ICC Opinions Finalized at July 2024 Session

Five draft opinions – some garnering much more attention than others – were finalized in an ICC Banking Commission quarterly discussion session lasting more than two hours on 2 July 2024. In advance of the session, 29 ICC National Committees submitted comments on the draft opinions.

ICC Opinion TA941

ICC Opinion TA941 involves a query about clean bills of lading. A commercial LC called for a full set of clean on board or shipped negotiable marine B/Ls. The presented B/L included the statement: “Cargo Conditions As Per Survey Report issued by [name of survey company].” No Survey Report was presented, nor required by the LC. The issuing bank refused, unable to determine if the B/L was “clean” since the survey report was not included in the presentation. The nominated bank, referencing UCP600 Article 27 and ISBP 821 Paragraph E20, countered that the B/L “did not expressly declare a defective condition.

The ICC determined that the issuing bank’s refusal was not valid and, even if a survey report had been presented, it should be disregarded as per UCP600 Article 14(g). As the statement on the B/L did not expressly reference a defective condition, the Opinion’s analysis said a document examiner is not to go beyond such statement by investigating references to another document which is not required by the LC.

ICC Opinion TA942

ICC Opinion TA942 involves a demand under a URDG758 guarantee. Issued by a guarantor in Country A in favour of a beneficiary in Country B, the guarantee was advised to the beneficiary via an advising bank in Country B. The guarantee required: “For identification purposes the Beneficiary's payment request shall be submitted via its servicing bank [Bank B], SWIFT: [SWIFT address of Bank B] that will confirm that the Beneficiary's signature(s) thereon is/are authentic and legally binding upon the Beneficiary.” Following issuance, Country B was subject to sanctions applicable to the guarantor which thereafter revoked the SWIFT keys it had previously exchanged with the advising bank. Beneficiary’s written demand was later made via courier service, apparently coming from the advising bank (although not sent from Country B) to the guarantor, followed by an unauthenticated SWIFT message sent by the advising bank to the guarantor, seeking confirmation of receipt of the beneficiary’s demand. As both means of delivery were not authenticated, the guarantor did not consider this to be the final demand.

The query asked three questions: 1) “Is it correct to consider the demand as not having been presented, as both means of delivery were not authenticated?”; 2) “Would it constitute a valid refusal to state ’SWIFT message not authenticated as required by the guarantee’”?; and 3) Whether it would make a difference if revocation of the SWIFT keys was based on internal policy of the guarantor or applicable sanctions?

Many written comments to the ICC’s initial draft opinion were received and several necessitated changes to the Analysis and Conclusion. Much of the discussion that then ensued focused on addressing the query’s questions as stated, whether sufficient facts were provided within the query, and the importance of the ICC refraining from answering questions beyond those raised in the query.

In its conclusion to question 1, ICC stated “no”, “[a] demand was presented but was discrepant as it did not comply with the requirements set out in the guarantee.” It continued: “URDG 758 article 24 on the rejection of non-complying demands and the preclusion sanction applies.” When concerned was expressed over use of the word “sanction”, it was decided that “rule” would be used instead.

On question 2, ICC responded in the negative and explained that “[t]he guarantee does not require that the SWIFT message transmitting the demand be authenticated, but that the SWIFT message include the statement confirming the authenticity of the beneficiary’s signature on the demand” and that it is legally binding on the beneficiary. In a reversal of its initial stance, ICC said “no” on question 3. It stated: “Revocation of SWIFT keys by the guarantor due to an internal policy cannot be used as a reason to refuse a demand.” And further added: “However, in the context of this query, it makes no difference as alternative methods for signature confirmation were available. As to the second situation, sanctions applicable to the guarantor, this hypothetical event is a matter for applicable law to determine and is not covered by URDG 758.”

On addressing the matter of internal policies, it was agreed the word “workability” would be removed and this portion of the Opinion’s Analysis was rephrased to read: “Internal policies should have no impact on an irrevocably issued guarantee instrument. Where mandatory law is applicable, it must be complied with.”

ICC Opinion TA943

ICC Opinion TA943 deals with a query asking a series of five questions regarding meaning of the phrase “send documents on approval basis” and interpretation of UCP600 Article 35 provisions concerning documents lost in transit. Under the scenario outlined, an advised LC was available with any bank and payable at sight. Documents were forwarded to the advising bank with a cover letter stating “send documents on approval basis”. The advising bank then forwarded the documents to the issuing bank without a specific statement of “on approval basis”, but with the request to “remit proceeds to their (advising bank’s) account”. The documents were lost in transit between the advising bank and the issuing bank.

The presenting bank claimed payment from the issuing bank and subsequently asked the advising bank to send a statement to the issuing bank, affirming that the presentation was compliant. The advising bank said it could not send such a statement due to its understanding of “send documents on approval basis” and that in any event UCP600 Article 35 did not apply.

In referencing wording in its Analysis, ICC concluded that the term “send documents on approval basis” is broadly understood to convey that “documents can be forwarded to the issuing bank with any prior examination.” 

