Thesis On Ucp

University of Southampton Research Repository
ePrints Soton
Copyright © and Moral Rights for this thesis are retained by the author and/or other
copyright owners. A copy can be downloaded for personal non-commercial
research or study, without prior permission or charge. This thesis cannot be
reproduced or quoted extensively from without first obtaining permission in writing
from the copyright holder/s. The content must not be changed in any way or sold
commercially in any format or medium without the formal permission of the
copyright holders.
When referring to this work, full bibliographic details including the author, title,
awarding institution and date of the thesis must be given e.g.
AUTHOR (year of submission) "Full thesis title", University of Southampton, name

of the University School or Department, PhD Thesis, pagination
http://eprints.soton.ac.uk
UNIVERSITY OF SOUTHAMPTON
FACULTY OF BUSINESS & LAW
School of Law
Document Examination and Rejection Under UCP 600
by
Jingbo Zhang
Thesis for the degree of Doctor of Philosophy
June 2015
ii
UNIVERSITY OF SOUTHAMPTON
ABSTRACT
FACULTY OF BUSINESS AND LAW
SCHOOL OF LAW
Thesis for the degree of Doctor of Philosophy
DOCUMENT EXAMINATION AND REJECTION UNDER UCP 600
Jingbo Zhang
Letters of credit, which are a well-recognised payment instrument, have bridged

international trade between different countries. The UCP, which is often regarded as
“soft regulation” has provided a solid backing for the operation of documentary credits
and nowadays the latest revision, UCP600 is universally incorporated into nearly all
letters of credit. This thesis focuses on two vital but controversial parts in a documentary
credit operation, i.e. document examination and rejection under UCP600.
The central research question addressed by this thesis is: Has the UCP600 provided a
sufficient framework for banks to fulfil their obligations concerning document
examination and rejection under documentary credits? This question can be divided into
three separate issues. Firstly, what requirements should a bank fulfil during document
examination and rejection as judged by the law of documentary credits and market
expectations? Secondly, what requirements have been expressly or implicitly set out in
the UCP600 regime? Finally, has the current UCP system provided a proper and
sufficient framework to the addressed areas? If not, what should and can be done next?
In order to answer the above questions, this thesis draws upon other ICC sources, such
as the ISBP, the ICC Opinions and DOCDEX decisions, which are frequently missed in
other academic works. The novelty of this thesis lies in a below-the-surface analysis of
the controversial areas of UCP600 by using the experience gained from recent case law
before suggesting ways to move forward. The merits of this thesis are not limited to
observing the current loopholes in the UCP system, but also in endeavouring to solve
current problems by providing feasible suggestions for improvement for the next UCP
revision.
iii
iv
Contents
Chapter 1 General Introduction ................................................................................. 1

1.1 Research background ........................................................................................ 1
1.1.1 The economic basis ................................................................................. 2
1.1.2 Regulatory superstructure ....................................................................... 4
1.2 Aims and contributions ..................................................................................... 5
1.3 Main issues and methodology ........................................................................... 7
1.4 Structure and connections ................................................................................. 9
Chapter 2 Documentary Credits and UCP600 ........................................................ 13
2.1 Introduction ..................................................................................................... 13
2.2 Documentary credits in outline ....................................................................... 14
2.3 A series of contractual relationships ............................................................... 17
2.3.1 The contracts ......................................................................................... 17
2.3.2 Contracts autonomous but interconnected............................................ 19
2.4 UCP and other sources for documentary credits ............................................. 21
2.4.1 UCP600 and its development ................................................................ 21
2.4.2 Nature and application of UCP ............................................................ 22
2.4.3 Other sources for documentary credits ................................................. 23
2.4.4 UCP and Case Law ............................................................................... 26
2.4.5 Construction of UCP within a documentary credit ............................... 28
2.5 Two fundamental principles ............................................................................ 30
2.5.1 Principle of irrevocability ..................................................................... 30
2.5.2 Principle of autonomy ........................................................................... 33
2.6 Conclusions ..................................................................................................... 35
Chapter 3 General Requirements for Document Examination ............................. 37
3.1 Introduction ..................................................................................................... 37
3.2 General standard for examination—Article 14 (a) ......................................... 39
3.2.1 Appearance of documents ..................................................................... 40
3.2.2 References for a “complying presentation”.......................................... 43
3.3 Requirement of reasonable care ...................................................................... 45
3.3.1 Historical controversies and current status .......................................... 45
3.3.2 Applications of reasonable care under UCP600 .................................. 47
3.4 Doctrine of strict compliance .......................................................................... 52
3.4.1 Development of strict compliance ......................................................... 53
3.4.2 Practical applications concerning strict compliance ........................... 56
v
3.4.3 The line of strictness ............................................................................. 64
3.5 Time for examination ...................................................................................... 70
3.5.1 Developments and previous controversies ............................................ 72
3.5.2 Current situation and existing controversies ........................................ 74
3.5.3 Author’s view on time for examination under the UCP600 .................. 77
3.6 Conclusions ..................................................................................................... 81
Chapter 4 Standards for Examining Generic Documents ...................................... 83
4.1 Introduction ..................................................................................................... 83
4.2 Descriptions in a single document .................................................................. 84
4.2.1 Correspondence in a commercial invoice ............................................. 85
4.2.2 No conflict description in any other document ..................................... 92
4.3 Requirements for content in a generic document ........................................... 99
4.3.1 No conflict data ..................................................................................... 99
4.3.2 Fulfil the function ................................................................................ 101
4.4 Issue of Linkage ............................................................................................ 104
4.4.1 Common Law position ........................................................................ 105
4.4.2 Pre-UCP600 status ............................................................................. 106
4.4.3 Linkage issue under UCP600 ............................................................. 111
4.5 Mismatched quantity of anticipated documents ........................................... 118
4.5.1 Additional document ........................................................................... 118
4.5.2 Non-documentary conditions .............................................................. 122
4.5.3 Combined documents .......................................................................... 147
4.6 Conclusions ................................................................................................... 149
Chapter 5 Standards for Examining Transport Documents and Impacts on Bank’s
Security ..................................................................................................................... 153
5.1 Introduction ................................................................................................... 153
5.2 Negotiable Bills of Lading ............................................................................ 155
5.2.1 Legal status and functions of the B/L .................................................. 156
5.2.2 Requirements under UCP600 Article 20............................................. 157
5.2.3 Miscellaneous provisions .................................................................... 194
5.2.4 Bank’s security upon B/L..................................................................... 200
5.3 Sea Waybills .................................................................................................. 206
5.3.2 Bank’s security upon sea waybills ....................................................... 209
5.4 Straight Bills of Lading ................................................................................. 212
5.4.1 Finding the right UCP Article for Straight Bills ................................. 213
5.4.2 Delivery issue and bank’s security ...................................................... 214
5.5 Charter Party Bills of Lading ........................................................................ 217
vi
5.5.2 Charterparty under Charterparty bills ............................................... 219
5.6 Multimodal Transport Documents ................................................................ 220
5.6.2 Bank’s security upon multimodal transport documents ...................... 223
5.7 Conclusions ................................................................................................... 225
Chapter 6 Rejection of Presented Documents ....................................................... 227
6.1 Introduction ................................................................................................... 227
6.2 Consultation with the applicant .................................................................... 228
6.2.1 Legal capacity of approaching an applicant ...................................... 229
6.2.2 Bank’s discretion and restriction to approach an applicant ............... 233
6.3 Time and mode of giving a notice of refusal ................................................ 240
6.3.1 Time for giving a notice of refusal ...................................................... 240
6.3.2 Mode of giving a notice of refusal....................................................... 243
6.4 Format and content in a notice of refusal ...................................................... 245
6.4.1 A single notice ..................................................................................... 246
6.4.2 Express statement of refusal ................................................................ 248
6.4.3 Each discrepancy ................................................................................ 249
6.4.4 Disposal of rejected documents .......................................................... 251
6.5 Post-notice obligations on the bank .............................................................. 255
6.5.1 Compliance with statements in the notice of refusal ........................... 255
6.5.2 Time and mode to perform the post-notice obligations....................... 259
6.5.3 Conditions of the returned documents ................................................ 262
6.6 The preclusion rule........................................................................................ 265
6.6.1 Scope of the preclusion rule ................................................................ 266
6.6.2 Legal consequences concerning failures of a non-confirming nominated
bank .............................................................................................................. 270
6.7 Conclusions ................................................................................................... 271
Chapter 7 Way Forward.......................................................................................... 275
7.1 Overview of the thesis .................................................................................. 275
7.2 Summary and the way forward ..................................................................... 277
7.2.1 General requirements for document examination ............................... 277
7.2.2 Standards for examining generic documents ...................................... 282
7.2.3 Standards for examining transport documents and impacts on bank’s
security ......................................................................................................... 287
7.2.4 Rejection of presented documents ....................................................... 291
7.3 Innovative proposals for future thinking…………………………………. 294
Concluding Remarks ............................................................................................... 299
vii
viii
Table of Cases
Abani Trading Pte Ltd v BNP Paribas [2014] SGHC 111, [2014] 3 SLR 909 ............. 162
Agricole Indosuez v Credit Suisse First Boston [2001] All ER (Comm) 1088............. 246
Astro Exito Navegacion SA v Chase Manhattan Bank NA (The Messiniaki Tolmi) [1986]
1 Lloyd's Rep 455 (QB) ............................................................................. 55, 58, 86, 90
Astro Exito Navegacion SA v Chase Manhattan Bank NA (The Messiniaki Tolmi) [1988]
2 Lloyd’s Rep 217 (CA) ............................................................................................ 137
Banco Santander SA v Bayfern Ltd [2000] 1 All ER (Comm) 776 (CA) ....................... 21
Bank Melli Iran v Barclays Bank [1951] 2 Lloyd’s Rep 367 (KB) ............ 54, 85, 93, 105
Bank of America National Trust & Savings Association v Liberty National Bank & Trust
Co of Oklahoma, 116 F Supp 233, 240 (W D Ok 1953), affirmed 218 F 2d 831 (10th
Cir 1955)...................................................................................................................... 49
Bank of Baroda v Vysya Bank Ltd [1994] 2 Lloyd’s Rep 87 (QB) ......................... 18, 270
Bank of Cochin Ltd v Manufacturers Hanover Trust Co 612 F Supp 1533 (DCNY 1985)
..................................................................................................................................... 60
Bank of Nova Scotia v Angelica-Witewear [1987] 1 SCR 59 ......................................... 67
Bankers Trust Co v State Bank of India [1991] 1 Lloyd's Rep 587, affd [1991] 2 Lloyd’s
Rep 443 .................... 20, 25, 72, 73, 77, 78, 79, 232, 233, 234, 235, 238, 239, 252, 253
Banque de l'Indochine et de Suez SA v JH Rayner (Mincing Lane) Ltd [1983] QB 711
(CA) ................................... 52, 55, 56, 65, 68, 95, 96, 98, 105, 107, 113, 123, 137, 283
Banque de l'Indochine et de Suez SA v JH Rayner (Mincing Lane) Ltd [1983] QB 711
(QB) ........................................................................................................................... 136
Basse v Bank of Australasia (1904) 20 TLR 431 ...................................................... 47, 53
Bayerische Vereinsbank AG v National Bank of Pakistan [1997] 1 Lloyd’s Rep 59 (QB)
............................................................................................... 233, 243, 247, 249, 252, 269
Brandt v Liverpool [1924] 1 KB 575 (CA) ................................................................... 202
British Imex Industries Ltd v Midland Bank Ltd [1958] 1 QB 542 (QB) ....... 43, 182, 194
Chailease Finance Corp v Credit Agricole Indosuez [2000] 1 All ER (Comm) 399 (CA)
ix
............................................................................................................................... 49, 90
Commercial Banking Co of Sydney Ltd v Jalsard Pty Ltd [1973] AC 279 ....... 41, 48, 102
Cooperative Centrale Raiffeisen-Baerenleenbank BA v Bank of China [2004] HKC 119
....................................................................................................................................... 246
Cooperative Centrale Raiffeisen-Boerenleenbank BA v Sumitomo Bank (The Royan )
[1988] 2 Lloyd’s Rep 250 (CA) ........................................................................ 246, 253
Cooperative Centrale Raiffeisen-Boerenleenbank BA v Sumitomo Bank (The Royan)
[1987] 1 Lloyd's Rep 345 (QB) ......................................................................... 234, 247
Courtaulds North America Inc v North Carolina National Bank, 528 F 2d 802 (4th Cir
1975) ............................................................................................................................ 85
Credit Agricole Indosuez v Credit Suisse First Boston [2001] All ER (Comm) 1088 (QB)
................................................................................................................................... 233
Credit Agricole Indosuez v Generale Bank (No.2) [2000] 1 Lloyd’s Rep 123 (QB) ... 135,
138
Credit Agricole Indosuez v Muslim Commercial Bank Ltd [2000] 1 All ER (Comm) 172
(CA) ..................................................................................................................... 48, 241
Credit Industriel et Commercial v China Merchants Bank [2002] EWHC 973 (Comm)
................................................................................................. 24, 43, 44, 251, 254, 261
Dessaleng Beyene and Jean M Hanson v Irving Trust Co 762 F 2d 4 (2nd Cir, 1985) .. 60
Diamond Alkali Export v Bourgeois [1921] 3 KB 443 ......................................... 164, 223
Donald H Scott & Co Ltd v Barclays Bank Ltd [1923] 2 KB 1 (CA) ........................... 176
E&H Partners v Broadway National Bank 39 F Supp 2d 275 (SDNY 1998) ................ 61
Edward Owen Engineering Ltd v Barclays Bank International Ltd [1978] QB 159 (CA)
..................................................................................................................................... 33
English, Scottish and Australian Bank Ltd v Bank of South Africa (1922) 13 Ll L Rep 21
(KB) ............................................................................................................................. 53
Enrico Furst & Co v W E Fischer Ltd [1960] 2 Lloyd’s Rep 340 (QB) ....................... 217
Equitable Trust Co of New York v Dawson Partners Ltd (1926) 25 Ll L Rep 90 (CA).. 65
Equitable Trust Co of New York v Dawson Partners Ltd (1927) 27 Ll L Rep 49 (HL)
....................................................................................................................... ……46, 54
x
Finska Cellulosaforeningen v Westfield Paper Co Ltd (1940) 68 Ll L Rep 75 (KB) ... 219
Flagship Cruises Ltd v New England Merchants 569 F 2d 699 (1st Cir 1978) ........ 50, 66
Floating Dock Ltd v Hong Kong & Shanghai Banking Corp [1986] 1 Lloyd’s Rep 65
(QB) ........................................................................................................... 137, 138, 269
Forestal Mimosa Ltd v Oriental Credit Ltd [1986] 1 WLR 631 (CA)...................... 22, 28
Fortis Bank & Stemcor v Indian Overseas Bank [2011] EWHC (Comm) 538 ............ 259
Fortis Bank v Indian Overseas Bank [2009] EWHC 2303 (Comm) .............................. 55
Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm), [2010] 2 All ER
(Comm) 28................................................................................................... 52, 258, 262
Fortis Bank v Indian Overseas Bank [2011] EWCA Civ 58, [2011] 2 All ER (Comm)
288 ....................................................................................... 26, 231, 245, 256, 257, 292
General Cable Ceat SA v Futura Trading Inc 1983 US Dist LEXIS 19956 .................. 50
Gian Singh & Co Ltd v Banque de l’Indochine [1974] 1 WLR 1234 ... 34, 40, 48, 55, 143
Glencore International AG v Bank of China [1996] 1 Lloyd’s Rep 135 (CA) . 24, 52, 256
Glencore International AG v Bank of China [1996] 1 Lloyd’s Rep 135 (QB) ..... 110, 117
Glyn Mills & Co v East and West India Dock Co (1882) 7 App Cas 591 (HL) .... 175, 200
Glynn v Margetson [1893] AC 351 (HL) ...................................................................... 128
Hamzeh Malas & Sons v British Imex Industries Ltd [1958] 2 QB 127 (CA) .... 29, 31, 33
Hanil Bank v PT Bank Negara Indonesia (Persero) 2000 WL 254007 (SDNY 2000) .. 62
Hansson v Hamel & Horley [1922] 2 AC 36 (HL) ......................................... 42, 185, 278
Harbottle (RD) (Mercantile) Ltd v National Westminster Bank Ltd [1978] QB146 (QB) 1
Hick v Raymond and Reid [1893] AC 22 (HL) ............................................................... 72
Hing Yip Hing Fat Co Ltd v Daiwa Bank Ltd [1991] 2 HKLR 35 ............ 60, 73, 243, 248
Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2003] UKHL 12, [2004]
1 AC 715 .................................................................................................... 128, 182, 218
JH Rayner & Co Ltd v Hambros Bank Ltd [1943] KB 37 (CA) ......................... 41, 54, 94
JI MacWilliam Co Inc v Mediterranean Shipping Co SA (The Rafaela S) [2003] EWCA
Civ 556, [2004] QB 702 ............................................................................................ 214
JI MacWilliam Co Inc v Mediterranean Shipping Co SA (The Rafaela S) [2005] UKHL
11, [2005] 2 AC 423 .................................................................................. 206, 207, 214
xi
Kerr-McGee Chemical Corp v Federal Deposit Insurance Corp 872 F 2D (11th Cir
1989) .......................................................................................................................... 248
Korea Exchange Bank v Standard Chartered Bank [2005] SGHC 220, [2006] 1 SLR
565 ..................................................................................................... 126, 130, 133, 249
Kredietbank Antwerp v Midland Bank plc [1999] CLC 1108 (CA)
................................................ …………………….41, 49, 51, 56, 57, 66, 68, 103, 279
Kumagai-Zenecon Construction Pte Ltd v Arab Bank Plc [1997] SGCA 41, [1997] 2
SLR (R) 1020 .................................................................................................... 129, 246
Kumagai-Zenecon Construction Pte Ltd v Arab Bank Plc [1997] SGHC 31, [1997] 1
SLR (R) 277 ................................................................................................ 28, 128, 129
Kuwait Petroleum Corp v I & D Oil Carriers Ltd (The Houda) [1994] 2 Lloyd’s Rep
541 (CA) .................................................................................................................... 200
Kydon Compania Naviera Co v National Westminster Bank Ltd (The Lena) [1981] 1
Lloyd's Rep 68 (QB).................................................................. 55, 85, 86, 90, 248, 269
LeaseAmerica Corp v Norwest Bank Duluth NA 940 F 2D 345 (8th Circ 1991) ......... 269
Lickbarrow v Mason (1794) 5 TR 683 .................................................................. 155, 223
M Golodetz & Co Inc v Czarnikow-Rionda Co Inc (The Galatia) [1980] 1 WLR 495
(CA) ............................................................................. 22, 26, 27, 42, 49, 195, 196, 278
Manbre Saccharine Co Ltd v Corn Products Co Ltd [1919] 1 KB 198........................ 195
Midland Bank Ltd v Seymour [1955] 2 Lloyd’s Rep 147 (QB) .......... 48, 55, 95, 101, 105
Moralice (London) Ltd v E D & F Man [1954] 2 Lloyd's Rep 526 (QB)................. 55, 57
National Bank of Egypt v Hannevig’s Bank (1919) 1 Ll L Rep 69 ............................... 182
National Bank of South Africa v Banca Italiana di Sconto (1922) 10 Ll L Rep 531 (CA)
..................................................................................................................................... 42
Norsk Bjergningskompagni A/S v Owners of the Pantanassa (The Pantanassa) [1970]1
All ER 848 ................................................................................................................. 198
Official Assignee of Madras v Mercantile Bank of India Ltd [1935] AC 53 ................ 203
Oliver v Dubai Bank Kenya Ltd [2007] EWHC 2165 (Comm) ............................ 135, 139
Pasir Gudang Edible Olis Sdn Bhd v The Bank of New York Index No 603531/99 (NY
Sup Ct 1999) ................................................................................................................ 60
xii
Rafsanjan Pistachio Producers Cooperative v Bank Leumi (UK) Ltd [1992] 1 Lloyd’s
Rep 513 (QB) ............................................................................................ 240, 243, 258
Re an Arbitration between Reinhold & Co and Hansloh (1896) 12 TLR 422 ....... 53, 105
Rosenberg v International Banking Corp (1923) 14 Ll L Rep 344 (CA) ..................... 204
Ross Smyth Co Ltd v TD Bailey, Son Co (1940) 67 Ll L Rep 147 (HL) ....................... 204
Sanders Brothers v Maclean & Co (1883) 11 QBD 327 (CA) ............................. 155, 176
Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1993] 1 Lloyd’s Rep
236 (CA) .......................................................................................... 55, 64, 68, 116, 117
Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1999] 1 Lloyd’s Rep 36
(CA) ............................................................... 25, 26, 72, 73, 77, 78, 240, 241, 243, 244
Sewell v Burdick (1884) 10 App Cas 74 (HL)....................................................... 155, 201
SIAT Di Del Ferro v Tradax Overseas SA [1978] 2 Lloyd’s Rep 470 (QB) ......... 217, 219
Societe Generale SA v Saad Trading, Maan Abdulwahid Abduljmajeed Al-Sanea [2011]
EWHC 2424 (Comm) .................................................................................................. 55
Soproma SpA v Marine and Animal By-Products Corp [1966] 1 Lloyd’s Rep 367 (QB)
............................................................................................... 58, 93, 100, 189, 198, 279
South Korean Hyosung Corp v China Everbright Bank (Xiamen Branch) Civil
Judgement (2003) Min Jing Zhong Zi Bo 069, Fujian High People’s Court, PRC ..... 59
Southland Rubber Co v Bank of China [1997] 2 HKC 569 .......................................... 159
Sze Hai Tong Bank v Rambler Cycle Co [1959] AC 576 .............................................. 200
The Aramis [1989] 1 Lloyd’s Rep 213 (CA)................................................................. 202
The Future Express [1993] 2 Lloyd’s Rep 542 (CA) .................................................... 204
The Marlborough Hill [1921] 1 AC 444 ....................................................................... 164
The Stettin (1889) 14 PD 142 ........................................................................................ 200
The Stone Gemini [1999] 2 Lloyd’s Rep 255 ................................................................ 204
Todi Exports v Amrav Sportswear Inc 1997 US Dist LEXIS 1425 .............................. 269
Total Energy Asia Ltd v Standard Charted Bank (Hong Kong) Ltd [2007] 1 HKLRD 871;
[2006] HKCU 2134 ................................................................................... 228, 231, 246
Trans Trust SPRL v Danubian Trading Co Ltd [1952] 2 QB 297 (CA) ......................... 19
United Bank Ltd v Banque Nationale de Paris [1991] SGHC 78, [1992] 2 SLR 64
xiii
................................................................................................................ …...61, 62, 246
United City Merchants (Investments) Ltd v Royal Bank of Canada (The American
Accord) [1983] 1 AC 168 (HL) ........................................................... 17, 19, 32, 33, 40
Urquhart Lindsay & Co v Eastern Bank Ltd [1922] 1 KB 318 ................................ 30, 33
Uzinterimpex JSC v Standard Bank plc [2008] EWCA Civ 819, [2008] 2 Lloyd’s Rep
456 ....................................................................................................................... 33, 144
Voest-Alpine Trading USA Co v Bank of China 167 F Supp 2d 940 (SD Tex 2000),
affirmed in 288 F 3d 262 (CA 5 Tex 2002) ................................................... 62, 63, 247
Voss v APL Co Pte Ltd [2002] 2 Lloyd’s Rep 707 ................................................ 207, 214
Westpac Banking Corp v South Carolina National Bank [1986] 1 Lloyd’s Rep 311 .... 40,
165
WJ Alan & Co Ltd v El Nasr Export and Import Co [1972] 2 QB 189 (CA) ................. 19
Yelo v SM Machado [1952] 1 Lloyd’s Rep 183 (QB) ................................................... 164
xiv
DECLARATION OF AUTHORSHIP
I, JINGBO ZHANG
declare that this thesis and the work presented in it are my own and has been generated
by me as the result of my own original research.
DOCUMENT EXAMINATION AND REJECTION UNDER UCP 600
I confirm that:
1. This work was done wholly or mainly while in candidature for a research degree at
this University;
2. Where any part of this thesis has previously been submitted for a degree or any other
qualification at this University or any other institution, this has been clearly stated;
3. Where I have consulted the published work of others, this is always clearly
attributed;
4. Where I have quoted from the work of others, the source is always given. With the
exception of such quotations, this thesis is entirely my own work;
5. I have acknowledged all main sources of help;
6. Where the thesis is based on work done by myself jointly with others, I have made
clear exactly what was done by others and what I have contributed myself;
7. Parts of this work have been published as:
Jingbo Zhang, ‘Banks’ Post-notice Obligations in the Documentary Credits under

UCP600’ (2013) 6(2) International Journal of Private Law 193-205
Signed: ................................................................................................................................
Date: ....................................................................................................................................
xv
xvi
ACKNOWLEDGMENTS
I would like to express my deep gratitude to my supervisor, Dr Andrea Lista, for his
continuous help and support during my Masters and PhD study.
My thanks also go to Professor Mikis Tsimplis, my advisor and the Director of
Southampton Institute of Maritime Law, for his kind encouragement and advice. I would
like to express my special thanks to Ms Johanna Hjalmarsson, who has offered me
precious opportunities in project collaborations and publications during my PhD study.
My appreciation is also due to other members of Southampton Institute of Maritime
Law, particularly to Professor Paul Todd, Professor Yvonne Baatz and Dr Ozlem
Gurses, for their useful academic and career guidance.
Huge thanks must go to Dr Emma Laurie, who has provided invaluable
recommendations for my thesis during the PhD upgrade exam. My gratitude also goes to
the PGR Director, Professor John Coggon, and the ex-PGR Director, Professor Nick
Hopkins at University of Reading, for their generous support and encouragement. I
would also like to thank the Faculty PGR Administrator, Ms Debbie Evans, for
providing me useful information and kind help.
I am very grateful to Professor Hazel Biggs, the Head of Law School at University of
Southampton, for believing in me and offering me the lectureship position at
Southampton. My thanks must also be given to the staff of the Law School, in particular
to Professor Steve Saxby, Professor Sarah Nield and Dr Caroline Jones, for their friendly
support and inspiration. I would also like to thank my Southampton PGR colleagues,
especially Dingjing Huang, Haihua Song, Semande Ayihongbe, Jennifer Lavelle,
Thomas Webber, Gaye Orr, Aysegul Bugra and Debo Awofeso, for accompanying me
in a lonely PhD journey.
My biggest appreciation is due to my beloved parents, who have given me endless
love and support. Without them, I would never have had today’s achievements. Last but
not least, a special thank you to my fiancé, Dr Robert Johnson, who has meticulously
proof-read my thesis and accompanied with me through the most difficult period of my
life. I am looking forward to starting the next leg of our life journey together.
xvii
xviii
Chapter 1 General Introduction
1.1 Research background
Letters of Credit, also named documentary credits, are described as the “life-blood of
international commerce”1. As one of the most popular financial instruments, they have
played a crucial role in the international payment mechanism for overseas transactions.
A documentary credit stands for an unconditional payment promise made by an issuing
bank to the beneficiary (normally the seller) according to the buyer’s instructions. As
long as the beneficiary presents the satisfactory documents specified by a documentary
credit, the bank will be obliged to provide an appointed payment without hesitation.2
As a durable payment tool, documentary credits have survived for nearly one hundred
years. With its self-contained system and particular principles, it is predicted that the
system will continue to operate smoothly and persistently in future international
transactions.3 Meanwhile, as a brilliant financial instrument, letters of credit have been
universally recognised by the world and widely applied to overseas trading
transactions.
With a gradually increasing market share, the International Chamber of Commerce

(ICC) has spared no effort to summarise and unify international practices and usages in
relation to documentary credits transactions since 1920. 4 The most recent public
version, Uniform Customs and Practice for Documentary Credits No.600 (UCP600)5,
has reached a new height compared with those previous versions. Although UCP600 is
not a mandatory regulation, it has been chosen by parties to apply to most international
1
Harbottle (RD) (Mercantile) Ltd v National Westminster Bank Ltd [1978] QB146 (QB) 155 (Kerr J)
2
In essence, documentary credits not only provide security for each party by requiring specific
documents, but also facilitate trade financing by means of negotiation and transfer. However, this thesis
aims to deal with its traditional role as a security of payment, rather than its second role of trade
financing. Details of trade financing can be found in Ali Malek and David Quest, Jack: Documentary
Credits (4th edn, Tottel Publishing 2009) ch 7 and ch 10
3
The -self-contained system of documentary credits and its particular principles will be analysed in
Chapter 2 of this thesis.
4
Dan Taylor, ‘How the UCP Has Evolved Since the 1920s’ (2008) 14(2) DCInsight 8, 8
5
ICC, Uniform Customs and Practice for Documentary Credits (ICC Publication No.600, ICC 2007)
1
transactions relating to letters of credit.6 In addition, some of the largest trading
countries in the world, such as the U.S. and China, have established their own
regulations on the basis of UCP.7 It is obvious that the development of documentary
credits system is a common goal of all over the world.
1.1.1 The economic basis
Since the documentary credit is a kind of financial product in nature, it is necessary to

review the economic base, which fundamentally affect its fate and future developments.
From an economic perspective, there are several reasons that illustrate why
documentary credits are in a dominant position in the international payment system
and why it is possible for documentary credits to accomplish the goal of economic
globalisation. Firstly, the banking credit rather than the business credit has been
involved into the documentary credits system. As illustrated in the background, the
essence of a documentary credit is a promise made by the bank to pay against the
specified documents. Hence, the issuing bank involved into a documentary credit bears
the primary, independent and irrevocable obligation to pay the beneficiary. 8 In other
words, the issuing bank participating into a documentary credit actually uses its own
credit to act as an independent third party to guarantee the payment. The risk is largely
decreased compared to business credit in a long-distance trade. Secondly, a
documentary credit is deemed to be a self-contained document which clearly lists all
the requirements. Only if the beneficiary satisfies the conditions specified in the
documentary credit, is he entitled to get payment as negotiated. Thirdly, transactions in
relation to documentary credits are purely documentary, so that the banks will ignore
the underlying facts, basic contracts and other incidental events, even if the actual
cargo has been lost or damaged. As a result, the beneficiary (normally the seller) will
6
UCP600, Article 1 states: ‘…UCP are rules that apply to any documentary credit when the text of the
credit expressly indicates that it is subject to these rules. They are binding on all parties thereto unless
expressly modified or excluded by the credit.’
7
The US Uniform Commercial Code (UCC) Revised Article 5 in 1995 dealt with rights and obligations
under documentary credits. China also promulgated ‘Rules of the Supreme People’s Court on Hearing
Letter of Credit Dispute Cases’ in 2006.
8
It may have the revocable documentary credits in practice. However, the UCP600 only regulates the
irrevocable type of documentary credits in that it accords with the needs of international transactions.
See UCP600 Article 2.
2
be in a safe position to get payment and the applicant (normally the buyer) will be in a
legal position to effectively control the goods. It is obvious that the use of documentary
credits can easily achieve a double-win situation in economics.
By contrast, letters of credit also have several disadvantages compared with other
payment instruments, such as bills of exchange, collection and international factoring.
Firstly, due to the intervention of bank credit, the banking commission charged upon
the buyer for opening a letter of credit is significantly higher than for other payment
instruments. Secondly, the buyer cannot physically control and check the goods via
documentary credits. The presented documents symbolise the actual goods, and
moreover the rights to accept them will be transferred to the banks. In addition, the
banks would not care about disputes between parties arising from the underlying
contract, and meanwhile the buyer cannot use them as a defence to the banks. Thirdly,
in order to protect its security, the bank will not simply honour a letter of credit until
the presented documents constitute a strict complying presentation. If the bank refuses
to pay against the documents, the seller will be in a dilemma because he might be in a
position of losing the physical control of the goods after shipment. Meanwhile, the
seller might be faced with the situation of breaching the sale contract by providing
discrepant documents.
Moreover, the recent global economic crisis has brought a huge strike to the
documentary credits system. Since a mass of trading companies have met with
operational difficulties, the bank has to examine the documents more carefully to
guarantee its security of transactions. That inevitably results in a higher rejection rate
of presentations, and leads to further business dilemmas. The trading companies, which
are nervous by the high rejection rate and massive bank failures in the crisis, gradually
turn to the other financial instruments. Therefore, in order to cope with the above
difficulties and promote the development of a documentary credits mechanism, it is in
a great necessity to increase traders’ confidence in the system. With the emergence of
other payment instruments, the only way forward for documentary credits is to
3
strengthen its own system so as to guarantee its healthy operation.
1.1.2 Regulatory superstructure9
As the superstructure, the law is able to regulate and direct economic actions. The UCP,
which has been incorporated into ninety per cent of documentary credits and granted
the contractual force to regulate the credits, could offer enormous help for
strengthening the economic system. The core idea is to establish a set of stipulations
which can effectively direct the bank’s conducts and provide a clear picture to the users.
As the Drafting Group stated before publishing of the UCP600, the purpose of reform
is to reduce rejections and make payments more smoothly.10 Apparently, the current
UCP system desires to express the above idea and endeavours to consolidate the status
of documentary credits as one of the most common payment instruments in
international transactions. Nevertheless, there are always some distances between
ideals and reality. Although the current UCP system has achieved a vast improvement
compared with its previous editions, there are still several vague, problematic and
blank areas left. Hence, the existing provisions cannot sufficiently demonstrate that
they have exactly reflected the best business expectations and practical market needs.
Reform is still urgently demanded so as to get rid of these conservative remains and
make the UCP system fit for dynamic developments, with the ultimate purpose of
keeping the system of documentary credits running effectively and stably.
Currently, various aspects of the UCP provisions continue to call for discussion and
also give rise to litigation, generally including the nature and undertaking concerning
each type of bank, the procedures and bank’s obligations faced with a documentary
presentation, as well as disclaimer rules and exceptions of autonomy etc. Although a
number of issues in the current UCP system require resolution , this thesis cannot seek
9
Although the UCP is only constituted by a set of international banking practice and customs, it
will have the force of law to a documentary credit after clear incorporation by the parties, and it has
also been given a great weight in terms of documentary credit operations.
10
Gary Collyer, Commentary on UCP600: Article by Article Analysis by the UCP600 Drafting Group
(ICC Publication No.680, ICC 2007) 1
4
to cover the entire field, and thus, the author will particularly choose to deal with the
most crucial and outstanding controversies in the documentary credits, i.e. provisions
revolving around documentary presentation, including document examination and
rejection. The reason lies in that these two procedures, as hubs of the operation, will
fundamentally decide the money flows so as to affect the fate of each party involved
into documentary credits. Regrettably, after continuous reforms, the requirements and
bank’s obligations relating to these two procedures set in the UCP600 are still far from
clear and give rise to a high degree of uncertainty. More importantly, to date, neither
academic literature nor past ICC works have been able to set aside or clarify this in a
definitive manner. Needless to say, interpretation and clarification for these areas is of
the utmost importance as money turns on this, and so breach of such requirements will
inevitably cause serious financial implications.
1.2 Aims and contributions
This thesis will be devoted to clarifying the requirements on document examination

and rejection in documentary credits, and afterwards putting forward feasible
suggestions in light of the current UCP600 regime for the next revision. The general
objective of this thesis is to establish a more user-friendly UCP regime than the current
UCP600 in terms of document examination and rejection for documentary credits.
The questions regarding document conformity and the standards for constituting a
valid rejection have been proved to be by far the most fertile source of litigation in
connection with documentary credit transactions. Questions relating to the documents
also arise in connection with the bank’s duty to the traders, and bank’s security to get
reimbursement. Different from most academic work, this thesis puts the UCP600 into
the system built by the ICC and interprets the UCP600 with the assistance of the ICC
publications, including the latest International Standard Banking Practice (ISBP)
released in 2013.11 By virtue of systematically expositing the current UCP regime, the
11
As will be demonstrated in Part 2.3, the UCP system is consisted of the UCP itself, the ISBP rules,
the ICC Banking Commission recommendation papers, the ICC Banking Commission Opinions and the
5
thesis seeks to clarify the requirements for documents presented under a documentary
credit transaction. Moreover, this thesis aims to perceive ambiguous statements in the
UCP600 system which are inconsistent with the goal of certainty, and detect the
historical residuals left in the current UCP regime which would deter the smooth
operation of documentary credits.
Through describing the current rules and examining their practical performance,
loopholes and uncertainties in the current regime can be observed. Nevertheless, the
original merits of the thesis are not only limited in finding the problems, but also in
endeavouring to solve the problems through providing feasible suggestions. Some of
the suggestions remain minor, which only refer to wording clarifications or
interpretations, while the others may involve fundamental changes for the ICC to
consider in the future reform. All in all, this thesis will contribute to proposing a clear
and certain regulatory framework for what is currently an ambiguous area of law, so as
to increase business efficiency and transaction security. The analysis in this thesis will
not only be of benefit for traders by drawing a clear picture of what they should do and
how to use their rights in the process of document transactions, but also tentatively
offer banks a handy guidance in terms of fulfilling their obligations under document
examination and rejection.
More importantly, the thesis will attempt to go beyond the appearance of problematic
issues and identify the reasoning behind the scene. The UCP, as a compromising
product between the civil law system and the common law system, shares the feature
of codified terms and needs to be regularly reviewed for updates. Experience from the
case law, which reflects dynamic legal practice and market expectations, can be
effectively borrowed for revising the current UCP system. The novelty of this thesis is
to step back from the exterior problems and to explore the underlying barriers.
Therefore, the thesis intends to abstract the practical problems into a set of theoretical
suggestions to complete the main part of the UCP as well as contribute to encouraging
DOCDEX expert decisions. Among them, the latest ISBP No.745 was published in 2013.
6
documentary credits transactions as a long-term sight financial instrument. The
ultimate purpose of this thesis is to establish a more user-friendly and transparent UCP
regime for documentary credit transactions.
1.3 Main issues and methodology
Reviewing and revising all the UCP600 rules is a tremendous task and unrealistic to
achieve within one thesis. As a well-recognised means of settlement, it is clear that the
most important role for documentary credits is to provide payment assurance for
international commercial sales. Document examination and rejection, as two vital but
controversial parts in a documentary credit operation, not only directly influence cash
flow but also closely link with bank’s obligations under the credit. Hence, this thesis
particularly concentrates on the issues of document examination and rejection under
documentary credits, and further examines whether the provisions of UCP600
regarding these two parts are satisfactory and sufficient.
The central research question addressed by this thesis is: Has the UCP600 provided a
sufficient framework for banks to fulfil their obligations concerning document
examination and refusal under documentary credits? More specifically, the question
should be resolved into three pieces. Firstly, what requirements should a bank fulfil
during document examination and rejection judging by the law of documentary credits
and market expectations? Secondly, what requirements have been expressly or
implicitly set out in the UCP600 regime? Thirdly, has the current UCP system provided
a proper and sufficient framework to the addressed areas? If not, what should and can
be done next?
In order to solve the above questions, this thesis adopts various research methodologies.
The traditional “black letter law” 12 method is primarily used for describing the
requirements of document examination and rejection, as well as for clarifying
12
Paul Chynoweth, ‘Legal Research’ in Andrew Knight and Les Ruddock (eds), Advanced Research
Methods in the Built Environment (Wiley-Blackwell 2008) 29
7
ambiguities within the UCP provisions. The doctrinal research method present in the
thesis aims not only to collate the UCP600 rules, but also to provide commentary on
the emergence of the authoritative sources in which such rules are considered, in
particular, the latest ISBP revision and the recent case law. 13 Different scholastic
arguments and the ICC opinions are also involved in the process of interpreting an
“open texture” of the UCP600.14
However, the doctrinal research method in this thesis is not an isolated category of
scholarship and the analysis will be assisted by a number of techniques.15 Deductive
reasoning is used for explaining the abstract rules and envisaging the challenges
stumbled upon in real practice. Meanwhile, inductive reasoning is of particular
assistance when a specific factual situation does not appear to be addressed directly by
the UCP framework. The rationale extracting from the case law and the recent ICC
Banking Commission Opinions would become necessary to fill the left gap.
The comparative analysis approach is also applied in this thesis. Firstly, the thesis
endeavours to review the performance of the UCP under the background of English
law. Experience from case law, particularly English case law, is borrowed to compare
with the existing UCP framework. Secondly, in order to evaluate the underlying
purpose of the draftsmen and review the status of the current provisions, changes
between the UCP600 and its predecessors are frequently compared. A striking example
for the application of this method can be found in analysis of the time for document
examination and determination.
As an uncertain or ambiguous provision can often be more easily interpreted when
13
It should be noted that “doctrinal research” is not well-defined. In this thesis, the author adopts a
two-part process doctrinal method stated in Nigel Duncan and Terry Hutchinson, ‘Defining and
Describing What We Do: Doctrinal Legal Research’ (2012) 17(1) Deakin L Rev 83, 110, which involves
locating the sources of the law and then analysing the text.
14
“Open texture” means that the legal rules expressed in general terms are capable of being interpreted
in more than one sense. See Paul Chynoweth, ‘Legal Research’ in Andrew Knight and Les Ruddock
(eds), Advanced Research Methods in the Built Environment (Wiley-Blackwell 2008) 32
15
Paul Chynoweth, ‘Legal Research’ in Andrew Knight and Les Ruddock (eds), Advanced Research
Methods in the Built Environment (Wiley-Blackwell 2008) 31-34
8
viewed in its proper historical or social context, the investigation in this thesis also
considers the understanding of the trading and shipping industry in addition to the
banking community. The study is not limited into the internal enquiry as to the literal
meaning of the UCP provisions, but extended to evaluate them within the commercial
and shipping context.16 Following the socio-legal research, the thesis aims to analyse
how a specific UCP provision can impact on the parties involved and puts forward a
future change with the purpose of achieving business efficiency and transaction
security.
1.4 Structure and connections
This thesis consists of seven chapters to analyse document examination and rejection
in documentary credits under UCP600. Chapter 1 (this chapter) provides a general
background of documentary credits and the UCP framework. It gives a brief
introduction as to why the subject of the thesis has been chosen, what the objectives of
the research are, which methodology has been used and how the structure of the thesis
has been organised.
Chapter 2 constitutes an academic introduction in respect of documentary credits and

the UCP600. As the contractual relationship and fundamental principles in a
documentary credit operation will significantly affect the bank’s position in the process
of document examination and rejection, it is necessary to briefly review the basics
before jumping to the practical applications in the main issue dealt with by this thesis.
Moreover, it is of great necessity to firstly illustrate the sources used for interpretation
of UCP600 and reveal the relationship between the UCP and English common law,
before discussing reform of the current UCP system.
Chapter 3, 4 and 5 of this thesis aims to answer the first part of the research question:
16
The method of placing the law into a proper social and economic context is also regarded as an
interdisciplinary exercise. See Paul Chynoweth, ‘Legal Research’ in Andrew Knight and Les Ruddock
(eds), Advanced Research Methods in the Built Environment (Wiley-Blackwell 2008) 30; Brian Cheffins,
‘Using Theory to Study Law: A Company Law Perspective’ (1999) 58(1) CJL 197, 198-201; Richard
Posner, ‘Legal Scholarship Today’ (2001-2002) 115 Harv L Rev 1314, 1317
9
On what standards should a bank examine the presented documents so as to make a
right decision? Chapter 3 will starts from the overall requirements for document
examination under letters of credit and analysing what should be regarded as a
complying presentation under UCP600 Article 14. Historical elements, such as
doctrine of strict compliance and requirement of reasonable care will be reviewed in
this chapter. In addition, the time requirement for document examination under a letter
of credit stipulated in the UCP600 Article 14 (b) will be addressed at the end of the
chapter.
On the basis of different treatments provided by the UCP, the thesis has divided the
presented documents into two categories, namely, generic documents mainly regulated
by UCP600 Article 14 and special documents specifically listed in other provisions.
Chapter 4 concentrates on how to examine a generic document. Requirements
concerning “no conflict” and “fulfilment of function” will be analysed in this chapter.
Moreover, the occurrence of mismatch in the number of presented documents,
particularly with the situation of non-documentary conditions, will be addressed in
details in this chapter.
Chapter 5 deals with the requirements of examining special documents categorised by

