Getting It Right: Malaysia’s Highest Court Restores Trial Court Decision in UCP600 Case

Further to my summary¹ on the decision made in the Court of Appeal Malaysia (Appellate Jurisdiction) between Punjab National Bank (PNB) and Malayan Banking Berhad (Maybank), Maybank was successful in obtaining leave of the Federal Court of Malaysia Putrajaya² to file an appeal against the decision made in the Court of Appeal Malaysia on the following questions of law:

1. Notice of Refusal – Where an issuing bank of a letter of credit governed by UCP600 determines documents presented do not constitute a complying presentation:
a) Must the issuing bank give notice to the negotiating bank in accordance with UCP600 Article 16(c) and (d), irrespective of the nature of the non-compliance?;
b) Is the issuing bank precluded from claiming that the documents presented do not constitute a complying presentation and obliged to honour its reimbursement undertaking if notice is not given in accordance with UCP600 Article 16(c) and (d)?

2. Standard for Examination of Documents Presented under a Letter of Credit – If a negotiating bank is only required to examine whether or not the documents appear on their face to constitute a complying presentation based on UCP600?

3. Grounds for Refusal to Reimburse on a Letter of Credit – Where an LC governed by UCP600 expressly provides it is available for negotiation by any bank in Malaysia, whether an issuing bank can avoid its obligation to reimburse the negotiating bank on grounds not stated in the notice of refusal and which relate to the manner of negotiation of the documents presented under the LC?

This case involves an LC issued for USD 1,962,500 subject to UCP600 with a tolerance of +/- 2% in value available by negotiation with any bank in Malaysia was issued by PNB. Apart from other documents, LC required presentation of a full set of signed clean on board ocean bills of lading and stated that freight forwarder’s bills of lading were not acceptable. Beneficiary presented faxed copies of the documents to Maybank in separate presentations and requested Maybank to negotiate them. Maybank negotiated on the following day. Six days later, Maybank received the original compliant documents from the beneficiary and confirmed no difference from the faxed copies presented earlier. Documents were subsequently forwarded to PNB by Maybank seeking reimbursement by crediting its account with Wells Fargo Bank, New York. Five days after the documents had been forwarded to PNB, Maybank received an amendment advice from the first advising bank and the LC was amended to include Certificate of Analysis, Weight and Quality in triplicate issued by SGS at loading port (“proposed amendment”). The proposed amendment was not accepted by the beneficiary.