Regarding if a document examination is only required when the named nominated bank is explicitly asked by the beneficiary to honour or negotiate, the ICC said no, but explained that “unless the nominated bank is a confirming bank or has otherwise agreed with the beneficiary to honour or negotiate, there is no obligation on that bank to examine the documents, either of their own volition or as a result of an agreement with the beneficiary.”

On whether a statement “send on approval basis” denotes for a named nominated bank or confirming bank that presented documents must be examined and what results if documents are found to be non-compliant, ICC stated that “documents can be sent to the issuing bank without prior examination. However, in the event of refusal of the documents, the issuing bank must follow UCP 600 sub-article 16 (c).”

The Opinion also clarified that if documents are lost in transit, UCP600 Article 35 covers a named nominated bank, confirming bank, and as well as “any bank in the case of a credit available with any bank”, as per UCP600 Article 2’s nominated bank definition.

Even if the presenting bank forwards documents to the issuing bank without a statement that it has “honoured the presentation” or “negotiated the documents”, but has stated to the issuing bank that it has examined the documents and has deemed them a compliant presentation, in the event that the documents have been lost in transit, UCP600 Article 35 would apply and the issuing bank remains obligated to honour. 

ICC Opinion TA944

ICC Opinion TA944 deals with concerns over whether a bill of lading is compliant when a party other than the beneficiary may be named, not as the shipper, but as an agent for the shipper. A charter party bill of lading was presented that evidenced “To Order” in the consignee field. The charter party bill of lading shipper box indicated “[YYYY Company] for and o/b of [Beneficiary Company]”. “Beneficiary Company” endorsed the charter party bills of lading in blank, without restrictions or qualifications. The query asks whether the endorsement on a bill of lading consigned to order, blank endorsed needs to match the name in the shipper’s box or if the Beneficiary Company’s blank endorsement sufficient. The query also referenced ICC Opinion R491 as addressing this issue, although for a UCP500 LC.   

In its Analysis, ICC stated that ICC Opinion R491 remains valid under UCP600 and, pointing to that conclusion, indicated that “the blank endorsement on the charter party bill of lading in this particular query could have been provided by either “YYYY Company” either with or without the addition of “(as agent for Beneficiary Company)” or “Beneficiary Company”.” As a result, blank endorsement by “Beneficiary Company” is acceptable.  

ICC Opinion TA945

ICC Opinion TA945 addresses questions about UCP600 Article 35 and specifically what “lost” means in the context of UCP600. According to the query, a nominated bank has included compliant documents (bills of lading among them) in a package which is sealed and sent to the issuing bank via international courier. Days later, the issuing bank transmits an authenticated SWIFT message to the nominated bank claiming to have received an empty, undamaged, sealed envelope. The nominated bank ascertains from the courier that the package arrived at the issuing bank and its weight (0.66 lbs) had not changed from its place of origin to its destination.

The nominated bank then transmitted via email a copy of the set of compliant documents to the issuing bank and also an authenticated SWIFT message stating that the compliant documents were lost in transit and accordingly claiming payment based on UCP600 Article 35. The issuing bank rejected the nominated bank’s claim, contending that UCP600 Article 35 was not applicable based on its internal CCTV evidencing that the sealed envelope was received but empty.

Importantly, the Opinion’s Analysis points out that: “It is not appropriate to conjecture upon the possible events that resulted in this incident”. Whatever transpired, the bottom line is that the documents went missing or were lost. The Analysis goes on to state: “Loss in transit can be pure ‘loss’, e.g., the mislaying of a package, or irretrievable damage to a package (package destroyed or badly damaged), or through theft, even before receipt by the courier.”

On the question of whether the issuing bank is entitled to refuse the nominated bank’s payment claim, ICC said no and that based on UCP600 Article 35, the documents are to be considered “lost in transit”. ICC further concluded that an attestation from the courier company that documents were lost in transit is not needed to “trigger” the Article 35 provisions. As for the query asking what would have been the best course of actions for the respective banks, ICC concluded that the nominated bank “pursued the best course of action by sending a copy of the compliant documents to the issuing bank whilst making a claim by authenticated message.”

For its part, the issuing bank should honour based on UCP600 Article 35. Regarding alternatives available to the applicant for release of the goods without the original bills of lading being delivered, the ICC’s draft conclusion on this matter was adjusted after considering written comments. It was finalized to read: “The applicant, who requested issuance subject to UCP 600, needs to agree with the carrier the conditions under which the goods can be released. It is usual that the carrier will require a shipping guarantee issued in its favour by order and at the cost of the applicant.”

During extensive discussion of this opinion, comments predominately focused on transit and the concept of bad faith. Some National Committee members maintained that the Opinion’s wording needed to do better qualifying “lost in transit”. The response given was that transit is more than the courier; there’s a phase before and after receipt by the courier. Article 35 does NOT say loss between the nominated bank and issuing bank. We do not know where the loss happened, so the documents were lost in transit and assumptions cannot be made as to what occurred.

A request was made to cover bad faith in the Analysis and this was debated. On one hand, some NC members said that the concept of bad faith should be inserted in order to affirm protection of the beneficiary and that a bank should not be protected if it acts in bad faith. Ultimately, it was decided the following sentence would be added to the final paragraph of the Opinion’s Analysis: “Any bank not acting in good faith loses the protection of UCP 600 including article 35.”