the UCP600.The discussion is limited to transport documents which are wholly or
partly involving sea carriage under the UCP600 Articles 19 to 22. The chapter will
begin by discussing bill of lading requirements, and then comparing the other variant
documents with the traditional bill of lading. Since the transport documents are highly
relevant with the bank’s security under documentary credits in obtaining the right of
control and disposal, this chapter will also scrutinise the security provided by the UCP
requirements and the documents themselves.
After building a proper framework to examine the presented documents, the attention
is turned to the next step after examination, i.e. how to deal with the discrepant
documents and how to make a valid rejection under documentary credits? Chapter 6
10
examines the requirements of document rejection under UCP600 and further
investigates whether the UCP600 has provided a sufficient illustration for this area.
Each requirement listed in the UCP600 Article 16 regarding to document rejection will
be scrutinised in this chapter. Moreover, recent decisions in the English court will be
considered together with the UCP provisions.
Chapter 7 summarises the whole thesis. It will firstly provide an overview to the entire
work and a subsequent summary of each chapter. In the meantime, the suggestions
scattered in each chapter will be collected and author’s view of the way forward for
UCP is described. At the end of this thesis, brief concluding remarks concerning
document examination and rejection in the current state and the need for future reform
are provided.
11
12
Chapter 2 Documentary Credits and UCP600
2.1 Introduction
In international commercial sales, the seller may be unwilling to despatch goods

overseas unless he is assured of payment, preferably in his own country, by a “reliable
and solvent paymaster”. It is also important that the payment obligation does not
depend on the wishes or the solvency of the buyer, or is interrupted by any disputes
under the sale contract. On the other hand, the buyer wants to hold a certain level of
security regarding the documents and the goods before releasing the money. Ideally,
the buyer would also like to be able to pledge or re-sell the goods first and use the
proceeds to reimburse the seller, rather than provide direct cash settlement. The use of
a documentary credit as a means of providing payment can reconcile the paradoxical
interests between the seller and the buyer. In essence, a documentary credit represents
a promise of payment by a bank against specified documents on terms that the bank
will be reimbursed by the buyer.
The intervention of the bank as the third party thus resolves many of the worries
experienced by sellers losing control of the goods before being paid, while at the same
time financing the transaction and resolving buyers’ cash flow difficulties. Clearly, a
letter of credit can not only provide transaction security, but also facilitate financing of
the sale. Banks, acting as payment and reimbursement channels, can offer mutual
benefits to both parties.17 The bank thus takes over the risk of the buyer’s insolvency
and failure of payment, but as we will see in Chapter 6 of this thesis, the risks to the
bank can be to some degree reduced by the shipping documents which are retained by
the bank as security for its reimbursement.18
17
One consequence of this mutuality is that it is not generally open to either party unilaterally to
withdraw from the credit, which is a feature we will not specifically discuss in this thesis. Further
discussion of this topic can been found in Paul Todd, Bills of Lading and Bankers Documentary Credits
(4th edn, Informa Publishing 2007) para 4.46
18
Sometimes, the bank may release the presented documents to its customer (the buyer) and rely on
13
The object of this chapter is to describe documentary credits, their functions and how
they are operated in the real world.19 The author first outlines the generation of a
documentary credit, and reviews the contractual relationship regarding a documentary
credit transaction. The chapter then introduces the Uniform Customs and Practice for
Documentary Credits (referred to in this thesis as the “UCP”) and other sources that
may govern the documentary credit transactions. Moreover, as a preface for the
following discussion in this thesis, the author briefly reveals the interactions between
English common law and the UCP regime, as well as how to construe the UCP in the
English courts. Last but not least, in combination with the UCP provisions, the chapter
analyses two fundamental principles in the operation of documentary credits, i.e.
principle of autonomy and principle of irrevocability. These two cardinal principles
have laid the foundation for the banks’ obligations in the documentary credits and they
are also closely linked with the subsequent discussions in this thesis.
2.2 Documentary credits in outline
‘The basic idea of a documentary credit can be stated simply: a bank commits itself to
a financial undertaking that it will fulfil against presentation of stipulated
documents.’20 In the following several paragraphs, the author will outline the typical
lifecycle of a documentary credit and reveal the relationship between different parties
involved in a documentary credit transaction.
Firstly, the underlying basis of any documentary credit is the sale contract, in which it
is agreed that payment will be made through a documentary credit. The buyer is
alternative financial arrangement to secure its right of reimbursement, such as using a trust receipt,
which is not the content we are going to deal with in this thesis. Regarding arrangement of trust receipt,
see Richard King, Guttidge & Megrah’s Law of Bankers’ Commercial Credit (8th edn, Europa
Publications 2001) para 8.20; Ali Malek and David Quest, Jack: Documentary Credits (4th edn, Tottel
Publishing 2009) para 11.11; Paul Todd, Bills of Lading and Bankers Documentary Credits (4th edn,
Informa Publishing 2007) para 6.39
19
The terms “documentary credit” and “letter of credit” are both in current use and no distinction need
be made between them.
20
Michael Bridge (ed), Benjamin’s Sale of Goods (8th edn, Sweet and Maxwell 2010) para 23-004
14
therefore obliged as the “applicant”, to procure the opening of a credit in the seller’s
favour pursuant to the terms of the sale contract. The bank which agrees to open a
letter of credit according to the buyer’s request is referred to as the “issuing bank” and
the application form will constitute the basis of the contract between the buyer and the
bank.21
As demonstrated in Figure 1 below, once the letter of credit is opened, the bank may
directly notify the seller who is as the “beneficiary” under the credit and advise him of
the terms of the credit. In the meantime, the issuing bank undertakes a primary
obligation to honour the credit when the beneficiary requires. However, in most cases,
it will inform a correspondent bank in the seller’s country which is involved in the
documentary credit transaction. If the role of this correspondent bank is only limited to
the transmission of communications between the issuing bank and the beneficiary, it is
known as the “advising bank”.22 The beneficiary, however, sometimes may want a
bank from its own country to add another financial guarantee and specifically asks for
a “confirmed credit”.23 In those circumstances, the issuing bank, acting on its mandate,
will require the correspondent bank to act as the “confirming bank”, i.e. not only to
transmit the information to the beneficiary but also to add its own confirmation. By
adding an independent undertaking to the beneficiary, a separate contract is created
between the confirming bank the beneficiary, which gives the seller recourse directly
against a bank in his own country.
21
It should be noted that this contract is not part of the credit itself. It is only the mandate that
authorises the bank to open the credit.
22
The credit may also provide for the possibility of presentation to an “advising bank”, but it will be
under no obligation to the beneficiary under the credit. Such banks are referred as “nominated banks” in
the UCP.
23
An additional commission will be involved for asking the second bank to make an independent
guarantee as a confirming bank.
15
Figure 1
After the seller ships the goods and obtains the required documents, he will present the
documents to the bank for payment. As illustrated in Figure 2 below, the issuing bank,
which has made an express undertaking directly to the beneficiary, needs to examine
the documents and pay for a complying presentation. Under a confirmed credit, the
confirming bank will take over the issuing bank’s role and make payment for the
documents first. The confirming bank will then remit the documents to the issuing
bank and claim reimbursement from it. The issuing bank will independently examine
the documents again and make its own judgement for accepting the documents or not.
Since the confirming bank has undertaken the independent responsibility of paying the
seller by itself, its position would not change even if it cannot obtain reimbursement
from the issuing bank later. The same rule applies to the issuing bank. Having
reimbursed the confirming bank, the issuing bank will then turn to the applicant for
reimbursement according to the terms of the application contract; however, its
undertaking under a letter of credit will not change even if the applicant refuses to pay
for the documents.
Clearly, when the documents are tendered under the letter of credit, the bank to which
they are presented is under a duty to examine them so as to decide whether they are
compliant or not. However, the major disputes which arise in connection with credits
are whether the documents comply with the credit. The subject-matter of this thesis
just concerns the last but most essential stage of documentary credit operations, i.e.
16
realisation of payment, which includes examination of documents and determination of
payment or rejection.
Figure 2
The credit appears to regulate three distinct relationships: between the issuing bank and
the beneficiary, between the confirming bank and the beneficiary, and between the
issuing bank and the confirming bank. Each of those relationships may be regarded as
part of the credit; however, of cardinal commercial and legal importance, these
contracts are entirely independent according to their terms and insulated from the
underlying sale contract and the application form in which they are originally
generated. As we will see in the next section concerning principle of autonomy,
payment under letters of credit solely depends on the acceptance of the presented
documents rather than the actual performance under the sale contract or the solvency
of the buyer. Further, the undertaking under a documentary credit is legally enforceable
and contractual in nature.
2.3 A series of contractual relationships
2.3.1 The contracts
The contractual relationships between parties involved in a documentary credit

transaction, demonstrated by Figure 3 at the end of this part, have been wonderfully
17
illustrated in United City Merchants v Royal Bank of Canada.24 As a leading House of
Lords authority on the juristic basis of documentary credits, it demonstrated four
contractual relationships involved in terms of an irrevocable confirmed credit. It is
worth quoting the classic and well-known passage from this judgment in full:25
‘It is trite law that there are four autonomous though interconnected
contractual relationships involved: (1) the underlying contract for the sale
of goods, to which the only parties are the buyer and the seller; (2) the
contract between the buyer and the issuing bank under which the latter
agrees to issue the credit and either itself or through a confirming bank to
notify the credit to the seller and to make payments to or to the order of the
seller (or to pay, accept or negotiate bills of exchange drawn by the seller)
against presentation of stipulated documents; and the buyer agrees to
reimburse the issuing bank for payments made under the credit. For such
reimbursement the stipulated documents, if they include a document of title
such as a bill of lading, constitute a security available to the issuing bank;
(3) if payment is to be made through a confirming bank, the contract
between the issuing bank and the confirming bank authorising and
requiring the latter to make such payments and to remit the stipulated
documents to the issuing bank when they are received, the issuing bank in
turn agreeing to reimburse the confirming bank for payments made under
the credit; (4) the contract between the confirming bank and the seller
under which the confirming bank undertakes to pay to the seller (or to
accept or negotiate without recourse to drawer bills of exchange drawn by
him) up to the amount of the credit against presentation of the stipulated
documents.’
24
United City Merchants (Investments) Ltd v Royal Bank of Canada (The American Accord) [1983] 1
AC 168 (HL)
25
AC 168 (HL) 182-183 The case itself actually concerned an action brought by the seller against the
confirming bank, i.e. contract (4) relationship.
18
It is clear from this passage that contracts (3) and (4) arise only where the credit is
confirmed. If there is no confirming bank, it will create only three contractual
relationships, i.e. the contract of sale, the contract between buyer and issuing bank, and
the contract between issuing bank and beneficiary.26 Nevertheless, it should be noted
here that one contractual relationship is missing from the above quotation. Since the
confirming bank’s undertaking is additional to that of the issuing bank, there must
remain a contract (5) between beneficiary and issuing bank, even where the credit is
confirmed. The relationship in contract (4) and contract (5) co-exists, giving a
beneficiary two banks which he may hold responsible for payment. 27 Normally
contract (5) will be of theoretical interest only, but the issuing bank would step in and
provide the beneficiary with additional recourse when it is appropriate, for example, in
the event of the insolvency of the confirming bank.28
Figure 3
2.3.2 Contracts autonomous but interconnected
According to Lord Diplock, all the contracts above are “autonomous though
interconnected”.29 It follows that the obligation of the confirming bank to pay the
26
If the credit is confirmed, contract (4) is the letter of credit. If the credit is unconfirmed, contract (5)
in the following diagram is the letter of credit.
27
Bank of Baroda v Vysya Bank Ltd [1994] 2 Lloyd’s Rep 87 (QB) 90-93
28
Paul Todd, Bills of Lading and Bankers Documentary Credits (4th edn, Informa Publishing 2007)
para 1.55 In this circumstance, the terms in contract (4) and contract (5) must be identical, since they are
originated in the same documentary credit.
29
19
beneficiary on tender of documents in contract (4), the obligation of the issuing bank to
reimburse the confirming bank in contract (3) and the obligation of the applicant to pay
the issuing bank in contract (2) should all be autonomous and independent of disputes
between the trading parties under contract (1). In principle, it is not even necessary to
have the same terms in contract (2), (3) and (4) since the performance of each contract
will be judged by its own terms. As we will see later, the principle of autonomy is
fundamental to the operation of documentary credits.
In respect to the point of “interconnected”, two issues need to be considered. Firstly, it

should be noted that there is a connection between the contracts involving the banks
and the sale contract, since the former are generated from the terms provided in the
underlying sale contract. The buyer who has failed to procure a documentary credit in
accordance with the requirements of the sale contract would be in breach of the sale
contract. 30 On the other hand, if the seller accepts the credit which contains the
different terms from the sale contract, the sale contract is arguably varied by the credit
terms or at least the seller would be estopped from claiming payment under the sale
contract terms. 31 In either scenario, however, the credit remains autonomous.
Consequently, the bank will only pay against tender of the documents required by the
documentary credit, irrespective of any different terms in the underlying sale contract.
Secondly, it is sensible to consider contracts (2), (3) and (4) to be interconnected, in
that a bank would expect its liability to pay to be tied in with its right to be reimbursed.
It would be strange and undesirable from a commercial point of view, if the contractual
duty owed by the bank to the seller under the credit was not matched with the
contractual liability in the bank-to-bank reimbursement contract or in the application
form, so that the bank which has paid the beneficiary could not claim reimbursement
from the upstream bank or its customer.32 As summarised by Megaw LJ in Bankers
AC 168 (HL) 182-183

30
Trans Trust SPRL v Danubian Trading Co Ltd [1952] 2 QB 297 (CA)
31
WJ Alan & Co Ltd v El Nasr Export and Import Co [1972] 2 QB 189 (CA)
32
AC 168 (HL) 184-185
20
Trust Co. v. State Bank of India,33
‘The metaphor “autonomous” means only that one does not read into any
one of the four contracts the terms of any one of the other three contracts.
But the “genesis and the aim of the transaction” … are not to be ignored
where they may be relevant to assist in the interpretation of the terms of the
contract.’
In reality, therefore, the obligations of the bank towards the beneficiary should tie in
with the obligations of the customer towards the bank. As we will see later in this
thesis regarding documentary examination, the mismatch between the requirements
under the documentary credit and the mandate received from the applicant will
generate a very unpleasant picture for the bank.
2.4 UCP and other sources for documentary credits
2.4.1 UCP600 and its development
In order to encourage a uniformity of banking practice and reduce the differences

emerging from national laws in relation to documentary credits, the International
Chamber of Commerce (ICC) initiated the first version of UCP in 1933. Revisions
have therefore averaged about once a decade, and have usually been in response to
changing trade and banking practices.34 The UCP was revised in 1951, 1962, 1974
(UCP 290), 1983 (UCP 400), 1993 (UCP 500) and most recently in 2006 (UCP 600), as
a result of the deliberations of the ICC Banking Commission.35 The English banking
society did not adopt the UCP until the 1962 revision, but since then, the UCP has
predominated and nearly all credits issued today are on its terms. It is of no doubt that
the UCP, as a private set of rules, has obtained a remarkable achievement in the course
33
Bankers Trust Co v State Bank of India [1991] 2 Lloyd’s Rep 443 (CA) 456
34
For example, as we will see in Chapter 6 of this thesis, the UCP has responded to new forms of
documentation, particularly for combined transport operations in 1974 revision and sea waybills in
UCP500.
35
UCP 600 did not come into force until July 2007.
21
of economic globalisation.
Compared with its predecessors, the UCP600 should probably still be regarded as
evolutionary, rather than revolutionary, since there are no substantial changes relating
to the documentation with respect to previous revisions. 36 Apart from radically
removing the application of revocable credits,37 the UCP600 in part is a tidying up
exercise. It consists of only 39 articles, which is less repetitive and more simplified
than the UCP500. The newly created UCP600 Article 2 regarding definitions has
effectively laid the foundation for the general orientation of UCP600, which also acts
to avoid unnecessary repetition in the following main content.38 UCP600 Article 3 in
respect of interpretations reflects a desire for achieving certainty and removing vague
meaning. In addition, the UCP600 has reacted to changes in trade practice, and perhaps
to developments in case law.39 Overall, UCP 600 is a conservative and moderate
document, since it does not substantially change the rules in relation to examination
and rejection of documents. As we will see in the next several chapters of this thesis,
there are several disappointing aspects in the UCP which are far from being clear and
certain.
2.4.2 Nature and application of UCP
Although the coverage of UCP is growing more comprehensive with each revision, the
UCP still falls far short of constituting a complete code. The UCP does not purport to
be a code setting out the law governing documentary credits. On the contrary, the ICC
had rightly recognised that ‘legal issues [as to the jurisdiction of the UCP] cannot be
addressed in the rules and the UCP cannot legislate national laws.’40 Although some
36
Paul Todd, Bills of Lading and Bankers Documentary Credits (4th edn, Informa Publishing 2007)
para 1.77
37
See UCP600 Article 3
38
This process might have been taken further. As we will see in Chapter 6, there remains considerable
inappropriate repetition, for example, in the provisions on transport documents, Article 19-22, which
could certainly have been avoided, had those responsible for drafting the new code been so inclined.
39
For example, decision covering the determination of an original document has been incorporated into
the text of UCP600 Article 17. Another example is the negotiation issue dealt with in Banco Santander
SA v Bayfern Ltd [2000] 1 All ER (Comm) 776 (CA)
40
Charles del Busto, UCP500 & UCP400 Compared (ICC Publication No.511, ICC 1993) 2
22
parts of UCP have defined the parties’ rights and obligations, they are not set out in
legal language. Moreover, the UCP has left issues which cannot be resolved by
contractual provisions alone, such as property issues, remedies for non-performance
and fraud. All these issues remain firmly within the province of the national courts. In
addition, the UCP does not govern sale or carriage contracts, and the courts have been
reluctant to give the UCP any weight beyond their ambit of being banking practice.41
It is essential to know that the UCP as a set of standard terms and conditions is usually
applicable only when incorporated into the relevant contracts.42 The UCP does not
have the force of law in the English courts.43 The UCP must rely upon contract to give
it binding effect in each documentary credit where they are incorporated. The
contractual nature is fundamental to the understanding of its provisions. In fact, the
ICC cannot, and does not purport to, legislate. In Article 1 of UCP600, it stipulates that
the UCP rules apply to any documentary credit when the text of the credit expressly
indicates that it is subject to these rules.44 Once incorporated, the UCP rules are
binding on all parties thereto on a contractual basis unless expressly modified or
excluded by the credit.
2.4.3 Other sources for documentary credits
2.4.3.1 International Standard Banking Practice
A more general source for regulating letters of credit is international banking practice45
and the usages of international trade. From 2003, during the currency of UCP500, the
ICC issued the first version of International Standard Banking Practice for the
41
E.g. definition of a clean bill of lading in M Golodetz & Co Inc v Czarnikow-Rionda Co Inc (The
Galatia) [1980] 1 WLR 495 (CA)
42
Peter Ellinger and Dora Neo, The Law and Practice of Documentary Letters of Credit (Hart
Publishing 2010) 45
43
M Golodetz & Co Inc v Czarnikow-Rionda Co Inc (The Galatia) [1980] 1 WLR 495 (CA) 509
44
It is not necessary for the wording to be incorporated into the text of the credit. See Forestal Mimosa
Ltd v Oriental Credit Ltd [1986] 1 WLR 631 (CA), in which an insertion in appropriate words in the
left-hand margin of the document was held by the Court of Appeal to be sufficient to incorporate the
provisions of the UCP.
45
It is necessary to distinguish between the internal practices, used by banks in their letter of credit
operations, and practices which have been adopted on a broad, often universal basis.
23
Examination of Documents under Documentary Credits (ISBP). 46 The ISBP
Publication No.681 (referred as ISBP No.681)47 has been updated simultaneously with
the birth of UCP600 in 2007 and the most recent revision is the ISBP Publication
No.745 (referred as ISBP No.745) in 2013.48 The status of the ISBP was doubted
during the UCP500, since there is no reference in the UCP500 (which has been
implemented 8 years previous) to the ISBP No.645. The problem has been solved by
the introduction of UCP600, which states in its preface that “the Publication [ISBP]
has evolved into a necessary companion to the UCP for determining compliance of
documents with the terms of letter of credit.”49
The practices described in the ISBP aim to highlight how the articles of UCP600 are to
be interpreted and applied.50 It is suggested that the ISBP is not intended to amend or
modify UCP600 and it should be read in conjunction with UCP600 rather than in
isolation. There is no need to incorporate the ISBP rules into the documentary credit
separately, as the requirement to follow agreed practices is implicit in UCP600.51
Clearly, although the ISBP is not formally referred by the main content of UCP600, it
is intended to be integrated with the UCP 600 as a set of authoritative statements.52
Therefore, it should be noted that any term in a documentary credit that modifies or
excludes the applicability of a provision of UCP600 may have an impact on the ISBP.
As we will see in Chapter 3, the UCP600 Article 2 refers to international standard

banking practice in determining a complying presentation. A specific reference to the
46
ICC, International Standard Banking Practice for the Examination of Documents under Documentary
Credits 2007 Revision for UCP500 (ICC Publication No.645, ICC 2003) Referred in this thesis as the
ISBP No.645
47
Credits 2007 Revision for UCP600 (ICC Publication No.681, ICC 2007)
48
Credits 2007 Revision for UCP600 (ICC Publication No.745, ICC 2013)
49
UCP600 Introduction
50
ISBP No.745, Preliminary Consideration para ii
51
ISBP No.745, introduction
52
‘As can be seen by comparing ISBP (2003) and ISBP (2007), many of the provisions of the previous
version have been elevated to UCP status in UCP600 and some provisions have been downgraded from
UCP status to ISBP status.’ Cited in James Byrne, The Comparison of UCP600 & UCP500 (ICC 2007)
136
24
ISBP has been avoided. It is suggested that issues respecting banking practice remain
issue of fact and can be referred to a non-exhaustive list. Nevertheless, there are clear
practical advantages in having an authoritative list of relevant practice. Despite the
statement in the UCP introductory texts, without a firm statement in the UCP, there
remains a question as to whether the ISBP practices should be regarded to be decisive
and whether the other banking practice is also admissible by the court. Reading from
the introductory texts of ISBP No.745, it seems possible for the ICC to recognise a
different practice other than those stated in the ISBP.
2.4.3.2 Other ICC publications and expert evidence
The ICC Commission on Banking Technique and Practice (referred to as “ICC

Banking Commission”) from time to time publishes their official opinions on questions
and interpretations concerning the UCP.53 Moreover, the ICC also publishes some
selected DOCDOX (Documentary Credit Dispute Resolution Expertise) decisions
made by the ICC experts on day-to-day documentary credit disputes.54 Those ICC
opinions and decisions represent the views of considerable experts, and are given
substantial weight by the court with the merits of the particular case.55 Assistance may
be also derived from some other publication of the ICC, such as commentary on each
56
periodic UCP revision, which offers historical background and drafting
interpretation of the various articles in UCP600. Commentary is often cited in the
courts and has persuasive value to some degree. However, as the comments and views
expressed in the commentary are made in the writer’s personal capacity and do not
53
Recent examples include: Gary Collyer and Ron Katz (eds), ICC Banking Commission Collected
Opinions 1995-2001 (ICC Publication No.632, ICC 2002); Gary Collyer and Ron Katz (eds),
Unpublished Opinions of the ICC Banking Commission 1995-2004 (ICC Publication No.660, ICC 2005);
Gary Collyer and Ron Katz (eds), ICC Banking Commission Opinions 2005-2008 (ICC Publication
No.697, ICC 2008); Gary Collyer and Ron Katz (eds), ICC Banking Commission Opinions 2009-2011
(ICC Publication No.732, ICC 2012)
54
Three collections have been published so far: Gary Collyer and Ron Katz (eds), Collected DOCDEX
Decisions 1997-2003 (ICC Publication No.665, ICC 2004); Gary Collyer and Ron Katz (eds), Collected
DOCDEX Decisions 2004-2008 (ICC Publication No.696, ICC 2008); Gary Collyer and Ron Katz (eds),
Collected DOCDEX Decisions 2009-2012 (ICC Publication No.739, ICC 2012)
55
Credit Industriel et Commercial v China Merchants Bank [2002] EWHC 973 (Comm) and Glencore
International AG v Bank of China [1996] 1 Lloyd’s Rep 135 (CA)
56
For UCP600, Gary Collyer, Commentary on UCP600: Article by Article Analysis by the UCP600
Drafting Group (ICC Publication No.680, ICC 2007)
25
necessarily reflect those of the ICC Banking Commission, the English court will treat
them no more than the same value as those of any other commentator of comparable
wisdom and experience.57
In most cases, the relevant banking practice has to be proven by expert evidence. For
example, expert views on what constituted a reasonable time to inspect documents
were accorded considerable weight in Bankers Trust Co v State Bank of India,58 as
also were their views on the desirability of the bank consulting the applicant. The
above ICC publications are undoubtedly of great assistance in dealing with issues that
actually arise and represent as the expert’s opinions, but they are probably of limited
value in the actual interpretation of terms which will ultimately be incorporated into
contractual documents. As Staughton L.J. held in Seaconsar Far East Ltd v Bank
Markazi Jomhouri Islami Iran,59 ‘it is no part of the function of an expert witness, or
for that matter of any other witness, to state his views on the meaning of ordinary
English words in a written contract, unless it is sought to prove some custom which is
pleaded and can be supported by appropriate evidence.’
2.4.4 UCP and Case Law
It is acknowledged the first revision of UCP to be generally accepted by the English

banks was the 1962 revision. In cases decided by an English court prior to 1962, no
concern has been addressed to the UCP. It is suggested that many of them remain good
law, since the same result will often be reached today through applying the UCP.60 In
many areas, there is little difference between the English case law and the UCP. The
provisions of the UCP do not in general operate in opposition to the common law, but
rather elaborate upon it. Where the credit incorporates the UCP, the approach in
nowadays must be to examine the UCP to find a direct answer to the point at issue. The
case law reflecting the same point may help to show the principle and illustrate how it
57
Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1999] 1 Lloyd’s Rep 36 (CA) 39
58
Bankers Trust Co v State Bank of India [1991] 2 Lloyd’s Rep 443 (CA)
59
60
Ali Malek and David Quest, Jack: Documentary Credits (4th edn, Tottel Publishing 2009) para 1.30
26
is to be applied. However, it is improper to apply the previous cases which would
achieve a result contrary to the current UCP provisions, since the UCP has deviated
from the established requirements under the case law in some respects. A typical
example can be found in Chapter 3 of this thesis regarding the standard of strict
compliance. As we will see in Chapter 3, the case law has established the doctrine of
strict compliance with respect to documentary examinations in documentary credits,
while the UCP has endeavoured to relax this doctrine in many ways.
As illustrated in the above parts, the UCP is intended to regulate the operation of
documentary credits, but it falls far short of constituting a complete code. There remain
a number of areas which continue to be resolved by common law, on which the UCP is
silent. Apart from the legal issues intentionally left by the UCP regime, such as choice
of law, legal remedies and fraud exceptions, some of the UCP provisions still need to
be clarified and polished. In the absence of an express contractual term, it is likely that
the courts will fill out the necessary details with the contractual interpretations, and a
term may be implied into the UCP in accordance with orthodox contract law
principles.61 As we will see in Chapter 6, in the recent case, Fortis Bank v Indian
Overseas Bank,62 the English Court of Appeal has extended the bank’s obligation
under UCP600 Article 16 to the post-notice stage by virtue of contractual
interpretations. Clearly, the common law can effectively interpret and supplement gaps
left by the UCP regime when it is necessary.
It is acknowledged that the UCP as a global product has to make compromises between
the civil law jurisdiction and the common law jurisdiction. It is not possible for the
UCP to satisfy all the national laws of a particular state, nor does it have power to
change the local law. Donaldson J. in The Galatia 63 was unimpressed with the
argument regarding interpreting a clean bill of lading according to the UCP definition,
observing that the rules did not have the force of law. He recognised that if there was
61
62
Fortis Bank v Indian Overseas Bank [2011] EWCA Civ 58, [2011] 2 All ER (Comm) 288
63
M Golodetz & Co Inc v Czarnikow-Rionda Co Inc (The Galatia) [1980] 1 WLR 495 (CA)
27
an ambiguity in interpreting the terms, it should be resolved in a way which could
reflect the position under general maritime and commercial law. 64 English case law,
which has developed continuously in accordance with real commercial practice, retains
its leading position in the world, especially in the commercial and maritime area. The
established English case law and its development can actually contribute to revealing
the loopholes in the UCP regime and provide references to the UCP for its future
reform. Therefore, it is not difficult to observe that in this thesis, especially in Chapter
4 regarding standards of documentary examination and in Chapter 5 concerning
transport documents, the author is endeavouring to compare the different positions
between the UCP and the relevant case law, so as to bring the merits of English case
law into the UCP reform.65
2.4.5 Construction of UCP within a documentary credit
An irrevocable credit or a confirmed credit, which constitutes the bargain between the
banks and the beneficiary, is treated for all practical purposes as a binding contract. 66
It follows that documentary credits subject to English law should be interpreted in
compliance with the ordinary rules of contractual construction. Prima facie the parties
entering into a documentary credit contract are free to make any arrangements and to
include any specific terms as they desire. In the UK, the UCP is regarded as a set of
standard contractual terms. Consistent with its contractual status, the provisions of the
UCP fall to be construed according to the normal approach in interpreting standard
terms which are incorporated into contracts and the courts are ultimately concerned to
ascertain the intentions of those particular parties to the contract. Although Article 1 of
the UCP600 requires an express indication in the credit that the UCP applies, it is still
possible for a court to give effect to the UCP terms on the basis of the clear intention of
64
M Golodetz & Co Inc v Czarnikow-Rionda Co Inc (The Galatia) [1980] 1 WLR 495 (CA) 509
65
For example, as the way treated linkage issue and non-documentary conditions issue in Chapter 4 and
the requirement for justifying a clean bill of lading and carrier’s liability in Chapter 5.
66
Although contract is the jurisprudential foundation for the obligations contained in the credit, it is
difficult to analyse them satisfactorily without recognising that documentary credits are to some extent
of a special nature. See detailed controversies in Ali Malek and David Quest, Jack: Documentary
Credits (4th edn, Tottel Publishing 2009) para 5.8 and Paul Todd, Bills of Lading and Bankers
Documentary Credits (4th edn, Informa Publishing 2007) para 1.70
28
the parties even without an express incorporation.67
At the end of UCP600 Article 1, it stipulates where included, the terms are binding on
all the parties thereto “unless expressly modified or excluded by the credit”. This
recognises that the parties are free to exclude some of the UCP provisions while
incorporating the remainder. Clearly, the UCP terms which are incorporated in a letter
of credit should be read together with the express terms set out in the document. No
issue will arise if the parties have expressly and unequivocally excluded or modified a
specific UCP provision. A difficulty does arise where there is a conflict between a UCP
provision which has not been expressly excluded or modified and an express term of
the credit. It is then a question of interpretation whether a particular term of the credit
overrides a contrary provision of the UCP. It is suggested that if possible, an English
court will first try to give effect to both terms without violating the language of
either.68
If the conflict cannot be resolved, the general position in English law is that an express
term of a contract normally prevails over a standard term which is incorporated into the
contract by reference. However, given the international recognition of the UCP, a court
may feel reluctant to conclude that the parties intended to depart from the UCP
provision without a clear specification, unless there is an “irreconcilable
inconsistency”. 69 Obviously, in the event of an irreconcilable inconsistency, the
situation faced by an English court will be extremely difficult and the result is hardly
predictable. It is suggested that the more that an express term of the credit is
fundamental to the commercial operation of a documentary credit, the more likely that
such a term will reflect the intentions of the parties and override the standard UCP
term.70 As discussed later in Chapter 4, the issue of non-documentary conditions is a
typical example for this point. Another example can be found in Chapter 5 when the
67
68
Forestal Mimosa Ltd v Oriental Credit Ltd [1986] 1 WLR 631 (CA)
69
Forestal Mimosa Ltd v Oriental Credit Ltd [1986] 1 WLR 631 (CA)
70
Kumagai-Zenecon Construction Pte Ltd v Arab Bank Plc [1997] SGHC 31, [1997] 1 SLR (R) 277,
affd [1997] SGCA 41, [1997] 2 SLR (R) 1020
29
credit expressly requires the transport document to meet a specific carriage
requirement, which is usually shown in the carriage terms and conditions. By contrast,
the UCP provides that the content of carriage terms and conditions will not be
examined. It is difficult to tell who will defeat whom and the final say would remain
with the court by addressing the parties’ intention.
2.5 Two fundamental principles
Two cardinal features, irrevocability and autonomy, fundamentally contribute to the

operation of documentary credits and provide the confidence to the beneficiary as
holding the equivalent of cash in hand. The principle of irrevocability imposes an
absolute obligation on the bank to pay against compliant documents under
documentary credit, while the principle of autonomy underpins the continuance of the
documentary system as the primary means of payment in international trade. Those
two principles, as the precedent condition for the operation of documentary credits,
were not only established at common law, but also reiterated in the UCP. As we will
see in the following chapters, these two principles run through the discussion in the
whole thesis, since they have penetrated into the bank’s obligations in documentary
examination and rejection all the time.
2.5.1 Principle of irrevocability
The documentary credits can be divided into irrevocable credits and revocable credits.
A revocable credit can be revoked by the issuing bank at any time, while an irrevocable
credit cannot be revoked once issued. Clearly, only an irrevocable documentary credit
which presents an absolute undertaking from a reliable and solvent paymaster can
provide financial assurance to the beneficiary. In essence, it constitutes a bargain
between the banker and the vendor of the goods, which imposes upon the banker an
irrevocable obligation to pay against presentation of the documents stipulated in the
credit, regardless of any dispute between the parties in the underlying contract.71
71
Hamzeh Malas & Sons v British Imex Industries Ltd [1958] 2 QB 127 (CA) 129
30
Since revocable credits have become obsolete and always constitute a poor assurance
of payment, they have been excluded from the ambit of UCP600. In the UCP600
Article 2, it expressly states that “credit” means any arrangement, however named or
described, that is irrevocable and thereby constitutes a definite undertaking of the
issuing bank to honour a complying presentation. Under Article 3, the UCP reiterates
that a credit is irrevocable even if there is no indication to that effect. In consequence,
once opened, the credit can be neither amended nor cancelled without the consent of
the issuing bank, the confirming bank, if any, and the beneficiary. 72 The issuing and
confirming bank, if any, are also legally bound as against the beneficiary to honour or
negotiate in accordance with the terms of the credit, and in the same vein, the issuing
bank is bound to reimburse any nominated bank that honours or negotiates a
complying presentation.
Although there is no doubt that the beneficiary obtains contractual rights against the
issuing bank or confirming bank under the irrevocable credit, the issue of when the
letter of credit becomes irrevocable gives rise to conceptual difficulties under the
common law. As stated above, in principle, letters of credit are governed by the legal
principles of contract law, so an obligation to be irrevocably bound can only arise once
the contract has been made, i.e. there has been an offer and acceptance, and
consideration. By tendering the required documents, there is a clear intention that the
seller accepts the unilateral offer and provides consideration.73 Therefore, the time of
being irrevocable does not really bother the subject-matter discussed in this thesis,
which concerns the procedure after tending the documents, i.e. documents examination
and rejection.
The problem respecting the exact moment at which the bank’s undertaking becomes
72
UCP600 Article 10 (a)
73
In Urquhart Lindsay & Co v Eastern Bank Ltd [1922] 1 KB 318, Rowlatt J had no doubt that upon
the plaintiff’s acting upon the undertaking contained in the letter of credit, consideration moved from the
seller.
31
irrevocable only arises if the bank revokes its offer at an earlier stage, i.e. before the
beneficiary acts on it. UCP600 attempts to settle this thorny problem by providing that
the issuing bank is irrevocably bound as of the time it issues the credit 74 or any
amendment.75 Equivalently, the confirming bank is irrevocably bound as of the time it
adds its confirmation to the credit76 and from the time it advises the amendment.77
However, the UCP provisions have not fundamentally resolved the problem, since the
UCP operates in the UK by incorporation into a contract, and the problem here is
precisely that there is no binding contract before the beneficiary accepts the offer and
provides consideration. Therefore, the problem still lies in how to define the nature of
the contract created by issuance of the credit and how to surmount the obstacle
regarding lack of consideration for the bank’s promise to the beneficiary.
It is suggested that the English courts have never resolved this incompatibility with the
principles of orthodox contract law in terms. On the contrary, it appears that
irrevocable letters of credit which are governed by English law constitute a sui generis
exception to the rule of English law as to consideration.78 Since international banking
practice considers the simple sending or transmitting of an advice of issuance,
confirmation or amendment of a credit to constitute a legally binding, irrevocable
unilateral offer, the English court is not intended to interfere with “mercantile usage” in
such an elaborate commercial system. 79 Therefore, an irrevocable credit becomes
binding as soon as it has been issued or confirmed by the bank, or more precisely, the
beneficiary will be able to enforce it as soon as it reaches the beneficiary’s hands.
74
UCP600 Article 7 (b)
75
76
77
UCP600 Article 10 (b) In the UCP, “advise” simply means to send or transmit an advice. See Gary
Collyer and Ron Katz (eds), Collected DOCDEX Decisions 2004-2008 (ICC Publication No.696, ICC
2008) No.264
78
Hugh Beale (ed), Chitty on Contracts, vol 1(30th edn, Sweet and Maxwell 2008) para 2-082; Michael
Bridge (ed), Benjamin’s Sale of Goods (8th edn, Sweet and Maxwell 2010) para 23-069
79
Hamzeh Malas & Sons v British Imex Industries Ltd [1958] 2 QB 127 (CA) 129
32
2.5.2 Principle of autonomy
80
As Lord Diplock stated in The American Accord which has been cited above, it is
trite law that there are four autonomous contractual relationships involved in the letter
of credit transactions. The credit is autonomous from the underlying transaction and
other contract on which it may be based. As a fundamental principle of documentary
credits, the principle of autonomy is designed to ensure that disputes extraneous to the
credit do not impair the realisation of the credit. The independence of the credit from
the underlying transaction also reflects an application of the privity of contract doctrine,
as the bank has no awareness of the original terms of the sale by the trading parties.
Moreover, the principle of autonomy further underpins the doctrine that a documentary
credit is a transaction in documents and in documents alone.
The principle of autonomy can be dated back to the original version of the UCP,
promulgated in 1933.81 It is still encapsulated in the current UCP 600, Article 4 and
Article 5. Article 4 (a) stipulates: “A credit by its nature is a separate transaction from
the sale or other contract on which it may be based. Banks are in no way concerned
with or bound by such contract, even if any reference whatsoever to it is included in
the credit. Consequently, the undertaking of a bank to honour, to negotiate or to fulfil
any other obligation under the credit is not subject to claims or defences by the
applicant resulting from its relationships with the issuing bank or the beneficiary”.82
Therefore, an issuing or confirming bank is obliged to honour a complying
presentation even if the bank has knowledge at the time of presentation that the seller
has committed a repudiatory breach of the underlying contract, which would have
entitled the buyer to treat the contract of sale as rescinded and to refuse to pay the
seller the purchase price. 83 The result actually interacts with the principle of
80
AC 168 (HL) 182
81
Peter Ellinger, ‘The UCP 500: Considering a New Revision’ [2004] LMCLQ 30, 31
82
UCP 600 Article 4(a) also emphasises the independence between the credit and other contracts
involved with banks making up the credit by stating that ‘a beneficiary can in no case avail himself of
the contractual relationship existing between the banks or between the applicant and the issuing bank.’
83
33
irrevocability, in which the bank cannot withdraw its unilateral promise once the credit
has been issued, notwithstanding any dispute occurring on the underlying contract.
The isolation from any disputes that may arise on the underlying contract is essential
for the operation of documentary credits which aims to provide financial reassurance to
the beneficiary. In The American Accord,84 it was held that the document which was
apparently compliant but contained an inaccurate material statement of fact was not a
ground for rejection, even if the person (not being the beneficiary) who prepared the
document knew of the inaccuracy. The principal of autonomy is primarily intended to
deter applicants or banks from claiming that payment should be stopped because of the
beneficiary’s breach of his contractual obligations to the applicant. It follows that, in
the event that the applicant has a genuine grievance against the beneficiary on the
underlying contract, he may seek redress outside the credit by receiving the adjustment
refund from the beneficiary, rather than by way of retaining payment under a letter of
credit.85 It is suggested that the English court has been reluctant to interfere with the
commercial practice by granting an injunction.86 In The American Accord, the House
of Lords recognised that there was one established exception to this general overriding
principle of autonomy, i.e. the “fraud exception”. However, its application has been
largely restricted to seller’s fraud rather than fraud caused by any third party. The
principle of autonomy might also be challenged by illegality and clear credit terms
which reflect the parties’ intention to disrupt it.87
The principle of autonomy has also been demonstrated in the UCP 600 Article 4(b),
which states that “an issuing bank should discourage any attempt by the applicant to
AC 168 (HL) 183; Edward Owen Engineering Ltd v Barclays Bank International Ltd [1978] QB 159
(CA) 169 Equally, a waiver of discrepancies in the required documents as between buyer and seller on
the underlying contract does not oblige a bank to honour the discrepant documents. See Uzinterimpex
JSC v Standard Bank Plc [2008] EWCA Civ 819, [2008] 2 Lloyd’s Rep 456 [29]
84
AC 168 (HL)
85
Urquhart Lindsay & Co v Eastern Bank Ltd [1922] 1 KB 318 (KB) 323
86
Hamzeh Malas & Sons v British Imex Industries Ltd [1958] 2 QB 127 (CA)
87
The exceptions of autonomy are beyond the scope of this thesis. Detailed discussion can be found in
34
include, as an integral part of the credit, copies of the underlying contract, proforma
invoice and the like”. It is suggested that “if the applicant’s motive for requiring a copy
of the original sale contract to be included in the credit is to protect him or herself from
a fraudulent seller, Article 4(b) sends out the message in a subtle way that there are
better ways of doing this, such as by requiring a certificate of inspection of the cargo
by an independent expert”. 88 However, it is difficult to use Article 4(b) as an
enforceable contractual term, and it might be argued that the objectives of providing a
code of behaviour and sending out signals are not really appropriate to a contractual
document. It remains to be seen how the bank can effectively enforce Article 4(b).
The independent nature of the credit is reinforced by virtue of UCP600 Article 5,

which emphasises that banks deal with documents rather than goods, services or
performance. It is in line with the general standard for documents examination in
UCP600 Article 14 (a), which stipulates that the bank must determine, on the basis of
the documents alone, whether or not the documents appear on their face to constitute a
complying presentation. Banks should not look at the facts behind the documents and
take any extraneous matters into account.89 It also forms no part of the bank’s function
to speculate or investigate the underlying facts. This exactly justifies the disclaimer on
effectiveness of documents in UCP600 Article 34,90 since the bank does not possess
the requisite expertise to investigate or inquire into the truth behind the documents.
Therefore, a big dilemma will be faced by the bank if the payment under a credit is
rendered conditional on matters of performance or terms which cannot be observed
from the stipulated documents, such as non-documentary conditions discussed in
Chapter 4.
2.6 Conclusions
The purpose of this chapter is to lay the foundation for the following discussions in this
88
Janet Ulph, ‘The UCP 600: Documentary Credits in the 21st Century’ [2007] JBL 355, 368
89
Gian Singh & Co Ltd v Banque de l’Indochine [1974] 1 WLR 1234
90
As stated in Article 34, a bank assumes no liability or responsibility for the form, sufficiency,
accuracy, genuineness, falsification or legal effect of any document.
35
thesis. The chapter has introduced the workflow of documentary credits and
developments of the UCP regime. Furthermore, the chapter has demonstrated the
contractual nature of the documentary credits and the UCP terms, as well as
overviewed the case law position towards the UCP and letters of credit. In addition, the
chapter has illustrated other sources, such as the ICC publications, which may affect
the construction for the credit terms and the UCP.
As mentioned, there are five autonomous but interconnected contracts relating to the
operation of documentary credits. Among them, the contract between the beneficiary
and the bank is regarded as the letter of credit. The letter of credit is independent from
the contracts between banks and the underlying sale contract, although it is generated
from them. Therefore, banks are obligated to focus on the documents alone and
disregard any allegations related to the underlying transaction. As we will see in the
following chapters, the principle of autonomy is closely linked with bank’s obligations
towards document examinations and rejections.
The principle of irrevocability, as the other fundamental principle in the letters of credit
operations, might not be obviously linked with the main content of this thesis regarding
document examinations. However, as a precedent condition of the bank’s undertaking
under documentary credits, it has penetrated into the letter of credit system and
provided a financial guarantee to the beneficiary and the nominated banks. As we will
see in Chapter 6, the irrevocable nature of the bank’s promise has extended to the
principle of irreversibility in the scenario of serving a rejection notice, since the bank
cannot change its mind once it sends its words. Clearly, all the subject-matters in this
chapter are intended to pave the way for the subsequent discussions in this thesis
regarding a bank’s obligations on document examination and rejection under UCP600.
36
Chapter 3 General Requirements for Document Examination
3.1 Introduction
Documents examination is the utmost important procedure in the circulation of

