Implications of the Place for Documentary Presentation

5.46

The nominated bank ‘with which [the credit] is available’,^{^[533]} or which the credit designates to receive the stipulated documents, is normally the bank to which the beneficiary must make a presentation.

Such a bank may be the issuing bank's correspondent operating in the beneficiary's jurisdiction; but may equally be any bank in that jurisdiction where the credit ‘is available with any bank'.^{^[534]} A significant number of credits have the latter feature. On its face, the nomination of a bank in this way is usually for the beneficiary’s convenience. Nevertheless, the beneficiary for its own business reasons may prefer to use its own bank to make the tender to the issuing bank, especially where the bank identified by the issuing bank under the credit is merely to receive the documents, examine them for compliance and then forward them to the issuing bank for payment.

5.47 Important questions arise as to whether the beneficiary has a choice between utilising his own bank or the bank named in the credit to make presentation to the issuing bank. Does the beneficiary have the discretion to deviate from what the credit has expressly directed it to do? A combined reading of articles 6(a)^{^[535]} and (d)(ii)^{^[536]} of the UCP 600 appears to confer upon the beneficiary the option of presenting his documents to the issuing bank without going through the bank specifically nominated in the credit.^{^[537]} This reflects the ICC Banking Commission’s stance over many years: its published official opinions enunciate that, where the issuing bank has nominated another bank and documents are not presented to that nominated bank, but are instead presented to the issuing bank whether directly or through a third bank, the issuing bank must still pay against a complying presentation.^{^[538]}

5.48 The Banking Commission’s stance is puzzling: how can a presentation be in compliance with the credit when it fails to adhere to what the credit has stipulated? The issuing bank’s undertaking in a letter of credit is to ‘honour a complying presentation’.

According to article 2 of the UCP 600, ‘a complying presentation means a presentation that is in accordance with the terms and conditions of the credit, the applicable provisions of the [UCP] rules and international standard banking practice’^{^[539]} In relation to these three criteria for establishing the conformity of a presentation, it is widely acknowledged in the banking world (and long recognised by the courts as a matter of contract law) that the express stipulations in a credit will override the UCP’s provisions or relevant banking practice in the event of any irreconcilable conflict. It is suggested that, when a letter of credit expressly requires the stipulated documents to be delivered to the issuing bank via a designated bank, article 6(a) of the UCP will effectively be displaced insofar as it otherwise purports to entitle the beneficiary to shun that nominated bank and present the documents directly to the issuing bank.

5.49 On this approach, a direct tender to the issuing bank will inevitably be non-conforming and in breach of the credit’s terms as to the place of presentation. Support for this view can be found in Kredietbank NV v Sinotani Pacific Pte Ltd,^{^[540]} in which a Chinese bank issued an unconfirmed letter of credit subject to the UCP 500 in favour of a Singapore beneficiary. The credit required that the documents ‘be presented to Royal Bank of Canada Singapore branch, which holds special arrangements for... document forwarding’ In the event, the beneficiary bypassed the stipulated bank and instead presented the documents to its own bank for onward transmission to the issuing bank in China. Chan Seng Onn JC expressed the view that the presentation was irregular because it did not comply with the directions specified in the credit.^{^[541]} That said, a beneficiary is at liberty to take his documents straight to the issuing bank's counters where the nominated bank is unwilling to negotiate the documents, provided of course that the time for presentation in the credit has yet to expire.^{^[542]}Furthermore, where the beneficiary presents the documents to a nominated bank that has not confirmed the credit, a decision by the nominated bank to accept or reject^{^[543]} the documents will bind the issuing bank, if in the circumstances the nominated bank appears to be acting as the issuing bank's agent.

In this regard, in Grains & Industrial Trading Pte Ltd v Bank of India,^{^[544]} Sundaresh Menon CJ (with whom Andrew Phang Boon Leong JA agreed) confirmed that if the ‘issuing bank nominates a bank in accordance with the UCP, then as between the beneficiary and the issuing bank... the latter's liability is engaged as long as the beneficiary makes a valid and complying presentation to the nominated bank. For this purpose, it is immaterial whether the nominated bank has expressly agreed to honour the credit or to act on its nomination.' In other words, the tender of the documents to a nominated bank is effectively treated as a tender to the issuing bank. This point will have some significance in a situation where the beneficiary tenders documents to the nominated bank on the last day of the period for presentation. In a situation of that type, the tender will be regarded as timely. However, the risk of late presentation is heightened when a beneficiary chooses to use his own bank, rather than the nominated bank, to deliver the requisite documents under a credit. That said, should a beneficiary insists on using his own bank in any event, he could always request an amendment to the credit from the buyer, who would then instruct the issuing bank to effect the changes as appropriate.

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Source: Hare C., Neo D. (eds.). Trade Finance: Technology, Innovation and Documentary Credit. Oxford University Press,2021. — 417 p.. 2021

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