, so a question about an issuing bank would need to be asked in a separate query.