documentary credits, since the decision of examination will control the fate of a
presentation so as to affect the release of payment or reimbursement. It is claimed that
the majority of the presentations will be rejected by the bank in the first instance, as the
presented documents can hardly meet the standards of compliance set out under UCP.91
However, the underlying reason is that, far from being clear, the UCP standards for
document examination are full of ambiguity and uncertainty. Much worse than that, the
courts in different areas serve various interpretations, and even in the same jurisdiction,
the courts also provide diverse understandings concerning similar issues. Hence, the
current legal confusion leads to many significant consequences. Not only will traders
suffer loss from the failures of documentary credits, but also the banks will inevitably
be involved in subsequent litigations so as to jeopardise their professional reputation.
Furthermore, the high rate of rejections and controversies will fundamentally
discourage international transactions and inhibit the facilitation of documentary credits.
Although the general requirements for document examination are continuously

reformed by different UCP versions, the problems and controversies have never been
eliminated. As we will see in the following discussions, the current version, the
UCP600, is also hardly achieving its initial expectations due to unclear wording. The
existing case law and most scholars tend to solve the difficulties encountered with
UCP600 through a case-by-case method instead of interpreting a set of definite rules.
However, in the author’s opinion, these problems will not be mostly eliminated without
91
The rejection rate of first time presentation in the UK documentary credits transactions is between
50%-60%. In 2000, about 113 million GBP was estimated to have been lost in the UK market due to
non-compliant presentations under letters of credit. See STIPRO, ‘Report of the Use of Export Letters of
Credit 2001/2002’ SITPRO’s Letter of Credit Report (London, 11 April 2003) 2
<www.gov.uk/government/organisations/sitpro> accessed 10 March 2011
37
providing a set of systematic and unmistakable standards for examinations. On the one
hand, the beneficiary has to know how to constitute a complying presentation and
follow the guidance to present the compliant documents to get payment. On the other
hand, the banks have to refer to these standards in order to perform their obligations on
examination and determination without mistake. Moreover, courts in different
jurisdictions also need a set of clear and definite rules to direct their reasoning.
Therefore, this chapter aims to analyse the bank’s obligations concerning document
examination, as well as clarify the ambiguous points in the current UCP system.
Meanwhile, the author will endeavour to put forward some suggestions to solve the
existing problematic issues and supplement gaps left by the explicit UCP provisions.
Through comparison with different revisions of UCP and ISBP, 92 extracting the
essence of case law in different jurisdictions and compromising the interpretations of
commentators from various areas, the ultimate purpose of this chapter is to contribute a
set of feasible examination standards for the international banking system.
This chapter will centre on the general requirements for document examination in
UCP600 Article 14 (a)93 and Article 14 (b)94, which respectively involves the general
standards to judge a complying presentation and the time allowance given for
documents examination. 95 The chapter will start from analysing the overall
requirement set out in Article 14 (a) and clarifying what constitutes a complying
presentation under UCP600 in Part 3.2. Whether the historical element of reasonable
care, which has been expressly deleted in Article 14 (a), still takes part in the process
92
ISBP is short for the International Standard Banking Practice for the Examination of Documents
under Documentary Credits. There are three revisions, i.e. ISBP Publication No.745 published in 2013
for UCP600, ISBP Publication No.681 published in 2007 for UCP600 and ISBP Publication No.645
published in 2003 for UCP500.
93
The UCP600 Article 14 (a) stipulates: ‘A nominated bank acting on its nomination, a confirming bank,
if any, and the issuing bank must examine a presentation to determine, on the basis of the documents
alone, whether or not the documents appear on their face to constitute a complying presentation.’
94
The UCP600 Article 14 (b) stipulates: ‘A nominated bank acting on its nomination, a confirming
bank, if any, and the issuing bank shall each have a maximum of five banking days following the day of
presentation to determine if a presentation is complying. This period is not curtailed or otherwise
affected by the occurrence on or after the date of presentation of any expiry date or last day for
presentation.’
95
Although there are still some trivial issues described in the UCP600 concerning general requirements
for examination, such as Article 14 (c) concerning date of presentation, the author endeavours to choose
the most important and disputable issues to discuss in this chapter.
38
of document examination under UCP600, is the problem considered by Part 3.3.
Furthermore, the common law doctrine of strict compliance, as a general criterion for
the bank to judge a complying presentation during the process of examination, will be
elaborately analysed with the aid of different case law authorities in Part 3.4. Finally,
Part 3.5 will particularly focus on the time frame settled in Article 14 (b) through
comparing its wording with the position under previous UCP revisions.
3.2 General standard for examination—Article 14 (a)
Since the UCP600 Article 14 does not contain an exhaustive list of standards regarding
document examination,96 as a general guidance of examination, it has to be very clear
and directive. With continuous development, the general standard for document
examination is briefly stipulated in the UCP600 Article 14 (a), which requires ‘a
nominated bank acting on its nomination, a confirming bank, if any, and the issuing
bank must examine a presentation to determine, on the basis of the documents alone,
whether or not the documents appear on their face to constitute a complying
presentation.’97 The article has revealed three elements. Firstly, the article expressly
points out that all three types of bank are entitled to examine the presented documents
and determine whether the documents constitute a complying presentation.
Accordingly, the above banks are also bound to perform their obligations in line with
the UCP600 Article 14. 98 Secondly, the article reinforces that the principle of
autonomy should be followed during the process of document examination. Thirdly,
the criterion of payment is whether the documents constitute a complying presentation,
which has to be cross-referred to the definition of “complying presentation” in the
UCP600 Article 2.99 In the following paragraphs, the author will elaborate on the
96
James Byrne, The Comparison of UCP600 & UCP500 (ICC 2007) 131
97
98
It is worth noting that, according to Article 14 (a) and Article 14 (b) the “bank” mentioned in the
following parts will include a nominated bank acting on its nomination, a confirming bank and an
issuing bank. Apart from particular circumstances, the author will not specifically stress the type of
involved bank in process of document examination.
99
Definition of complying presentation is the UCP600 Article 2 as follows: ‘Complying presentation
means a presentation that is in accordance with the terms and conditions of the credit, the applicable
provisions of these rules and international standard banking practice.’
39
meaning of the last two elements.
3.2.1 Appearance of documents
Article 14 (a) requires that the bank should examine and determine, on the basis of the
documents alone, whether the documents appear on their face to constitute a
complying presentation. It efficiently links with the fundamental principle in a
documentary credit operation, principle of autonomy, which has been analysed in
Chapter 2. As mentioned in Chapter 2, the bank bears no responsibility for the
accuracy or genuineness of tendered documents, provided that the documents appear
on their face to be in conformity with the UCP.100 In Gian Singh & Co Ltd v Banque
de l'Indochine, 101 after identifying the controversial signature, Lord Diplock
concluded that:102
‘The fact that a document presented by the beneficiary under a documentary

credit, which otherwise conforms to the requirements of the credit, is in fact a
forgery does not, of itself, prevent the issuing bank from recovering from its
customer money paid under the credit. The duty of the issuing bank, which it
may perform either by itself, or by its agent, the notifying bank, is to examine
documents with reasonable care to ascertain that they appear on their face to
be in accordance with the terms and conditions of the credit.’
It is suggested that the documentary nature of the transaction determines that a bank
should independently examine the pure documents without concerning any extraneous
matters, such as the underlying transactions between traders or the facts hidden behind
the presented documents.103 The principle has also been affirmed by common law. In J
100
Also see the disclaimer rule in UCP600 Article 34: ‘A bank assumes no liability or responsibility for
the form, sufficiency, accuracy, genuineness, falsification or legal effect of any document…’
101
Gian Singh & Co Ltd v Banque de l’Indochine [1974] 1 WLR 1234, see also United City Merchants
(Investments) Ltd v Royal Bank of Canada [1983] 1 AC 168 (HL) 183
102
Gian Singh & Co Ltd v Banque de l’Indochine [1974] 1 WLR 1234, 1238
103
For example, in Westpac Banking Corp v South Carolina National Bank [1986] 1 Lloyd’s Rep 311,
315, the Privy Council corrected that the Court of Appeal “went beyond the terms of the document itself
and sought to draw inferences of fact as to what had occurred at the time when the document was
40
H Rayner v Hambro’s Bank Ltd,104 the Court of Appeal held that the trade usage was
irrelevant for determining a complying presentation even if the “Coromandel
groundnuts” were the same as “machine shelled groundnut kernels” in the trade market.
The bank had no duty to know the trade customs and trade terms of its customers,
because it was impossible to suggest that a banker was to be affected with knowledge
of the customary terms of every one of the thousands of trades for whose dealings he
might issue letters of credit.105
Similarly, the bank is also not concerned with “why” in its customer’s mind. In
Commercial Banking Co of Sydney Ltd v Jalsard Pty Ltd,106 Lord Diplock stated that
‘the banker is not concerned as to whether the documents for which the buyer has
stipulated serve any useful commercial purpose or as to why the customer called for
tender of a document of a particular description.’107 However, the judgement in
Kredietbank Antwerp v Midland Bank plc 108 seemed to be inconsistent with this
rationale, in which Evans J inferred that, the disputable “draft surveyor report” was
compliant, as the commercial purpose of the beneficiary for requiring such a document
has been satisfied. More controversially, the commercial approach has been repeatedly
referred by the courts to defeat the mechanical and literal examination.
In the author’s opinion, the commercial approach should only be applicable for the
purpose of interpreting the contractual terms, rather than judging the acceptability of a
presented document. Without doubt, analysing the commercial purpose behind a
document will jeopardise the principle of autonomy, which is regarded as a golden rule
underpinning the operation of a documentary credit. The bank is obliged and restricted
to assess the documents on their appearance, irrespective of any underlying facts and
extraneous matters. As we will see in the next chapter, a possible challenge against this
issued.”
104
JH Rayner & Co Ltd v Hambros Bank Ltd [1943] KB 37 (CA)
105
JH Rayner & Co Ltd v Hambros Bank Ltd [1943] KB 37 (CA) 41
106
Commercial Banking Co of Sydney Ltd v Jalsard Pty Ltd [1973] AC 279
107
Commercial Banking Co of Sydney Ltd v Jalsard Pty Ltd [1973] AC 279, 286
108
Kredietbank Antwerp v Midland Bank plc [1999] CLC 1108 (CA) 1122
41
statement may arise from UCP600 Article 14 (f), in which the standard of examining a
document without specific designations lies in whether the content of the document
appears to fulfil its function.109 It might be possible to argue that a document has not
fulfilled its function since it did not achieve an expected commercial purpose.110
However, distinction should be drawn between analysing the commercial purpose
behind the scene and holding a general common sense approach based on a bank’s
expertise and experience. It is true that in some cases the line might be easy to draw,
while in the others it might be less clear-cut, and therefore the residual controversies
may still remain in the courts.
Nevertheless, the English common law has developed a straightforward method to

identify whether a tendered document should be accepted by the bank. It is suggested
that ‘a tender of documents which, properly read and understood, calls for further
inquiry or are such as to invite litigation is clearly a bad tender.’111 Due to the time
limit set up for documentary examination, the bank has to decide the acceptance or
rejection of the document promptly and without prolonged inquiry. It is clear that the
bank is entitled to reject the presented documents which raise uncertainty on their face
and cannot be readily resolved.112
The expression “on their face” in Article 14 (a) not only reinforces the documentary
nature of the transaction, but also delimits the extent of the consideration regarding the
presented documents. The scope of “on their face” has been well defined in many ways.
The phrase should not be literally interpreted as only examining the front of any
document so as to exclude other subsequent pages. Similarly, it cannot be misled as
109
UCP600 Article 14 (f): ‘If a credit requires presentation of a document other than a transport
document, insurance document or commercial invoice, without stipulating by whom the document is to
be issued or its data content, banks will accept the document as presented if its content appears to fulfil
the function of the required document and otherwise complied with sub-article 14 (d).’
110
Since Article 14 (f) only requires that the content of a document “appears to fulfil its function”, the
author suggests that the article has not asked the bank to consider the commercial purpose of the
document beyond its appearance.
111
M Golodetz & Co Inc v Czarnikow-Rionda Co Inc (The Galatia) [1980] 1 WLR 495 (CA) 510,
applied the rationale in Hansson v Hamel & Horley [1922] 2 AC 36 (HL) 46
112
National Bank of South Africa v Banca Italiana di Sconto (1922) 10 Ll L Rep 531 (CA) 535-536
42
overlooking the back of a document.113 On the other hand, the bank is not entitled to
examine the documents beyond their appearance and the issue of discrepancy should
not depend upon the degree of inquisitiveness within the bank.114 Neither does the
bank need to check the detailed mathematical calculations in documents, 115 nor
investigates the issuing authority for a specific document.116 Moreover, as we will see
in Chapter 5, the requirement of checking on the face does not extend to the scrutiny of
the small print in transport documents.117
3.2.2 References for a “complying presentation”
The general standard for taking up or refusing the tendered documents in the UCP600
Article 14 (a) is whether they constitute a “complying presentation”. In particular, the
phrase has been expressly defined in the UCP600 Article 2, which stipulates ‘a
presentation that is in accordance with the terms and conditions of the credit, the
applicable provisions of these rules and international standard banking practice.’
Among these three elements, the most confusing concept should be the “international
standard banking practice”; since the lack of capitalisation of the phase might indicate
that the ISBP (International Standard Banking Practice) is not the only exhaustive
source for reference.118
As we have seen in Chapter 2, the ISBP is devoted to explaining “how the practices
113
114
Credit Industriel et Commercial v China Merchants Bank [2002] EWHC 973 (Comm) [30]
115
ISBP No.745, section A22, ISBP No.681, para 24; also see Credit Industriel et Commercial v China
Merchants Bank [2002] EWHC 973 (Comm); Gary Collyer and Ron Katz (eds), ICC Banking
Commission Collected Opinions 1995-2001 (ICC Publication No.632, ICC 2002) R391
116
Gary Collyer and Ron Katz (eds), ICC Banking Commission Collected Opinions 1995-2001 (ICC
Publication No.632, ICC 2002) R403, R405
117
See the UCP600 Article 19-23 concerning small print, also see the case law position in British Imex
Industries Ltd v Midland Bank Ltd [1958] 1 QB 542 (QB) 551. However, there is no clear authority on
whether the bank is bound to check small prints merged in other documents apart from transport
documents. The author boldly suggests, according to the same spirit, all the small print should be
ignored.
118
UCP500 Article 13 (a), which stated that the compliance ‘shall be determined by international standard
banking practice as reflected in these articles’, was be criticised as an ambiguous and narrow definition.
43
articulated in UCP600 are applied by documentary practitioners”, 119 and it has
evolved into a necessary companion to the UCP600 for determining compliance of
documents with the term of letters of credit.120 The role of ISBP can be divided into
two aspects. Firstly, it effectively clarifies and interprets the misleading points in the
UCP provisions. Secondly, it provides a set of authoritative statements and an
informative checklist for bankers. Even though it has not been expressly incorporated
into a documentary credit, the courts still give it a prevailing status as the most
authoritative international standard banking practice in determining the regularity of
presented documents.121
However, whether the ISBP should be regarded as either a definitive or exhaustive

banking practice is still unclear. 122 The ISBP itself, in the introductory part, has
recognised that ‘the law in some countries may compel a different practice than those
stated here.’123 Moreover, it has conceded that ‘no single publication can anticipate all
the terms or the documents that may be used in connection with documentary credits or
their interpretation under UCP600 and the standard practice it reflects.’ 124 Therefore,
the ISBP has just endeavoured to cover “terms commonly seen on a day-to-day basis
and the documents most often presented under documentary credits”.125 That may be
why a specific reference to the ISPB in the UCP600 Article 2 has been avoided, and
thus plenty of room has been left for other variants to international banking practice.
Nonetheless, apart from the ISBP, what sources can be qualified as a part of
“international standard banking practice” within the concept of UCP?
It is submitted that banking practices published by the regional association may well
119
120
UCP600, introduction
121
In Credit Industriel et Commercial v China Merchants Bank [2002] EWHC 973 (Comm), the
construction of banking practice by the ICC is to be given considerable weight.
122
123
124
ISBP No.745, introduction. It is also argued by scholars that the banking practices formulated in the
ISBP were not based on a comprehensive survey of the prevailing practices in a substantial number of
jurisdictions.
125
44
satisfy the needs of local market and efficiently supplement the gaps left by the ICC.126
Nevertheless, the local practice may be inconsistent with the provisions in the ISBP. At
this time, the expert opinions, which can reflect the dynamic commercial development
and represent the best regional banking practice, might be given paramount
consideration by courts. Although the ISBP is given considerable weight in
determining compliance of documents, it will not be regarded as a decisive and
ultimate statement of banking practice. Other decisions and opinions from the ICC
Banking Commission, regional standard practice and expert evidence will remain
relevant to determine whether the documents constitute a complying presentation, and
in the meantime, ‘may be used to cast doubts on points of practice stated in the
ISBP’.127
3.3 Requirement of reasonable care
Before further analysing the criteria to constitute a complying presentation, it is

necessary to retrospect the requirement of reasonable care, which has been historically
used both at common law and in the previous UCP versions, to judge whether the bank
has fulfilled its obligations regarding document examination. Although there is no
express reference concerning the requirement of reasonable care in the current
UCP600 system, its residual effect should not be overlooked. Due to various
circumstances involved in document examinations, it is impossible for a bank to invent
a clear-cut method and the aid of reasonable care becomes necessary. In this part, how
the requirement of reasonable care fits into the UCP regime and in what aspects it
affects the bank’s duty in the process of examination, will be scrutinised.
3.3.1 Historical controversies and current status
The UCP600 Article 14 (a) deletes the reference to “reasonable care”, which had
126
For example, Standard Banking Practices for the Examination of Letter of Credit Documents
(SBPED) published in 1996 by the IFSA (The International Financial Services Association) in the US.
127
Peter Ellinger, ‘Use of Some ICC Guidelines’ [2004] JBL 704, 709
45
emerged from the beginning of the UCP revisions until the recent UCP500.128 The
UCP500 Article 13 (a) stipulated that the bank’s duty was to “examine all documents
stipulated in the Credit with reasonable care to ascertain whether or not they appear,
on their face, to be in compliance with the terms and conditions of the Credit…”129
Regrettably, the scope of “reasonable care” had not been well-defined. It would be
argued that, since the documents were not compliant on their face, any reasonable
examination should detect them. Thus, fulfilment of the reasonable care could not be
used as a justification to take up a non-compliant presentation. If justification
regarding fulfilment of reasonable care was permitted, it would conflict with the
UCP500 Article 14 (a), which mentioned reimbursement for taking up a presentation
should solely rely on compliance on the face of documents. Moreover, involving the
exercise of reasonable care as a test to decide whether the bank must accept or reject
the documents would conflict with the spirit of case law. As Lord Sumner held in
Equitable Trust Co of New York v Dawson Partners Ltd:130
‘there is really no question here of waiver or of estoppel or of diligence or of

negligence or of breach of a contract of employment to use reasonable care
and skill… the accepting bank can only claim indemnity if the conditions on
which it is authorised to accept are in the manner of accompanying
documents strictly observed.’
Consequently, the only decisive component for accepting or rejecting a presentation is

whether the tendered documents appear to be compliant, rather than whether the bank
has duly exercised reasonable care to examine the documents. A bank which has
honoured or negotiated a non-compliant presentation will not be entitled to get
reimbursement, even though it claims that reasonable care has been exercised in the
128
Dating back to UCP83 (1933), it was declared that banks had considerable discretion in determining
the compliance of documents but were required to act reasonably in exercising it. Then the formula
appeared in UCP151 (1951) Article 9. See James Byrne, The Comparison of UCP600 & UCP500 (ICC
2007) 132
129
130
Equitable Trust Co of New York v Dawson Partners Ltd (1927) 27 Ll L Rep 49 (HL) 52
46
process of document examination.
The above conflicts and confusion urged the ICC Banking Commission to boldly leave
out the phrase of reasonable care in the UCP600, since it was never very clear what
was precisely added by this qualification. 131 Nevertheless, the bank’s duty of
reasonable care has not been eliminated despite the absence of the express words.
Generally speaking, this omission will not lead to any substantial difference in the way
of performance,132 and arguably the duty is just transferred from explicit to implicit.
‘Whilst the content of that practice will no doubt reflect what a reasonable and careful
bank would do, there is no longer a separate express obligation for a bank to exercise
reasonable care in examining documents. The omission of any reference to reasonable
care should be regarded as intended to clarify, rather than amend, the duties of a
bank.’133 The omission is unlikely to defeat the common law position where by the
bank should fulfil its obligations in a professional and diligent manner.134 Meanwhile,
the deletion of express words in Article 14 (a) aims to clarify that, ‘“reasonable care” is
simply the degree of care that would be exercised in particular circumstances by a bank
in handling the presented documents,135 rather than an effective defence that would
excuse the bank’s liability for accepting a non-compliant document.
3.3.2 Applications of reasonable care under UCP600
Subsequently, the tricky question turns to how can the implicit duty of care play a role
under UCP600? Put in another way, in which aspects does the bank needs to perform
its examination function with reasonable care, and to whom is the duty owed? It is
131
132
See James Byrne, The Comparison of UCP600 & UCP500 (ICC 2007) 132; Charles Debattista, ‘The
New UCP 600 - Changes to the Tender of the Sellers’s Shipping Documents under Letters of Credit’
[2007] JBL 329, 337; Janet Ulph, ‘The UCP 600: Documentary Credits in the 21st Century’ [2007] JBL
355, 362
133
134
The common position rooted from Basse v Bank of Australasia (1904) 20 TLR 431, cited in
Ebenezer Adodo, ‘A Presentee Bank’s Duty When Examining a Tender of Documents under the
Uniform Customs and Practice for Documentary Credits 600’ (2009) 24(11) JIBLR 566, 567
135
Michael Isaacs and Michael Barnett, ‘International Trade Finance - Letters of Credit, UCP 600 and
Examination of Documents’ (2007) 22(12) JIBLR 660, 662
47
undoubted that the examining bank owes a duty of reasonable care to its customers,
which may occur between the issuing bank vis-a-vis its applicant or between the
nominated bank vis-a-vis the issuing bank. The first application can be illustrated in
construing an ambiguous instruction of the credit. In Midland Bank Ltd v Seymour,136
Devlin J held ‘when an agent acts upon ambiguous instructions he is not in default if
he can show that he adopted what was a reasonable meaning.’137 Arguably, if the
examining bank does not act reasonably to interpret the mandate, it will breach the
duty of reasonable care and may not be entitled to get reimbursement.
The second situation occurs when the examining bank negligently or inadvertently
ignores any “sufficiently suspicious features” on the face of the documents. These
sufficiently suspicious features have served as red flag, permitting an examining bank
acting with reasonable care to detect the truth of documents in spite of the appearance
of good order.138 In Gian Singh & Co Ltd v Banque de l'Indochine,139 Lord Diplock
affirmed that the application of reasonable care in document examination was a
restatement of the bank’s duty at common law. The judge further analysed that,
although the bank was under no duty to take any further steps to investigate the
genuineness of a signature, it still needed to take reasonable care to call evidence for
the non-documentary requirement and see whether the signature appeared to be
compliant.140 However, the onus of proving lack of reasonable care would lie upon the
customer who makes such a claim.141 Obviously, if the customer was able to prove
136
Midland Bank Ltd v Seymour [1955] 2 Lloyd’s Rep 147 (QB), also see Commercial Banking Co of
Sydney Ltd v Jalsard Pty Ltd [1973] AC 279, 283. In Credit Agricole Indosuez v Muslim Commercial
Bank Ltd [2000] 1 All ER (Comm) 172 (CA), the principle of reasonable construction also applied to the
confirming bank.
137
Midland Bank Ltd v Seymour [1955] 2 Lloyd’s Rep 147 (QB) 153
138
Ebenezer Adodo, ‘A Presentee Bank’s Duty When Examining a Tender of Documents under the
Uniform Customs and Practice for Documentary Credits 600’ (2009) 24(11) JIBLR 566, 568 It is
necessary to notice that there is a significant difference between the above situation and the pure fraud
which is separated from the appearance of documents. In the later consideration, the principle of
autonomy and the declaimer rule in Article 35 will apply. The phrase of “sufficiently suspicious
features” on the face of documents delimits the current situation into the scope of reasonable care, even
though the practical possibility may be very rarely.
139
Gian Singh & Co Ltd v Banque de l’Indochine [1974] 1 WLR 1234, 1238-1239 The case was subject
to the UCP 1962 version.
140
The non-documentary conditions will be ignored in the UCP600 Article 14 (h), which will be
elaborately discussed in the next chapter.
141
In Gian Singh, the applicant failed to prove that the issuing bank was negligent in honouring a forged
48
that the examining bank had negligently performed its duty in this case, the bank
would not claim reimbursement from it. Due to no fundamental changes in meanings
under UCP600, the author supports that the same result would be borne out, provided
that reasonable care has been admitted as an implicit duty for banks.
Thirdly, reasonable care will be called for when the bank needs to exercise its
professional judgment to decide an ambiguous or indefinite point in the presented
documents. In Kredistbank Antwerp v Midland Bank plc,142 Evans LJ explained that
‘the professional expertise of a trading bank includes knowledge of the UCP rules and
of their practical application. This necessarily involves a degree of judgment...’ Clearly,
the examining bank has to make its own judgment with sufficient reasonable care upon
the tendered documents, especially for some grey area or suspicious disparities.143
Since the UCP is not described as an exhaustive list and the bank is ought not to
require the rigid meticulous fulfilment of precise wording in all cases, it is clearly
necessary for the bank to reasonably examine the presented documents with its
professional knowledge.
However, does an examining bank owe the beneficiary a duty to process the tendered
documents with reasonable care? Concerning the English case law, the issue had been
slightly touched upon. In Chailease Finance Corp v Credit Agricole Indosuez,144
Potter LJ mentioned that:145
certificate. Conversely, in Bank of America National Trust & Savings Association v Liberty National
Bank & Trust Co of Oklahoma, 116 F Supp 233, 240 (W D Ok 1953), affirmed 218 F 2d 831 (10th Cir
1955), where the claimant issuing bank succeeded in establishing a nominated negotiating bank’s
negligence in taking up a defective railway certificate. Cited in Ebenezer Adodo, ‘A Presentee Bank’s
Duty When Examining a Tender of Documents under the Uniform Customs and Practice for
Documentary Credits 600’ (2009) 24(11) JIBLR 566, fn 12
142
143
Although Donaldson J. in M Golodetz & Co Inc v Czarnikow-Rionda Co Inc (The Galatia) [1980] 1
WLR 495 (CA) 510 pointed out that ‘a tender of documents which, properly read and understood, calls
for further inquiry or are such as to invite litigation is clearly a bad tender’, the precedent condition of
this requirement is to fulfil the proper reading and understanding with reasonable care. Moreover, in
practice, there are plenty of grey areas existing in the presented documents. Due to sustaining the
banking reputation and market benefits, the bank will be extremely cautious to determine
non-compliance.
144
Chailease Finance Corp v Credit Agricole Indosuez [2000] 1 All ER (Comm) 399 (CA)
145
Chailease Finance Corp v Credit Agricole Indosuez [2000] 1 All ER (Comm) 399 (CA) [25]
49
‘insofar as this provision [UCP500 Article 13 (a)] imposes an obligation, it
seems to me that it is at least primarily an obligation owed to and protective
of the issuing bank’s customer rather than the beneficiary (c.f. the view of
Parker J in “The Lena” [1981] 1 Lloyd's Rep 68 at 78). Even if it be right to
regard it also as an obligation owed to the beneficiary, it is yet one in respect
of which the remedy is a claim for payment in accordance with the issuing
bank's undertaking rather than a claim for damages for breach of the
obligation properly to examine the documents.’
Let alone the issue of remedy, it is arguable that the judgement did not give a certain
answer regarding whether the examining bank should owe the duty of reasonable care
to the beneficiary. Comparatively, the American cases have efficiently affirmed this
point. In Flagship Cruises Ltd v New England Merchants,146 the court decided that the
nominated bank, which had negligently delayed forwarding the presented documents
to the issuing bank, was obliged to pay the beneficiary for the result of negligence in
his part. In General Cable Ceat SA v Futura Trading Inc,147 the nominated bank had to
pay the sum claimed by the beneficiary since it did not diligently examine the
presented documents within a reasonable time before the issuance of a political
freezing order. The significance of the above cases is to recognise that an examining
bank owes a duty of reasonable care to a beneficiary concerning handling the presented
documents.
Under the frame of UCP600 Article 14 (a), if the duty of reasonable care is implicit as
the commenter analysed, it can be inferred from the U.S. cases that the bank will owe
this duty to its beneficiary, regardless of whether it is a nominated bank acting on its
nomination or a confirming bank or an issuing bank.148 The duty might be manifested
146
Flagship Cruises Ltd v New England Merchants 569 F 2d 699 (1st Cir 1978) 705
147
General Cable Ceat SA v Futura Trading Inc 1983 US Dist LEXIS 19956 [5]
148
For one thing, if the duty of reasonable care as an implied term of UCP600, it should be incorporated
into the credit together with the explicit UCP provisions. Thus, it will be a part of contractual terms and
50
in various aspects. As the Kredistbank Antwerp case proposed,149 the bank should
reasonably examine the presented documents with its professional knowledge. If a
bank intentionally or literally picked up an obvious typo mistake such as “Smithh” as
the only discrepancy to reject the presentation, it is arguable that the bank will breach
its duty of care to the beneficiary.150 Another circumstance of breaching the duty will
be negligently handling the presented documents, such as mistakenly forwarding the
presented documents to an upper bank or wantonly disposing the superfluous tendered
documents.151 In addition, a bank’s duty of reasonable care to a beneficiary may be
triggered when there is unreasonable delay merged into an expiring credit. Provided
that the time limit allowed for examination in the UCP600 Article 14 (b) is a fixed
five-banking-day period, it is doubtful whether a bank causing unreasonable delay in
document examination will be liable for breaching the duty of care, even handing in all
the documents in the end of fifth banking day.
In conclusion, as far as the duty of reasonable care under UCP600 is concerned, the
omission of express words is not absolutely equal to modification. In the author’s
opinion, it merely represents an intention of clarification, which means the obligation
of reasonable care will be in an implicit status to remove the previous misconceptions.
On the one hand, the examining bank cannot rely on fulfilling the duty of reasonable
care to justify non-compliance in the presented documents. On the other hand, the
implied requirement of reasonable care forces the bank to diligently exercise its
obligations in the process of examination. The author also tentatively proposes that the
duty of reasonable care on an examining bank benefits not only the customers, but also
the beneficiaries.
the duty will be regulated by contractual relationship as other express terms. For another, even if the
duty of care will not be regulated by contract law, it has been suggested that the party can sue in tort.
The elements of consideration and requirements are beyond the discussion of this part. See Ebenezer
Adodo, ‘A Presentee Bank’s Duty When Examining a Tender of Documents under the Uniform Customs
and Practice for Documentary Credits 600’ (2009) 24(11) JIBLR 566, 568-570
149
150
See the illustration of obvious typo mistakes in the ISBP No.681, para.25
151
How to deal with the superfluous tendered documents, which are not required by a documentary
credit, will be discussed in Chapter 4.
51
3.4 Doctrine of strict compliance
In contrast to the duty of reasonable care discussed above, which as a historical

requirement was formally deleted from the appearance of Article 14 (a), the other
traditional standard – doctrine of strict compliance has never been expressly involved
into the wording of UCP. However, it does not mean that the UCP has discarded the
doctrine of strict compliance as being the most general requirement for documentary
examination. The UCP system has continuously applied this requirement in an implied
way. According to the UCP600 Article 14 (a), the general criterion for taking up the
tendered documents is whether they have constituted a complying presentation. The
UCP600 Article 2, which provides the concept for a “complying presentation”, has
considerably reflected the original doctrine of strict compliance.152
The doctrine of strict compliance has been traditionally articulated by common law to
govern the law of letters of credit since the beginning of the twentieth century. The
doctrine is not only applicable to test the compliance between the presented documents
and the terms in a documentary credit, but also appropriate to verify the compliance
with the initial mandate from the customer. Since the nature of a letter of credit
transaction is purely documentary, the application of strict compliance will bring vast
benefits for the commercial security. Meanwhile, following the doctrine of strict
compliance, the bank will efficiently proceed with its examination, as well as refrain
from being dragged into the underlying contracts or facts. To some degree, the
application of strict compliance can effectively support and supplement the
fundamental principle of autonomy. That is why the doctrine of strict compliance at
common law remains intact after the development of UCP.153 Moreover, the UCP
152
UCP600 Article 2: ‘Complying presentation means a presentation that is in accordance with the
terms and conditions of the credit, the applicable provisions of these rules and international standard
banking practice.’
153
The following examples can illustrate the application of strict compliance under the UCP system.
Banque de l'Indochine et de Suez SA v JH Rayner (Mincing Lane) Ltd [1983] QB 711 (CA) is under
UCP 1974 version; Glencore International AG v Bank of China [1996] 1 Lloyd’s Rep 135 (CA) is under
UCP500; Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm), [2010] 2 All ER (Comm) 28
is under UCP600.
52
system has absorbed the essence of strict compliance and developed it in its own
regime as the most important criterion to judge a complying presentation. Nevertheless,
due to no express reference in the UCP system and no precise definition inherited from
history, different courts may have some divergences in interpreting the degree of
strictness, even existing in the same court with respect to different cases.
Since the doctrine of strict compliance, as an invisible hand, has played a dominant
role in determining a complying presentation, it is essential to clarify the doctrine itself
and its application, especially within the UCP600 framework. It is obvious to see that
this part of research will have a determinative influence on bank’s attitude to take
document examinations as well as the fate of document presentation. Through
analysing and comparing the case law, the author aims to reconcile the existing
conflicts both in theory and in practice. Furthermore, the author will endeavour to
clarify that in what degree the strictness should be applied under UCP600, so as to
satisfy the needs of commercial market. The whole part will be divided into three
sections. Firstly, the history and development concerning the doctrine of strict
compliance will be briefly reviewed. Secondly, comparing cases under the common
law and the UCP, the doctrine of strict compliance will be tested in various aspects of
practical applications, including technicalities, the de minimis rule and the most
annoying typographical errors. Thirdly, through learning from the practical experience
and judging different theories, the best line of strictness will be drawn.
3.4.1 Development of strict compliance
The doctrine of strict compliance was originated in Basse and Selve v Bank of
Australasia.154 Then it was explained in English, Scottish and Australian Bank Ltd v
Bank of South Africa,155 before concluding whether the substituted ship was compliant
with the terms of credit, Bailhache J stated:156
154
In which concerned a certificate of quality. Basse v Bank of Australasia (1904) 20 TLR 431,
following Re an Arbitration between Reinhold & Co and Hansloh (1896) 12 TLR 422
155
English, Scottish and Australian Bank Ltd v Bank of South Africa (1922) 13 Ll L Rep 21 (KB)
156
English, Scottish and Australian Bank Ltd v Bank of South Africa (1922) 13 Ll L Rep 21 (KB) 24
53
‘It is elementary to say that a person who ships in reliance on a letter of credit
must do so in exact compliance with its terms. It is also elementary to say that
a bank is not bound or indeed entitled to honour drafts presented to it under a
letter of credit unless those drafts with the accompanying documents are in
strict accord with the credit as opened.’
Subsequently, the leading House of Lords case, Equitable Trust Company of New York
v Dawson Partners Ltd., 157 ascertained the application of strict compliance into
document examination under documentary credits governed by English law. The issue
of this case was whether a requirement of “a certificate of quality to be issued by
experts who are sworn brokers” can be satisfied by a certificate signed by only one
broker. The House of Lords served a negative answer. As Viscount Sumner pointed
out:158
‘It is both common ground and common sense that in such a transaction the
accepting bank can only claim indemnity if the conditions on which it is
authorised to accept are in the matter of the accompanying documents strictly
observed. There is no room for documents which are almost the same, or
which will do just as well. Business could not proceed securely on any other
lines. The bank's branch abroad, which knows nothing officially of the details
of the transaction thus financed, cannot take upon itself to decide what will do
well enough and what will not. If it does as it is told, it is safe; if it declines to
do anything else, it is safe; if it departs from the conditions laid down, it acts
at its own risk.’
The above classic passage is oft-cited159 and “has been never or improved upon”.160
157
Equitable Trust Co of New York v Dawson Partners Ltd (1927) 27 Ll L Rep 49 (HL)
158
Equitable Trust Co of New York v Dawson Partners Ltd (1927) 27 Ll L Rep 49 (HL) 52
159
Cited by following classic non-UCP cases: JH Rayner & Co Ltd v Hambros Bank Ltd [1943] KB 37
(CA) 40; Bank Melli Iran v Barclays Bank [1951] 2 Lloyd’s Rep 367 (KB) 374; Moralice (London) Ltd
54
Meanwhile, the established doctrine has also been frequently applied in the cases
incorporated the UCP provisions. In The Lena,161 a case incorporated the UCP 1974
revision, Parker J. stated that ‘unless otherwise specified in the credit, the beneficiary
must follow the words of the credit…’162 In Seaconsar Far East Ltd. v Bank Markazi
Jomhouri Islami Iran,163 a case under the UCP400, following the doctrine of strict
compliance, Lloyd J held that the rejection was justifiable due to the absence of the
letter of credit number and the buyer’s name, which have been specifically required by
the credits. In Glencore International AG v Bank of China,164 a case judged under
UCP500, the Court of Appeal was reluctant to follow the doctrine of strict compliance
to judge a very technical discrepancy, although they admitted that a rule of strict
compliance would give little scope for recognising the merits. Even in Societe
Generale SA v Saad Trading, Maan Abdulwahid Abduljmajeed Al-Sanea,165 the most
recently case under the UCP600, Teare J still referred to the doctrine of strict
compliance to measure whether the confirming bank had acted properly under the
mandate of the issuing bank.
Nonetheless, the doctrine of strict compliance has not been completely applied to all
the cases. Sometimes the courts would adopt a circuitous interpretation concerning
loosening the strict compliance, so as to avoid the harsh legal effect. In particular, this
trend can be exemplified by several cases under the UCP system. The first most
notable case is Banque de l’Indochine v J H Rayner (Mincing Lane) Ltd,166 in which
Parker J proposed that ‘Lord Sumner's statement cannot be taken as requiring rigid
v E D & F Man [1954] 2 Lloyd's Rep 526 (QB) 532; Midland Bank Ltd v Seymour [1955] 2 Lloyd's Rep
147 (QB) 151
160
Gian Singh & Co Ltd v Banque de l’Indochine [1974] 1 WLR 1234, 1239-1240
161
Kydon Compania Naviera Co v National Westminster Bank Ltd (The Lena) [1981] 1 Lloyd's Rep 68
(QB), also see Astro Exito Navegacion SA v Chase Manhattan Bank NA (The Messiniaki Tolmi) [1986] 1
Lloyd's Rep 455 (QB)
162
(QB) 76
163
164
Glencore International AG v Bank of China [1996] 1 Lloyd’s Rep 135 (CA) 153
165
Societe Generale SA v Saad Trading, Maan Abdulwahid Abduljmajeed Al-Sanea [2011] EWHC 2424
(Comm), also see Fortis Bank v Indian Overseas Bank [2009] EWHC 2303 (Comm), which was held
under UCP600 concerning compliance of documents.
166
Banque de l'Indochine et de Suez SA v JH Rayner (Mincing Lane) Ltd [1983] QB 711 (CA)
55
meticulous fulfilment of precise wording in all cases. Some margin must and can be
allowed…’167 Furthermore, in Kredietbank Antwerp v Midland Bank plc,168 the Court
of Appeal concluded that ‘the requirement of strict compliance is not equivalent to a
test of exact literal compliance in all circumstances and as regards all documents. To
some extent, therefore, the banker must exercise his own judgment whether the
requirement is satisfied by the documents presented to him.’169 Therefore, the main
question is under which circumstances and to what extent the bank should take
document examination with strict compliance? In order to properly answer this
question, the author will first investigate the application of strict compliance in various
practical aspects whether under common law and the UCP system.
3.4.2 Practical applications concerning strict compliance
3.4.2.1 Technicalities
A technical discrepancy is a kind of discrepancy that will not affect the value or
merchantability of the goods.170 In most cases, the reason for a party to refuse the
documents only with technical discrepancies is based on the desire of defeating the
payment, rather than the discrepancies themselves. However, the issuing bank, which
is not obliged to concern “why” and the materiality of discrepancies, will cautiously
follow the mandate from the applicant without deviation. Since the bank has to bear
the risk for any departures from applicant’s instructions, an advisable bank will
mechanically follow the doctrine of strict compliance to reject the presentation with
technical discrepancies. A typical example is the case of Glencore International AG v
Bank of China,171 in which the issuing bank rejected the factual original certificate on
the basis of no express original mark as stipulated by UCP500 Article 20 (b).172
167
Banque de l'Indochine et de Suez SA v JH Rayner (Mincing Lane) Ltd [1983] QB 711 (CA) 722
168
169
170
171
Glencore International AG v Bank of China [1996] 1 Lloyd’s Rep 135 (CA) The identification of
originality has been changed in the UCP600 Article 17, so the technical issue would not be risen under
UCP600.
172
UCP500 Article 20 (b) stipulated: ‘Unless otherwise stipulated in the Credit, banks will also accept
as an original document(s), a document(s) produced or appearing to have been produced…provided that
56
Although the courts described this discrepancy as a very technical one and lacking in
merit, they were reluctant to justify the rejection. Meanwhile, Sir Thomas Bingham
pointed out ‘a rule of strict compliance gives little scope for recognising the merits.’173
Since a technical discrepancy can be easily found in a bundle of presented documents,

the beneficiary or the issuing bank always makes use of its availability as a best chance
to avoid payment. Therefore, the result in the Glencore case seems to be practically
unfair to the presenter. For solving a similar issue with regard to an original mark, the
174
courts in Kredietbank Antwerp v Midland Bank plc adopted a different
interpretation from the reasoning in Glencore to balance the detrimental impact of
technicalities. The court observed that the UCP500 Article 20 (b) was not a rule to
entitle the bank to reject an obvious original document, so the issuing bank was
obliged to accept the documents. Clearly, the robotic approach to apply the doctrine of
strict compliance concerning technical discrepancies has been set off by the courts;
however, the bank which accepts these discrepancies will be obliged to bear the perils
of deviation from the mandate of credit.
3.4.2.2 No application of the de minimis rule
In Moralice (London) Ltd v E D & F Man, 175 the court rejected the presented
documents covered the quantity of 499,700 kilos instead of 500,000 kilos, even though
the difference was merely 0.06%. Based on the established doctrine of strict
compliance in documentary credits, the English court in the first time clarified ‘though
the de minimis rule would have applied to such short shipment as between buyer and
seller under a normal contract of sale, that rule could not be prayed in aid where
payment was to be made against documents in accordance with a letter of credit.’176
it is marked as original and, where necessary, appears to be signed.’

