US UCC Article 5’s Non-Variable Provisions
How UCC Article 5 governs letters of credit in the US, its non-variable provisions, and the legal nuances that affect issuers and beneficiaries.
ICC TAB 9 points out that there is a risk of documents being presented to more than one bank at the same time, especially under an LC that is freely negotiable, but it stops short of making any recommendations for avoiding this risk. Here’s my suggestion.
On 20 March 2024, the International Chamber of Commerce published the 9th in its series of Technical Advisory Briefings concerning letters of credit that are subject to UCP600. The so-called “TABs” are intended to serve as educational materials on topics that are contentious or often misunderstood. (All of the Technical Advisory Briefings can be downloaded for free here.)
Technical Advisory Briefing No. 9 concerns presentation of documents directly to the issuing bank under a letter of credit that allows for presentation to a nominated bank. Although the expectation of the issuing bank is probably that documents will be received from the nominated bank, UCP600 Article 6(a) clearly says, “A credit must state the bank with which it is available or whether it is available with any bank. A credit available with a nominated bank is also available with the issuing bank.” Therefore, an issuing bank cannot refuse to honour a drawing just because documents were presented directly by the beneficiary.
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