173
Glencore International AG v Bank of China [1996] 1 Lloyd’s Rep 135 (CA) Both the Rix J in the
first instance (p.148) and the judges in the Court of Appeal (p.153) admitted the technicality of this
discrepancy.
174
175
Moralice (London) Ltd v E D & F Man [1954] 2 Lloyd's Rep 526 (QB)
176
Moralice (London) Ltd v E D & F Man [1954] 2 Lloyd's Rep 526 (QB) 527
57
Several years later, the court in Soproma SpA v Marine and Animal By-Products
Corp,177 which followed the Moralice spirit, held that the de minimis rule did not
apply in the letters of credit. In this case, the controversial difference was a matter of
0.5º F. The credit called for the temperature no more than 37.12 ºC, whereas the bill of
lading stated that the temperature was not exceed 100 ºF. McNair J., who had also
decided the Moralice case, regrettably stated that ‘I suppose in strict law I should give
effect to this objection, but I confess that I should be reluctant to do so if it stood
alone.’178 Jack straightforwardly comments that ‘the case indicates the reluctance of
judges to take the principle of strict compliance to absurd lengths.’179
Although the common law has illustrated the strong desirability of following the terms
of the credit precisely, it may infer from the above statements that the judge would like
to find a way around the strict compliance if the small numerical difference is the only
discrepancy in the documents. In The Messiniaki Tolmi,180 the court accepted the
debatable survey report which described the vessel as being 51,412.58 gross tonnes
instead of a figure of 51,412.18 gross tonnes appearing in the credit. Leggatt J.
distinguished the current difference of 1/285th of one per cent with the fact in the
Moralice case, in which McNair J. declined to apply the de minimis rule to a difference
of 1/15th of one per cent. Meanwhile, Leggatt J. concluded that ‘it is as though a
scarcely perceptible part had been left off the dot of one of the i’s in the name of the
vessel. As a venial imperfection in rendition I would ignore it.’181 Obviously, the judge
in The Messiniaki Tolmi has boldly adopted a reasonable interpretation to eliminate the
detrimental impact of unduly strict compliance.
Following this trend, the UCP system has publicly inserted the provisions to allow
177
178
Soproma SpA v Marine and Animal By-Products Corp [1966] 1 Lloyd’s Rep 367 (QB) 390
179
180
Astro Exito Navegacion SA v Chase Manhattan Bank NA (The Messiniaki Tolmi) [1986] 1 Lloyd's
Rep 455 (QB)
181
Rep 455 (QB) 461
58
certain tolerances concerning the credit amount, quantity and unit prices.182 Therefore,
under the UCP600 Article 30 (b)183, the difference of 0.06% in the Moralice case
would be justifiable. Nonetheless, apart from these express terms, it is arguable that the
maxim of de minimis non curat lex still cannot apply in the other aspects of a credit,
such as the situation regarding temperature description in the Soproma SpA case. In
practice, the application of no de minimis rule may cause the troubles and even
nonsenses sometimes. Nevertheless, in the author’s opinion, based on the nature of
documentary sale in international trade, the doctrine of strict compliance should not be
loosened as far as allowing the de minimis rule. Since the documents act as the only
guarantee for the seller’s physical performance regarding the actual goods, and the
discrepancy on the documents necessarily affects the buyer’s resale position in an
international chain sale, opening de minimis exceptions within the doctrine of strict
compliance will inevitably cause uncertainty to the daily transactions and undermine
the foundation of document examination. Therefore, the UCP and the court should
endeavour to protect the doctrine of strict compliance rather than trample it with too
many exceptions.
3.4.2.3 Typographical errors
Typographical errors, as the most frequently occurring kind of discrepancies, are

inevitably hidden in the presented documents and threaten the authority of strict
compliance. Surprisingly, the UCP system did not regulate this area until the
emergence of the ISBP No.645 in 2003. In the new ISBP 2013 revision, it persistently
provides that ‘a misspelling or typing error that does not affect the meaning of a word
or the sentence in which it occurs does not make a document discrepant.’ 184
182
See UCP500 Article 39 and UCP600 Article 30. It will be further discussed in the part regarding
descriptions in documents.
183
UCP600 Article 30 (b) stipulates: ‘A tolerance not to exceed 5% more or 5% less than the quantity of
the goods is allowed, provided the credit does not state the quantity in terms of a stipulated number of
packing units or individual items and the total amount of the drawings does not exceed the amount of the
credit.’
184
ISBP No.745, section A23, same as in the ISBP No.645 2007 revision, para.25 The judicial
application can be found in a Chinese case—South Korean Hyosung Corp v China Everbright Bank
(Xiamen Branch) Civil Judgement (2003) Min Jing Zhong Zi Bo 069, Fujian High People’s Court, PRC.
In this case, the court adopted approach in the ISBP held that the typo of “INC” in a manufacturer’s
59
Meanwhile, the ISBP tentatively rather than exhaustively illustrates a few tolerable and
intolerable circumstances.185 However, until the publication of the ISBP, the typing
error was completely left in the discretion of courts to decide whether it would
constitute a discrepancy. Even after the emergence of the ISBP, the limited number of
examples within still cannot solve the various problems in practice. Unfortunately, the
courts, which play a crucial role in judging typing errors, always develop their own
standards and deliver inconsistent rulings concerning similar typing mistakes.
Therefore, typographical errors, as the most troublesome discrepancies under the
transactions of documentary credits, continuously challenge the line of strictness.
Different courts in the world have developed their own standards with respect to
justifying typing errors in their leading cases. Among them, the typical standards put
forward by the US court in Beyene v Irving186 have been consistently followed by
several cases.187 In that case, the court rejected the bill of lading with “Mohammed
Soran” as a notifying party instead of “Mohammed Sofan” required by the credit. The
first test used by the court was whether the misspelling was unmistakably clear so that
it was too obvious to a reasonable bank. Secondly, the court would detect whether the
misspelling was inconsequential. Thus, the court reject this material misspelling since
neither would “Soran” be obvious to recognise as “Sofan” in the Middle East, nor the
notifying name in a bill of lading would be inconsequential. By contrast, a leading case
in the Hong Kong court accepted the documents containing a typographical error in a
draftee name. In Hing Yip Hing Fat Co Ltd v Daiwa Bank Ltd,188 Kaplan J. agreed
with the opinion in Gutteridge189 that:
name would lead to another meaning compared with stipulating “CO. LTD”.
185
See ISBP No.745, section A23 and ISBP 2007, para.25
186
Dessaleng Beyene and Jean M Hanson v Irving Trust Co 762 F 2d 4 (2nd Cir, 1985)
187
The second test has been followed by Bank of Cochin Ltd v Manufacturers Hanover Trust Co 612 F
Supp 1533 (DCNY 1985), in which held that the typo of insurance number was not inconsequential. The
test has also been applied into Pasir Gudang Edible Olis Sdn Bhd v The Bank of New York Index No
603531/99 (NY Sup Ct 1999), which held that the deviation in the name of destination port was
material.
188
Hing Yip Hing Fat Co Ltd v Daiwa Bank Ltd [1991] 2 HKLR 35 The case was subject to the UCP
1974 version.
189
Maurice Megrah, Gutteridge & Megrah’s Law of Bankers’ Commercial Credit (7th edn, Europa
Publications 1984) 120, quoted by Hing Hip Hing Fat Co Ltd v Daiwa Bank Ltd [1991] 2 HKLR 35, 44
60
‘Strict compliance does not extend to the dotting of i's and crossing of t’s or to
obvious typographical errors either in the credit or the documents. Because of
the wide variations in language to be found in both, it is impossible to be
dogmatic or even to generalise. Each case is to be considered on its merits,
and the bank’s obligation may obviously be most difficult to fulfil.’
Meanwhile, Kaplan J. put forward the three following points which would affect the
fate of discrepancy. Firstly, the typographical error was minor and could easily occur in
a non-English society. Secondly, the bank was not misled by this error. 190 Thirdly, the
bank was also vulnerable to repeat the error. On the basis of above points, the court
held that the word of “Industrial” was an obvious typographical error compared with
the word of “Industries”, so that the bank would not be entitled to rely on this
discrepancy. In the author’s opinion, despite the different interpretations, naturally the
methods used by Hing Hip Hing are the same as the tests established by Beyene v
Irving, since all the concerns have been focused on “obviousness” and “materiality”.
The trivial difference is that the court in Hing Hip Hing has adopted a more
commercial approach with the aid of factual analysis. Nonetheless, application of
materiality as the test for typographical errors would potentially threaten the principle
of autonomy, and furthermore testing the materiality of particulars required by the
credit would be full of uncertainty.
Nonetheless, a corresponding case held by the Singaporean court provided a different

reasoning concerning typographical errors. In United Bank Ltd v Banque Nationale de
Paris,191 the court held that the bank was entitled to reject the documents with the
additional “Pte” in its company name compared with the requirement in the credits.
Even though the evidence was adduced to show that it was impossible in Singapore to
190
This method was been applied into E&H Partners v Broadway National Bank 39 F Supp 2d 275
(SDNY 1998)
191
United Bank Ltd v Banque Nationale de Paris [1991] SGHC 78, [1992] 2 SLR 64 The case was
subject to the UCP 1974 version.
61
co-exist with such a similar name for two companies, the judge still insisted that ‘any
discrepancy, other than obviously typographical errors, will entitle either the
negotiating or the issuing bank to reject.’192 Furthermore, the judge emphasised that
the compliance of a presented document should not depend on whether the banker was
aware of this position in law. In a letters of credit transaction, the parties only need to
concern themselves with documents rather than the commercial insignificance. In other
words, although the test of “obviousness” was still affirmed, the attitude of the court
has changed to support the objective compliance based on the analysis of documents
instead of the subjective test of “materiality”. The principle was likewise adopted in
Hanil Bank v PT Bank Negara Indonesia (Persero)193 under the UCP500. The court
concluded that, if the bank merely examined the appearance of documents following
the requirement of the UCP500 Article 13(a)194, the misspelling of the beneficiary’s
name as “Sun Jin” could not be obviously recognised as the right style of “Sun Jun”.
However, the Hanil decision has been criticized by commenters as “a formalistic
mirror-image application of the strict compliance standard”195 because it failed to
distinguish the different standards concerning compliance between commercial
invoices and general documents.
In stark contrast to the Hanil case, Voest-Alpine Trading USA Co v Bank of China,196 a
US case delivered in the same month, had adopted a completely different approach
dealing with typographical errors. There were three typing errors in the tendered
documents, including the inversion of beneficiary’s name, wrong number of
documentary credit in a fax copy and a misspelled destination port in the certificate of
origin. Surprisingly, the court rejected the nit-picking approach and concluded that all
192
United Bank Ltd v Banque Nationale de Paris [1991] SGHC 78, [1992] 2 SLR 64, para.36
193
Hanil Bank v PT Bank Negara Indonesia (Persero) 2000 WL 254007 (SDNY 2000) The case was
subject to the UCP 500.
194
UCP500 Article 13 (a) states: ‘Banks must examine all documents stipulated in the Credit with
reasonable care, to ascertain whether or not they appear, on their face, to be in compliance with the
terms and conditions of the Credit…’
195
Kyle Roane, ‘Hanil Bank v PT Bank Negara Indonesia (Persero): Continuing the Quandary of
Documentary Compliance under International Letters of Credit’ (2004-2005) 41 Houston Law Review
1053, 1078
196
Voest-Alpine Trading USA Co v Bank of China 167 F Supp 2d 940 (SD Tex 2000), affirmed in 288 F
3d 262 (CA 5 Tex 2002) The case was subject to the UCP 500.
62
the typographical errors should be accepted by the bank. In the process of reasoning,
the court discarded the preceding test of materiality which would undermine the
principle of autonomy. Instead of it, the court proposed:197
‘a common sense, case-by-case approach would permit minor deviations of a

typographical nature because such a letter-for-letter correspondence between
the letter of credit and the presentation documents is virtually impossible.
While the end result of such an analysis may bear a strong resemblance to the
relaxed strict compliance standard, the actual calculus used by the issuing
bank is not the risk it or the applicant faces but rather, whether the documents
bear a rational link to one another. In this way, the issuing bank is required to
examine a particular document in light of all documents presented and use
common sense but is not required to evaluate risks or go beyond the face of
the documents.’
Comparing with the overly formalistic method in the Hanil case, the common sense
approach developed by the Voest-Alpine case would be much more favoured by the
documentary credit community. 198 Essentially, the approach illustrated by the
Voest-Alpine case is in accordance with the development of the UCP600 provisions.
While the UCP500 Article 13 (a) required the bank to examine all the documents so as
to ascertain whether they appear to be compliant, the UCP600 Article 14 (a) only
focuses on whether the documents constitute a complying presentation as a whole.
Moreover, the UCP600 Article 14 (d)199 points out that data in a document need not be
identical but must not conflict with each other. Therefore, the test under the UCP600
might be inferred as a decision on whether the documents with typographical errors
will obviously relate to the transaction on their face. However, this test may still suffer
197
Voest-Alpine Trading USA Co v. Bank of China 167 F Supp 2d 940 (SD Tex 2000) 947
198
1053, 1079
199
UCP600 Article 14 (d) provides: ‘Data in a document, when read in context with the credit, the
document itself and international standard banking practice, need not be identical to, but must not
conflict with, data in that document, any other stipulated document or the credit.’
63
a potential difficulty, because in principle a deficiency in one document could not be
simply cured by reference to another.200 Meanwhile, the subjective test concerning the
meaning of words in the ISBP cannot drastically make up for this theoretical
imperfection. Observing from the above cases, practically the courts prefer relying on
the materiality of particulars in a specific document to judge whether the typographical
error could affect the meaning of the word. The most evident example should be that
the misspelling regarding the beneficiary’s name in a transport document will be
treated much more seriously than if the same misspelling happened in other general
documents.
In respect of the existing tests developed by different courts, the author believes that
the test in the Voest-Alpine case should be the most practice-oriented approach;
however, it would not be the safest approach for the bank. Under the current UCP
system, the safest approach for the bank is to reject the documents containing
typographical errors unless the nature of the error is too unmistakable to be
misunderstood as a different particular from the one specified in the credit.201 Due to
the principle of autonomy, it is not proper to impose on the bank a burden to measure
the commercial significance of a typing error or to judge the facts of the underlying
transaction. The bank is merely obliged to reasonably assess the typing errors on the
appearance of documents within the whole context.
3.4.3 The line of strictness
Through the above analysis in practical applications, it is evident that the fundamental
debate was triggered by recognising the level of strict compliance. Since, in practice,
the applicant or the issuing bank may intentionally take advantage of strict compliance
to pick up a very technical discrepancy with the aim of defeating a rightful claim from
the beneficiary or the negotiating bank, the courts have to justify that the strict
200
The issue of linkage will be elaborately analysed in the following parts.
201
64
compliance is not equal to a mirror image or duplication. While, on the other hand, as
the stronghold of documentary credits, the relaxation of strict compliance will cause
insecurity and uncertainty. Furthermore, it is unfair to impose on the bank an
obligation to evaluate the materiality of discrepancies or consider the facts of
underlying transactions. Therefore, in order to solve this practical paradox, it is of great
importance to draw a line for strictness, which will be precisely fit for the spirit of the
UCP as well as being suitable for the reasonable expectations of commercial markets.
Reviewing the existing theories, there are three types of standards concerning the level
of strictness: “literal compliance”, “substantial compliance” and “wider strict
compliance”. Obviously, the reaction of commercial markets is the fundamental reason
to direct the legal attitude. The literal compliance, which will cause the high rate of
rejection and lead to undeserved interruptions for documentary credit operations,
cannot satisfy the needs of practical markets nor benefit the wide application of
documentary credits. Even in the leading case defining the doctrine of strict
compliance, Equitable Trust Company of New York v Dawson Partners Ltd,202 the
court still took a less rigid measure to treat the alleged discrepancy regarding an
inspector’s name in the certificate as an invalid ground for rejection. It is clear that the
court did not interpret “strict compliance” as “literal compliance”, which required
replicating the credit by verbatim.
Since the literal application of strict compliance favours formalism over reasonably
commercial expectations, the subsequent cases under the UCP system consistently
clarify the distinctions between literal compliance and the strict compliance. In Banque
de l’Indochine v J H Rayner (Mincing Lane) Ltd,203 Parker J restated that ‘Lord
Sumner’s statement cannot be taken as requiring rigid meticulous fulfilment of precise
wording in all cases. Some margin must and can be allowed…’204 In Kredietbank
202
Equitable Trust Co of New York v Dawson Partners Ltd (1926) 25 Ll L Rep 90 (CA) This point was
delivered by the Court of Appeal.
203
204
65
Antwerp v Midland Bank plc, 205 Evan J stressed that ‘the requirement of strict
compliance is not equivalent to a test of exact literal compliance in all circumstances
and as regards all documents.’206 Therefore, the doctrine of strict compliance should
not be applied in a literal or robotic manner and the bank should not fulfil its
examination by mechanical duplication of the relevant parts in the credit. Consequently,
although the tenets of strict compliance remained sacrosanct, English law has never
required the level of strictness to an absolute degree, to achieve duplication or mirror
image.
The second type of standard is substantial compliance, which has been judicially
created by the US court in order to promote equity for the beneficiary in a letter of
credit transaction.207 As a less stringent standard, the rule of substantial compliance
merely focuses on whether the presented document would achieve its commercial
object.208 Thus, a tendered document with insignificant departures from a commercial
point of view should be acceptable. Take a typical US case Flagship as an example.209
In this case, regardless of the express requirement, the court accepted a discrepant
statement on the presented draft, which substituted the word of “draft” by the phrase
“letter of credit”. The court insisted that the deviation was insignificant and this result
would realize the functional equal of documentary credit. Unfortunately, as Professor
Dolan analysed, ‘some courts that resort to these devices see them as marginal
deviations from letter of credit discipline and seem unaware that they are in effect
corroding the letter of credit as a commercial device.’210
As a chief rival to the doctrine of strict compliance, the application of substantial

compliance runs contrary to the fundamental tenets of documentary credits. Since the
205
206
207
1053, 1065
208
Peter Ellinger, ‘The UCP 500: Considering a New Revision’ [2004] LMCLQ 30, 38
209
Flagship Cruises Ltd v New England Merchant 569 F 2d 699 (1st Cir 1978)
210
John Dolan, The Law of Letters of Credit: Commercial and Standby Credit, vol 1 (4th edn, A S Pratt
2007) para 6-4
66
role of a bank involved in a letter of credit is to examine whether the presented
documents are compliant on their face, there is no obligation on the bank to speculate
the significance of any deviations in the documents. Moreover, evaluating the
commercial significance of alleged discrepancies will be time-consuming so as to
reduce the efficiency of credits and violate the basic objective of promptness. Although
the original intention of substantial standard is to prevent the bank from abusing the
rule of strict compliance, this purpose cannot be perfectly achieved. The application of
substantial compliance will accordingly release wider room for the bank to interpret
the discrepancy and it contains the danger of abusing this test. Meanwhile, different
commercial interpretations would dramatically cause the legal uncertainty and
undermine the foundation of documentary credits. Consequently, ‘the idea of
substantial compliance is thoroughly unworkable.’211
‘While the English and Canadian courts have not adopted a rule of substantial
documentary compliance there has apparently been recognition that there must be
some latitude for minor variations or discrepancies that are not sufficiently material to
justify a refusal of payment.’212 Rather than rejecting the rule of strict compliance,
English courts and the UCP drafters ‘have fashioned rules that counterbalance the
somewhat harsh results of the strict rule’.213 Therefore, the optimal standard of wider
strict compliance comes out. Wider strict compliance has succeeded the nature of strict
compliance, but might tolerate a few trivial and immaterial variations from the
requirements of the credit, which would render the documents discrepant in the view of
literal compliance. Essentially, the core issue in this test is to establish what kind of
discrepancy belongs to the ambit of triviality. It has been admitted by authorities that
‘strict compliance does not extend to the dotting of i’s and crossing of t’s or to obvious
typographical errors either in the credit or the documents.’ 214 Meanwhile, a slight
211
2007) para 6-15
212
Bank of Nova Scotia v Angelica-Witewear [1987] 1 SCR 59, 67
213
2007) para 6-15
214
Richard King, Guttidge & Megrah’s Law of Bankers’ Commercial Credit (8th edn, Europa
67
margin of error for such documents must and can be allowed.215 Regrettably, there was
no definitive test laid down by the courts as to what amounts a trivial difference that
can be disregarded. The relative segment can be detected through the judgement of
Lloyd LJ in Seconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran:216
‘I cannot regard as trivial something which, whatever may be the reason, the
credit specifically requires. It would not, I think, help to attempt to define the
sort of discrepancy which can properly be regarded as trivial. But one might
take, by way of example, Bankers Trust Co v State Bank of India, [1991] 2
Lloyd's Rep 443 where one of the documents gave the buyer's telex number as
931310 instead of 981310.’
Since the judge did not define which sort of discrepancies could be regarded as trivial,
the division of discrepancies is still full of uncertainty and depends on the discretion of
different courts. As Jack doubted, ‘if the test, as suggested in Seaconsar, is that ‘trivial’
errors can be ignored, then one has the possibility of the parties arguing over whether a
particular error is trifling (de minimis: ‘mimimus’ least, smallest, trifling), when the
document must be rejected, or merely trivial, when it must be accepted.’217
Several years later, in Kredietbank Antwerp v Midland Bank plc,218 the Court of
Appeal recognised that it was difficult to draw the distinction between “trivial”
discrepancies and those which require the bank to reject the tendered documents.
Subsequently, the court adopted an unexpectedly wide sight to delimit the triviality of
discrepancies. The court accepted a “draft surveyor report” signed by “Daniel C.
Griffith (Holland) BV… member of the worldwide inspectorate” substituting for a
Publications 2001) 186

215
216
Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1993] 1 Lloyd’s Rep 236 (CA) 240 It
should be noted that under UCP600 Article 14 (g), for a generic document, ‘contract details (telefax,
telephone, email and the like) stated as part of the beneficiary’s and the applicant’s address will be
disregarded.’
217
Ali Malek and David Quest, Jack: Documentary Credits (4th edn, Tottel Publishing 2009) para 8.34,
fn.2
218
68
“draft survey report” issued by “Griffith Inspectorate” required by the credit.
Concerning the “draft survey report”, the judge held that the implied intention of
parties to call for this document was to understand the quantity of loading cargo rather
than the vessel measurements themselves. Thus, the controversial “draft surveyor
report” would be fit for the functional significance. Although the difference between
words seems trivial, it is arguable that the application of wider strict compliance might
go too far to loosen the doctrine of strict compliance.219 In the author’s opinion, the
functional approach itself, which has been adopted by the court to evaluate the
triviality, is feasible. However, with full respect, the court seemed to overdo this
approach through analysing the commercial intention of instructions.220 The trivial
discrepancy, however in the author’s thoughts, is a kind of discrepancy which can be
unmistakably identified by a reasonable banker without the aid of extrinsic factors.
Inferring from the current UCP regime and case law authorities, the author suggests
that the UCP600 is looking for a wider strict compliance test. Although the UCP600
aims to reduce the rate of rejection and the case law has tried to create leeway from
mechanical examination, it is crystal clear that the threshold is to keep the doctrine of
strict compliance, rather than adopt the method of substantial compliance.221 However,
in order to counterbalance the harsh result led by strict compliance, the UCP has
adopted a more flexible attitude than the position at common law. Firstly, the UCP has
reserved certain margins for quantity of the goods in Article 30. Secondly, references
219
Jack had the same opinion but it was based on a different point regarding the name of inspector. Jack
stressed that ‘many international firms of professionals have affiliates or subsidiaries which have very
similar names but which do not necessarily have the legal identity, reputation or liability insurance.
Documents may need to be passed on to sub-buyers, customs authorities or official bodies who require
exact compliance. It is not for a bank to speculate or investigate why the certificate was required in that
form.’ In Ali Malek and David Quest, Jack: Documentary Credits (4th edn, Tottel Publishing 2009)8.37
220
In Elligner’s paper (Peter Ellinger, ‘The Doctrine of Strict Compliance: Its Development and Current
Construction’ in Francis Rose (ed), Lex Mercatoria: Essays on International Commercial Law in
Honour of Francis Reynolds (LLP 2000) 197), he affirmed that the courts in Kredietbank Antwerp did
not seek to modify the doctrine of strict compliance, but he roughly referred that the courts just used a
reasonable approach to interpret the doctrine. The author shares a doubtful view considering the second
part of his statement.
221
The preclusion rule in the UCP, which will be discussed in Chapter 6 of this thesis, is also regarded
as an effective way to control the abuse of strict compliance, because it requires the alleged
discrepancies should be written down in a definite form within the stipulated time. See John Dolan,
‘Weakening the Letter of Credit Product: the New Uniform Customs and Practice for Documentary
Credits’ [1994] IBLJ 149, 157
69
of judging a complying presentation are not restricted. International standard banking
practice, as a source being referred, will involve an open mind to prove justice. Finally,
the UCP requires a complying presentation as a whole rather than seeking for
individual correspondence. As will be seen in Chapter 4, the requirements for general
descriptions and data in the documents have been minimised to “no conflict”.222
Through the above discussion, it is clear that the rule of literal compliance, which
requires an overly pedantic and mirror-image examination, cannot satisfy the needs of
documentary credit as a commercial device. Conversely, the approach of substantial
compliance, which measures the discrepancies by their commercial significance,
would be conducive of uncertainty and incompatible with the tenets of documentary
credits. Hence, the rule of wider strict compliance will be the most recommendable
standard in the process of examination. Although the principle of strict compliance
remains intact, both the English courts and the provisions of UCP have recognised that
slight margin must and can be allowed. For instance, the following discrepancies
should be tolerated by the margin—an obvious typographical error, an imperceptible
divergence or a trivial discrepancy which would be unmistakably recognised by a
reasonable banker. However, it is regrettable to see that in most cases the bank has to
bear at its own risk to make any deviations from strict compliance. Consequently, apart
from the above tolerable situations, an advisable bank should cautiously perform the
rule of strict compliance in the process of its examination. The mission of courts lies in
delivering a reasonable interpretation concerning the level of strictness, as well as
leaving the doctrine of strict compliance unscathed,223 so as to correspond with the
compliance spirit in the UCP.
3.5 Time for examination
As an effective financial instrument, documentary credit has to provide an efficient
222
See UCP600 Article 14 (d) and Article 14 (e), which will be elaborately discussed in Chapter 4.
223
Peter Ellinger, ‘The Doctrine of Strict Compliance: Its Development and Current Construction’ in
Francis Rose (ed), Lex Mercatoria: Essays on International Commercial Law in Honour of Francis
Reynolds (LLP 2000) 198
70
payment to international traders. Banks involved in a document credit operation, are
not only obliged to check the presented documents according to the general standard of
compliance, but also need to fulfil this obligation in a timely manner. Hence, after
stating the general standard for document examination, the UCP600 lists another
general requirement concerning time for examination in its Article 14 (b). 224 It
authorises the bank to have “a maximum of five banking days” following the day of
presentation to determine whether a presentation is complying.225 It continues to state
that the five-day period is not curtailed or affected by any expiry date on or after the
date of presentation. Obviously, it means that the bank is not obliged to expedite its
examination so as to create an opportunity of curing discrepancies for the beneficiary,
who makes the presentation less than five banking days before expiration.
The stipulation of “a maximum of five banking days”; however, constitutes a major

innovation compared with its predecessors. Unexpectedly, the innovative statement in
the UCP600 Article 14 (b), which endeavours to solve the previous controversies on
the length of examination time, triggers many new debates in academia.226 The author
will firstly illustrate the current leading interpretations, and then tentatively put
forward own thoughts with respect to the meaning of Article 14 (b). Nonetheless, as
we will see later, different interpretations in theory will inevitably lead to practical
difficulties in judging the time allowance regarding document examination. Therefore,
until the ICC Banking Commission clarifies the rules, controversies around the time
frame in the UCP will remain persistent.
224
Article 14 (b) stipulates: ‘A nominated bank acting on its nomination, a confirming bank, if any, and
the issuing bank shall each have a maximum of five banking days following the day of presentation to
determine if a presentation is complying. This period is not curtailed or otherwise affected by the
occurrence on or after the date of presentation of any expiry date or last day for presentation.’
225
Although not expressly stated in Article 14 (b), it seems clear that each bank mentioned in the article
has a separate period of five banking days to take for examination. See Ali Malek and David Quest, Jack:
Documentary Credits (4th edn, Tottel Publishing 2009) para 5.47
226
Another persistent controversy under the UCP500, considering the application of preclusion rule to
the examination time, was also not solved by the UCP600. However, the author will elaborate on this on
the part of preclusion rule in Chapter 6.
71
3.5.1 Developments and previous controversies
The length of time for examination, which is highly relevant to business efficacy, has
been consistently stressed by different UCP revisions. Dating back to the UCP400,227
it is stipulated that the bank should examine the tendered documents and determine the
fate of presentation within a reasonable time. Clearly, the “reasonable time” without
any elaboration was the only criterion to measure the time spent on the document
examination in the UCP400. Later in the UCP500, the most significant change for the
time frame was to establish a seven-banking-day outer limit to restrict the criterion of
reasonable time.228 While, under UCP500, the bank had to perform two separate
obligations during the limit of seven banking days,229 i.e. documents examination and
determination in a reasonable time, and sending a refusal notice without delay.
Nevertheless, the UCP500 did not state the time division for each obligation and still
kept the “reasonable time” as the criterion to measure the time taken for examination.
In English law, “reasonable time” generally means that such a period of time would be
spent reasonably under the circumstances of a particular case. In Hick v Raymond and
Reid,230 Lord Herschell held that ‘…there is of course no such thing as a reasonable
time in the abstract. It must always depend upon circumstances…the only sound
principle is that “reasonable time” should depend on the circumstances which actually
exist.’231 Therefore the measurement of reasonable time, essentially as a matter of fact,
varies from case to case. In a leading case, Bankers Trust Co v State Bank of India,232
227
In the UCP 400 Article 16 (c), it states that ‘the issuing bank shall have a reasonable time in which to
examine the documents and to determine as above whether to take up or to refuse the documents.’ See
also 1974 Revision Article 8 (d), 1963 Revision Article 8 and 1951 Revision Article 10.
228
UCP500 Article 13 (b) stipulates: ‘The Issuing Bank, the Confirming Bank, if any, or a Nominated
Bank acting on their behalf, shall each have a reasonable time, not to exceed seven banking days
following the day of receipt of the document, to examine the documents and determine whether to take
up or refuse the documents and to inform the party from which it received the documents accordingly.’
229
Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1999] 1 Lloyd’s Rep 36 (CA) 42 In
this case, the judge concluded that giving a notice of refusal “without delay” was a separate and
additional obligation on the bank from that of examining and determining presentation within a
reasonable time. Therefore, the bank which has rapidly completed examination cannot get rid of the
liability caused by an unreasonable delay in notification.
230
Hick v Raymond and Reid [1893] AC 22 (HL) 29
231
Hick v Raymond and Reid [1893] AC 22 (HL) 32
232
Bankers Trust Co v State Bank of India [1991] 2 Lloyd’s Rep.443 (CA)
72
Lloyd LJ supported the argument that the reasonable time ‘will depend, not only on the
number and complexity of the documents, but also on the level of sophistication in
dealing with documents in the particular country.’233 Furthermore, although the time
spent on consultation with the applicant for seeking a pre-refusal waiver would be
allowed,234 Lloyd LJ firmly clarified that the time spent on delegating the customer to
examine for further discrepancies could not be justified as reasonable time.235 Despite
checking more than 900 pages of documents in three days, the bank still did not fulfil
its examination within reasonable time, since it had wrongly enabled the applicant to
do a further examination.
By contrast, in Hing Yip Hing Fat Co Ltd v Daiwa Bank Ltd,236 taking three banking
days to check mere 19 pages of documents against a four-page credit was held as
reasonable. Kaplan J explained that both the small size and the language skills of the
involving bank should be considered in the processing of judging the length of
reasonable time. Apart from the points mentioned above, other factors may also be
considered in a particular case, such as number and complexity of the presented
documents, size and resources of the bank, the volume of work for the bankers to
handle at the material time237 and difficulties to get an upper authority to recheck the
alleged discrepancies etc…238 Clearly, a non-exhaustive list for judging the reasonable
time brought great uncertainty and much litigation. 239 With the emergence of
continuous controversies, there were considerable thoughts on defining an objective
test to judge the time permitted for a bank to do its examination.240 As a result, the
233
Bankers Trust Co v State Bank of India [1991] 2 Lloyd’s Rep.443 (CA) 449
234
The point had been further recognised by the UCP500 Article 13 (c) and UCP600 Article 14 (b).
235
236
Hing Yip Hing Fat Co Ltd v Daiwa Bank Ltd [1991] 2 HKLR 35
237
Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1999] 1 Lloyd’s Rep 36 (CA) 41-42
238
See Ali Malek and David Quest, Jack: Documentary Credits (4th edn, Tottel Publishing 2009) para
5.50; Richard King, Guttidge & Megrah’s Law of Bankers’ Commercial Credit (8th edn, Europa
Publications 2001) 144-145; Peter Ellinger and Dora Neo, The Law and Practice of Documentary
Letters of Credit (Hart Publishing 2010) 241; King Tak Fung, Leading Court Cases on Letters of Credit
(ICC Publication No.658, ICC 2005) 83-84
239
240
Under the UCP400, replies to a detailed questionnaire showed approximately equal support for the
status quo and for a change. See Bernard Wheble, UCP 1974/1983 Revisions Compared and Explained
(ICC Publication No.411, ICC 1984) 33. However, the meeting before the publication of UCP600, 36
out of 37 has voted for a fixed period.
73
UCP600, which replaces the “reasonable time” by a specific period of time, is a
welcome development on first reading.
3.5.2 Current situation and existing controversies
Under UCP600, the previous test of “reasonable time” for measuring time of
examination has been officially deleted. Instead of it, the new statement of “a
maximum of five banking days” is introduced. Meanwhile, it is suggested that the
examination time given in the UCP600 Article 14 (b) should be read in tandem with
the consultation time stipulated in the UCP600 Article 16 (b)241 and the notice time
expressed in the UCP600 Article 16 (d).242 The reason is that all these provisions have
shared a common subject, i.e. no more than a same five-banking-day period, which
means a bank must examine the presented documents, decide whether to take up the
presentation, and send a required notice of refusal if it has determined to reject the
documents, within a maximum of five banking days or no later than the close of the
fifth banking day.243
From Figure 4 attached below, it is clear to observe that the bank will be allowed a
maximum of five banking days to take its examination and rejection, in case there are
further actions to be taken when the bank encounters a non-complying presentation.
Unexpectedly, the word “maximum” has triggered fierce controversies concerning
whether the time for examination should be based on a fixed period or any reasonable
time within the limit of that period.244 Put in another way, provided that a bank can
finish document examination and rejection in a shorter time than five banking days,
241
The UCP600 Article 16 (b) states: ‘When an issuing bank determines that a presentation does not
comply, it may in its sole judgment approach the applicant for a waiver of the discrepancies. This does
not, however, extend the period mentioned in sub-article 14 (b).’
242
Publishing 2010) 242 The UCP Article 16 (d) provides: ‘The notice required in sub-article 16(c) must be
given…no later than the close of the fifth banking day following the day of presentation.’
243
Although the UCP600 Article 16 (d) has omitted the test of “without delay” for sending a refusal
notice, it is argued by the scholars that the new statement of “no later than” will not change the nature of
this obligation. See Peter Ellinger and Dora Neo, The Law and Practice of Documentary Letters of
Credit (Hart Publishing 2010) 119
244
74
can it be immune from the liability by taking the full period of five banking days, even
if there involves a deliberate delay?
Figure 4
One argument is that ‘the use of the word, “maximum” would suggest that five
banking days is not a fixed period, within which a bank can in all instances safely
reject documents without being penalised with late and consequently invalid
rejection.’245 Therefore, it is suspicious that five banking days is only an outer limit
and the real examination time is supposed to be based on the previous criterion of
“reasonable time”. The commenters continuously argue that, although the UCP600
245
Publishing 2010) 240 Such an interpretation of Article 14 (b) is also applied to the Article 16 (d) which
sates sending a rejection notice “no later than the close of the fifth banking day…”.
75
does not contain an express requirement for examination to be done within a
reasonable time, it is not clear to prove that these requirements are no longer relevant
under UCP600. Moreover, since it is unfair to protect a deliberate delay by aid of the
tolerance of five banking days, the continuing application of “reasonable time” would
reflect the needs of international standard banking practice. Nevertheless, the previous
fundamental difficulties to apply the test of “reasonable time” have not been eliminated.
Therefore, as predicted by Professor Ellinger, ‘courts will probably be unwilling to
reintroduce the requirements of “reasonable time” or “undue delay”, given that these
terms were deliberately omitted from the text of UCP600.’246
The other argument focuses on troubles brought by “reasonable time” and supports a
fixed time prescribed by the UCP600 Article 14 (b). Without doubt, this is a simpler
rule for bankers and applicants to apply; however, it is suggested that it does not
constitute a fairer rule for the other parties because the bank will be immune from any
arguments for delay within the period. In the meantime, ‘under UCP600, where the
issuing bank has a fixed period of five banking days, there is perhaps less risk in
involving the applicant, but it cannot be regarded as good practice; it is the job of the
bank alone to examine the documents.’247 Furthermore, from a commercial point of
view, such interpretation is open to abuse. Suppose that a credit gets close to its expiry
date, bankers might deliberately delay the examination and rejection until the end of
the fifth banking day so as to minimise the possibility of re-presentation from the
beneficiary. Where there is a significant drop in the price of the contracted goods,
delay in the time for examination and rejection would let the beneficiary suffer a
significant economic loss due to missing a proper time to rearrange the goods at a
higher price. Hence, although the UCP600 has tried to avoid these adverse impacts by
virtue of reducing the time limit to five banking days, these risks still cannot be
completely eliminated in theory.
246
Publishing 2010) 119
247
76
3.5.3 Author’s view on time for examination under the UCP600
It is clear that the ICC Banking Commission, which has deliberately discarded the test
of “reasonable time” in the UCP600, would be extremely reluctant to recycle this test
to interpret the meaning of “maximum” in Article 14 (b).248 In the author’s view, the
word “maximum” does not aim to involve the possibility of any shorter time as
contested by the above commenters. Some radical commenters might have overly
interpreted the actual intention of the UCP600 itself. The UCP600, which endeavours
to eliminate the uncertainty in respect of time for examination, merely adopts a way of
statement by means of “maximum”, to indicate that there are still some other
obligations needed to be taken into account by the bank within the allowed five
banking days.249 Therefore, the “maximum” used in the Article 14 (b) seeks to clarify
that the bank is entitled to have at most five banking days to examine the presentation,
while some leeway for further actions indicated in the Article 16 must be left if the
bank decides to reject the presentation.
As far as the above allegations from the opponents against a fixed period are concerned,
the author tentatively puts forward two points of argument. Firstly, in order to resist the
hidden unfairness brought by introducing a fixed period, the UCP600 has made a great
effort to curtail the time limit to five banking days instead of seven banking days as
stated in the UCP500. Five banking days, in the author’s opinion, is the optimal
standard for the time limit in respect of the majority of cases. As evidence shows, a
sound market expects the bank to fulfil its examination and determination within three
banking days.250 If the presentation has been rejected, the case law suggests that the
bank should send a notice of refusal on the same day or on the following day.251
Meanwhile, both the case law and the UCP allow the bank to use a reasonable period
248
The same as using “without delay” to interpret the new rule of “no later than…” In the author’s view,
the requirement of promptness concerning sending a refusal notice after determination is too obvious to
expressly mention in the UCP. Thus, “no later than the close of fifth banking day” in the UCP is enough
to restrict the bank’s performance.
249
See the above Figure 4 for the actions might be occurred within the five banking days.
250
251
77
of time for the purpose of consulting the found discrepancies with the applicant, and
normally it will take one or two days.252 Accordingly, the period of five banking days
is suitable for the most cases as a reasonable time limit and leaves less room for
deliberate delay than that in seven banking days. Furthermore, ‘whatever the
theoretical position, practically speaking, since the period of five days is relatively
short, if the bank manages to meet this requirement, the delay is unlikely to be serious
enough to take the bank outside international standard banking practice.’253
Secondly, most opponents allege that there is a high possibility of deliberate delay with
a fixed period. Comparatively, the standard of reasonable time will reveal the actual
time spent by the bank and effectively control the risk. Nevertheless, a fact should not
be ignored is that the party who bears the burden of proof for alleging delay is the
beneficiary rather than the bank. The rule seems easy to apply in principle; however, it
is extremely difficult for the beneficiary to master the evidence to fulfill the obligation
in practice. Since the beneficiary does not have sufficient information regarding when
the examination has been completed and the full details concerning the process of
making a determination, the probability of success is largely minimised. 254 Even
though “reasonable time” is a prior standard to measure the time of examination under
UCP500, litigation has been rarely raised on the basis of alleging an unreasonable
delay within the seven-banking-days outer limit. Therefore, a fixed period acts not only
as a simpler rule for the bank, but also as a simpler rule for the beneficiary. The
beneficiary, who has been exempted from a substantial burden of proof with a fixed
period, is entitled to claim his rights as long as the time limit in the UCP600 elapsed.
Consequently, a fixed period for examination time is not as unfair as has been
understood by others, since the beneficiary may also profit from this point.
252
In Bankers Trust Co v State Bank of India [1991] 2 Lloyd’s Rep 443 (CA), Sir John Megaw agreed
that 24 hours for the consultation with the applicant was regarded as being reasonable. In special
circumstances, it could be extended to 48 hours.
253
254
In Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1999] 1 Lloyd’s Rep 36 (CA) 42,
the plaintiff lost the point concerning the second presentation because he could not prove why the
unreasonable delay had occurred.
78
Although the beneficiary might lose the right to sue the bank for a deliberate delay
occurring in a fixed five-banking-day period,255 in the author’s view, it does not mean
that the beneficiary will forfeit the rights to claim the delay caused by delegating an
applicant to do further examination, even within the ambit of five banking days. A
distinction must be drawn between the delay caused by the bank itself and the delay
caused by delegation, since the latter will constitute a breach for bank’s obligations
regarding independent examination. 256 Therefore, in principle, there is nothing to
prohibit the beneficiary, who has mastered sufficient evidence on delegation, claiming
the bank’s breach, even though the examination and determination has been
accomplished within five banking days.257
The surviving point argued by the supporter of the “reasonable time” standard is that
the negative commercial impact caused by bank’s deliberate delay in the process of
examination. It has been argued that a deliberate delay merged into a full fixed period
will largely reduce the possibility of representation with cured discrepancies before the
credit expiry, and may cause a significant economic loss to the beneficiary in a
fluctuant market. Meanwhile, with development of documentary credits, the bank has
maturely mastered the skills for examining the typical documents frequently required
by a credit. ‘For banks involved in wholesale as opposed to retail banking the market
expectation of the time taken to examine documents and make a determination is
considerably less than 48 hours and in straightforward cases “same day” turnaround
will be required.’ 258 Concerning the above analysis, it is regrettable that the
introduction of a fixed period will inevitably bring a few negative impacts to particular
255
Based on the implicit duty of reasonable care, the bank needs to reasonably fulfil its obligations on
examination. Thus, the beneficiary will not necessarily lose the right to claim a deliberate delay caused
by a negligent bank within the five banking days. See the part in Chapter 3.3.2.
256
Arguably, it constitutes a breach under UCP600 Article 14 (a) and Article 16 (b), which follows the
ratio decidendi in Bankers Trust Co v State Bank of India [1991] 2 Lloyd’s Rep 443 (CA)
257
Therefore, the author doubts Jack’s above analysis concerning the hidden risk for delegation in a
fixed five banking days. Cf. Ali Malek and David Quest, Jack: Documentary Credits (4th edn, Tottel
Publishing 2009) para 5.52
258
Publications 2001) para 6-06, fn 23
79
cases, although such situations will be a rare occurrence in practice. However,
sacrificing the commercial interest of a particular case is not as significant as building
the certainty for the whole system. Moreover, the party can still avoid sacrificing its
commercial interests by modifying a particular credit. As a set of binding provisions
through incorporation, the UCP600 Article 14 (b) is not a compulsory stipulation for
all the cases. The parties, involved in a simple and straightforward transaction, are
entitled to expressly contract out this provision by negotiation and formulate their
satisfactory time limit in their credit, such as three banking days.259
From the above illustrations, it is obvious to see that the UCP600 is much more
developed than its predecessors, but the meaning of a maximum five-banking-day has
given rise to potential controversies. It is suggested that the drafting of Article 14(b)
could have been clearer, to avoid ‘a serious and potentially troublesome ambiguity as
to whether it is a fixed period’.260 By leaving the application of “reasonable time” in
the phantom, different courts in different jurisdictions may interpret Article 14 (b)
diversely. 261 Therefore, an official clarification is urgently needed to dismiss the
current uncertainty and existing controversies away from the UCP mechanism. The
prompt clarification will not only contribute in correcting the theoretical
misunderstanding, but also minimise the possibility to reintroduce the discarded
conception of “reasonable time”. In the author’s opinion, the ICC Banking
Commission is entitled to boldly recognise that the time frame settled in the UCP600
as a fixed period, because the practical consequences will not be as harsh as predicted
by alarmists and the detrimental impact on a particular case also could be prevented by
modifying the credit. However, the practical advice and the safe route for banks is still,
until the ICC Banking Commission clarifies the position, to adopt a more conservative
way of treating the five banking days as the maximum and examining the presented
documents without any delay.
259
Vice versa, the bank may negotiate with the applicant to contract out the fixed period and stipulate a
new time limit when it faces with an intractable transaction with plenty of details.
260
261
80
3.6 Conclusions
This chapter has concerned the issue of general requirements for documents
examination under the current UCP system. Although there are still many trivial issues
described in the UCP600 concerning general requirements for examination, the author
has tentatively chosen the most important and disputable issues to discuss in this
chapter. Generally speaking, the discussions have been particularly focused on the
UCP600 Article 14 (a) and Article 14 (b), which are full of controversies and
uncertainty in practical interpretations. Based on the word “appearance” in the Article
14 (a) and the principle of autonomy, the author has delimited bank’s obligations on
document examination. Considering the references to judge a complying presentation,
the author has clarified that “international standard banking practice” is not limited to
the ISBP itself and any proper practice has a chance to be referred. In addition, as far
as the omitted duty of reasonable care, the author personally insists that there is still an
implicit duty in the UCP600, so that the bank needs to perform its obligations on
examination diligently and reasonably.
Subsequently, regarding the general criterion for judging a complying presentation, the
author has concluded that the common law doctrine of strict compliance is mainly
intact under UCP600. However, through analysing the difficulties occurred in the
practical applications and reviewing the case law in different jurisdictions, the author
suggests that the level of strictness should be neither too tight nor too loose. The
principle of wider strict compliance seems to be the most suitable test for judging a
complying presentation and it is also in accordance with the spirit of UCP600,
although it is still difficult to draw a precise range of deviation. With respect to the
time of document examination, the UCP600 triggers a new round of controversies in
academia concerning the word “maximum”, while it has been endeavouring to
eliminate the uncertainty caused by the old test “reasonable time”. Nevertheless, the
author is not convinced that introducing a fixed period following Article 14 (b) will
cause a significant commercial consequence as predicted by some commenters. The
81
author suggests that the ICC Banking Commission take an urgent attempt to clarify the
intention behind the Article 14 (b) and boldly confirm a fixed timeframe for document
examination.
82
Chapter 4 Standards for Examining Generic Documents
4.1 Introduction
As we discussed in Chapter Three, the general criterion for the banks to examine
tendered documents is on the basis of the documents alone, whether or not the
documents appear on their face to constitute a complying presentation. 262 In this
criterion, the classic common law principle – the doctrine of strict compliance is not
expressly stated and it has been argued that the UCP system has given up this doctrine.
In my opinion, this inference is not absolutely precise. With the development of market
needs, the UCP system has discarded literal compliance. Instead, the UCP600
endeavours to build up its own checking system for document examinations which is
relaxing but conforming to the spirit of strict compliance. It is fair to say the UCP600
does give a little latitude for the document examination; however, this latitude is
pending on how to explain the standards for document checking stipulated in the
UCP600 Article 14.263
In this chapter, the author will adopt an initiative method to classify the massive
provisions in the UCP600 Article 14 and endeavour to present a whole picture in
respect of examining generic documents. According to the various elements set out in
Article 14 for checking the presented documents, this chapter is divided into four parts,
which includes descriptions in a single document, the data content in generic
documents, the linkage issue and mismatched quantity of anticipated documents.
Considering descriptions in a single document, the criterion of “no conflict” in Article
14 (e) and the “correspondence” test in Article 18 (c) will be elaborately analysed. As
far as to the data requirements for the generic documents, Article 14 (d) and Article 14
262
263
The checking system also includes some pieces scattered in other articles, such as Article 18 (c)
concerning commercial invoice, and requirements for examining specific documents, such as transport
documents in Article 20-27, which will be discussed in the following chapter.
83
(f) will be considered. In the third part, the long-lasting controversial “linkage” test
will be examined in detail. The last part will deal with the mismatched quantity of
required documents, which contains the situation of additional documents as
mentioned in Article 14 (g), the emergence of non-documentary conditions set out in
Article 14 (h) and the combined documents concerned by the ISBP. Additionally, the
common law rules and the previous UCP revisions which have had a significant
influence on the current state will be reviewed.
4.2 Descriptions in a single document
The UCP600 Article 14 (e) stipulates that ‘in documents other than the commercial
invoice, the description of the goods, services or performance, if stated, may be in
general terms not conflicting with their description in the credit’. Obviously, the
UCP600 has followed its predecessor to set aside the requirements for descriptions in a
commercial invoice.264 In the UCP600 Article 18 (c), it states ‘the description of the
goods, services or performance in a commercial invoice must correspond with that
appearing in the credit.’ It is clear to see the UCP600 has adopted a bifurcated criterion
to judge the descriptions in presented documents, i.e. “no conflict” and
“correspondence”, which will be discussed in the following part respectively.
Apart from the description of the goods stipulated in Article 14 (e), the other data in a
single document is regulated by UCP600 Article 14 (d) which provides that ‘data in a
document, when read in context with the credit, the document itself and international
standard banking practice, need not be identical to, but must not conflict with, data in
that document…or the credit.’ Apparently, the standard for judging the data in a single
document is still “no conflict”, which is the same as the criterion for judging
descriptions in “generic documents”.265 Therefore, the author will not further stress the
264
UCP500 Article 37 (c) A commercial invoice is actually treated as a special document in the UCP,
since its examination requirement has been separately listed.
265
In this chapter, “generic documents” means all the presented documents apart from the commercial
invoice. However, since the description in a commercial invoice has triggered many controversies in the
past and is linked with the description in generic documents, the author will still analyse it in this part.
84
data requirement concerning a single document in this part, and instead the author will
take the description in generic documents as an example to illustrate the meaning of
“no conflict”. The author prefers to leave the data issue with the interactions between
documents in the next part. Nevertheless, how to distinguish the descriptions with the
other data in a commercial invoice will be another aspect of problem considered in the
following paragraphs.266
4.2.1 Correspondence in a commercial invoice
4.2.1.1 Notion of “correspondence”
As stated in the UCP600 Article 18 (c), ‘the description of the goods, services or
performance in a commercial invoice must correspond with that appearing in the
credit.’ The words “must correspond” aim to stress that the descriptions in a
commercial invoice must fully and accurately follow the descriptions in the letter of
credit. The test of correspondence can be analogous to the doctrine of strict compliance
at common law, since any departure in substance will justify a refusal by the bank. In a
pre-UCP case, Bank Melli Iran v Barclays Bank,267 the court followed the classic strict
compliance rule to conclude that the description of 100 Chevrolet trucks “in new
condition” in the commercial invoice was not be synonymous with the term “100 new
Chevrolet trucks” required by the credit. Subsequently, The Lena,268 which was the
case subject to UCP1962 version269, clarified the requirement of correspondence. In
this case, the invoices were found discrepant, since they made no reference to the year
built, the light displacement tonnage “as built” and the inclusion of the equipment.
Additionally, there were differences between the credit and commercial invoices with
266
The criterion for examining descriptions in a commercial invoice is correspondence; however, the
standard for other data apart from descriptions is “no conflict”. Hence, different standards will trigger
controversies concerning which criterion should be applied to some data which cannot be clearly
identified as a part of descriptions or general data. The author will elaborate in part 4.2.1.3.
267
Bank Melli Iran v Barclays Bank [1951] 2 Lloyd’s Rep 367 (KB); See also Courtaulds North
America Inc v North Carolina National Bank, 528 F 2d 802 (4th Cir 1975) which held the “imported
acrylic yarn” in the commercial invoice cannot be instead of “100% acrylic yarn” described in the credit.
268
(QB)
269
The UCP 1962 version Article 30 is similar to the current state, which provides ‘the description of
the goods in the commercial invoice must correspond with the description in the credit’.
85
regard to the gross and net register tonnage. Parker J held that the commercial invoices
were discrepant and meanwhile he delivered the following explanation for the
requirement of correspondence:270
‘Unless otherwise specified in the credit, the beneficiary must follow the
words of the credit and this is so even where he uses an expression which,
although different from the words of the credit, has, as between buyers and
sellers the same meaning as such words. It is important that this principle
should be strictly adhered to… If specific items of description are included
in the credit they must also be included in the invoice.’
From the above paragraph, it is obvious to see that the test of correspondence is strict,
but it is still a test that values substance rather than demanding a mirror image or
duplication.271 ‘For example, details of goods may be stated in a number of areas
within the invoice which, when collated together, represent a description of the goods
corresponding to that in the credit.’272 It is not difficult to observe that the test of
correspondence is in accordance with the spirit of strict compliance at common law,
which does not require exact compliance either. In The Messiniaki Tolmi,273 the judge
held in that context, expressions “ex Berger Pilot” and “previous name Berger Pilot”
meant the same. As a result, a commercial invoice should be regarded as compliant if it
includes all the details, even though it is not in the same format or layout as the
description shown in the credit.274
270
(QB)76
271
Michael Bridge (ed), Benjamin’s Sale of Goods (8th edn, Sweet and Maxwell 2010) para 23-119,
also see ISBP No.745, section C3; ISBP No.681, para.58
272
ISBP No.745, section C3; ISBP No.681, para.58
273
Rep 455 (QB)
274
Gary Collyer and Ron Katz (ed), ICC Banking Commission Collected Opinions 1995-2001 (ICC
Publishing No.565, Paris 2002) R471
86
4.2.1.2 Additional wording
It is clear to see that the test of correspondence does not request the description in a
commercial invoice to be identical with that of the credit. 275 The additional
information might be supplied into the description of the merchandise appearing in the
commercial invoice. Since there is no requirement that the description in the invoice
should be exact or limited to that stated in the credit, the presence of additional
information itself does not produce a lack of correspondence. The question of whether
a commercial invoice with the additional information would be acceptable, depends on
whether this additional information may be considered “detrimental or inconsistent”
with the requirements in the credit.276
Unsurprisingly, there are massive queries and opinions concerning whether the
substance of the additional wording introduces a lack of correspondence. For example,
the commercial invoice adding the word “secondhand” before the description of the
goods stated in the credit was regarded as a discrepant document.277 In another query,
the additional word “imitation” contained in the commercial invoice to describe the
suede fabric in the credit was considered to create a discrepancy. 278 Conversely, the
additional information “Eurocab Brand on reels each 85 yards” inserted into the
commercial invoice versus the description in the credit was not deemed to constitute a
discrepancy.279
The classic English case under the UCP500, Glencore International AG v Bank of
275
See Charles del Busto, UCP500 & UCP400 Compared (ICC Publication No.511, ICC 1993) 100:
‘The Working Group felt that the word "identical" was too restrictive and would place an undue burden
on all the parties to the Documentary Credit and increase the number of discrepant invoices presented.’
276
277
ICC, Opinions (1980-1981) of the ICC Banking Commission (ICC Publication No.399, ICC 1983)
R80
278
Gary Collyer and Ron Katz (eds), Unpublished Opinions of the ICC Banking Commission
1995-2004 (ICC Publication No.660, ICC 2005) R584
279
Publication No.632, ICC 2002) R456; See also ICC, Opinions (1980-1981) of the ICC Banking
Commission (ICC Publication No.399, ICC 1983) R81
87
China,280 also provided an illustration of the difficulties in judging the requirement of
correspondence when the additional words in the commercial invoice came out. This
case concerned whether the additional words in the invoice “Indonesia (Inalum
Brand)” following the original description in the credit “any western brand” would
constitute a discrepancy. Although both Rix J at the first instance court and the judges
in the Court of Appeal took the view that “correspondence” did not mean that the
descriptions must be identical, they reached opposite conclusions. Rix J at the first
instance court supported that a reasonable banker would or ought to regard “western”
as being used in a geographical, rather than a geo-political or commercial sense to
embrace Indonesia. Hence, as well as serving the following judgement, he held these
additional qualifying words ruined the correspondence of the commercial invoice:281
‘Even though the terms of Article 37(c) [current Article 18 (c) in the
UCP600] may fall short of the requirement of complete identity between
the language of the credit relating to description and the language of the
invoice, it does not seem to me that additional language which is prima
facie inconsistent with the language of the credit, and at the very least
introduces an element of ambiguity and doubt, falls within any latitude
which is intended to reflect the distinction between correspondence and
identity referred to in the cited passage from “UCP 500& 400
Compared”.’
Nevertheless, the Court of Appeal respectfully disagreed. The Court of Appeal believed
that the additional words were to indicate the precise brand of the goods and that brand
was implicitly fallen within the broad generic description required by the credit. On
any possible reading of the documents, the additional words could not have been
intended to indicate that the goods might not fall within “any western brand”.
Therefore, the Court of Appeal concluded that the additional information was not
280
Glencore International AG v Bank of China [1996] 1 Lloyd’s Rep 135 (CA)
281
88
considered as “detrimental” or in any way “inconsistent” with the requirement of the
credit and the commercial invoice was acceptable.282
From the above judgements, it seems the Glencore case did not confer a licence to
ignore the additional wording shown in a commercial invoice. The divergent
conclusion of the two trials appears to be triggered by “how much knowledge the court
was prepared to impute to the reasonable banker”.283 Furthermore, the key point for
making a decision seems to lie in how broad or generic the description on the credit is.
As Benjamin inferred, ‘greater specificity of description in the credit would have
commensurately increased the chance of additional wording generating a lack of
correspondence.’284 While, in the author’s view, the decisive element concerning the
correspondence of the additional wording is whether these words would change the
nature of the merchandise required by the credit. If the additional description in a
commercial invoice may indicate a different category or classification of the goods, it
will constitute a discrepancy.285 By contrast, if the additional wording only refers to
certain specific brand or accurate parameters without conflict to other data in the credit,
the commercial invoice will still be acceptable. However, the general rule summarised
above from the ICC Opinions cannot be regarded as a perfectly safe route to follow.
The beneficiary who normally issues the commercial invoice still needs to exercise
extreme caution to make sure the correspondence between descriptions in the
commercial invoice and that in the credit, since any gambling may lead to lasting
dispute and huge economic losses.
4.2.1.3 Absence of wording
It is obvious to deduce that the correspondence will not be achieved if the commercial
282
283
284
285
ISBP No.745, section C5
89
invoice omits any part of the credit description. As Parker J in The Lena286 held, ‘if
specific items of description are included in the credit they must also be included in the
287 288
invoice.’ Subsequently, Leggatt J in The Messiniaki Tolmi noted that
‘correspondence in the description requires all the elements in the description to the
present, although the descriptions need not be the same as that in the credit.’289 For
example, the trade items related to describing the goods must be specified in the
commercial invoice, irrespective of whether the trade term is part of the goods
description in the credit or stated in connection with the amount.290
Nonetheless, the English courts have drawn a line to distinguish the words in the credit
which form part of the description and the words relating to the condition of the goods.
In The Messiniaki Tolmi291, although Leggatt J has set up the “all elements test” for
correspondence, he took the view that the missing words in the commercial invoice
were merely related to the condition of the vessel when the notice of readiness was
issued and they did not form part of the description of the particular vessel being sold.
As a result, the court concluded that the omitted words in the commercial invoice did
not constitute a discrepancy. Similarly, in Chailease Finance Corporation v Credit
Agricole Indosuez,292 Potter J found that the delivery date in the credit “for delivery in
Taipei during 17-20 August 1998” did not form part of the description of the goods, so
that the shortage of words in the commercial invoice was permissible.
286
(QB)
287
(QB) 76
288
Rep 455 (QB)
289
Rep 455 (QB) 458
290
ISBP No.745, section C8; ISBP No.681, para.61; Gary Collyer and Ron Katz (eds), ICC Banking
Commission Collected Opinions 1995-2001 (ICC Publication No.632, ICC 2002) R237; also see R362,
where gave a little flexibility for missing the immaterial words in the trade item, provided that the
missing words did not affect the meaning of the trade item in that context.
291
Rep 455 (QB)
292
Chailease Finance Corp v Credit Agricole Indosuez [2000] 1 All ER (Comm) 399 (CA), [2000] 1
Lloyd’s Rep 348, p.358
90
It is obvious to see the UCP600 Article 18 (c) has circumscribed its application by the
concept of description. Therefore, the most important point is to demonstrate which
part of words in the credit belongs to the description of goods regulated by the rule of
correspondence in Article 18 (c). The other data apart from descriptions in a
commercial invoice, arguably, should belong to the ambit of Article 14 (d) in the
UCP600, which only requires a lower standard of “no conflict”. Hence, shortage of
words in a commercial invoice will still be acceptable as long as these words do not
fall into the category of descriptions. However, unless using the SWIFT format with an
express “Description of goods and/or services” column, the description of merchandise
in a credit may not be clearly identifiable.293 In the author’s opinion, rather than
gambling on the judicial result from a shortage of wording, why not follow the “all
elements test” to state every element required by the credit into the commercial
invoice?
To summarise, the safest route for a beneficiary is to follow the exact words used in the
credit to describe the merchandise. Even where he might adopt other expressions apart
from the words used in the credit, the particular expression should be understood by
each party as having the same meaning. While, all the bankers should do is to apply the
test of “correspondence” set aside by the UCP without further investigating the
different particulars shown in the commercial invoice. In the author’s view, with
sufficient care, it should not be so difficult to make the commercial invoice compliant
with the credit requirements in practice, for the reason that almost all the commercial
invoices are issued by the beneficiary, rather than the third party, in which case the
beneficiary will have an effective control on the content of the document.
293
In Bernard Wheble (ed), Opinions (1987-1988) of the ICC Banking Commission (ICC Publication
No.469, ICC 1989) R166, the argument concerning the trade terms being a part of descriptions was
reinforced by the fact that it had been transmitted in field 45 of MT700, which was designed for the
description of the goods.
91
4.2.2 No conflict description in any other document
4.2.2.1 Notion of “no conflict”
Apart from the description in a commercial invoice, UCP 600 Article 14 (e) requires
the description of the goods, services or performance in other documents, “if stated,
may be in general terms not conflicting with their description in the credit”. Obviously,
the new “no conflict” test in UCP600 has superseded the “consistency” test stated in
UCP500 Article 37 (c), which says ‘in all other documents, the goods may be
described in general terms not inconsistent with the description of the goods in the
Credit’.294 Nevertheless, the main point is whether the literal difference between “no
conflict” and “not inconsistent” will lead to a different standard to judge the
compliance of description in a generic document. The concept of “inconsistent” has
been in place since the UCP 1951 revision, and more importantly the term is still used
in other articles of UCP600. Therefore, Professor Byrne suspected that the phrase “no
conflict” must have a different meaning distinct from the term of “not inconsistent”.295
However, in the absence of any ICC opinions or other direction, it is difficult to
determine in what this difference consists.
The ICC Drafting Group believed that the concept of “inconsistency” needed to be
changed, because this concept seemed to encompass issues including simple typing
and grammatical errors, which had led to a high rate of rejections and
misinterpretations of the rule. In order to change this unwarranted situation, the
Drafting Group felt “no conflict” would be “a much narrower and more preferable
294
The notion of consistency was adopted by UCP500 to judge the compliance of description in generic
documents under Article 13 (a), which stipulates that ‘documents which appear on their face to be
inconsistent with one another will be considered as not appearing on their face to be in compliance with
the terms and conditions of the Credit.’ Meanwhile, the notion was applied to the UCP500 Article 37 (c)
with respect to description in the general document. However, this notion was deleted by UCP600
Article 14 (a) concerning the standard of compliance, and moreover, it was taken over by the notion of
“no conflict” stated in two articles of the UCP600—Article 14 (e) concerning description and Article 14
(d) regarding to data in the document.
295
92
concept” and this would result in a reduction of discrepancies.296 Based on the above
reason, it is suggested that perhaps the best interpretation of the phrase “no conflict” is
that it applies only to situations where there is a true and substantive conflict in its
impact on the document, rather than an apparent and superficial conflict.297 Hence, in
respect of providing a broader justification of refusals, the notion of “no conflict”
‘should simply be taken as meaning that documents which contained contradictions are
unacceptable’.298
In the author’s opinion, it cannot be alleged that the rule of “no conflict” has
constituted a significant change compared with the previous “consistency” test, since
both of them do not require a linguistic duplication or a mirror image of data, and
furthermore both of them cannot tolerate a substantial divergence from the
requirements in the credit. For example, even under the UCP600 “no conflict” rule, the
delivery order stating “100 new-good, Chevrolet trucks” is still defective compared
with the description of “100 new Chevrolet trucks” in the credit.299 Moreover, the
analysis certificate stated “Protein 69.7 per cent” would definitely conflict with the
description of “Chilean Fish Fullmeal 70% Protein” in the credit.300
However, when the “no conflict” test applies to judge a diverse description in a generic
document against that of the credit, the conceptive difference between “no conflict”
and “not inconsistent” may cause a slightly dissimilar conclusion. In a recent ICC
opinion, the Banking Commission believed that a health certificate stated “Wet Salted
Lambskins” was not inconsistent with the credit described “Double-Face Lambskins”,
for the reason that the difference in wording addressed different aspects of the
296
297
298
299
The example was shown in Bank Melli Iran v Barclays Bank [1951] 2 Lloyd’s Rep 367 (KB), a
pre-UCP case but got the same conclusion.
300
93
goods. 301 Similarly, based on a narrower notion of “no conflict” rather than
“consistency”, the bill of lading with the description of “machine-shelled groundnut
kernels” is arguably not in conflict with the description of “Coromandel groundnuts” in
the credit.302 Moreover, the description of “Koolyanobbing Lump Iron Ore” shown on
the insurance policy against the requirement of “Iron ore concentrate” in the credit
might not be grounds for refusal under “no conflict” rule from a reasonable banker’s
view. 303 Arguably, the report on quantity and weight with the description of
“Pakistanese blue (coloured) poppyseed” would be acceptable compared with the
credit which required “Pakistanese blue poppyseed” under the UCP600 “no conflict”
rule, since it is hard to observe any conflicts caused by the additional word.304 After
reviewing the previous cases, it is clear to see that the test of “no conflict” will be able
to achieve the purpose of reducing unnecessary inconsistencies, as well as decreasing
the rate of rejection. In a word, the current state played in the UCP600 seems that, the
non-compliance of description in a general document can only be approved when a
positive conflict in the substance of the description occurred.
4.2.2.2 Requirement of “general terms”
The UCP600 Article 14 (e) requires descriptions of goods in the presented documents
apart from the commercial invoice, “if stated, may be in general terms not conflicting
with their description in the credit”. This phrase “general terms” is inherited from the
previous UCP revisions.305 However, up to now, neither the UCP nor the ISBP has
provided any guidance on the limits to the generality of terms that may be employed.
301
No.697, ICC 2008) R669
302
Under the current circumstance, this result will be different from the conclusion in JH Rayner & Co
Ltd v Hambros Bank Ltd [1943] KB 37 (CA) at common law.
303
Contrary to the decision in Gary Collyer and Ron Katz (ed), ICC Banking Commission Collected
Opinions 1995-2001 (ICC Publishing No.565, Paris 2002) R363 based on the UCP500 Article 37 (c)
“consistency” rule. The element of “reasonable care” needs to take a part in the process of examination.
See Chapter Three.
304
Contrary to the decision in Gary Collyer and Ron Katz (eds), ICC Banking Commission Collected
Opinions 1995-2001 (ICC Publication No.632, ICC 2002) R235 based on the UCP500 Article 37 (c)
“consistency” rule.
305
For example, UCP500 Article 37 (c): ‘In all other documents, the goods may be described in general
terms not inconsistent with the description of the goods in the Credit.’ See also UCP 1974 revision,
Article 32.
94
‘It is suggested that, in principle, the permissible level of generality in wording is
limited by the need for the wording still to function as a description of the goods,
services or other performance.’306 For example, “sugar” as a simpler description in the
bill of lading for “200 metric tons up to 5% more or less EEC white crystal sugar
category no 2 minimum polarization 99.8 degrees…” should be regarded as no conflict,
but the description change as general as “food” will constitute a conflict. 307 Therefore,
whether the general terms used for describing the goods can be acceptable is dependent
on what an experienced banker thinks with reasonable care.
The wording of “may be in general terms” indicates that there is no implied

requirement for general documents other than for the invoice to contain any description
of the goods, services or other performance at all. Moreover, ‘by using the words “if
stated”, it also emphasises that there is no need for a description of goods to appear on
every document.’308 This position is in accordance with the spirit of UCP500 and the
requirement under the common law. In Midland Bank Ltd v Seymour,309 concerning
the shortage of descriptions in the bill of lading compared with those in the credit,
Devlin J reached a conclusion that:310
‘it is sufficient that the description should be contained in the set of

documents as a whole and that the documents should each one be valid in
itself and each be consistent with the other; and, accordingly, it would not
matter for this purpose whether the description in the bill of lading is or is
not negatived by the clause in the bill of lading, since the description is
sufficiently contained in the invoice, which is one of the documents.’
306
307
308
(ICC Publication No.680, ICC 2007) 65 In order to clarify the situation, the words “if stated” is a new
inclusion into the UCP600.
309
Midland Bank Ltd v Seymour [1955] 2 Lloyd's Rep 147 (QB)
310
Midland Bank Ltd v Seymour [1955] 2 Lloyd's Rep 147 (QB) 155
95
Although this was a case decided under the common law without the aid of the UCP,
the court in Glencore International AG v Bank of China311 held that there was nothing
in the UCP which contradicted it. Hence, unless the credit particularly required, each
generic document listed in the credit was not necessary to contain all the descriptions
which were specified in the credit.312 Comparatively, from the appearance of the
UCP600 Article 14 (e), it seems that a bank faced with a generic document with part or
even no descriptions of goods, should be satisfied as long as there is no conflict with
the description that appears in the credit and other documents.
Nonetheless, this supposition is built on the premise of linkage, which means either the
goods with part (or general) descriptions in a single document can be identified as the
goods from the same transaction with the credit, or a generic document with no
descriptions of the goods bears the other necessary link to the same transaction. The
second issue in the linkage test, regarding the data rather than descriptions of the goods,
will be discussed in the following part, while the first situation concerning the general
terms used in the description will be considered here. In Banque de L’Indochine et de
Suez SA v JH Rayner (Mincing Land) Ltd,313 the court illustrated that the “E.E.C.
White Crystal Sugar Category No. 2, Minimum Polarisation 99.8 degrees Moisture
Maximum 0.08 per cent” in the credit could be described as simplified as “sugar” in a
generic document, but the generic document had to identify “the goods” by reference
to marks on the bags or by evidencing shipment. Sir John Donaldson held that:314
‘There is, in my judgment, a real distinction between an identification of

“the goods”, the subject matter of the transaction, and a description of
those goods. The second sentence of Article32 (c) [equivalent to UCP600
Article 14 (e)] gives latitude in description, but not in identification…But
however general the description, the identification must, in my judgment,
311
312
Glencore International AG v Bank of China [1996] 1 Lloyd’s Rep 135 (CA) 154 See the same rule in
the ICC Opinions 1995-2001 R237, R364; DOCDEX 1997-2003, No. 204.
313
314
96
be unequivocal.’
It is clear to see that however the generality of the words used to describe the goods,
the description must be unequivocally identified with the goods which are the
subject-matter of the transaction. Even Glencore International AG v Bank of China,315
a subsequent case subject to UCP500, in which Rix J was inclined to think that even
though the identification test referred by the UCP revisions was intended to be less
demanding, the court still supported that “a sufficient link” should be put into the
document so as to make the goods identifiable.316 Although the identification test
concerning descriptions of the goods in a generic document is not spoken out in the
UCP600 provisions themselves, in the author’s view, the ICC Banking Commission
still treats it as an international standard banking practice and continues to apply this
rule into its opinions. In the ISBP No.745 section L4, it specifically requires that the
goods description in a certificate of origin may state in general terms but the statement
must indicate a relation to the goods in the transaction.317 Regarding another recent
query, the Banking Commission concluded that a certificate of health absence of the
details of goods description was acceptable as long as it has fulfilled the function of
being a required document under the credit.318 However, the author suspects how such
a document can be claimed to fulfil the function as a required document under the
credit if there is no link between the presented document and the credit at all, in which
case, the document would become a master key and can be inserted into all sorts of
presentation. .
Clearly from the above analysis, after the Banque de l'Indochine case, the test of
identification of the goods is gradually replaced by requesting a sufficient link between
generic documents and the credit. This requirement however can be achieved by ways
315
316
Glencore International AG v Bank of China [1996] 1 Lloyd’s Rep 135 (CA) 145, see also ICC
Opinions 1995-2001, R237, R364 which required a sufficient link.
317
See also ISBP No.681, para.183. Gary Collyer and Ron Katz (eds), ICC Banking Commission
Opinions 2009-2011 (ICC Publication No.732, ICC 2012) R727
318
No.732, ICC 2012) R728
97
other than the description itself, such as adding reference data (which will not be a part
of goods description). ‘Plainly, if there is no linkage at all, and the state of the
documents calls for enquiry, there is a strong case for saying that, if the documents are
to be acceptable, the identification must be unequivocal.’319 The author believes that,
without a sufficient link to the credit, the bank is entitled to reject a generic document
which is not necessary to identify the goods in the credit drawn from the description on
its face. Consequently, UCP600 Article 14 (e) cannot merely be satisfied by “no
conflict” descriptions shown on a generic document and the meaning “general terms”
has been implicitly restricted by the latitude of descriptions.
The last question concerning the use of “general terms” is whether the additional
words put into the goods description in a generic document can be acceptable. There is
no reason to reject the additional words in the goods description since the phrase
“general terms” has covered any circumstances. The double standard for checking the
description of the goods and other data existed in a document is only set up for
commercial invoices. Comparatively, for a generic document, both Article 14 (e) and
Article 14 (d) of the UCP600 adopts the same requirement of “no conflict”. Since the
same standard applies, there is no need to distinguish the additional words to become a
part of description or other data. Thus, it is obvious to conclude that the additional
words which are not in conflict with the description in the credit and any other
documents are acceptable.320 The phrase of “general terms” cannot save any conflict
descriptions shown in the description, whether they are superfluous or not.321
In light of the above analysis, an acceptable practical rule is that a generic document
will be a good presentation if the description of the goods in no way conflicts with that
given in a credit and carries certain link as enable the goods unequivocally to be
319
320
Although the UCP600 Article 14 (e) only refers the conflict between a document and the credit,
according to the UCP600 Article 14 (d), the rule of “no conflict data” between documents should
include “no conflict description” between documents, since the description is recognised as part of data
in a document.
321
98
identified with those specified in the credit. 322 To be safe, inserting additional
descriptions which are not stated in the credit should be discouraged, since it might
constitute any conflict with the original description in the credit. Obviously, this rule is
subject to any particular mandate expressed in the credit.
4.3 Requirements for content in a generic document323
Data in a document, apart from the description of goods, is regulated by the UCP600
Article 14 (d). It stipulates ‘data in a document, when read in context with the credit,
the document itself and international standard banking practice, need not be identical
to, but must not conflict with, data in that document, any other stipulated document or
the credit.’ 324 Moreover, concerning the data content in a generic document, the
UCP600 innovatively creates a new concept in Article 14 (f), which states ‘if a credit
requires presentation of a document other than a transport document, insurance
document or commercial invoice, without stipulating by whom the document is to be
issued or its data content, banks will accept the document as presented if its content
appears to fulfil the function of the required document and otherwise complies with
sub-article 14 (d).’ It is clear to see that the UCP600 expresses two requirements for
the data content in a general document, i.e. “no conflict” data and “fulfilling its
function”, which will be analysed respectively as follows.
4.3.1 No conflict data
The requirement of “no conflict” data in the UCP600 Article 14 (d) has taken the place
of the rule in the UCP500 Article 21 which requires that “data content is not
inconsistent with any other stipulated document presented”. Again, as mentioned above,
the current “no conflict” rule seems to be a narrower definition than the previous
formulation to judge discrepancies in a presentation, since the rule only applies to the
322
Publications 2001) 203
323
The term of generic document in this part means a document other than a transport document, a
insurance document or a commercial invoice.
324
UCP600 Article 14 (d)
99
situation where there is a true and substantive conflict with the data in the letter of
credit.325 The reference to “need not be identical” in Article 14 (d) indicates a pure
linguistic inconsistency does not justify the rejection. Moreover, the phrase “read in
context” in Article 14 (d) provides a clear clue that a prima facie conflict between data
might be resolved by a proper understanding of that nature combined with the context.
For example, the different consignee name shown in the certificate of origin and the
bill of lading will not justify a conflict according to Article 14 (d), since the consignee
name stated in the certificate of origin normally serves the customs purpose, while the
consignee name appeared in the bill of lading is related to financing security and
document of title.326
However, the “no conflict” rule obviously cannot tolerate a document which contains
obvious contradictions compared with the data in itself, the terms of credit and the
international banking practice. For example, “minimum 67% protein” in a general
document could possibly be acceptable with the requirement of “70% Protein” in the
credit, but it would definitely be rejected if it states “Protein 69.7 per cent”. 327
Therefore, the “no conflict” rule in Article 14 (d) does not call for the bank to pick up
the inconsistent data mechanically, and on the contrary it requires the bank to examine
the data in a document with reasonable care.
Sometimes, the additional data might be inserted into a generic document; however,
they are not necessary to trigger a conflict. Since Article 14 (d) does not prohibit
including the additional data into a generic document, the presence of these data per se
does not constitute a discrepancy. For instance, inclusion of a disclaimer text in a
certificate which aims to separate the content of certificate from the contract of
carriage will not make the document discrepant.328 Nevertheless, the additional data
325
326
ISBP No.745, L5; ISBP No.681, para.184, also see Gary Collyer, Commentary on UCP600: Article
by Article Analysis by the UCP600 Drafting Group (ICC Publication No.680, ICC 2007) 64
327
Example from Soproma SpA v Marine and Animal By-Products Corp [1966] 1 Lloyd’s Rep 367
328
100
should not be conflict with any original data required by the credit or any other
additional data appearing in the presented documents. A certificated copy of fax quoted
with a wrong contract number, which constituted a conflict with the data shown in the
invoice and the credit, had to be rejected, even if the contract number in the fax was
regarded as the additional data.329 It is concluded that ‘by inserting data on a document,
the beneficiary is inviting the bank to examine that data for compliance with the credit
and the UCP.’330 Therefore, in order to fulfil its obligations in accordance with Article
14 (d), the bank inevitably has to examine all the data.
4.3.2 Fulfil the function
The data stated in a general document do not need to be identical with the data
contained in a credit as long as there is no conflict; however, according to UCP600
Article 14 (f), the data content in this document has to appear to fulfil the function of
the required document. Although this requirement is expressly introduced into the
UCP600 for the first time, it actually succeeds the position from the common law and
the previous UCP revisions. 331 As Devlin J remarked in Midland Bank Ltd v
Seymour,332 ‘if the weight note does not contain the weight, it obviously is not a weight
note, and therefore it must at least contain the weight.’333 Similarly, under UCP500,
the ICC Banking Commission concluded that the certificate of origin which only
contained the name of “Sudan Raw Cotton” was not sufficient to describe that the
goods were of Sudanese origin, so the certificate would not fulfil the function as
required by the credit.334
No.732, ICC 2012) R725 In this case, neither the action nor the wording of the disclaimer has created a
conflict with the required data. See also R724, R732
329
No.732, ICC 2012) R740
330
ibid
331
See ISBP No.645 para.43, which states ‘the content of a document must appear to fulfil the function
of the required document.’
332
Midland Bank Ltd v Seymour [1955] 2 Lloyd’s Rep 147 (QB)
333
334
ICC Opinions 1995-2001, R320; this opinion is in accordance with the statement in the ISBP No.681,
para.181 concerning the requirement of a certificate of origin.
101
The requirement of fulfilling the function is, nevertheless, a question of substance
rather than form or title of the document. As the ISBP illustrates, the requirement for a
packing list should be satisfied by any document containing packing details whether
bearing a title such as packing note or packing and weight list or whether untitled.335
For example, an untitled invoice with a format produced or approved by the U.S.
Customs should be acceptable when the credit only calls for a U.S. Customs invoice
without other specifications.336 Following the same rule, the Banking Commission
affirmed that, a “Shipment Confirmation” required by the credit without indication as
to the content could be satisfied by the presented “Approval of Shipment”, as long as it
indicated the shipment was agreed upon and confirmed by the issuer. Comparatively, in
the same case, the Banking Commission also demonstrated that, a beneficiary’s
certificate certifying that a fax has been sent cannot fulfil the function of a certified
copy of the beneficiary’s fax or telex requested by the credit. 337 Therefore, it is
obvious to conclude that the title or heading of a document is not of decisive element
in determining compliance or not, while the content in the document is what is used to
ascertain whether the document has met the credit requirements or not.
Nevertheless, without any specific expressions in the credit, whether a presented

document appears to fulfil the function as the required document will depend on the
view of a reasonable banker and the attitude of the judge.338 In Commercial Banking
Co of Sydney Ltd v Jalsard Pty Ltd, 339 Lord Diplock held that without special
stipulations, the “Certificate of Inspection” requested by the buyer should have the
ordinary meaning of the words, which was the goods had been visually inspected by
the certificate issuer. If the instructor intended that a particular method of inspection
335
ISBP No.745, section M1; ISBP2007, para.41. See also DOCDEX 2004-2008, Decision No.241
336
ICC Unpublished Opinion 1995-2004, R555
337
ICC Opinions 2005-2008, R668
338
As discussed in Chapter 3, a reasonable document checker does not need to have knowledge of all
the specific requirements for the document, but he must be able to recognise the intended purpose of this
document required in the credit. See Gary Collyer, Commentary on UCP600: Article by Article Analysis
by the UCP600 Drafting Group (ICC Publication No.680, ICC 2007) 65
339
Commercial Banking Co of Sydney Ltd v Jalsard Pty Ltd [1973] AC 279
102
should be adopted or that particular information as to the result of the inspection
should be recorded, the credit needed to state expressly.340 While in another case,
Kredietbank Antwerp v Midland Bank plc,341 the Court of Appeal accepted the “draft
surveyor report” to take over the “draft survey report” required by the credit, even
though they appeared to be different documents. The court analysed that the implied
commercial intention of parties to call for a “draft survey report” was to understand the
quantity of loading cargo rather than the vessel measurements themselves, so that the
“draft surveyor report” would still be fit for the functional significance.342 Since there
are no established standards on determining to which degree the document will be
regarded as fulfilment of its function, the parties who play with the unspecified credit
have to take a risk. From another perspective, this risk may motivate an applicant or an
issuing bank to illustrate the required documents in a clear and unambiguous manner.
The last remaining question is, as a residual category of general requirements, whether
the scope of Article 14 (f) intends to contain the test of linkage.343 In other words, the
issue of linkage may be argued as an essential part to judge “fulfilling the function”.
Without particular stipulations in the credit, a generic document may not cover the
description of goods or other data which can make this document identifiable as a part
from the same transaction. For example, assume certificate of health merely stating
“Livestock: Non-infected”. Will this be sufficiently qualified under the UCP600 Article
14 (f) for the special species of “New Zealand Lamb” required by the credit? At the
first glance, the words on the certificate appear to be a good tender. However, after
further thinking, the certificate is not necessary to be issued for this transaction, since
there is no linkage with the credit concerning whatever the description of goods are or
any reference numbers. Therefore, in the author’s opinion, without a clear linkage, this
340
Commercial Banking Co of Sydney Ltd v Jalsard Pty Ltd [1973] AC 279, 285
341
342
As analysed in Chapter 3, the author tentatively believes that the judges in this case went too far,
because the bankers were not obliged to evaluate the implied intention of parties behind the required
documents. With full respect, the author suspects that the artificial analysis from the court may
constitute a breakout against the doctrine of strict compliance.
343
Regarding the question of linkage and the relationship with the UCP600 Article 14 (f), the author
will scrutinise it in the following part.
103
certificate of health cannot be deemed to “fulfil the function” of the required document
in the credit.344
In conclusion, it is clear to see the UCP600 has adopted a more relaxed regime than the
doctrine of strict compliance under the common law for examining a generic document.
The UCP600 only requires that there is no conflict between data and whatever the data
contained in a document, it has to fulfil the function of the required document.
Nonetheless, without a clear definition of what will constitute a conflict and how to
judge the functional fulfilment, there is still some leeway for controversies in practice.
Particularly, by changing the notion of “consistency” in UCP500, whether the test of
linkage still exists in the generic document examination and where it should be placed
in will inevitably trigger certain debates.
4.4 Issue of Linkage
Following the questions left above, is the presenter obliged to tender the documents
which are necessarily linked with the credit or other documents in the same transaction?
On the other hand, does the bank have an obligation to check the linkage between or
among the documents, and moreover is the bank entitled to reject the document
without the linkage? The term “linkage” has not been expressly quoted into the UCP
provisions; however, this notion did exist at common law cases and in the pre-UCP600
interpretations. ‘The term “linkage” denotes an additional requirement, namely that the
presented documents must all relate in some way to the transaction financed by the
credit.’345 Literally, the linkage test seems to create an additional requirement apart
from the stipulations in the UCP600 Article 14, in which Article 14 (e) and Article 14
(d) only refer to no conflicts regarding descriptions and data content in the documents.
Moreover, the residual article in the UCP600 Article 14 (f) merely mentions that
whatever a document states, it has to fulfil the function required by the credit.
344
Another example of missing linkage which caused functional failure can be seen in the ICC
Opinions 2009-2011, R727
345
104
Therefore, whether the linkage test exists in the UCP600, how strictly the linkage test
should be set up and how to interpret this test into the UCP regime will be the core
questions addressed in this part. The author prefers to adopt a chronological order to
analyse the whole issue, starting with the common law and pre-UCP600 positions
before turning to the issue under UCP600.
4.4.1 Common Law position
The notion of linkage was generated by the English courts as early as to Re an

Arbitration between Reinhold & Co and Hansloh.346 In this case, the Divisional Court
held that the certificate of quality without referring to the mark “F” on the bags as the
bill of lading stated was a bad tender, since there was no evidence to prove that the
bags shipped were the subject-matter in this certificate. In Bank Melli Iran v Barclays
Bank,347 McNair J decided that a certificate mentioning that a number of vehicles were
in new condition was defective because it failed to identify the required vehicles. In
Midland Bank Ltd v Seymour, 348 Devlin J concluded that the documents were
consistent with one another in that they had made up a set which was apparently
referring to the same parcel of goods. He further analysed:349
‘The set of documents must contain all the particulars, and, of course, they
must be consistent between themselves, otherwise they would not be a good
set of shipping documents. But here you have a set of documents which not
only is consistent with itself, but also incorporates to some extent the
particulars that are given in the other- the shipping mark on the bill of
lading leading to the invoice which bears the same shipping mark and
which would be tendered at the same time, which sets out the full
description of the goods.’
346
Re an Arbitration between Reinhold & Co and Hansloh (1896) 12 TLR 422, cited in Banque de
l'Indochine et de Suez SA v JH Rayner (Mincing Lane) Ltd [1983] QB 711 (CA) 731
347
Bank Melli Iran v Barclays Bank [1951] 2 Lloyd’s Rep 367 (KB) 375
348
Midland Bank Ltd v Seymour [1955] 2 Lloyd’s Rep 147 (QB)
349
105
From the above judgement, it is evident that the English Court could tolerate a generic
document with incomplete descriptions or missing data, providing that this document
can be linked with the other document in the same presentation and the incompletion
can be supplemented by reading a set of tendered documents.350 Consequently, under
the common law, it is not sufficient for a document to literally be in “no conflict” with
the other documents and the credit. The document must also carry a linkage to the
same transaction, so as to render the presentation effective.351
4.4.2 Pre-UCP600 status
Since the UCP1974 revision, the notion of consistency has been involved in the test for
documentary compliance. It was well recognised from the UCP1974 revision to
UCP500 that ‘documents which appear on their face to be inconsistent with one
another will be considered as not appearing on their face to be in accordance with the
terms and conditions of the credit.’ 352 It was also generally accepted that the
description of goods in all other documents apart from the commercial invoice may be
“in general terms not inconsistent with that in the credit”, and moreover without
specific stipulation in the credit, banks will accept a generic document as tendered.353
Nevertheless, the notion of consistency was not narrowly restricted to its apparent
meaning. In the DOCDEX Decision under UCP1974 revision, the ICC Banking
Commission for the first time affirmed that, consistency required not only avoiding
disparities in their content but also that ‘the whole of the documents must obviously
relate to the same transaction, that is to say that each should bear a relation (link) with
the others on its face.’354
350
It should be noted that a deficiency in a document which does not comply with an express
requirement of the credit cannot be cured by reference to another document. See Seaconsar Far East Ltd
v Bank Markazi Jomhouri Islami Iran [1993] 1 Lloyd’s Rep 236 (CA) 240
351
Sir John Donaldson MR expressed in Banque de l'Indochine et de Suez SA v JH Rayner (Mincing
Lane) Ltd [1983] QB 711 (CA) 731 that he would accept the submission from the plaintiff following the
above analysis in a case to which the UCP did not apply.
352
See UCP1974 Article 7, UCP400 Article 15 and UCP500 Article 13 (a)
353
See UCP1974 Article 32 (c) and Article 33; UCP400 Article 41 (c) and Article 23; UCP500 Article
37 (c) and Article 21
354
ICC, Decisions 1975-1979 of the ICC Banking Commission (ICC Publication No.371, ICC 1980) R
106
In the meantime, Banque de L’Indochine et de Suez SA v JH Rayner Ltd,355 as the
leading case concerning linkage under letters of credit was brought to the English
courts. At the first instance court, Parker J rejected the argument that the documents
did not need to be linked with each other as long as their description were literally
consistent with the requirement of Article 32 (c) in the UCP1974 revision. 356
Furthermore, Parker J emphasised that the documents must “be plainly seen to be
linked with each other”.357 In the Court of Appeal, Sir John Donaldson MR still
rejected the argument but on the basis of a real distinction between identification and
description of the goods. Sir John Donaldson MR analysed that ‘however general the
description, the identification must, in my judgment, be unequivocal. Linkage between
the documents is not, as such, necessary, provided that each directly or indirectly
refers unequivocally to “the goods”.’358 ‘Clearly these certificates could relate to the
goods, but they do not necessarily do so.’359 In consequence, the court held that the
controversial documents did not satisfy the rule of consistency under the UCP1974
revision.
In the author’s opinion, without an express reference of linkage under UCP, the Banque
de L’Indochine had successfully discovered a breakout to make the consistency rule
operative. From the above context, it is clear to see that a plain linkage as Parker J
suggested at the first instance might not be necessary; however, in the words from the
Court of Appeal, the documents have to “necessarily” relate to the goods in the same
transaction.360 According to the different methods of creating linkage, a linkage can be
set up as a hard linkage or a soft linkage. Hard linkage means that each presented
11
355
356
UCP400 Article 32 (c) reads that ‘in all other documents [apart from commercial invoice] the goods
may be described in general terms not inconsistent with the description of the goods in the credit.’ It is
similar to the UCP600 Article 14 (e).
357
358
359
360
The word “necessarily” means “with reasonable certainty” in Jack’s view, see Ali Malek and David
Quest, Jack: Documentary Credits (4th edn, Tottel Publishing 2009) para 8.49
107
document provides a clear and direct reference which makes the document plainly
linked to the same goods or services, while soft linkage is achieved via an indirect
description or information which makes the document possibly relate to the goods or
services stipulated in the credit. It is quite clear in Banque de L’Indochine case that the
first instance court preferred a hard linkage but the Court of Appeal tended to choose a
soft linkage. Nonetheless, whether through unequivocal identification of the same
goods or through clear links between the documents, the Banque de L’Indochine case
affirmed that there had to be an irrefutable linkage, however achieved.
Subsequently, the UCP400 in 1983 maintained the general requirement of consistency

and moreover, it followed the rule in the Banque de L’Indochine case to re-word its
residual article, which indicated that in the absence of contrary instructions in the
credit, documents within this purview would be accepted only if their data content
made them “possible to relate” to the goods or services referred to in the commercial
invoice or the credit. 361 Although the residual article in the subsequent UCP500
omitted the phrase, it was acknowledged that the minor wording change in the UCP500
was only for the purpose of clarity and concision.362 Nevertheless, the ambiguity of
this rule lies in the strictness of setting a linkage. In other words, it is hard to tell to
which degree the data content would satisfy the test of “possible to relate”. ‘Was it
necessary that each presented document clearly referred to the same goods or services
(“hard linkage”) or was it sufficient that each document might possibly so refer even
though they might possibly not so refer (“soft linkage”)?’363 Neither the residual
article in the UCP400 nor that in the UCP500 managed to clarify the formulation.
In the meantime, there were a series of ICC Opinions and DOCDEX Decisions that
confirmed the linkage requirement as an ongoing aspect of consistency. However, they
did not systematically demonstrate how tight the link should be and to which degree
361
UCP400 Article 23
362
363
108
the linkage should be regarded as sufficient. In the ICC Opinion R237, the Banking
Commission decided that a failure to give any description of the goods in the presented
packing list could not be construed as being a discrepancy, since there was a sufficient
link between the data content in the commercial invoice and the packing list by
indicating the quantity of goods, style number and invoice number. 364 Similarly, in the
ICC Opinion R364, the Banking Commission established that ‘a bank, faced with a
document with no description of goods, should be satisfied that the document and its
content relate to the transaction in hand. The inclusion of the invoice number on the
beneficiary certificate would be sufficient information to relate this to the other
documents.’365 It is clear from these two opinions that the linkage can be undoubtedly
achieved by inserting the unique number of a transaction appearing in the credit or
commercial invoice, which should be so called “hard linkage”.
Comparatively, the other type of linkage between documents might be achieved by

“soft linkage”, the character of which is not as obvious or clear-cut as “hard linkage”.
A general description of goods and other particulars appearing in the letter of credit
terms or other documents could be a means of providing a subsidiary link. As the ICC
Opinion R251 stated, ‘if the credit provides a quantity of goods to be shipped and the
certificates make reference to this among the other information that was required to
appear, this may constitute a sufficient link.’366 Similarly, the bills of lading presenting
the same gross weights and total measurements as those stated in the packing lists were
considered to have an adequate link with the presentation.367 The provisional weight
and moisture certificate showing the name of the vessel and the date of the bill of
lading was deemed to unequivocally establish the necessary linkages between the
documents relating to the shipment.368 However, as mentioned in aforementioned
364
Publication No.632, ICC 2002) R237
365
366
367
Gary Collyer and Ron Katz (eds), Collected DOCDEX Decisions 1997-2003 (ICC Publication
No.665, ICC 2004) Decision No.203
368
DOCDEX Decisions 1997-2003, Decision No.213
109
opinions, each answer was provided on a case-by-case basis. The unpublished Opinion
R556 subsequently proved the indefinite outcome by relying on the “soft linkage”.369
In this query, three certificates individually quoted the exact wording as required by the
credit. Nevertheless, apart from the same beneficiary name, none of them provided any
other information which could clearly link with the specific presentation. The Banking
Commission concluded that the certificates issued by the named beneficiary did not
create a sufficient linkage.
In another leading case under UCP500, Glencore International AG v Bank of China,370

the courts held a divergent view concerning the identification test established in the
Banque de L’Indochine case by measuring the wording used in the UCP500 and the
above ICC Opinions. Rix J expressed that ‘I am impressed by the fact that, consistently
as it seems to me with the less demanding language of UCP revisions subsequent to
Banque de l'Indochine, the ICC experts’ test goes no higher than to demand a
“sufficient link”.’371 The court believed that the minimal requirement for a packing list
should be that it can unequivocally relate to the goods and its data content was not
inconsistent with the other documents. In this case, the goods described in the packing
list were found to be unequivocally, albeit indirectly, identified with both the letter of
credit goods and the goods shipped. Therefore, the Court of Appeal concluded that the
bank was not entitled to reject the packing lists which did not contain a description of
the goods, since when reading in conjunction with the other documents, ‘the linkage
between the documents was clear, exact and devoid of discrepancy.’372 Regrettably, as
the linkage argument was satisfied by the strictness of texts, the court felt unnecessary
to further decide the requisite degree of specificity. In terms of the above cases, the
only judicial conclusion that can be drawn is that, “consistency” as referred to in the
UCP500 regime should include the meaning that the whole of documents must relate
369
370
Glencore International AG v Bank of China [1996] 1 Lloyd’s Rep 135
371
Glencore International AG v Bank of China [1996] 1 Lloyd’s Rep 135 (QB) 145
372
110
to the same transaction. Regardless of if the relation is achieved by “hard” or “soft”
means, it has to be a sufficient link between the data content of each document.
4.4.3 Linkage issue under UCP600
Under UCP600, the notion of “consistency” used in the previous UCP revisions has
been deleted. Instead of it, the UCP600 starts to transplant the concept of “no conflict”
into the generic document examinations regarding both descriptions of goods and the
data content in the documents. In the meantime, the residual article in the UCP600,
Article 14 (f), only mentions that the content in a generic document should fulfil its
function as required. Literally, the UCP600 has left the question of linkage entirely
outside its provisions. Moreover, it is strongly argued that the notion of “consistency”,
which embraced the linkage requirement into the previous UCP revisions, has been
substituted by “no conflict” without further extension. It is therefore difficult to
confirm whether the linkage requirement still exists, where it would be placed and how
strict it would be if it still remains under UCP600.
4.4.3.1 Necessity of linkage under UCP600
From the current UCP600 provisions, it might be argued that there is no necessity to
link the content in a generic document with the descriptions of goods or any reference
numbers under the credit, and the document will be accepted as long as no conflict data
in there. If so, the conclusion might be drawn that a generic document need not be
positively related to, or identified with, the goods for which payment is sought.
Nonetheless, ‘that would be an invitation to fraud and would greatly detract from the
security which the inclusion of such documents is aimed to provide.’373 Since the
UCP600 has already relaxed the strictness of compliance rule in some ways, such as
setting up “no conflict” rule and tolerating lack of descriptions in most documents, the
absence of a linkage requirement will inevitably bring detrimental results. Consider, as
an example, the difficulty that would arise if a certificate of inspection only shows
373
111
“Trucks—inspected”, without bearing any reference to link with the credit which
requires “100 new US Chevrolet trucks”. That inspection certificate seems to fulfil the
function of inspection as stated in the UCP600 Article 14 (f); however, it may be
issued for another sale with “Benz trucks”. No one can identify from the appearance of
this certificate that it necessarily represents the goods stipulated in the credit. Since the
linkage requirement is an effective tool to identify the goods bound under the specific
credit and defend against documentary fraud, the author believes that it is of necessity
to constitute a condition for document examination under UCP600.
Regrettably, the UCP600 does not refer to, expressly or implicitly, that linkage is
necessary between or among documents. The only clue concerning linkage under the
UCP600 regime can be found in the ISBP regarding the certificate of origin. The ISBP
states that the certificate of origin must appear to relate to the invoiced goods, either
through containing description in itself or by referring to a goods description appearing
in another stipulated document.374 However, there is no linkage requirement specified
for other generic documents in the ISBP. Evidently, the express words concerning the
issue of linkage under the UCP600 regime are far from enough. In stark contrast,
whether from the historical succession or practical needs, the necessity of requiring
linkage between or among documents is unshakable. Therefore, the question turns to
where the linkage requirement should be put and how to achieve that.
4.4.3.2 Proposed way to impose the linkage requirement
Once the necessity is affirmed, how to achieve the linkage requirement under UCP600
should subsequently be considered. Apart from expressly requiring insertion of linkage
in the credit, there are three proposed ways to impose the requirement of linkage on the
parties, which include treating the linkage issue as the common law requirement,
stretching the meaning of “no conflict” and expanding the scope of “fulfilling the
function” as respectively analysed in the following paragraphs.
374
ISBP No.745, section L4; ISBP No.681, para.183
112
The first approach would be to say that the requirement for linkage arises under
common law, since the UCP is silent on the point. This approach was widely used by
the English courts. In Banque de L’Indochine,375 Parker J derived from the common
law rules and concluded that the documents must be plainly linked with each other.
The Court of Appeal also construed the UCP provisions by adding its own
understanding, i.e. the documents must sufficiently identify the goods to which they
relate. Even though the judges in the Glencore case believed the linkage and
identification tests derived from Banque de L’Indochine were too rigorous, they were
still intended to support a less demanding sufficient link between or among documents,
in the absence of contrary provisions in the UCP.376
However, with the demise of the notion of “consistency” in the UCP600, the
imposition of linkage requirement from common law will trigger the proposition that
‘national law has a substantial role to play in articulating major principles relating to
the operation of documentary credits, thereby jeopardizing the remarkable uniformity
of law achieved by the UCP.’377 It also raises the question that the parties involved
into documentary credits might not wish to face with an uncertain situation and let
their rights and obligations depend on the applicable national law. Moreover, it will
inevitably cause difficulties and confusions in practice since the same examining bank
has to use different standards to check documents required by various credits which are
governed by different applicable law. The situation will be extremely embarrassing if a
bank in London has to insist on linkage when examining documents under a credit
governed by English law, but not when acting under a credit governed by a foreign law.
The second approach to the same end is to incorporate the concept of linkage into the
requirement of “no conflict” mentioned in the UCP600 Article 14 (d) and Article 14 (e).
375
376
377
113
Since the rule of “no conflict” superseded the notion of “consistency” under UCP500
and UCP400, it might argue that the new concept should also embrace the linkage
requirement as attached in the notion of “consistency”. In the author’s view, this
approach stretches the ordinary meaning of “no conflict” rule in an unrealistic way, in
that no reasonable person can easily get this remote conclusion through an objective
judgment. ‘Linkage, whether hard or soft, cannot be read into absence of conflict in
data content unless it is reduced to a degree of softness that denies it any independent
meaning.’378 In consequence, the author believes that the requirement of linkage has to
find its own foothold to stay, even if without an express statement, its independent
meaning needs to be clearly implied.
The third suggestion is to treat the vestige of linkage as a requirement of Article 14 (f)
which states that a presented document must appear to fulfil its function. In the
author’s opinion, this proposal may make the scope of the documentary “function” in
the Article 14 (f) slightly wide, but in a sensible way. In a recent ICC query, the
Banking Commission intended to join the linkage issue and fulfilling documentary
functions together.379 The certificate of origin was presented with the words “We
certify that the goods are of French origin” and bore the name of the beneficiary and a
signature, but it contained no relationship to the invoiced goods. The Banking
Commission held that the certificate was deficient, since it had failed to fulfil the
function. Although the decision was made by reference to the ISBP No.681 para.183,
which expressly required that a certificate of origin must appear to relate to the
invoiced goods, the author cannot see why the same spirit would not be followed when
it comes to the other documents. Even if there are no express linkage requirements
under the UCP600 regime concerning other documents, it can still be strongly argued
that linkage is an essential element to judge whether the presented document has
fulfilled its function. This approach is closer to the previous UCP structures, i.e.
378
ibid
379
No.732, ICC 2012) R727
114
putting the linkage issue into the residual clause, such as what the UCP400 Article 23
did.380 Thus, the author tends to adopt this method to insert the linkage requirement
into the UCP600 via a reasonable way.
Whatever the interpretation is, it can only be the exception rather than the rule. In any
case, the ICC Banking Commission urgently needs to clarify the status of linkage in
the UCP system. It is not about whether to make a compromise in putting the classic
rule established by a national law into the UCP. In the author’s view, the crucial
question faced by the ICC Banking Commission is whether they will revise the UCP
system in accordance with their strict compliance reform and the market needs so as to
make the documentary credit transactions more secure and fluent.381 It is not necessary
to distinguish that the origin of a doctrine is from a national or international level, as
long as the UCP initiates a big step to absorb this good practice and complies with its
previous decisions. According to the above analysis, the author tentatively suggests
that the ICC should indicate the requirement of linkage in UCP600 Article 14 (f), or at
least place a clear and detailed reference concerning the linkage requirement in the
ISBP, which can apply to all the presented documents without doubt.
4.4.3.3 Strictness of linkage
What kind of linkage needs to be built up between or among the documents is an issue
surrounded with continuous disputes, from the unequivocal identification of goods
stated by the Court of Appeal in Banque de L’Indochine to the “possible to relate” rule
380
UCP400 Article 23 reads, ‘when documents other than transport documents, insurance documents
and commercial invoices are called for, the credit should stipulate by whom such documents are to be
issued and their wording or data content. If the credit does not so stipulate, banks will accept such
documents as presented, provided that their data content makes it possible to relate the goods and/or
services referred to therein to those referred to in the commercial invoice(s) presented, or to those
referred to in the credit if the credit does not stipulate presentation of a commercial invoice.’
381
There is a clear sign that during the revision process, some ICC national committees believed that
the UCP should include reference to linkage in the documents and they still thought linkage was being a
remaining issue until now. See Gary Collyer, ‘Responses to 9 “Key Issues” Help Shape the UCP 600’
Coastline Newsletter (Issue 2, August 2006) <www.coastlinesolutions.com/issue02.htm> accessed 10
April 2013
115
stipulated in the UCP400. From the plain linkage required by Parker J in Banque de
L’Indochine to the indirect linkage indicated in the Glencore case, and not to mention
the massive volume of ICC expert opinions. The UCP, in which future revisions tend to
reduce the rejection rate of documentary presentation, is not very likely to impose any
compulsory fixed linkage, such as containing an identical reference number or
requiring the specific description of goods in each presented document. Hence, it is
suggested that the linkage is not necessary to be direct unless there is a contrary
requirement in the credit.382 A soft or indirect linkage is capable of satisfying the
documentary requirement as long as it is sufficient, but the controversial point lies in
what kind of linkage would constitute a sufficient linkage and how to judge a qualified
linkage.
In the author’s opinion, the linkage should be regarded as a sufficient one, if a

reasonable banker will be able to unequivocally identify the shipped goods or
undoubtedly relate the presented document to the credit transaction. There are many
ways to constitute a sufficient linkage, such as referring to the correct quantity of
goods in a named vessel, pointing out the ship markings on the bags, mentioning any
specific reference number related to the transaction or providing particular descriptions
of the goods as stated in the credit. Nevertheless, in the author’s view, the sufficiency
of linkage will not be satisfied by a link which leads the document such that they are
“possible to relate” to the transaction as UCP400 stipulated. Comparatively, a
sufficient linkage must make the presented document clearly, or to some degree
necessarily, relate to the transaction. For example, if the credit states “100 new US
Chevrolet trucks”, a certificate of origin which only shows “new trucks” without other
relevant linkages to the whole presentation would not be acceptable, since this linkage
is possible but not sufficient enough to relate to the goods in the credit.383 Although it
is not possible to summarise a golden rule to judge the sufficiency, one point is definite,
382
383
It may be argued that if the description in the certificate changes to “100 Chevrolet trucks”, the
sufficiency would be reached.
116
namely, the sufficiency should be satisfied if the document in issue clearly forms part
of a set of documents or it unequivocally links to the subject of the credit. Again,
similar to the process of deciding whether a document fulfils its function, the bank
needs to perform reasonable care in judging the sufficiency of linkage between or
among documents.
‘It is clear, therefore, that hard, unequivocal linkage will not be required under
UCP600 unless stipulated by the terms of the credit, nor indeed is soft linkage an
aspect of compliance outside of Article 14 (f), as discussed.’384 The safe course is for
the applicants to ensure that their intention is covered by the express wording of the
credit. 385 On the other hand, to be safe, the beneficiary should put in relevant
descriptions of goods or at least a commercial reference number into the presented
documents to ensure a sufficient link to the subject matter which payment is sought for.
Nonetheless, the banks, which were frequently reminded for the existence of the
linkage requirement, still face with dilemma to claim the missing linkage in practice,
due to no express statement in the UCP600.386 The author believes that the uncertainty
can only be fundamentally solved by the ICC clarification. As analysed above, it is of
great importance to insert the requirement of linkage into the current documentary
compliance regime. The ICC Banking Commission can either choose to illuminate the
issue in the UCP600 Article 14 (f) to supplement the “function” rule, or draft a new
provision requiring “a sufficient link to the transaction” in the ISBP which would
widely apply to any general documents other than to the certificate of origin only.
384
385
Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1993] 1 Lloyd’s Rep 236 (CA), in
which the credit provided that each document should contain the credit number, LJ Lloyd p.240 held that
even though the linkage between the documents without stating the credit number can be observed, the
deficiency of missing credit number still cannot be cured due to such an express requirement in the
credit.
386
also cited by Rix J in Glencore International AG v Bank of China [1996] 1 Lloyd’s Rep 135 (QB) 146
117
4.5 Mismatched quantity of anticipated documents
Apart from the deficient data in a document, the situation of mismatched quantity
between the presented documents and the required documents in the credit frequently
occurs in a documentary examination. The bank may face with more presented
documents than those stated in the credit, or in another case the bank may suffer a
shortage of documents compared with the expectations drawn from the credit. If a
document is absent from the express list stated in the credit, the bank can
unambiguously reject the deficient presentation. However, the trouble of shortage lies
in when the credit terms state certain requirements rather than specifically request a
document, i.e. non-documentary conditions. How should the bank deal with the
difference between the actual documents called for and the anticipated documents
inferred from the credit? The third situation concerning the mismatched quantity of
documents happens in a presentation with the combined document, which means two
or more required documents merged into a joint document. In this part, all the above
three situations with respect to mismatched quantity of documents coming across in the
bank’s documentary examination will be thoroughly analysed.
4.5.1 Additional document
It is quite common for a bank to receive additional documents which are not required
by the credit in a presentation. The additional documents, which may be used to
strengthen the beneficiary’s position to get payment or just tendered without intention,
theoretically will not cause any impact on bank’s decision. UCP600 Article 14 (g)
expressly states that ‘a document presented but not required by the credit will be
disregarded and may be returned to the presenter’. In its predecessor, the UCP 500
Article 13 (a) declares that ‘documents not stipulated in the credit will not be examined
by banks…’ It is obvious to see that UCP600 remains but clarifies the position under
UCP500. Clearly, the official attitude towards the additional documents is that whether
or not the documents are examined, they are to be disregarded which signifies that they
118
cannot be asserted as a basis for curing a discrepancy or refusing the presentation.387
Firstly, an additional document cannot be used to cure a discrepancy in a required

document. For example, a required air waybill evidencing the applicant as the
consignee in the credit could not be justified by presenting an air waybill filling the
bank as the consignee plus a telex confirming the change in name of the consignee. In
this case, the telex confirmation was considered as an additional document not called
for in the credit, so that it would be ignored and could not affect the obvious
discrepancy.388 Nevertheless, sometimes it is hard to tell that the additional document
intents to cure a discrepancy or supplement a gap left in the required documents.
Taking the ICC Opinion case as an example, the credit required a pre-shipment
inspection certificate issued by A (Country B) Ltd or their accredited representative.
While, the certificate was tendered with A (Country I) Ltd as the issuer and its
representative status was verified by a separate letter enclosed from A (Country B) Ltd.
The ICC Banking Commission concluded that the inclusion of an additional letter
would not be acceptable under the credit terms and the evidence of A (Country I) Ltd
acting as the agent would need to appear on the actual certificate itself.389 In the
author’s opinion, the ICC’s reasoning was correct but too technical. The additional
document in this case did not intend to cure an apparent conflict, but it was used to
supplement the agent status in order to fit with the credit terms. 390 Unsurprisingly, the
conclusion would be completely changed if there was a notation in the original
certificate, which could easily turn the additional letter to be an integral part of
certificate. From the above, the experience learnt is that the bank is entitled to
disregard any additional documents as long as they cannot be alleged as a part of
387
388
389
390
The author suspects whether the difference in the issuer’s names will be treated as a discrepancy
under the current UCP600 Article 14 (d), in which the standard of examination changes to “conflict”
rule rather than the “inconsistency” rule in UCP500. It might be quite difficult to justify the rejection if
the difference in names is the only discrepancy.
119
required documents, whatever the additional document serves for.
Secondly, an apparently conforming required document cannot be rendered

non-compliant by the inconsistent data in an additional document. Since the bank has
already claimed to disregard the additional documents, it would not be justified if the
bank still makes use of the inconsistencies in the additional document to allege
discrepancies in a presentation. However, in practice, this conclusion is not absolute
and the conflicting data in the additional document may trigger unexpected
consequences. The reason lies in that the scope of the additional document is not very
clear-cut and sometimes the extra document may be considered as a joint part of the
required documents. In a DOCDEX Decision, the inconsistent data in the additional
log list rendered the presentation discrepant.391 The panel analysed that although the
log list was not stipulated in the credit, the presented certificate of inspection which
expressly referred to the “log list(s) attached” made the log list form an integral part of
such certificate. Therefore, the panel concluded that the log list should not fall into the
scope of additional documents which would be disregarded. Instead, as a part of
documents to be examined, any inconsistent data in the log list would justify the
rejection. From this case, it is clear to see that an additional document is not definitely
to be disregarded if it bears a relation with the required documents. It should be alerted
that the presenter has to take any possible risk for tendering the additional documents
to the bank.
It is clear to see the official attitude towards the additional documents is that they
should be disregarded and cannot be used as a basis for curing a discrepancy or
refusing the presentation. However, in practice, the banks may suffer difficulties in
determining whether the unlisted document in a bundle of presented documents is a
so-called “additional” document or not. In an ICC Query, two forms of health
391
No.665, ICC 2004) No.224
120
certificate were included within the presentation made to the issuing bank.392 Since no
reference was made in the covering schedule from the negotiating bank, the issuing
bank had to consider which of the two certificates should be qualified as the required
health certificate. Far from the opinion of the negotiating bank which regarded the
Statutory Declaration to be an additional document, the issuing bank believed that the
Statutory Declaration further named Health Certificate was the indivisible part of the
original Health Certificate issued by the beneficiary, so that the alleged discrepancies
in this document would render the whole presentation non-compliant. The ICC
Banking Commission disagreed with the issuing bank’s opinion, which held that the
Statutory Declaration could only be treated as a part of documents to be examined if
there was a reference made in the required health certificate to that effect.
The above query highlights the problem when an additional document is forwarded to
the issuing bank, but no reference to this effect is made in the covering schedule of the
negotiating bank. It is correct for the issuing bank to consider the content of all the
presented documents and judge the nature of the additional document. However, in the
process, both parties have taken a risk. If the document is considered as an integral part
of the required document, then it will be subject to the “no conflict data” rule in the
UCP600 Article 14 (d). Otherwise, the additional document has to be disregarded as
the UCP600 Article 14 (g) even if it might indicate the discrepancy in the presentation.
Clearly, inserting an additional document in a presentation hardly achieves the effect as
a supplement and even worse it may cause unnecessary troubles. According to the
above cases, the rule which claims passing on an additional document to the upstream
examiner without responsibility may not be applicable in practice, since the nature of
an extra document is indefinite. 393 If a bank decides to forward the additional
document, the advisable way to do so would be to put an annotation in its covering
392
No.697, ICC 2008) R669
393
See UCP500 Article 13 (a) para.2. The equivalent paragraph is deleted in the UCP600 Article 14 (g),
which only leaves “may return to the presenter”. However, the return opinion is not without doubt. Since
the additional document belongs to the property of presenter, same as the return issue in a rejection, the
time and condition of the returned document should be alerted by banks as well.
121
statement so as to let the next examiner know what has happened.
4.5.2 Non-documentary conditions
As mentioned in the introduction of this section, if the quantity of presented documents

is less than the number of documents expressly listed in the letter of credit, the bank
can reject the presentation without hesitation. However, the difficulty of mismatch lies
in when the conditions stipulated in the credit are more than the documents actually
required by the credit. In another words, the quantity of the actual calling is less than
the anticipated documents inferring from the credit conditions. These conditions which
cannot be matched and evidenced by the stipulated documents in the credit are so
called non-documentary conditions. In this part, the author will firstly analyse the
nature of non-documentary terms and the measures taken by the UCP to stop this
incorrect practice. Then, the author will examine the cases that have occurred under the
ambit of UCP provisions concerning non-documentary conditions and reveal the
difficulties suffered in their applications. Subsequently, in order to solve the current
dilemma, the author will review the common law position upon non-documentary
conditions and make use of the experience extracted from the case law. Finally, a
balanced proposal to deal with the non-documentary issue will be put forward.
4.5.2.1 Definition, nature and UCP measures
The non-documentary condition is a type of condition stated in the credit but without
specifying a required document to evidence its compliance. It is evident that the
non-documentary requirements will impose on the bank a duty which falls outside the
traditional documentary examination. The bank is not likely to determine whether the
non-documentary conditions have been satisfied by examining the stipulated
documents, so it has to refer to extraneous materials within the limited examination
time. As Sir John Donaldson pointed out, ‘this was an unfortunate condition to include
in a documentary credit, because it breaks the first rule of such a transaction, namely,
122
that the parties are dealing in documents, not facts.’394 It is clear to see that the
inclusion of non-documentary conditions in the credit not only undermines the basic
principle of autonomy, but also corrodes the capacity of the bank to act with reasonable
promptness. Despite the serious side effects caused by the non-documentary conditions,
parties are still addicted to including these terms in their credits. The situation is partly
attributed to professional incompetence in drafting, but mainly led by the account party
who intends to strengthen its transaction security against the beneficiary through
adding these qualifications. Clearly, in nature a non-documentary term is a tool
designed by the applicant with the aid of the issuing bank against payment to the
confirming bank and the beneficiary.
The ICC Banking Commission endeavours to strike this increasingly wrong practice
which contradicts the provisions regarding to documentary examination, namely
Article 2 defining a complying presentation, Article 4 and Article 5 stating principle of
autonomy as well as Article 14 (a) stipulating standards of examination in the
UCP600.395 The ICC first shot at attacking non-documentary conditions could be
found in UCP500 Article 13 (c), which held “the specific purpose of eradicating the
totally wrong practice of incorporating non-documentary condition(s) into
documentary credits”.396 It provided the “disregard rule”, i.e. ‘if a Credit contains
conditions without stating the document(s) to be presented in compliance therewith,
banks will deem such conditions as not stated and will disregard them.’ 397
Subsequently, in order to clarify the meaning of Article 13 (c) and emphasise the ICC’s
disapproval concerning this wrong practice, the ICC issued a position paper to explain
its position. It also proposed that ‘sometimes, however, a condition appears in a
documentary credit which can be clearly linked to a document stipulated in that
documentary credit. Such a condition is not then deemed to be a non-documentary
394
395
In UCP500, inclusion of a non-documentary condition would conflict with Article 2 defining the
meaning of credit, Article 4 and Article 5 (b) concerning principle of autonomy, as well as Article 13 (a)
regarding to documentary examination.
396
ICC Banking Commission, Position Papers No 1, 2, 3, 4 on UCP 500 Uniform Customs and
Practice for Documentary Credits (1 September 1994) Position Paper No.3
397
UCP500 Article 13 (c)
123
condition. For example, if a condition in the documentary credit states that the goods
are to be of German origin and no Certificate of Origin is called for, the reference to
“German origin” would be deemed to be a non-documentary condition and disregarded
in accordance with UCP 500 sub-Article 13(c). If, however, the same documentary
credit stipulated a Certificate of Origin, then there would not be a non-documentary
condition as the Certificate of Origin would have to evidence the German origin.’398
It seemed under UCP500 that only if the term could not be clearly linked with the
stipulated documents would it be counted as a non-documentary condition. Guided by
this explanation, in several queries the ICC Banking Commission tried to distinguish
the real non-documentary conditions from all the terms which were separated with the
stipulated documents. In one case, it held that the name of carrier added in the
“Additional Conditions” of the credit could undoubtedly be linked to the air waybill
which was expressly required by the credit, so the term in the “Additional Conditions”
would not be considered as a non-documentary condition.399 Similarly, the term of
“shipment to be by seafreight vessel sailing to Mombasa Port via Suez” mentioned in
the “special instructions” of the credit would not be treated as a non-documentary
condition, since the term can be related to the stipulated bill of lading which specified
the port of loading and discharge. Moreover, in order to satisfy this additional term, the
Banking Commission concluded that the bank was entitled to require the bill of lading
which stated “the seafreight vessel would be sailing via Suez”.400 Nonetheless, the
view held by the Banking Commission was not always consistent. In another ICC
query, it concluded that a term “shipment must be effected by/through ABC” in the
“special conditions” section of the credit without stipulating a corresponding document
would be regarded as a non-documentary condition.401 Since there was no guideline in
398
ICC Banking Commission, Position Papers No 1, 2, 3, 4 on UCP 500 Uniform Customs and
Practice for Documentary Credits (1 September 1994) Position Paper No.3
399
No.665, ICC 2004) No.205
400
401
124
respect of judging “clearly linked”, ‘it has been suggested that the Position Paper’s
linkage test suffered from a regrettable vagueness that served only to introduce
uncertainty.’402
Following the UCP500, the UCP600 keeps the same “disregard rule” concerning
non-documentary conditions in its Article 14 (h), which states that ‘if a credit contains
a condition without stipulating the document to indicate compliance with the condition,
banks will deem such conditions as not stated and will disregard it’. Although the
words used for the non-documentary issue in the UCP600 are similar to those in the
UCP500, the Position Paper No.3 which played a controversial role under UCP500 to
interpret the “disregard rule” would not however be applicable under UCP600
anymore.403 Therefore, the UCP600 Article 14 (h) would be arguably interpreted in a
more literal fashion, i.e. all non-documentary conditions must be disregarded, whether
or not its satisfaction is determinable through linking with the tendered document.404 It
seems that the scope of “disregard rule” under UCP600 is wider than that under
UCP500, since all the non-documentary conditions would be disregarded even though
some of them can be clearly linked to the required documents. Hence, to some degree,
the literal recognition set out in the UCP600 might reduce the uncertainty caused by
the linkage test and further discourage the use of non-documentary conditions.
It is evident that the non-documentary provision in the UCP aims to discourage the
issuance of a credit containing the non-documentary terms through ignoring those
terms. The UCP has put the responsibility on the applicant and the issuing bank to
stipulate which documents need to be presented under the credit.405 For this purpose, it
is well grounded that the UCP500 Article 13 (c) (and by extension, the UCP600 Article

402
403
UCP600, Introduction
404
(ICC Publication No.680, ICC 2007) 66; Michael Bridge (ed), Benjamin’s Sale of Goods (8th edn, Sweet
and Maxwell 2010) para 23-114
405
125
14 (h)) avails the negotiating or confirming bank against the issuing bank and arguably,
the issuing bank against the applicant, rather than in a reverse order.406 Nevertheless,
the ICC Banking Commission did not achieve its aim of eradicating the
non-documentary conditions in the credit by setting up the “disregard rule” and the
parties still follow their routine practice to inject non-documentary conditions into their
credits.407 Moreover, problems both in law and in practice have come out in the
application of the UCP “disregard rule”. Even worse, the courts have even decided to
uphold a non-documentary clause in a credit rather than follow the UCP provision in
certain circumstances. In the next part, the author will examine the cases decided under
the UCP “disregard rule” and reveal the difficulties faced by the UCP from different
perspectives.
4.5.2.2 Difficulties met by the UCP “disregard rule”
Since the UCP500 first introduced the “disregard rule” to discourage the usage of
non-documentary conditions in documentary credits, several main difficulties have
emerged both in law and in practice. These difficulties still remain under UCP600 in
that the “disregard rule” has kept intact. In this part, the author will divide the main
problems triggered by the “disregard rule” into four sections, namely, primacy of
special terms in contract law, the challenge caused by “fundamental” importance, the
practical dilemma faced by the issuing bank and interactions with other provisions
under UCP600.
A. Primacy of special terms
The problem arises because the UCP does not have the force of law and its legal effect
comes from the general incorporation into a contract. The status of the UCP terms is
considered to be a set of standard terms. It is clear that the parties are free to make their
406
Korea Exchange Bank v Standard Chartered Bank [2005] SGHC 220, [2006] 1 SLR 565, 577
407
Roy Goode, ‘Abstract Payment Undertakings and the Rules of the International Chamber of
Commerce’ (1995) 39 St Louis L J 725, 736-737
126
own bargain to expressly modify or exclude any provisions in the UCP.408 Therefore,
if the credit expressly provides that the UCP600 Article 14 (h) should not apply, the
bank will need to follow the instruction and examine the compliance for
non-documentary conditions. However, the difficulty lies in whether the same result
can be achieved by implication, namely, whether the existence of non-documentary
conditions can implicitly dismiss the UCP “disregard rule”. Although the UCP600
Article 1 states that the UCP provisions are binding on all the parties after
incorporation “unless expressly modified or excluded by the credit”, it is suggested
that the quoted words have not been interpreted so stringently as to mean that only an
express exclusion will have effect.409 ‘It is enough if an express provision in UCP500
[or currently, UCP600] in circumstances where an implication may be drawn that the
intention was to exclude the operation of the UCP provision in question. In such an
event, the express provision will override the provision of the UCP incorporated by
reference only.’ 410 Therefore, it is questionable that whether the insertion of
non-documentary conditions, which creates a situation different from that envisaged by
the UCP “disregard rule”, would constitute a modification to the UCP provision.
It can be strongly argued that non-documentary conditions are the specific terms which
are particularly written by the parties in the credit to reflect their intentions. By
contrast, UCP provisions are regarded as standard terms which are general
incorporated into the credit. According to the principle of interpreting contract terms,
in the event of conflict between a general term and a specific term, the latter should
prevail on the ground that it is more likely to manifest the intention of the parties in
408
UCP500 Article 1 and UCP600 Article 1
409
In Gary Collyer and Ron Katz (eds), ICC Banking Commission Opinions 2009-2011 (ICC
Publication No.732, ICC 2012) R716, the Banking Commission concluded that ‘a modification of a rule
[under UCP600] may be made by the simple insertion of data that creates a situation different from that
envisaged by the UCP.’
410
Korea Exchange Bank v Standard Chartered Bank [2005] SGHC 220, [2006] 1 SLR 565 [32] Words
used in the UCP600 Article 1 are similar to words in the UCP500 Article 1 so the analysis drawn under
UCP500 in this case should remain unchanged in UCP600.
127
their transaction.411 From this perspective, non-documentary conditions which act as
bespoke terms are capable of overriding the UCP “disregard rule” incorporated by
reference. Furthermore, nothing in the UCP attempts to grant the “disregard rule”
paramount status over any inconsistent provision in the credit.412 As a result, due to
the primacy of special terms in the contract law, the “disregard rule” in the UCP has to
step back when it comes across non-documentary conditions.
B. “Fundamental” challenge
The above difficulty is questioned by Jack, which suggests that ‘in the absence of an
express exclusion an English court will seek to uphold the scheme of the UCP by
requiring all effective conditions to be documentary.’ 413 However, in the same
paragraph, it is also well recognised that the strength of the support for the UCP
scheme will be subject to the importance of the non-documentary condition to the
working of the credit. The more important the condition in the credit, the more effect
will be given by the courts. This attitude can be demonstrated by a leading Singapore
case under UCP500, Kumagai-Zenecon Construction Pte Ltd v Arab Bank Plc.414 In
this case, clause 2 of the credit called for the bank to pay the liquidators the sum
payable by Low [the buyer] pursuant to his obligations to KIP [the seller] as
determined by the judgments of the trial court and the Court of Appeal. The documents
specified in the credit including copies of both courts’ judgments and the accompanied
demand. However, instead of assigning a precise figure, the judgments only indicated
that Low’s obligation was to pay the higher of the purchase price and the fair price of
the relevant shares. Since the liquidators did not furnish the bank with a copy of the
411
Glynn v Margetson [1893] AC 351 (HL) 358; Homburg Houtimport BV v Agrosin Private Ltd (The
Starsin) [2003] UKHL 12, [2004] 1 AC 715 [11]
412
Unlike Article 20 (c) (ii) of the UCP600 as analysed in Chapter 5, the disregard rule in Article 14 (h)
does not specific its paramount status in its provision. Article 20 (c) (ii) confers the possibility of
transhipment in the clause with the paramount status, even if there is an express clause in the credit
which prohibits transhipment.
413
414
Kumagai-Zenecon Construction Pte Ltd v Arab Bank Plc [1997] SGHC 31, [1997] 1 SLR (R) 277,
affd [1997] SGCA 41, [1997] 2 SLR (R) 1020
128
valuation report, the bank rejected the demand on the basis that it was not compliant
with the terms of the credit. Regardless of “disregard rule” under UCP500, the court
supported the bank’s rejection on the ground that the documents tendered by the
liquidators had failed to establish that the amount in their demand was the amount of
Low’s obligation under the judgments. Judith Prakash J further explained:415
‘Whilst I recognised the desirability of upholding the provisions of

UCP-500 in general, it appeared to me that in this instance the
circumstances were such that the credit could only be operated if the
non-documentary conditions ie the ascertainment of the fact and quantum
of Low’s obligation were satisfied. Otherwise the credit did not make sense
since the implication was that any amount within the maximum limit of the
credit could have been demanded irrespective of the effect of the two
judgments. I therefore found that in this case Art 13c [the “disregard rule”
in UCP500] had been excluded by implication because of the express
wording of cl 2 of the credit.’
Although the “disregard rule” in the UCP500 Article 13 (c) was implicitly excluded,
the above judgment was still challenged by the “surplus documents rule” in the
UCP500 Article 13 (a) second paragraph [equivalent to UCP600 Article 14 (g) as
discussed above], which directed the bank not to examine documents not stipulated in
the credit. However, in order to satisfy the non-documentary condition in the present
case, a valuation report which was considered as an additional document must be
presented and examined. The Court of Appeal emphasised, by reason of “irreconcilable
inconsistency” between the credit terms and the UCP provisions, the “surplus
documents rule” in the UCP500 Article 13 (a) had to be ignored by the bank as well.416
It was evident that in front of the non-documentary condition, which was fatal to the
415
Kumagai-Zenecon Construction Pte Ltd v Arab Bank Plc [1997] SGHC 31, [1997] 1 SLR (R) 277
[26]
416
Kumagai-Zenecon Construction Pte Ltd v Arab Bank Plc [1997] SGCA 41, [1997] 2 SLR (R) 1020
[28]
129
operation of the credit, the courts had chosen to sacrifice the UCP rules and
endeavoured to clear up all the barriers. In spite of the existence of “disregard rule”
under UCP, the courts still found a leeway to get rid of it and called for the evidence to
uphold the non-documentary conditions. The same approach was adopted by a
subsequent case under UCP500, Korea Exchange Bank v Standard Chartered Bank.417
In this case, the issuing bank contended that the “fluctuating price clause” in the credit
was a non-documentary condition so that it should be disregarded. Nevertheless,
following the Kumagai-Zenecon approach, the court held that:418
‘…the importance of the price clause and the automatic fluctuation clause
to the working of the credit is obvious. Without it, the credit would be
unworkable as the price for the gas oil is not fixed but fluctuates with a
benchmark. Therefore, even if they were non-documentary conditions,
effect should be given to the two express clauses rather than to Art 13(c).’
The similar approach dealing with the issue of non-documentary conditions can be also
found in the U.S. Uniform Commercial Code (UCC) Revised Article 5. The UCC, as
another main source to strike the wrong practice of non-documentary conditions in
letters of credit, also initiates the “disregard rule”. In Section 5-108 (g), it states that ‘if
an undertaking constituting a letter of credit under Section 5-102 (a) (10) contains
non-documentary conditions, an issuer shall disregard the non-documentary conditions
and treat them as if they were not stated.’ Nonetheless, the UCC also points out ‘that
section does not apply to cases where the non-documentary condition is fundamental to
the issuer’s obligation.’419 ‘Where the non-documentary conditions are central and
fundamental to the issuer’s obligation (as for example a condition that would require
the issuer to determine in fact whether the beneficiary had performed the underlying
contract or whether the applicant had defaulted) their inclusion may remove the
417
[2006] 1 SLR 565
418
Korea Exchange Bank v Standard Chartered Bank [2005] SGHC 220, [2006] 1 SLR 565 [33]
419
Uniform Commercial Code Revised Article 5 (US, 1995) Official Comment 6 of section 5-102
(a)(10)
130
undertaking from the scope of Article 5 entirely.’420 Clearly, the UCC illustrates that
the non-documentary condition should be ignored as superfluous, but when the
non-documentary condition is fundamentally important to the operation of credit, the
law of documentary credit stated in Article 5 would not govern.
According to the above case law and the UCC rules, it is evident that the impact of
non-documentary terms on the proper working of a credit as a valid consideration has
become a strong challenge against the “disregard rule”. Since the situation remains
unchanged under UCP600, it is very likely for the English courts to hold that at least
non-documentary conditions which are fundamental to the commercial operation of the
credit would not be overridden by the standard “disregard rule” in the UCP. The more
important a non-documentary term, the more prepared a court would be to say that the
general incorporation of UCP600 Article 14 (h) has been modified or excluded.
However, the fatal risk hidden behind this approach lies in how to ascertain a
“fundamental” non-documentary condition. None of the authorities has provided a set
of tests to identify which kinds of non-documentary conditions should belong to the
category of “fundamental”.421 Without knowing the standards of being “fundamental”,
it will be extremely difficult for the parties to predict the legal prospects led by
different non-documentary conditions. From this perspective, the “fundamental”
approach cannot be regarded as an efficient supplementary of the “disregard rule” and
the argument of “fundamental” non-documentary conditions do challenge the
application of the UCP “disregard rule”.
C. Dilemma faced by banks
420
Uniform Commercial Code Revised Article 5 (US, 1995) Official Comment 9 of section 5-108 (g)
421
Concerning the tests for fundamental and non-fundamental non-documentary conditions, see Richard
Dole, ‘The Essence of a Letter of Credit under Revised U.C.C. Article 5: Permissible and Impermissible
Non-documentary Conditions Affecting Honor’ (1998-1999) 35 Hous L Rev 1079. In this article, the
author suggested that in order to reveal the fundamental injustice caused by the “disregard rule”, the
applicant must prove that he had reasonably relied on the enforceability of a non-documentary condition
involving extrinsic facts. However, this process would inevitably involve the concept of good faith.
131
The third difficulty caused by the application of “disregard rule” is the practical
dilemma faced by the bank which has been involved in different contracts. The issuing
bank, who has agreed with the applicant to open a letter of credit, has to deal with two
or more contracts in the circulation of the credit. The first contract is an application
contract between the issuing bank and the applicant. In this contract, the parties are
free to negotiate and insert an express non-documentary term against payment,
regardless of the general incorporation of UCP600 in the credit. Assuming a simple
scenario without other banks involved, once the credit is issued, it will be as an
independent unilateral contract between the issuing bank and the beneficiary. Since the
credit is subject to the UCP600, the “disregard rule” concerning the non-documentary
conditions will take effect. Up to this point, an irreconcilable problem has been
generated. By agreeing to open a credit with such non-documentary instructions, it is
indicated that in the application contract the issuing bank has consented to undertake
this obligation, i.e. payment against the satisfaction of non-documentary terms.
However, after involving the UCP “disregard rule” in the credit, the tacit situation has
been changed significantly. The credit between the issuing bank and the beneficiary
has incorporated the UCP “disregard rule”. Without clear modification or exclusion,
the beneficiary can claim that the non-documentary condition in the credit should be
ignored by the issuing bank and the payment should be released upon the presentation.
In consequence, the issuing bank would suffer the most unfortunate situation, which
means it is obliged to take up the documents presented by the beneficiary but cannot be
reimbursed from the applicant due to a non-documentary discrepancy.
Even in the case of incorporating UCP into the application form, assuming that the
parties in the application contract have directed their intention clearly by inserting an
express non-documentary condition, the UCP “disregard rule” as a general
incorporation has to give way to the special expression. The issuing bank, who has
agreed with its customer to include a non-documentary condition in its credit, may not
be entitled to treat the term imposed by itself as a nullity. As the “disregard rule”
directs, ‘even though non-documentary conditions must be disregarded in determining
132
compliance of a presentation (and thus in determining the issuer’s duty to the
beneficiary), an issuer that has promised its applicant that it will honour only on the
occurrence of those non-documentary conditions may have liability to its applicant for
disregarding the conditions.’422 It can also be strongly argued that the issuing bank has
waived its right to claim for ignoring the non-documentary term since it was willing to
include this term in its credit.423 Furthermore, it is doubtful as to whether the issuing
bank owes a duty of reasonable care to its customer in the credit drafting. If the issuing
bank does owe this duty, it will be in breach of its duty to the customer in accepting
such instructions without pointing out that these terms will be null and void under the
“disregard rule”.424 To sum up, it is evident that the “disregard rule” has caused a
dilemma for the issuing bank. If the issuing bank follows the disregard rule to ignore
the non-documentary conditions, it may breach the application contract and may not
get reimbursement from its customer. On the contrary, if the issuing bank claims a
discrepancy regarding the non-documentary term, the bank may be sued for the wrong
rejection since the non-documentary condition is supposed to be disregarded under the
UCP.
D. Interactions with “no conflict” rule
Unlike UCP500, the “disregard rule” under UCP600 does not involve the “linkage”
test, so that the bank is supposed to ignore all conditions without calling for a specific
document to prove them. For example, under UCP600 Article 14 (h), the bank was
422
Uniform Commercial Code Revised Article 5 (US, 1995) Official Comment 9 of section 5-108 (g)
423
In Korea Exchange Bank v Standard Chartered Bank [2005] SGHC 220, [2006] 1 SLR 565, the
court concluded that the “disregard rule” should be the tool used by the confirming bank against the
issuing bank or the issuing bank against the applicant and the claim in the reverse order should not be
allowed. Although this interpretation was inferred from the UCP Drafting Group’s intention of setting up
the “disregard rule”, the conclusion is doubtful since the rule itself has not been clearly restricted in this
way. The author wonders whether the principle of estoppel can be applied in this scenario. According to
“a man cannot be permitted to take advantage of his own wrong” principle, the issuing bank has waived
its right to claim nullity of this term by actions (i.e. putting the non-documentary term in the credit).
424
Nonetheless, some scholars do not agree with this proposition. See Ebenezer Adodo, ‘Non-documentary
Requirements in Letters of Credit Transactions: What is the Bank’s Obligation Today?’ [2008] JBL103,
fn 57
133
entitled to disregard a non-documentary requirement concerning the place of delivery,
even though a “goods receipt” was called for in the credit which might be clearly
linked with the fact and evidence the performance.425 Nevertheless, the ICC Banking
Commission further restricts Article 14 (h) by Article 14 (d) via suggesting that, the
data contained in a non-documentary condition must not be in conflict with the data in
the other stipulated documents. In Query TA644 rev426, the Banking Commission held
that a condition referring to a “latest shipment date” without stipulating a required
document to indicate its compliance would be deemed as a non-documentary condition
and disregarded under Article 14 (h); however, should the beneficiary elect to insert the
data regarding the “latest shipment date” on any other stipulated document, it must
ensure that the data did not conflict with those data in the non-documentary condition.
The conclusion drawn by the ICC is that, since a non-documentary condition remains
to be a part of the credit, “Article 14 (h) is not absolute and is qualified by the content
of Article 14 (d)”.427
The conclusion of Query TA644 rev was added into the new ISBP No.745, which
clarified the UCP600 disregard rule as follows. ‘When a credit contains a condition
without stipulating a document to indicate compliance therewith (“non-documentary
condition”), compliance with such condition need not be evidenced on any stipulated
document. However, data contained in a stipulated document are not to be in conflict
with the non-documentary condition. For example, when a credit indicates “packing in
wooden cases” without indicating that such data is to appear on any stipulate document,
a statement in any stipulated document indicating a different type of packing is
considered to be a conflict of data.’428 It is clear to see that the non-documentary
425
No.697, ICC 2008) R640. It should be noticed that a forwarding agent’s “goods receipt” is not a
transport document covered by UCP600 Article 19-25, so it is not obliged to evidence the shipment and
delivery ports.
426
No.697, ICC 2008) R631
427
The conclusion was followed by Query TA689 in Gary Collyer and Ron Katz (eds), ICC Banking
Commission Opinions 2009-2011 (ICC Publication No.732, ICC 2012) R743
428
ISBP No.745, section A26
134
conditions cannot be literally ignored by the bank. The bank has to examine whether
there are any conflict in data between the non-documentary condition and the
presented documents. It seems that completely disregarding the information stated in a
non-documentary condition under UCP600 would result in a harsh and unfair result, so
that the ICC endeavours to use “no conflict” rule to restrict its side effect under
UCP600.429 Although this effort has not brought as much uncertainty as the linkage
test under UCP500, it does involve the bank to concern about the non-documentary
condition and spend time comparing with data in all the documents. Consequently,
under the practical pressure, the ICC has added a qualification to the “disregard rule”,
which was supposed to be unrestricted in the UCP600.
Through analysing the above difficulties and qualifications in the application of

“disregard rule”, it is questionable that whether the ICC’s laudable endeavour to
impose discipline in the marketplace would achieve its desired effect. Even though the
UCP literally states that the bank should ignore the non-documentary conditions, the
beneficiary or the confirming bank may not be entitled to use the “disregard rule” as a
shield when the non-documentary condition is fundamentally important to the
operation of the credit. Meanwhile, the issuing bank may be faced with a dilemma to
choose the priority between the “disregard rule” and the special term in the application
contract. ‘It seems likely that Article 13 (a) [Article 14 (h) now in the UCP600],
well-intentioned though it is, will lead to problems more serious than those it was
designed to prevent.’430 It is also evident to see that the courts were straining to
qualify the absolute prohibition contained in the “disregard rule” and this rule was
rarely successfully invoked in the real cases.431 Therefore, the author wonders whether
there is a better way to get rid of the current quandary. How about a different approach
of requiring documentary evidence of compliance which was adopted under common
429
Paul Downes, ‘UCP600: Not So Strict Compliance’ (2007) 22(4) JIBFL 196, 198
430
Roy Goode, ‘Abstract Payment Undertakings and the Rules of the International Chamber of
Commerce’ (1995) 39 St Louis L J 725, 736-737
431
It seems that the “disregard rule” was never successfully invoked in the English courts. See Credit
Agricole Indosuez v Generale Bank (No.2) [2000] 1 Lloyd’s Rep 123 (QB); Oliver v Dubai Bank Kenya
Ltd [2007] EWHC 2165 (Comm) [15]
135
law? Compared with the current “disregard rule”, which one is more reasonable?
4.5.2.3 Approach adopted by the English courts
Prior to the existence of “disregard rule”, the English courts have adopted a different
approach through asking for the documentary proof to solve the problem caused by
non-documentary conditions in a letter of credit. The revolutionary case in the English
courts concerning the issue of non-documentary conditions is Banque de l’Indochine v
J H Rayner (Mincing Lane) Ltd432. In this case, the credit under the heading “Special
Conditions”, stated: “Shipment to be affected on vessel belonging to shipping company
that member of an International Shipping Conference”; however, it did not call for a
shipping company certificate to evidence. The dispute between the beneficiary and the
confirming bank lied in whether the absence of documentary proof for this
non-documentary condition in the credit would justify the rejection. Parker J held
that:433
‘As to the primary contention of the parties, since the credit expressly
stipulated for shipment on what for convenience I shall call merely “a
Conference Line vessel” the plaintiffs [the confirming bank] were both
entitled and obliged to ensure that the stipulation was complied with. No
specific documentary proof was called for by the credit but, since parties to
documentary credits deal only in documents, the bank were in my judgment
entitled to insist upon, and the defendants [the beneficiary] were obliged to
provide, reasonable documentary proof. The requirement for a certificate
was, in my view, a reasonable requirement and accordingly the bank were
entitled to regard its absence as a valid ground for refusing payment even if,
as was in fact the case, the vessel was a Conference Line vessel.’
432
Banque de l'Indochine et de Suez SA v JH Rayner (Mincing Lane) Ltd [1983] QB 711 In this case,
the credit was subject to UCP 1974 reversion, where had no express provisions concerning
non-documentary conditions.
433
Banque de l'Indochine et de Suez SA v JH Rayner (Mincing Lane) Ltd [1983] QB 711 (QB) 719
136
In the Court of Appeal, Sir John Donaldson completely upheld Parker J’s decision and
further complemented:434
‘This is an unfortunate condition to include in a documentary credit,

because it breaks the first rule of such a transaction, namely, that the
parties are dealing in documents, not facts. The condition required a state
of fact to exist. What the letter of credit should have done was to call for a
specific document which was acceptable to the buyer and his bank
evidencing the fact that the vessel was owned by a member of a conference.
It did not do so and as, accordingly, the confirming bank had to be satisfied
of the fact, it was entitled to call for any evidence establishing that fact.’
The approach of calling for evidence was followed in several English cases after
Banque de l’Indochine. In Floating Dock Ltd v Hong Kong & Shanghai Banking
Corp,435 Evan J held that the bank was entitled to demand any documentary evidence
regarding “delivery dates” under the credit terms even though the stipulation did not
specify any document. In The Messiniaki Tolmi,436 concerning the requirement of “a
Gas-free certificate to be approved by the Taiwan Authorities” in the credit, Lloyd LJ
reasoned that ‘the fact of approval had to be evidenced by a contemporary document
accompanying the gas-free certificate, if not by endorsement on the certificate itself.
The fact (if it be the fact) that such documentary evidence may have been hard or even
impossible to get is neither here nor there.’437
It has been subsequently argued that the approach adopted by the English courts
regarding calling for documentary proof would generate considerable uncertainty in
434
435
Floating Dock Ltd v Hong Kong & Shanghai Banking Corp [1986] 1 Lloyd’s Rep 65 (QB) 79-80
The non-documentary requirement in the credit was stating that “the latest delivery date is 20 February
1985”.
436
Rep 455 (QB), affd in [1988] 2 Lloyd’s Rep 217 (CA)
437
Astro Exito Navegacion SA v Chase Manhattan Bank NA (The Messiniaki Tolmi) [1988] 2 Lloyd’s
Rep 217 (CA) 220
137
dealing with non-documentary conditions.438 Meanwhile, since a majority of the ICC
National Committees voted for the application of “disregard rule”, the approach
established by the Banque line of cases has been laid aside in the subsequent UCP
revisions.439 Under this circumstance, it is doubtful whether the English courts can
still follow the cases decided on the basis of previous UCP revisions to achieve a result
which would be contrary to the current “disregard rule”. The first case met by the
English courts after introducing the disregard rule in the UCP was Credit Agricole
Indosuez v Generale Bank (No.2).440 The credit in this case required a condition of
“shipment to be effected not later than July 30 1998” without stipulating a
corresponding document. Relying on the UCP500 Article 13 (c), the beneficiary
contended that the clause was non-documentary so that it should be disregarded. By
rejecting this “misconceived” contention, David Steel J. held that a bill of lading dated
after the latest date of shipment would properly be refused by the bank. 441 It should be
noticed that David Steel J. made this conclusion by interpreting the credit terms rather
than mechanically applying the “disregard rule” or referring to the “clear linkage” test
in the Position Paper No.3 under UCP500. Even though the linkage test was ticked off
in the UCP600, the conclusion would be still justified according to the new established
“no conflict” rule between data in the credit terms and those in the presented
documents.
Nevertheless, would the conclusion be changed if the bill of lading was not a stipulated
document in the credit, so that there would be no way to compare the data?
Alternatively, what about the requirement in the non-documentary condition stating the
“delivery date” instead of the “shipment date”, so that the bill of lading would be
ineffective to evidence it? Under this circumstance, would the court be able to follow
Evans J in Floating Deck Ltd v Hong Kong & Shanghai Banking Corp442 to ask for
438
Ebenezer Adodo, ‘Non-documentary Requirements in Letters of Credit Transactions: What is the
Bank’s Obligation Today?’ [2008] JBL103, 107
439
Gary Collyer, ‘A Look Back at the UCP Revision’ (2006) 12(4) DCInsight 1, 23
440
Credit Agricole Indosuez v Generale Bank (No.2) [2000] 1 Lloyd’s Rep 123 (QB)
441
Credit Agricole Indosuez v Generale Bank (No.2) [2000] 1 Lloyd’s Rep 123 (QB) 127
442
Floating Dock Ltd v Hong Kong & Shanghai Banking Corp [1986] 1 Lloyd’s Rep 65 (QB)
138
documentary proof regardless of the “disregard rule”?443 There seems to be no direct
authority in point. However, it is generally accepted that ‘David Steel J. hinted strongly
that the courts might stick with the old beneficent practice that enabled the
construction of a non-documentary clause as requiring the production of a reasonable
documentary proof in spite of the prevailing UCP regime.’444
The UCP “disregard rule” has also failed to be invoked in a subsequent English case,
Oliver v Dubai Bank Kenya Ltd.445 In this case, condition 3 of the credit expressed the
payment against presentation of an authenticated swift message and tested telex issued
by the issuing bank “confirming the beneficiary’s fulfilment of their commitments
towards” the applicant in the underlying contract. The claimant alleged that condition 3
should be disregarded as contrary to the principle of autonomy and the “disregard rule”
in the UCP500 Article 13 (c). However, Andrew Smith J. could not accept that Article
13 had any application in this case. He compared the position addressed by the
disregard rule with the fact of the current case:446
‘Article 13c is concerned with an attempt to make a payment (or equivalent)

obligation conditional upon something other than a documentary condition
in a letter of credit. The letter of credit in this case does not lay down any
condition for payment other than that it is to be made against the draft
(properly marked), the certificate and the telex referred to in condition
3…The express terms of the letter of credit do not make, or purport to make,
the obligation to pay conditional upon anything other than a documentary
condition. (If they did, then the court might have to consider whether the
general words that incorporate the UCP into the letter of credit should
prevail over the parties’ express stipulation in condition 3…)’
443
Some scholars suggested the answer might be yes, but the author doubts this is correct. See Ebenezer
Adodo, ‘Non-documentary Requirements in Letters of Credit Transactions: What is the Bank’s
Obligation Today?’ [2008] JBL103, 108
444
Ebenezer Adodo, ‘Non-documentary Requirements in Letters of Credit Transactions: What is the
Bank’s Obligation Today?’ [2008] JBL103, 107-108
445
[2007] EWHC 2165 (Comm)
446
Oliver v Dubai Bank Kenya Ltd [2007] EWHC 2165 (Comm) [14]-[15]
139
Nevertheless, it is clear to see behind the screen that the required document in
condition 3 has inevitably included the issuing bank’s statement of facts which are
outside its own records and operations. The parties generally admitted in the court that
condition 3 had imported an implied obligation on the issuing bank to issue the telex in
some circumstances. Because of that obligation, the claimant argued that condition 3
had given rise to a “condition without stating the document[s] to be presented in
compliance therewith”, which would fall into the domain of “disregard rule”. However,
Andrew Smith J rejected this argument and held that ‘the basis for any such
implication would be that it is necessary in order to give business efficacy to condition
3, and no obligation can be said to be implicit in condition 3 if the effect of implying
the term is that condition 3 is to be disregarded and so given no business efficacy.’447
It should be recognised that condition 3 in the Oliver case was an abnormal clause to
be inserted into a credit. The inclusion of such a condition would not only be a trap for
the beneficiary to lose control of compliance, but also deprive the bank’s undertaking
of independence in the credit. However, the court simply interpreted the condition as
its literal meaning to call for a telex so as to avoid the application of the “disregard
rule”. 448 Although the condition in the credit has contaminated the principle of
independence, it seems that Andrew Smith J still preferred considering the parties’
intention rather than applying the “disregard rule”.449 The actions taken in the Oliver
case has once again proved that the English courts are very reluctant to change the
447
Oliver v Dubai Bank Kenya Ltd [2007] EWHC 2165 (Comm) [15]
448
It has been argued by James Barnes, ‘Non-documentary Conditions and the L/C Independence
Principle’ (2008) 14(4) DCInsight 11, that in nature there was no difference between a condition in the
present case addressing a telex and a condition which did not mention a telex but required to fulfil the
same obligation, such as payment on “the issuing bank’s determination of completed performance of the
beneficiary’s obligation to the applicant”. It has been suggested that both of the above conditions should
be treated as the same and be disregarded, since neither of them belonged in an independent
undertaking.
449
It was reckoned that different results would be come out if the Oliver case was decided in the U.S.
by applying the revised UCC Article 5. The U.S. courts would tend to determine “whether a purported
letter of credit strays too far from the independence principle, in which case either the offending credit
provision should be disregarded or, in extreme cases, the undertaking should be re-characterised as an
ordinary promise or suretyship undertaking”. See James Barnes, ‘Non-documentary Conditions and the
L/C Independence Principle’ (2008) 14(4) DCInsight 11, 11-12
140
bargain that parties have deliberately made and alter the wording of a special term that
they have agreed on into nothing.450 Instead of mechanically following the “disregard
rule” set out by the UCP, it is clear to see that the English courts have endeavoured to
construe the non-documentary conditions as special contract terms and as much as
possible provide the business efficacy to them. Ultimately, it seems that the UCP
“disregard rule” has got little room to play in the English courts and the English courts
have kept to pursuit of justice concerning the matter of non-documentary conditions in
their own way.
4.5.2.4 Proposed way out
It is clear that all the major sources disapprove of the inclusion of non-documentary
conditions in a credit, because the existence of such a condition breaks the first rule of
documentary credit transactions, namely, that the parties are dealing in documents, not
facts. However, the question as to what should be done when the non-documentary
conditions are inevitably confronted by the bank in the course of documentary
examination, and by the courts in documentary credit litigations, remains problematic.
In this part, the author will put forward a set of thoughts different from the UCP
“disregard rule” to solve the issues brought by non-documentary conditions, and
furthermore the author will endeavour to clarify each party’s role played in the new
scheme. In addition, some practical suggestions under the current regime will be
provided so as to help the parties minimise the dilemma as much as possible.
A. Solution in principle
The “disregard rule”, is well-intended, but rarely achieves the desired effect. On the
contrary, as illustrated above, the “disregard rule” in the UCP has caused more serious
difficulties in law than those it was designed to prevent. Through the emergence of the
“disregard rule”, it seems that the document checker under a credit incorporating the
450
Roger Fayers, ‘Non-documentary Conditions and the Oliver Case’ (2008) 14(4) DCInsight 13
141
UCP500 or the UCP600 cannot confidently rely on the Banque line of cases and call
for evidence to satisfy the non-documentary requirements. Meanwhile, the English
courts have to find certain revolving methods to interpret the rule and struggle in
giving effect to certain non-documentary terms. Nevertheless, with the legal
difficulties in construction of contract terms and the reluctant attitude from the courts,
the beneficiary also cannot be confident to contend that all non-documentary
conditions in the credit must be disregarded. Although the efforts made by the ICC to
regulate the non-documentary conditions needs to be fully appreciated, it is well
recognised that the “disregard rule” has defeated the commercial expectations and
caused confusion in law. Therefore, by absorbing the merits from the English courts
approach, the author speculates whether the improved “evidence approach” can take
over the “disregard rule” in dealing with the matters triggered by non-documentary
conditions.
According to the “evidence approach” set up by Banque case, certain reasonable

documentary proof needs to be provided in order to satisfy the non-documentary
condition in a credit and get payment. The supporters of “disregard rule” claim that the
“evidence approach” would generate considerable uncertainties from two main aspects.
Firstly, what documentary evidence should be called for to establish that the
non-documentary condition has been fulfilled? Secondly, what will the position of the
bank be if the tendered documentary proof is in fact an ingenious forgery? Regarding
the first question, the author’s answer will be that the presented documentary evidence
should be considered to be enough as long as it appears to “fulfil the function” of the
requirements in the non-documentary condition. Similar to the UCP600 Article 14 (f),
which concerns the required document without stipulating its data content in the credit,
the ICC states that banks will regard the document to be compliant if its content
appears to fulfil the function of the requirement and also complies with “no conflict”
rule in the UCP600 Article 14 (d). In the author’s view, there is no reason to prevent
the “function” standard driving from Article 14 (f) applying to the fresh documentary
evidence for non-documentary conditions because its content is also not stipulated in
142
the credit. One might argue that this method would give the bank too much discretion
and cause uncertainties. However, it must be admitted that the bank’s discretion is
voluntarily granted by the parties who have not stipulated a corresponding document
and specified the data content. Arguably, Article 14 (f) faces with the same challenges
in terms of judging whether the presented document can fulfil its function under the
credit.
The second question brought by the opponents is whether the bank should bear any
responsibility towards the genuineness of the presented documentary evidence
supporting for the non-documentary terms. This answer can be found from the decision
of the Privy Council in Gian Singh v Banque de l’Indochine.451 In this case, a special
non-documentary condition required that the signature on the certificate should be that
of a person called Balwant Singh holding a specific Malaysian passport. A fake but
compliant in appearance passport was provided by the beneficiary to the confirming
bank to prove the satisfaction of that condition. The court held that the
non-documentary requirement would impose upon the bank an additional duty to take
reasonable care to check that the signature on the certificate appeared to correspond
with the signature on an additional document presented by the beneficiary; however,
the bank’s position to claim a compliant presentation would not be affected by the
genuineness of the tendered document proof. 452 Evidently, this conclusion is in
accordance with the principle of autonomy and the UCP “disclaimer clause”, i.e. the
bank is under no duty to responsible for the genuineness, sufficiency or materiality of
the presented documents.453 Therefore, even if the documentary evidence submitted
for the non-documentary condition is forgery, the bank still bears no responsibility and
naturally the forgery will not stop the customer from claiming fraud under the credit.
In author’s opinion, the improved “evidence approach” is a balanced way to solve the
451
Gian Singh & Co Ltd v Banque de l’Indochine [1974] 1 WLR 1234
452
Gian Singh & Co Ltd v Banque de l’Indochine [1974] 1 WLR 1234, 1238-1239 Clearly, the onus of
proving lack of reasonable care in failing to detect the forgery of the certificate lies upon the customer
who claims against the bank.
453
See UCP600 Article 34
143
non-documentary issues. Since it will not be generally possible to imply a term which
is non-documentary in nature, there must be certain documentary evidence which can
be related to the non-documentary requirement and prove its satisfaction.454 The core
idea of “evidence approach” lies in effectively transferring the passive resistance of the
“disregard rule” to the positive reaction. In the course of this transformation, the
business intention can be better reflected and the conflict brought by the hierarchy of
contract terms can be easily solved. Business is business. There should be no reason
for changing a bargain that parties have deliberately made, especially in an express
term. Since in the majority of cases, the non-documentary conditions are the results of
the buyer’s efforts to protect himself against the sharp practice of the seller/beneficiary,
it will be sensible to uphold the non-documentary conditions in commercial bargains
so as not to destroy the commercial expectations.
Moreover, the author believes that, through a set of burden sharing measures, the
improved “evidence approach” will be a reasonable approach to handle the emergence
of non-documentary conditions in practice. Since the non-documentary conditions can
be satisfied by the documentary evidence which only appears to fulfil the function of
requirements, it will not be too difficult for the beneficiary to present such a
documentary proof. Meanwhile, compared with leaving the issue of non-documentary
conditions to the court which inclines to develop the exceptional construction against
the “disregard rule”, the beneficiary under the “evidence approach” will be much
easier to predict and handle the fate of the presentation. The bank, in the same token,
might bear less, increasing its chances of reimbursement than that under the “disregard
rule”. This is because calling for evidence will drag the bank out of the dilemma faced
between the applicant and the beneficiary. What the bank needs to do is simply follow
the same documentary examination rule to check the tendered evidence, i.e.
compliance in appearance but without genuineness and sufficiency guarantee. The
454
which referred to the position in Uzinterimpex JSC v Standard Bank plc [2008] EWCA Civ 819, [2008]
2 Lloyd’s Rep 456 [23]
144
applicant, who has voluntarily inserted the non-documentary conditions without further
stipulations, has to bear the risk of receiving a documentary proof which might be far
from his imagination. The author believes that the unsatisfactory experience will
motivate the applicant to clearly illustrate what he wants in the future, so as to reduce
the chance of non-documentary conditions in the credit.
In addition, the author cannot be completely convinced by the proposition that a rule
should be established with the aim of protecting the beneficiary against the
non-documentary conditions. In the author’s opinion, the existence of
non-documentary conditions in the credit would not put the beneficiary in a very unfair
position. If a letter of credit is not issued in line with the requirements under the
underlying sale contract, the buyer (normally the beneficiary) is entitled to object such
a credit and ask for modification. Hence, if a non-documentary condition is
deliberately added in the credit by the applicant or the issuing bank, the beneficiary
will be entitled to delete it or even claim against the applicant who has breached the
underlying contract by opening an unmatched letter of credit. On the other hand, if the
non-documentary condition is a part of the contract terms but the parties have not
illustrated any corresponding document towards this requirement, the beneficiary has
to provide some reasonable document proof to satisfy this requirement in the credit
since the non-documentary condition has been used to reflect the true intention of the
parties. Alternatively, the beneficiary can negotiate with the applicant to stipulate a
specific document in the credit so as to make such a term to be documentary. It is
obvious to see from above that the emergence of non-documentary conditions is not
necessary to cause the unfair treatment to the beneficiary. On the contrary, in most
cases, the non-documentary conditions are designed to reflect the real bargain between
the parties. Even if the applicant intentionally wants to trap the beneficiary by adding
non-documentary conditions in the credit, the beneficiary can still use his own right
under the underlying contract to refuse and rectify these terms.
Clearly, construing a non-documentary clause as requiring the production of a
145
document evidencing its satisfaction may not be without difficulty; however, the
envisioned difficulties and uncertainties cannot be overly exaggerated. Compared with
the dilemma faced by the “disregard rule”, the improved “evidence approach” can
solve most difficulties in law. The improved “evidence” approach not only meets the
commercial expectations, but also balances the parties’ interest in commercial
transactions. The author believes that, in a long run, it will contribute to eliminating the
wrong practice of non-documentary conditions and benefit the operation of
documentary credits.
B. Solution in practice
Since the current dominant rule regulating the bank towards non-documentary
conditions is still the “disregard rule”, it is worthy of mentioning here some practical
measures which would drag the parties out of the present dilemma caused by the
“disregard rule” and other UCP provisions. Under the reign of “disregard rule”, the
bank will not be entitled to request any documentary proof from the beneficiary
regarding to non-documentary condition in the credit. On the contrary, according to the
above analysis, the non-documentary condition may not be able to be ignored in any
circumstances. It is also unclear whether the issuing bank is entitled to use the
“disregard rule” against the applicant. ‘The only satisfactory solution, however, is that
banks should not accept instructions to issue or to confirm credits containing
non-documentary conditions.’455 If the bank with weak bargaining power has to accept
the instructions, it should attempt to transfer such instructions into documentary
requirements.
Since the legal status of the “disregard rule” is still controversial, it is unclear to
conclude whether the beneficiary can use Article 14 (h) as an effective defence to
defeat the non-documentary conditions which are specifically expressed in the credit.
455
146
Thus, a better way for the beneficiary is to discourage the applicant from inserting any
non-documentary terms into the credit and ask for alteration as soon as such a term has
been found. If the beneficiary has already accepted a credit with non-documentary
conditions and trapped himself in a tricky position, the only safe way is to provide
certain evidence which can prove the satisfaction of non-documentary conditions.
Nevertheless, the form of such evidence will be inevitably restricted by the UCP600
Article 14 (g).456 Since Article 14 (g) states that the bank will disregard the document
which is not required by the credit, the evidence for satisfying non-documentary
conditions must be presented in a required document rather than in an additional
document. Even if an additional document has to be tendered to satisfy the
non-documentary conditions, such an additional document must belong to a part of the
certain stipulated document so as to meet the requirement of Article 14 (g).457
In conclusion, avoidance of issuing a credit with non-documentary conditions is the

ideal solution. However, it seems impossible to eliminate such an incorrect practice
easily. Under the current circumstances, the parties have to be alert the difficulties
brought by the “disregard rule” and squeeze themselves into a safe area. In the long
term, the author believes that a balanced common law approach is more suitable for
solving the non-documentary issues and achieving commercial expectations.
4.5.3 Combined documents
The third situation caused the quantity mismatch between the number of required
documents in the credit and the number of tendered documents lies in the existence of
combined documents. Combined documents, namely are two or more individual
documents combined together into one document. The issue of combined documents
should be divided into two circumstances. The first scenario occurs when the presenter
456
It is unclear whether the UCP600 Article 14 (g) will be removed if the ICC decides to adopt the
“evidence approach” instead of the “disregard rule”. According to the Singapore case Kumagai-Zenecon
Construction Pte Ltd v Arab Bank Plc [1997] SGCA 41, [1997] 2 SLR (R) 1020 under UCP500, the
second sentence of Article 13 (a) concerning the “ignorance of additional document” was removed as
the same time as excluding the application of the “disregard rule” in Article 13 (c).
457
See Part 4.5.1 concerning “additional document”.
147
tenders a combined document instead of two individual documents required by the
credit. The second situation happens when the credit asks for a combined document but
the presenter tenders two separate documents. Both issues are not expressly covered by
the UCP, but they are continuously addressed in the different versions of the ISBP.
Concerning the first situation, the ISBP expressly stipulates that documents required by
a credit must be presented as separate documents.458 In most cases, the combination of
listed documents into one would constitute an inconsistent presentation. However, the
ISBP illustrates an exceptional example by stating that ‘a requirement for an original
packing list and an original weight list will also be satisfied by the presentation of two
original combined packing and weight lists, provided that such documents state both
packing and weight details.’459 It is obvious to see that the possible solution for the
beneficiary, who chooses to tender a combined document, is to present the same
number of combined documents as separate documents required in the credit.
Nevertheless, such a combined document should be able to fulfil the function of each
document, and meanwhile the bank can clearly identify the details of the required
document from the combined document. Therefore, a combined packing and weight
list may satisfy the credit requirement, but a commercial invoice which includes the
details of weight list might not be regarded as a combined document of commercial
invoice and weight list. Another exception for accepting combined documents is
illustrated by the ISBP No.681 in respect of declarations and certifications. ‘A
certification, declaration or the like may either be a separate document or contained
within another document as required by the credit.’ 460 It was suggested by the
DOCDEX panel that unless the credit stipulated conversely, the presentation of several
shipper’s statements in one combined document and of several beneficiary’s
certificates in one combined document should be considered as a compliant
458
See ISBP No.745, section A40, ISBP No.681, para.42 and ISBP No.645, para.44
459
460
See ISBP No.681, para.8 and ISBP No.645, para.8. It is deleted by the ISBP No.745; however, the
author does not think the previous practice will change by this deletion.
148
presentation.461
The second scenario is concerning that two or more separate documents are presented
for satisfying a combined document required in the credit. On the contrary to the first
situation which will cause the shortage of documents, under this circumstance, the
quantity of tendered documents will appear to be more than the number of required
documents. The latest ISBP revision for the UCP600 newly addresses this issue, i.e. ‘a
document required by a credit that is to cover more than one function may be presented
as a single document or separate documents that appear to fulfil each function.’462 ‘For
example, a requirement for a Certificate of Quality and Quantity will be satisfied by
the presentation of a single document or by a separate Certificate of Quality and
Certificate of Quantity that each document appears to fulfil its function and is
presented in the number of originals and copies as required by the credit.’463 It is
evident that there is no objection to transfer a combined document required by the
credit into several separate documents tendered by the presenter; however, the reverse
way of presenting a combined document for separate documentary requirements is
highly restricted. Clearly, the revised ISBP has been made in accordance with the
market practice and also it would effectively supplement the previous gap regarding to
the issue of combined documents.
4.6 Conclusions
The chapter has focused on the issues occurring in the process of general document
examination. Different from most authorities, the chapter has conducted a
layer-by-layer in-depth analysis for bank’s obligations on examining generic
documents under UCP600. The chapter starts from illustrating the requirements for
examining a single document before gradually drilling down to the interactions among
documents. In respect of examining a single document, the most frequently raised issue
461
No.665, ICC 2004) No.211
462
463
149
concerning descriptions of goods is addressed firstly and separately. The description in
commercial invoices must correspond with that in the credit; however, correspondence
is not equal to duplication and some additional wording might be accepted. Different
from descriptions in commercial invoices, the description in other general documents
is governed by a “no conflict” rule, which reflects the tolerance in documentary
examination provided by the UCP. Nevertheless, for documentary security, this
tolerance should be restricted to a reasonable latitude. In the author’s opinion, the
requirement of linkage will effectively and sufficiently solve the worry. However, the
wording of the UCP600 has been far from enough to support this requirement.
Interpreting the linkage requirement through reading into Article 14 (f) and analysing
its implication is a compromise rather than an ideal solution. It is necessary for the
ICC Banking Commission to review the problem and boldly face with it by drafting
the requirement into explicit wording.
Apart from examining the content of documents, the chapter also considers the
mismatch of quantity between the documents which the credit has called for and those
actually tendered by the beneficiary. Although the UCP600 stipulates that the
document is not required by the credit will be disregarded, it should be noticed that the
surplus document should not necessarily be ignored since it might be regarded as a part
of the required document. A mismatch of quantity can also occur through the
emergence of combined documents. If a credit asks for two separate documents,
presenting a combined document instead will not be allowed in most cases. However, a
requirement of combined documents can be taken over by presenting two separate
documents as long as they have fulfilled the function of the required document. Last
but not least, a distorted mismatch can be triggered by the existence of
non-documentary conditions. With such a term, the conditions in the credit will be
more than the number of documents it has actually called for. The UCP measure is to
cure such a mismatch by intentionally deleting the non-documentary conditions.
Nevertheless, the result is not as ideal as expected. Therefore, the author attempts to
solve the issue in another way, i.e. through adding a documentary proof to satisfy the
surplus condition in the credit.
150
Up to now, the author has elaborately analysed the standards for examining generic
documents under UCP600 and endeavoured to supplement the gap left by the current
regime. In the next Chapter, the author will turn attention to special documents which
have been specifically dealt with by the UCP provisions and analyse the standards for
examining those special documents, especially sea transport documents.
151
152
Chapter 5 Standards for Examining Transport Documents and Impacts on
Bank’s Security
5.1 Introduction
The overall standards for banks in a documentary examination and the requirements of
examining general documents under UCP600 have been analysed in Chapter 3 and
Chapter 4. In this Chapter, the author is going to dig into the requirements set up by
UCP for examining the “specific” documents – transport documents. The transport
document is one type of the documents invariably required to be presented under a
commercial letter of credit, because “it serves as an objective and apparently
enforceable assurance by a third party carrier that there are goods and that they have
been shipped as indicated”.464 Without the emergence of the traditional bill of lading
and other developing transport documents, neither international trade nor documentary
credits could have achieved their current state.
A transport document not only demonstrates the status of the shipped goods, but also
evidences the contractual terms under the carriage contract between the shipper and the
carrier.465 Moreover, in the case of a transferable bill of lading, it is regarded as a
“document of title”, which can transfer the constructive possession to its holder.466
Presently, the traditional bill of lading is gradually superseded by other alternative
forms of transport documentation, which are not necessary to perform all the same
functions, but the common role of all transport documents is still the same, i.e.
facilitating international commercial sales and strengthening transaction security. From
the bankers’ perspective, not only do they need to concern themselves with whether the
tendered transport document would fit the requirements set up in the credit, but more
464
465
The contractual relationship was built by statute, Bill of Lading Act (BLA) 1855 and more
developed in Carriage of Goods by Sea Act (COGSA) 1992.
466
There is no unified definition for “document of title”, but some explanation will be given below.
Moreover, the property right brought by the bill of lading will be analysed below.
153
importantly, they have to concern themselves with the security brought by the transport
document against the default parties.
Since 1974, successive revisions of the UCP have responded to the rapid changes in
trading practice and in law. Although the traditional bill of lading still form the
mainstay in the specific provisions, the UCP has already reacted to the increasing use
of non-traditional documentation, in particular multimodal transport documents,
non-negotiable sea waybills and charterparty bills. The current version UCP600 has
succeeded the style under UCP500 and enumerated the acceptable transport documents
in Articles 19-25. If a transport document called by the credit does not fall into the
scope of Articles 19-25, the standard for general documents examination in Article 14
will be applied.467 However, it is regrettable to see that the UCP600 still leaves the
most problematic issue under UCP500 intact. More importantly, these issues are
closely connected with the banks’ security.
In this chapter, the author will endeavour to clarify the issues surrounding the transport
documents from two aspects. Firstly, what types of transport document tendered by the
seller can or must the bank accept under the UCP600? Secondly, what security can the
transport document provide the bank against the default party under the letter of credit
and will this document jointly bring any liabilities on the bank towards another party,
such as the carrier? To avoid an over-bloated discussion, the author will not examine
each and every document mentioned in the UCP, but instead focus on the transport
documents which have taken most of the international market share, i.e. sea-carriage
related documents.
The traditional bills of lading, which are the focus of most of the reported decisions,
will be highlighted in the first instance in Part 5.2. The alternative forms of sea
transport documentation, including sea waybills, straight bills of lading, charterparty
bills of lading and multimodal transport documents will be discussed in Part 5.3 to Part
467
Detailed analysis for requirements under Article 14 can be found in Chapter 4 of this thesis.
154
5.6 respectively. Since the rules covering most of transport articles are very similar, the
author will only elaborate the part concerning bills of lading article by article as an
example. For the remaining documents, the emphasis will be put on the differences
compared with bills of lading, both under the common law and UCP positions.
However, the author will carefully consider the security issues involved by each type
of transport document and provide the most secure way for banks to proceed in every
scenario. In Part 5.2 together with the bills of lading, the author will also illustrate the
miscellaneous provisions in the UCP600 regarding sea transport documents, such as
clean document, on deck cargo and additional freight.
5.2 Negotiable Bills of Lading
Since the emergence of marine carriage towards the close of sixteenth century, bills of
lading have been in widespread use and dominated international carriage over several
hundred years. A traditional bill of lading, in very broad terms, ‘is a two-sided one
page document usually issued by or on behalf of the carrier, acknowledging that goods
have been shipped on board a particular vessel bound for a particular destination’.468
With the changes that have occurred in commercial practice and the development of
standardised container transport, the varieties in bills of lading as well as the other
forms of transport documentation have actively participated in the market. The
common varieties from earliest bills of lading include straight bills of lading,
charterparty bills of lading, received for shipment bills of lading and through bills of
lading.469 However, the bills of lading varieties are not necessary to hold the same
functions and share the same legal status in law as the traditional bills of lading. That is
why the author will analyse different types of bills of lading respectively in the
following parts. In this part, the author will only focus on traditional bills of lading, i.e.
bills of lading which can be transferred for re-selling the goods. For achieving both
academic and practical consistency, the author will use the word “negotiable” to
describe this kind of bills of lading, although the real meaning is “transferable” rather
468
Filippo Lorenzon, Sasson: CIF and FOB Contracts (5th edn, Sweet & Maxwell 2012) 115
469
Through bills of lading, are deduced into multimodal bills of lading discussed in Part 5.6
155
than “negotiable” in law.470
5.2.1 Legal status and functions of the bills of lading
The reason that the bill of lading (B/L) is crucial to the smooth running of international
trade and the documentary credit system lies in that the B/L is regarded to be a
“document of title”.471 Dating back to the early common law case Lickbarrow v
Mason,472 in which the court recognised a custom of merchants that a shipped bill of
lading enabled the holder to transfer the property in the goods to the transferee. Then in
Sanders Brothers v Maclean & Co,473 Bowen LJ in the Court of Appeal described the
B/L as “the key to unlock the door of the warehouse” and held that “the endorsement
and delivery of the bill of lading operates as a symbolical delivery of the cargo”.474
Although it was established later in Sewell v Burdick475 that the transfer of a B/L is not
necessary to transfer the property of the goods because the property could only be
passed when the parties intended to do so, it was still no doubt that the transfer of a
B/L would create a special legal title, which can give the holder of B/L “a pledge
accompanied by a power to obtain delivery of the goods when they arrive, and to
realise them for the purpose of the security”.476 Therefore, it is evident that a B/L, as a
document of title, can give the transferee a constructive possession of the goods as well
as the right to control and dispose of them, and even the right of property if so
intended.
Apart from being “document of title” at common law, B/L also acts as a receipt of the
470
The word “negotiable” has been used both in the UCP600 and the Hague-Visby Rules. However, the
bills of lading are traditionally regarded as non-negotiable since a transferor cannot transfer a better title
than he has. See Michael Bridge (ed), Benjamin’s Sale of Goods (8th edn, Sweet and Maxwell 2010)
para 18-111; Paul Todd, Bills of Lading and Bankers Documentary Credits (4th edn, Informa Publishing
2007) para 3.17 fn 24; Charles Debattista, Bills of Lading in Export Trade (3rd edn, Tottel Publishing
2009) para 3.6
471
However, there is no authoritative definition of “document of title” at common law. See Michael
Bridge (ed), Benjamin’s Sale of Goods (8th edn, Sweet and Maxwell 2010) para 18-007
472
Lickbarrow v Mason (1794) 5 TR 683
473
Sanders Brothers v Maclean & Co (1883) 11 QBD 327 (CA)
474
Sanders Brothers v Maclean & Co (1883) 11 QBD 327 (CA) 341
475
Sewell v Burdick (1884) 10 App Cas 74 (HL)
476
Sewell v Burdick (1884) 10 App Cas 74 (HL) 105
156
goods in charge of the carrier for delivery. The carrier will put the time of shipment
and the port of loading in the B/L. Moreover, the carrier will normally specify the
description of the goods as well as their apparent order and condition in the B/L. These
statements will offer the cargo-interests an assurance when paying against the
document. Meanwhile, these statements on the B/L will become the conclusive
evidence for the third party to whom the B/L had been transferred against the default
carrier in case of cargo damage or non-delivery.477
The third function of the B/L is to act as evidence of the contract of carriage. Usually
the B/L contains a number of carriage clauses contracted between the carrier and the
consignor on its reverse side; however, the contractual rights and obligations
represented by these clauses can now be vested in the third party who becomes a
lawful B/L holder under the COGSA1992.478 As we will see later, if a party can bring
himself within one of the categories listed in the Act, he will obtain the title to sue the
carrier under the contract of carriage evidenced in the B/L for the situation of loss,
damage or short-delivery. However, before digging into the security offered by B/L
under English law, the author would like to first look at what kind of B/L is acceptable
under UCP600 Article 20 and whether the stipulations under UCP600 can sufficiently
protect banks from suffering the loss.
5.2.2 Requirements under UCP600 Article 20
Generally speaking, there are not many substantial differences between the
requirements under UCP500 Article 23 and those listed in the UCP600 Article 20,
although the language has been somewhat simplified. However, from another
perspective, the congenital deficiencies left by the UCP500 mainly remain in the
UCP600. In this part, the author is going to examine the requirements set out by the
UCP600 Article 20 with the aid of the latest ISBP revision in 2013, i.e. ISBP No.745,
477
See COGSA1971 Article III. 4 and COGSA 1992 s.4
478
COGSA 1992 s.2(1)(a). The COGSA 1992 has effectively built a bridge for the privity gap between
the carrier and the third party. Moreover, different from the Bill of Lading Act 1855, the contractual right
for the B/L holder under COGSA 1992 has separated with the property issue.
157
so as to further analyse the loopholes. The analysis will mainly follow the order of the
UCP600 Article 20 provisions. The analysis will start from delimiting the application
of Article 20 and then examine the issues covered by Article 20 concerning a
negotiable B/L, including issuance and signature, shipment and route, role of carriage
terms and transhipment.
5.2.2.1 Application of Article 20
UCP600 Article 20 addresses its application to the general bills of lading, “however
named”, without specifying more details. Comparatively, it has omitted the phrase
“covering a port-to-port shipment” under the corresponding article in UCP500.479
However, this omission does not mean that the UCP600 Article 20 is intended to
extend its scope more than covering a marine, ocean bill of lading. This conclusion can
be reached by referring to the ISBP provisions. In the ISBP No.681 paragraph 91, it
makes clear that Article 20 is applicable if a credit requires presentation of a bill of
lading covering sea shipment only. Moreover, the ISBP No.745 further explains that
Article 20 is to be applied only if a credit is calling for a transport document merely
covering a “port-to-port shipment”,480 i.e. “a credit that contains no reference to a
place of receipt or taking in charge or place of final destination.”481
A bill of lading need not be titled “marine bill of lading”, “ocean bill of lading”, “port
bill of lading” or words of similar effect, since Article 20 is applicable to bills of lading
covering port-to-port shipment, however named. The ISBP No.745 section E2
emphasises that even when the credit so names the required document, the bill of
lading is not necessary to bear the same title. It is the function rather than the name of a
transport document to decide whether Article 20 is going to apply. For example, a
479
UCP500 Article 23(a)
480
The port should mean an ocean port, rather than an inland waterway port, since an inland waterway
bill will fall within UCP600 Article 25. However, arguably, the wording in the ISBP No.745 section E1
is not as precious as it intends to be. Deletion of “sea shipment” from the ISBP No.681 para.91 does
achieve conciseness but at the same time the new version creates the space for imagination.
481
ISBP No.745 section E1. If a transport document combines the sea carriage with other carriage, such
as carriage by land, it will be considered as a multimodal transport document, which will fall within the
UCP600 Article 19.
158
document which is in a form of a standard combined transport document can still be
regarded as an acceptable tender against a credit requiring a bill of lading, as long as it
relates exclusively to sea carriage and meets the other requirements under Article 20.482
Nevertheless, Article 20 is not applicable to all types of bills of lading. Charterparty

bills of lading are one type of bill of lading excluded by Article 20 and they are under
the province of UCP600 Article 22.483 Article 20 (a) (vi) addresses that a bill of lading
under this article should not contain any indication that it is subject to a charterparty. A
transport document mentioning “freight payable as per charterparty”, will be treated as
a charterparty bill of lading under UCP600, since it is subject to or has a reference to a
charterparty. By contrast, a document heading a name normally associated with a
charterparty bill of lading, such as “Congenbill” or “Tanker Bill of Lading”, but
without any further reference to that charterparty,484 will be examined as a usual bill of
lading under Article 20.485 Once again, substance rather than the title determines
whether a transport document will belong to Article 20.
Clearly, Article 20 is designed to apply to all types of bills of lading other than
charterparty bills. It, therefore, covers both negotiable and straight bills of lading.486
However, the basic rule is that, unless the documentary credit requires such a
document, the bank will not accept that document, even though it can fall into the
scope of Article 20. Thus, if the credit requires a negotiable bill of lading, a straight bill
of lading which is consigned to a named person will not be acceptable. Based on the
special status of straight bills of lading, the author would like to discuss them
particularly in a separate part and the negotiable bills of lading are the subject-matter
482
Gary Collyer (ed), Opinions of the ICC Banking Commission on UCP 500 (1995-1996) (ICC
483
A transport document, however named, containing any indication that it is subject to, or any
reference to, a charterparty is deemed to be a charterparty bill of lading. The author will focus on
charterparty bill of lading later in this chapter.
484
A Congenbill with the heading “Bill of Lading to be used with Chater Parties” will be considered as
a charterparty bill; however, if a Congenbill is presented without this reference, it will be examined
under article 20. See ICC Opinions 2005-2008, R648.
485
ISBP No.745, section G3
486
ISBP No.745, section E12
159
focused on here.
5.2.2.2 Issuance of a bill of lading
A. Identification of the carrier
UCP600 Article 20 (a) (i) firstly requires that a bill of lading “must appear to indicate
the name of the carrier”, which in other words, requires that a bill of lading must state
the name of the carrier on its face.487 It is unclear here whether the appearance of a
carrier’s name is sufficient or it is necessary to point out the identity of that name. The
issue is effectively supplemented by the ISBP, which not only requires the indication of
the carrier’s name, but also identifies that name as the carrier.488 Therefore, a bill of
lading that indicates only the company’s name “XYZ Ltd” is not enough, since it is
difficult for the bank to assess whether such a company is the carrier. The word
“carrier” appears on the bill of lading must be linked to the name of the company.
There is no express requirement in the UCP600 which governs the specific position of
the carrier’s name on the face of the bill of lading. It can be demonstrated by a
letterhead of a company bill or by a specific reference added in the middle of the page
on a public bill which is for general use. The manner of identifying the carrier is not
exclusive. It can simply be achieved by adding a specific reference on the face of the
bill of lading, such as “XYZ Ltd, the carrier”, or by signing the document with capacity,
e.g. “For XYZ Ltd as carrier”. Nevertheless, one point was raised by the Position Paper
No.4 under UCP500, which stipulated that the name of the carrier must appear on the
front of the document.489 It further emphasised that banks would reject documents
which failed to indicate the name of the carrier on the front of the document, even
487
488
ISBP No.681, para.94; ISBP No.745, section E5. The requirement of identifying the carrier is also
referred by the Hong Kong case Southland Rubber Co v Bank of China [1997] 2 HKC 569. Nonetheless,
the author believes a small change in the wording of the UCP600 will be better than clarifying it in the
ISBP. Article 20 (a) (i) can be amended as “a bill of lading must indicate the name of the carrier,
identified as the carrier…”
489
Although it is authoritatively unclear whether these position papers are effective under UCP600, the
author believes they still have the persuasive effect to the extent that the provisions in UCP600 remain
similar to those of UCP500.
160
though the identity of the carrier might be indicated on the back of the document.490
However, since the Position Paper would not take effect under UCP600, it is pending
for the ICC Banking Commission to clarify the situation.491 Before that, the safest way
to satisfy the requirement under Article 20 (a) (i) is still to indicate the carrier’s name
as well as identify the carrier altogether on the front page of the bill of lading.
As mentioned above, a bill of lading works as evidence of a carriage contract and it is

fundamental requirement to know who is undertaking the carriage. If a document is
issued by a company called “XYZ Ltd” as the carrier, it can possibly be the vessel
owner, a charterer or anyone who has the right to the vessel. However, the bank is not
required to identify the carrier from the perspective of carriage of goods by sea. It is
well established that the bank is only obliged to determine whether a document appears
to be compliant or not without further investigation.492 Moreover, the bank is not
responsible for the genuineness and sufficiency of the documents. 493 The research for
the capacity of in which the company is acting is obviously beyond the scope of bank’s
duty. Therefore, banks are merely obliged to follow the shortcut designed by the ICC
Banking Commission, i.e. the requirement of identifying the carrier is satisfied as long
as there is an indication on the face of the document to identify the carrier.
B. Signature in a bill of lading
The UCP600 Article 20 (a) (i) also goes on to describe what is required by way of
signature.494 A bill of lading can be signed by the carrier, the master or a name agent.
However, a simple signature on the bill of lading does not suffice. Article 20 (a) (i)
requires the capacity of the person who signs the bill of lading must be identified.
Therefore, the word “carrier”, “master” or “agent” must be added respectively in the
490
The reason is that under UCP500 Article 23 (a) (v), banks would not examine the back of the
document containing the terms and conditions of carriage. It has been applied to the ICC Opinion R760
under UCP600. See ICC Opinions 2009-2011, R760.
491
According to the analysis in Chapter 3 of this thesis, it is clear that “the face of the document” under
UCP600 should not mean the front page of the document only.
492
See Chapter 3 of this thesis.
493
UCP600 Article 34
494
UCP600 Article 3 recognises different methods to sign a document, but the issue will not be
particularly discussed here.
161
signature box after the signature. However, if a bill of lading is already identified
elsewhere on the front of the bill of lading, it is not necessary for the carrier to be
named again at the location where the carrier or the agent signs the bill of lading.495 In
addition, if the party is signed as the agent, the name of that agent must be included, as
well as demonstrating the principal for whom it is signing.496
It should be noted that the requirements of signature has not changed between UCP500
and UCP600, apart from when the bill of lading is signed by an agent on behalf of the
master. Different from UCP500 Article 23 (a) (i), UCP600 Article 20 (a) (i) does not
require stating the name of the master.497 ‘The transportation industry pointed out that
it is quite common for agents not to know the name of the master of a vessel at the
time the transport document is issued, and therefore the name of the master should not
need to be indicated on the bill of lading.’498 It has also been suggested that the name
of the master was irrelevant to the letter of credit examination, although the status
(whether for the carrier or master) mattered.499 Consequently, the argument has been
recognised by the rules, which currently require all the parties identifying the capacity,
but only the carrier and the agent need to be named.500
C. Bills of lading signed by freight-forwarders
The terms “forwarder bill of lading” and “freight forwarder’s bill of lading” are
frequently used in the letter of credit; however, these terms were not defined
specifically in the UCP600 and many disputes were generated there. It is common in
international trade to engage a freight forwarder in the process of arranging for
495
ISBP No.745, section E5 (c). In addition, section E5 (b) supplements that “when a bill of lading is
signed by a named branch of the carrier, the signature is considered to have been made by the carrier”.
496
The article does not treat the master as the normal agent to demonstrate the principal. It is enough if
the carrier is named on the bill of lading and the master has signed as the master. The reason has been
presumed to be “because it is within the ordinary authority of a master to issue bills of lading on behalf
of the party who has the right to the use of the vessel”. See Jack, para.8.89.
497
See ISBP No.681, paragraph 94 (b); ISBP No.745, section E5 (d) It should be noted that the
corresponding paragraph 4 in Position Paper No.4 which required stating the name of the master would
be overruled by the new provision under UCP600.
498
499
500
ISBP No.745, section E5 (d) & (e)
162
carriage of goods by sea and it may perform a variety of roles. It may be acting as an
agent of the cargo owner or the shipper of the goods, and in certain cases, it may enter
into a carriage contract as a contractual carrier. Alternatively, it may be acting as an
agent of for the actual carrier to sign a bill of lading.
It is clear that a bill of lading may be issued by any party other than a carrier or master
provided that the transport document meets the requirement of Article 20.501 There is
no legal impediment or reason why a freight forwarder is unable to sign the bill of
lading as an agent of the carrier, since by then, the bill of lading will be considered as
an acceptable bill of lading between the shipper and the carrier as long as it satisfies
the requirement under Article 20. 502 However, the situation may become quite
controversial if a bill of lading is signed by a freight forwarder in its own capacity or in
the capacity of an agent for the shipper, since it is not strictly considered as a normal
bill of lading.503 Such bills of lading are often referred to “freight forwarder’s bill of
lading” or “house bill of lading”.
If a document is issued by a company called “XYZ Ltd” and on the face of the
document identified it as the carrier, it is possible that “XYZ Ltd” is a freight forwarder
acting in its own capacity rather than a shipping company who actually carries the
goods. Nevertheless, it is very difficult to tell from the appearance of the bill of lading.
In whose capacity a freight forwarder signs a bill of lading depends entirely on the
facts of each case and the arrangements between the parties. ‘In these circumstances, it
will be impractical to impose such an onerous duty on the bank to investigate the legal
status of the signing party when it is not privy to the arrangements entered into by the
parties to the shipping transaction.’ 504 If banks are not going to investigate the
underlying facts, how can they ensure the real capacity of the person who has signed as
501
ISBP No.745, section E3; also cf. UCP600 Article14 (l)
502
Abani Trading Pte Ltd v BNP Paribas [2014] SGHC 111, [2014] 3 SLR 909 [39]
503
Stephen Girvin, Carriage of Goods by Sea (2nd edn, OUP 2011) para 3.21 It is suggested that the
freight forwarder bills of lading cannot perform three functions as a “normal” bill of lading since they
are not regarded as documents of title to the goods.
504
Abani Trading Pte Ltd v BNP Paribas [2014] SGHC 111, [2014] 3 SLR 909 [40]
163
the carrier on the bill of lading?
The UCP600 does not respond to this specific point as directly as the UCP500 did, but
instead it explains the issue in the ISBP.505 If a credit states “freight forwarder’s bill of
lading is acceptable” or words of similar effect, a bill of lading may be signed by a
freight forwarder in its own capacity, without the need to identify the capacity in which
it has been signed or the name of the carrier.506 On the other hand, the ISBP No.745
section E4 emphasises that the term “freight forwarder’s bills of lading are not
acceptable” or words of similar effect “has no meaning in the context of the title,
format, content or signing of a bill of lading unless the credit provides specific
requirements detailing how the bill of lading is to be issued and signed”. Therefore, in
the absence of these requirements, the stipulation of “freight forwarder’s bills of lading
not acceptable” is to be disregarded, and the bill of lading presented is to be examined
according to the requirements of UCP600 Article 20.507
Clearly, issuance of a bill of lading by a freight forwarder is an established and

acceptable practice under the UCP. However, in the context of UCP600, the expression
“freight forwarder’s bills of lading” will not take the same effect in the process of
documentary examination as it does under carriage of goods by sea. 508 A document
checker will not be in a position to determine the status of the signing company when it
signs as carrier.509 Terms, which exclude freight forwarder’s bills of lading but do not
clearly define the type of document that would be acceptable, are ambiguous and will
be disregarded. As long as a bill of lading can pass through the two tests under Article
20 (a) (i), i.e. identifying the carrier and following the rule of signature, it will be
accepted by banks.
505
UCP500 Article 30 dealt with the issue of freight forwarder bills of lading. However, the specific
article has been deleted in the UCP600 itself, but instead it has been put into the ISBP.
506
ISBP No.745 section E3 (b)
507
ISBP No.745 section E4, which was not included in the ISBP No.681. See also ICC Opinions
2005-2008, R643
508
If a freight forwarder signs as carrier, the bill of lading becomes a carrier document. See ICC
Opinions 2005-2008, R643
509
164
5.2.2.3 Shipment of the goods
The UCP600 Article 20 (a) (ii) stipulates that a bill of lading must “indicate that the
goods have been shipped on board a named vessel at the port of loading stated in the
510
credit”. In the absence of the contrary statement in the credit, a
received-for-shipment bill of lading will not be accepted by the bank. Clearly, the UCP
requirement is in line with the traditional common law position in which a
received-for-shipment bill is not a good tender under an international sale contract.511
It has been argued that a received-for-shipment bill could neither acknowledge the
actual shipment nor afford adequate security to the bank under a letter of credit. Since
a received-for-shipment bill of lading has not traditionally been recognised as a
document of title at common law, it is doubtful whether it could give its holder
bailment rights against the carrier.512 Although the problem has been partly solved by
the COGSA1992 which confers the “lawful holder” of a received bill of lading a
contractual title to sue the carrier, the traditional bias towards shipped bill of lading is
still strong.513 More fatally, the evidential problem still remains, since a received bill
cannot function as a receipt for the goods shipped without the aid of an on board
notation.
UCP600 Article 20 (a) (ii) provides two ways to satisfy the requirement for a shipped
bill of lading, i.e. by pre-printed wording or by an on board notation indicating the date
of shipment.514 The date of issuance of the bill of lading will be deemed to be the date
510
Once again, the substance prevails over the title. Any phrases that incorporate “shipped” or “on
board” which have the same effect as the words “shipped on board” are acceptable, such as “Shipped in
apparent good order”, “Laden on board”, “Clean on board” etc. See ISBP No.745, section E7
511
Diamond Alkali Export v Bourgeois [1921] 3 KB 443; Yelo v SM Machado [1952] 1 Lloyd’s Rep 183
(QB)192
512
Diamond Alkali Export v Bourgeois [1921] 3 KB 443, in which McCardie J distinguished The
Marlborough Hill [1921] 1 AC 444 and held that a received for shipment bill cannot be regarded as
document of title, without proof of custom.
513
COGSA1992 s 1 (2) (b) has specifically covered received-for-shipment bills of lading and s 2 (1) (a)
confers its holder the title of suit.
514
UCP400 Article 26 (a) (ii) required an on board notation carrying both the date of shipment and the
initials or signature of the carrier or his agent. The need for initials or an extra signature has been
dispensed since UCP500 and the requirement for on board notation has been relaxed as to simply require
the date of shipment. The relaxation coincides with the Hague-Visby Rules Article III (7) [incorporated
by COGSA1971], under which the shipper (normally the seller) has no right to demand an additional
165
of shipment unless the bill of lading bears a separate date on board notation, in which
case the date stated in the on board notation will be deemed to be the date of shipment,
no matter if it is before or after the issuance date of the bill of lading. 515 If the bill of
lading contains two different “shipped on board” dates, i.e. one from pre-printed
wording “shipped on board” and the other from the on board notation, the conflict will
not constitute a ground for rejection and the date in the on board notation will be
treated as the date of shipment.516 Consistent with the autonomy principle, banks are
only required to check the shipment status on the face of the bill of lading, rather than
to ascertain whether the goods have been in fact shipped on the “deemed” date of
shipment.517
Article 20 (a) (ii) emphasised that the goods have been shipped on board a “named
vessel” as stated in the credit. If the bill of lading contains the indication “intended
vessel” or similar qualification in relation to the name of the vessel, an on board
notation is needed which must indicate both the date of shipment and the name of the
actual vessel.518 The additional notation is necessary even where the vessel actually
carrying the goods is the same as it was intended. Moreover, according to Article 20 (a)
(ii), the bill of lading must indicate that the goods have been shipped on board “at the
port of loading stated in the credit”. If the bill of lading indicates a different place or if
the port of loading is qualified as “intended”, an on board notation is required as
described next, even if the bills are pre-printed in a shipped-on-board form.
5.2.2.4 The route
A. Port of loading
signature with the on board notation.

515
See UCP600 Article 20 (a) (ii); ISBP No.745, section E6 (a). However, the bill of lading must
evidence a date of shipment within the permitted shipment period under the credit.
516
See ICC Unpublished Opinions 1995-2004, R572.
517
Westpac Banking Corp v South Carolina National Bank [1986] 1 Lloyd’s Rep 311, 315-316
518
UCP600 Article 20 (a) (ii) However, according to the interpretations of the ICC Commission on
Marine Transport, a bill of lading which in its pre-printed form uses the words “or substitute vessel” is
not to be considered as a qualification similar to “intended vessel” here. See ICC Opinions 1995-2001,
R349 which has replaced the conclusion of Query R283 in Gary Collyer (ed), More Queries and
Responses on Documentary Credits - Opinions of the ICC Banking Commission 1997 (ICC Publication
No.596, ICC 1998)
166
The UCP600 Article 20 (a) (iii) requires that the bill of lading must indicate shipment
from the port of loading to the port of discharge stated in the credit. It further states
that if the port of loading in the bill of lading is different from what has been stated in
the credit, or if the port is qualified as “intended” or by similar words, an on board
notation containing the port of loading, the date of shipment and the name of the vessel
must be added on the bill of lading. Compared with the corresponding provisions under
UCP500, the statement under UCP600 Article 20 is much simplified. Moreover, the
UCP600 deletes the wording that appeared in UCP500 Article 23 (a) (ii) dealing with a
place of receipt or taking in charge different from the port of loading, since the
wording in UCP500 was seen to encourage the presentation of a document covering
pre-carriage of the goods. 519 However, unexpectedly, the omission caused more
confusion on the specific requirements of on board notation, which had already been
complicated enough.520
It is common in practice that the contract of carriage may contain the clause for the
goods to be collected from an inland point for delivery to the port of loading for
loading onto the vessel, but the letter of credit only refers to shipment from port to port.
The bill of lading may consequently evidence a place of receipt that is different to the
port of lading or even include the details of pre-carriage.521 The bill of lading may also
contain the pre-printed wording “shipped on board in apparent good order and
condition” or add an on board notation with the date of shipment as usual.
Consequently, the problem is how can a document examiner determine that “shipped
519
UCP500 Article 23 (a) (ii) reads: “If the bill of lading indicates a place of receipt or taking in charge
different from the port of loading, the on board notation must also include the port of loading stipulated
in the credit and the name of the vessel named in the bill of lading. This provision also applies whenever
loading on board the vessel is indicated by pre-printed wording on the bill of lading.” See Gary Collyer,
Commentary on UCP600: Article by Article Analysis by the UCP600 Drafting Group (ICC Publication
No.680, ICC 2007) 91
520
The problem concentrates on whether the on board notation requires more than just a date when the
bill of lading indicates place of receipt and/or pre-carriage details.
521
Pre-carriage refers to the carriage between the stated place of receipt and the stated port of loading
on a bill of lading. See ICC Banking Commission, Recommendations of the Banking Commission in
respect of the Requirements for an On Board Notation (Document No 470/1128 rev final, 22 April 2010)
8
167
on board”522 statement is connected with the sea-going vessel at the required port of
loading, rather than with any other means of conveyance for the pre-carriage of the
goods between a place of receipt and the port of loading, by solely reading text on the
face of the bill of lading. With respect to this problem, the ICC Banking Commission
endeavours to provide a detailed guidance concerning the requirement of on board
notation to the bank, so that the bank can draw a conclusion from simply reading the
words on the face of the transport document.523 The baseline is that unless the shipped
on board statement on the bill of lading evidently applies to the vessel and the required
port of loading, a specific on board notation is required.524
The distinction can be set up between whether the bills of lading contain the
pre-carriage details or not.525 When there is no indication of a means of pre-carriage,
the bill of lading will be acceptable if it contains the “shipped on board” statement
(pre-printed wording or by a separate notation as stipulated in Article 20 (a) (ii)), no
matter whether the bill of lading indicates a place of receipt and whether the place of
receipt is the same as the port of loading stated in the bill of lading or different.526
Nevertheless, it is subject to one exception. If there is an express clause on the face of
the bill of lading to indicate that, when the place of receipt box has been completed,
“loaded on board” or words to like effect shall be deemed to be on board the means of
transportation performing the carriage from the place of receipt to the port of loading, a
specific on board notation showing the port of loading and the name of the vessel is
needed, even without seeing the details of pre-carriage on the bill of lading.527
522
It can be a part of the text in a pre-printed form or as an on board notation added to the bill of lading.
523
ICC Banking Commission, Recommendations of the Banking Commission in respect of the
Requirements for an On Board Notation (Document No 470/1128 rev final, 22 April 2010), which has
been incorporated into the ISBP No.745 section E6 without major changes.
524
525
With due respect, the author believes that the ISBP No.745 section E6 (b) and (c) are not drafted
very concisely and skilfully. The section seems to mirror-image the conclusion wording in the ICC
Recommendation Paper. The section has taken two pages to describe the different circumstances, but the
only decisive point for drawing an acceptable on board notation is to distinguish whether there is a
pre-carriage.
526
ISBP No.745, section E6 (b). This new rule has replaced the ICC Opinion R644 which required an
on board notation in the circumstance of no pre-carriage details but with a different place of receipt.
527
ISBP No.745, section E6 (d) However, the author doubts how can the bank observe such a clause if
the bank is not going to examine the terms of carriage in the bill of lading as stated in Article 20 (a) (v).
168
By contrast, when a bill of lading indicates a place of receipt different from the port of
loading and there is also an indication of pre-carriage (either in the pre-carriage field or
the place of receipt field), an on board notation containing the date of shipment, the
name of the vessel and the port of loading as stated in the credit must be added to the
bill of lading, no matter that the bill of lading is in a pre-printed shipped form or in a
received-for-shipment form.528 The requirement remains the same even if there is no
place of receipt shown in a bill of lading. As long as there is an indication of
pre-carriage, the on board notation with the three elements described above must be
added on the bill of lading.529
The above rules set out by the ISBP No.745 seem pretty clear. If a bill of lading
indicates the details of pre-carriage, in whatever form, an on board notation containing
the time of shipment, the name of the vessel and the port of loading is necessary. If a
bill of lading does not address the details of pre-carriage, it will be acceptable as long
as it shows the goods have been shipped on board, since the bank supposes to be able
to connect “shipped on board” or words of similar effect with the sea journey, rather
than linking with any pre-carriage. It is suggested that although the situation that
appeared in UCP500 Article 23 (a) (ii) regarding “the place of receipt or taking in
charge different from the port of loading” has not been incorporated into UCP600
Article 20, the position remains unchanged. Evidently, the ICC Banking Commission
has endeavoured to follow developments in the transport industry and cater for cases
where the carrier receives the goods at a point earlier than the port of loading.
Nevertheless, a few problems will come up if we take a step back and have another
review at the whole picture.
Firstly, the compromise of allowing different modes of pre-carriage may undermine the
528
ISBP No.745, section E6 (c)
529
If the place of receipt is the same as the port of loading in the bill of lading, it is deemed that no
pre-carriage is needed. If the pre-carriage box in the bill of lading is however completed, a three-element
on board notation which contains the date of loading, the place of loading and the name of the ocean
vessel must be added. See ICC Opinions 1995-2001, R350, R457
169
scope of Article 20. In order to fit the market practice, the ICC Banking Commission
concludes that ‘a bill of lading is a generic term for a transport document that includes,
but is not necessarily limited to, transport by sea from a port of loading to a port of
discharge.’530 It is recognised that there will be occasions when the shipping company
or its agent will include reference to a place of receipt or taking in charge that is
different from the port of loading, whether it is a feeder port or an inland point.531 To
cover this eventuality, the ICC Banking Commission designs a set of rules concerning
the on board notations as stated above, so as to lead bankers to determine the
acceptability of a bill of lading which contains a pre-carriage by the inland conveyance.
A bill of lading covering two different modes of transport may not be considered as a
combined transport document and may not be rejected for that reason, provided it
contains a dated on board notation specifying the port of loading and the vessel’s
name.532
It is clear from the beginning of this chapter that the bank will accept the document,
“however named”, as long as it satisfies the requirements under the credit and the UCP.
The name of the document does not necessarily have to represent its content. Whether
the document falls within Article 19 or Article 20 is a test of substance not form. For
example, a document only covering a single means of transportation cannot be
regarded as a multimodal transport document, even though it has been named so.
Arguably, in principle, a so called “bill of lading” containing more than one means of
transportation on the face of the document should not be examined under Article 20,
which only applies to a bill of lading covering transport by sea from one port to
another port.533 When any other means of conveyance apart from sea carriage is
envisaged, the parties should ensure that the credit allows for a multimodal transport
document under UCP600 Article 19.
530
ICC Opinions 2005-2008, R648, R645
531
532
ICC Opinions 2005-2008, R648, R645
533
If a credit requires the presentation of a marine bill of lading and either the port of loading or
discharge, as specified in the credit, is not actual ports, an amendment should be obtained so as to call
for a multimodal transport document. See ICC Opinions 1995-2001, R454
170
If a credit is only calling for a multimodal transport document, presenting a document
which contains sole sea carriage may not be acceptable. Comparatively, is it fair to
accept a transport document containing two or more modes of transport when the
credit specifically calls for a marine bill of lading and prohibits presentation of other
documents? If a transport document containing both an inland conveyance (by air, rail,
road or inland waterway) and a sea carriage is acceptable under Article 20, the need for
stipulating a separate Article 19 for multimodal transport documents will be
significantly diminished, since the scope between these two articles will be largely
overlapping. In this perspective, the rules in the ISBP No.745 appear to be inconsistent
with the scope of Article 20, since these rules are dating back to the position under
UCP500 and catering for combined transport operations, which are designed to be
covered exclusively by UCP600 Article 19.534
In order to distinguish a bill of lading containing pre-carriage details with a multimodal

transport document, the ICC Banking Commission shifts the emphasis to the on board
statement, i.e. the on board statement in the bill of lading must be in correspondence
with the port of loading and the port of discharge stated in the credit. As long as the on
board notation can correct the inconsistencies and make sure that the notated port is
compliant with the credit, the bill of lading containing more than one mode of transport
will still be accepted under Article 20.535 This solution is able to temporarily provide a
practical guidance for the bankers in the process of documentary examination; however,
the problem has not been solved radically, especially when the credit only states a
geographical range for loading and discharge.536
As Figure 5 illustrated, assuming the credit states loading at any Chinese port and
534
In Paul Todd, Bills of Lading and Bankers Documentary Credits (4th edn, Informa Publishing 2007)
para 8.12, it states that ‘there is no equivalent in Article 20 of UCP600, multimodal transport now being
covered exclusively by Article 19.’
535
ICC Opinions 2005-2008, R648, R645
536
When a credit indicates a geographical area or range of ports of loading, a bill of lading is supposed
to state the actual port of loading within that geographical area or range of ports of loading. The
geographical area itself is not required to show on the bill of lading. See ISBP No.745 section E6 (g).
171
shipping to Southampton, with transhipment allowed, the tendered bill of lading
provides the following details respectively:
Bill of Lading 1 Bill of Lading 2

Port of Receipt: Qingdao Port of Receipt: Wuhu
Pre-Carriage by: Vessel A Pre-Carriage by: Vessel A
Port of Loading: Shanghai Port of Loading: Shanghai
Ocean Vessel: Vessel B Ocean Vessel: Vessel B
Port of Discharge: Southampton Port of Discharge: Southampton
Figure 5
Since both bills of lading contain the details of pre-carriage, according to the ISBP
No.745 section E6 (c) above, a dated on board notation indicating the name of the
vessel and the port of loading as stated in the credit must be added to the bill of lading.
For the Bill of Lading 1, when Shanghai is used as the port of loading, the on board
notation must indicate “Shipped on board Vessel B at Shanghai as the port of loading
on XXX (date)”, so that the on board statement can relate to the main carriage.
Alternatively, Qingdao is a Chinese port which may be qualified as the port of loading
in the credit as well, even though it has been put down in the bill of lading as the place
of receipt. Since it is uncommon for the bill of lading in current use to provide fields
for the ports of transhipment, the port of loading stated in the credit is always
customarily noted as the place of receipt and the transhipment port is subsequently
added in the field of port of loading. 537 The inconsistent data, however, can be
rectified by adding an on board notation with the actual port of loading. 538 In the
current example, the bank will regard Qingdao as the port of loading if the bill of
lading contains an on board notation which indicates “Shipped on board Vessel A at
Qingdao as the port of loading on XXX (date) for transhipment via Shanghai on Vessel
B”.
537
(ICC Publication No.680, ICC 2007) 92. See also ICC Opinions 1995-2001, R227
538
See ISBP No.745, section E6 (e). See also ICC Opinions 1995-2001, R458, R460
172
Consequently, since the credit does not stipulate a specific port of loading, the bill of
lading may indicate the port of loading as either the port (Shanghai in the current
example) where the goods have been loaded on board the ocean vessel or the port
(Qingdao in the current example) where the goods have been loaded on board the
feeder vessel. In each case, additional notation as stated above must be added on the
bill of lading.
The format in the Bill of Lading 2 looks very similar to that in the Bill of Lading 1.
The on board notation may mark the ocean port Shanghai as the port of loading by
stating “Shipped on board Vessel B at Shanghai on XXX (date)”. Nevertheless,
different from Qingdao in the Bill of Lading 1, Wuhu probably cannot be an alternative
port of loading even with the aid of the on board statement such as “Shipped on board
Vessel A at Wuhu as the port of loading on XXX (date)”, because Wuhu is an inland
river port and the inland waterway carriage from Wuhu to Shanghai is arguably under
the scope of UCP600 Article 24.539 If Wuhu is used as the port of loading, the entire
carriage from Wuhu to Southampton must at least contain both the inland waterway
carriage and the sea carriage. In this circumstance, the tendered transport document
must be a multimodal transport document under article 19 rather than an ocean bill of
lading under Article 20 as required by the credit. Moreover, turning back to the
practical solution provided by the ISBP No.745 E6 (c), another on board notation
which can relate to the ocean carriage from Shanghai to Southampton is still required,
since the on board statement “Shipped on board Vessel A at Wuhu as the port of
loading on XXX (date)” only confirms the goods have been shipped on board for the
inland waterway pre-carriage.
However, the most challenging problem here is whether a bank is able and obliged to
identify a foreign port being an ocean port or inland waterway port, so as to tell the
needs for the second on board statement. Is a reasonable banker supposed to know the
539
UCP600 Article 24 covers the carriage by road, rail or inland waterway.
173
difference between Qingdao and Wuhu without making queries to the external
resources? The answer is possibly no, but unfortunately the bank who is unaware of the
situation and induced to accept the discrepant document may be the party paying for
the loss caused by the less specific requirement in the credit and the impracticality of
the rules.
It is clear that the ISBP rules for judging the on board shipment have been very
detailed, but certain problems are still unavoidable. The ISBP rules for on board
notations works perfectly well when the whole journey is connected by two or more
legs of sea journey, especially when the entire carriage is partly performed by a
container feeder vessel and partly performed by a mother line vessel.540 As stated
above, the ISBP rules for on board notations can also provide the beneficiary an
opportunity to rectify the inconsistent port of loading stated in the bill of lading,
especially when the port of transhipment is customarily put down into the box of port
of loading.541 The rules seem also quite handy when apply to an inland place of receipt
with the pre-carriage by air, road or rail. However, practical difficulties for judging an
on board notation will rise up when the credit only draws a geographical area and the
place of receipt is a feeder port with a pre-carriage by inland waterway. It is difficult to
make the rules perfect unless fundamentally changing the whole structure of the UCP
transport articles. However, if the applicants and the banks can carefully select the
transport document which reflects the correct routing and appropriate means of
conveyance, many of the issues seen above would be avoided.542
B. Port of discharge
The UCP600 has provided detailed texts dealing with identifying the port of loading;
however, it does not mention the circumstance concerning a different port of discharge
540
It is also commonplace in the container trade to use a feeder service, which is utilized by the carrier
to bring cargo from a number of ports to a hub port or vice versa. See ICC Opinions 1995-2001, R227,
R352, R459, R460
541
It arguably reflects the relaxation of doctrine of strict compliance under UCP.
542
Most shipments today seem to contain an element of multimodal transport and perhaps. Therefore,
the parties should ensure that the credit allows for a multimodal transport document to be presented.
174
stated in the bill of lading. The ISBP No.745 has effectively supplemented this gap.
The ISBP No.745 section E8 (a) requires that the named port of discharge, as stated in
the credit, should appear in the port of discharge field within a bill of lading. However,
the ISBP No.745 section E8 (b) also admits that the named port of discharge may be
stated in the field headed “Place of final destination” or words of similar effect,
provided there is a notation evidencing that the port of discharge is the one stated under
“Place of final destination” or words of similar effect. For example, the credit requires
shipment from Southampton to Shanghai with transhipment allowed. However, the
port of transhipment Singapore has occupied the box of port of discharge and Shanghai
is subsequently put down into the field of place of final destination. In this
circumstance, the bill of lading evidencing a port of discharge different from the port
of discharge as stated in the documentary credit would be acceptable, as long as a
notation stating “Port of discharge Shanghai” is added into the bill of lading.543
Similar to the situation concerning the port of loading above, the rule works very well
when identifying the port of discharge in a sole sea carriage with transhipments, but the
problem may still occur when a general geographical area is stated by the credit. 544 In
the author’s opinions, the condition precedent of section E8 (b) must be that the goods
are to be transported to that place of final destination by sea carriage.545 Hence, when
a credit states transportation to any Chinese port, it must mean a Chinese sea port
rather than an inland river port. Using the previous example in Figure 5 reversely, if
the credit calls for shipment from Southampton to any Chinese port, in the Bill of
Lading 1, both Shanghai and Qingdao are possible to be the port of discharge.
Comparatively, in the Bill of Lading 2, only Shanghai can be the port of discharge
543
The ISBP No.745 section E8 (b) only requires a notation to evidence the actual port of discharge in
compliance with that in the credit. It does not specify any detailed requirements for the notation.
Comparing with the position under UCP500 Article 23 (a) (iii) in the ICC Opinions 1995-2001, R460,
which concluded that the reference to the port of discharge would not necessarily correct the
inconsistency unless it has been included within the on board notation.
544
When a credit indicates a geographical area or range of ports of discharge, a bill of lading is
supposed to state the actual port of discharge within that geographical area or range of ports of discharge.
The geographical area itself is not required to show on the bill of lading. See ISBP No.745 section E10.
545
The condition appeared in the ISBP No.681 para 99, but the corresponding phrase was omitted in the
ISBP No.745. The author believes the condition is still implied in the new ISBP rules.
175
since Wuhu is an inland waterway port.
In order to compromise the practice of transport industry, the ICC tries to break the
boundaries between the bill of lading and the multimodal transport document
superficially. Since the operation is not in principle, the confusion still remains when
the carriage involves more than one mode of transport. It is clear that if a credit
requires the transportation to an inland point, an amendment should be obtained so as
to call for a multimodal transport document.546 However, how about if a credit calls
for a port-to-port bill of lading, but the bill of lading contains an inland place of
delivery which is different from the port of discharge as stated in the credit? Will the
bill of lading including an inland on-carriage to the place of delivery still be examined
under Article 20?547 If it is acceptable under Article 20, the author wonders what is left
for Article 19 concerning multimodal transport documents.548
5.2.2.5 The full set
In early days of international trade, bills of lading are usually issued in sets (usually of
three) to provide the protection against loss, but it can largely increase the risk of fraud,
due to the principle of “the one being accomplished, the others to stand void”.549
Hence, it is usual to demand the entire set of bills of lading as a precaution against
fraud under documentary credits.550 On the other hand, as a document of title, bills of
546
ICC Opinions 1995-2001, R454 See also ICC Opinions 2009-2011, R751, although the author does
not agree the second half of analysis, in which Article 20 applies to the transport document with an
inland final destination.
547
There is no work concerning the on-carriage issue, as what the ICC did for the pre-carriage in its
Recommendation Paper.
548
There is no clear authority for this point. The ICC Opinion R280 under UCP500 Article 23 suggested
a bill of lading showing an inland point would be acceptable provided that a valid on board notation was
included, but it did not clearly explain the situation between the port of discharge and the place of
delivery.
549
Each of the three original bills of lading can be separately negotiated so as to obtain delivery of the
goods from the carrier. However, the carrier’s duties extend no further than to deliver the goods to the
first person who has presented an original bill of lading. Under common law, the carrier need not wait all
original bills against delivery, nor need he take further step to make sure that the presenter is in fact the
person entitled. See Glyn Mills & Co v East and West India Dock Co (1882) 7 App Cas 591 (HL)
550
Under the common law case, Donald H Scott & Co Ltd v Barclays Bank Ltd [1923] 2 KB 1 (CA),
the credit called for a full set of bills of lading. The Court of Appeal held that two out of three bills of
lading accompanied by either an undertaking to produce the third or an indemnity for accepting less than
three was not a sufficient tender.
176
lading can control delivery of the goods and give rights to the holder. If in any event
the banks are stuck with the goods, the full set of bills of lading would provide the
banks some security concerning delivery and disposal of the goods. Based on the
importance of holding a full set of bills, the UCP600 Article 20 (a) (iv) continues to
stress the UCP500 position and require the beneficiary to present the full set of original
bills of lading as issued or the sole original bill of loading if only one was issued.551
Moreover, the ISBP No.745 section E11 requires a bill of lading to indicate the number
of originals that have been issued.552 It further stipulates that bills of lading marked
“First Original”, “Second Original”, “Third Original”, or “Original”, “Duplicate”,
“Triplicate” or similar expressions are all originals.553
5.2.2.6 Carriage terms
The UCP600 Article 20 (a) (v) requires a bill of lading to contain terms and conditions
of carriage or make a reference to another source containing the terms and conditions
of carriage (i.e. a short form or blank back bill of lading). It further emphasises that
contents of terms and conditions of carriage will not be examined, whether or not they
are contained in the bills themselves. Nevertheless, broadly speaking, terms and
conditions of carriage can include both “special terms” regarding the transport of
goods, such as port of loading/discharge, name of the vessel and the carrier, shipment
and transhipment details, and “general terms” which are customarily stated on the back
of a bill of lading or by reference to another document. The UCP600 Article 20 has
made specific requirements for the former and described the latter as “terms and
551
In respect of this requirement, UCP is more stringent than the position in an ordinary sale contract
under common law, which demonstrates in the absence of an express stipulation, tender of one is
sufficient. See Sanders Brothers v MacLean & Co (1883) 11 QBD 327 (CA)
552
Publishing 2010) 254, fn 48 suggests that absent such an indication, it should be understood that the bill
of lading was issued in one original. However, in James Byrne, UCP600: An Analytical Commentary
(IIBLP 2010) 894, it believes the assumption is that the bill of lading will state the number of bills of
lading issued even if it is the sole original.
553
It is suggested that if a bill of lading is not an original document, it will not be regarded as a
transport document under the UCP600 at all. According to UCP600 Article 17, it is however not
necessary for a document to have an “original” mark on its appearance in order to be recognised as
original.
177
conditions” in Article 20 (a) (v).554
Following this division, the “special terms” must be examined by the bank whereas the
“general terms” cannot be used as a basis for refusal. The confusion arises when the
“special terms” which are supposed to be examined by the bank cross-refer to clauses
on the reverse side of the bill of lading. Is a bank required to read the carriage terms
which appear on the reverse of the bill of lading in order to understand the information
contained on the front side? The ICC Banking Commission responded negatively to
this question, which stated that “reference to specific clauses, by number or otherwise,
within the terms and conditions listed on the reverse of a bill of lading do not compel
the bank to review such clauses to establish compliance of the document with the
credit terms and conditions.”555 This conclusion also equally applies to short form bills
of lading when the carriage terms can only be found from an external source.556
The intention behind Article 20 (a) (v) is to deter the banks to review any terms and
conditions of carriage and to make the banks rely solely upon the data that appear on
the face of the document. Unfortunately, the UCP does not specify whether the terms
and conditions (or reference thereto) are to appear on the front or reverse of the
document, nor does it provide a guidance for the bank as to how to distinguish between
the “special terms” and the “general terms”. The situation may look straightforward if
a bill of lading follows the traditions to address the former on its front page and leave
the latter on the reverse. However, the situation becomes “more clouded” should the
general carriage terms appear on the face of the bill of lading. 557 Unless the general
terms have been clearly indicated within the layout of the text, it would be extremely
difficult for the bank to distinguish those carriage terms under Article 20 (a) (v) from
the whole data in the process of reviewing the front of a bill of lading, especially when
554
James Byrne, UCP600: An Analytical Commentary (IIBLP 2010) 895
555
ICC Unpublished Opinions 1995-2004, R575
556
557
ICC Unpublished Opinions 1995-2004, R576
178
those terms are linked with the letter of credit criteria.558
Another issue arises when the general carriage terms contradict with the letter of credit
terms or render the required terms in the bill of lading meaningless. It is not
uncommon for the content of the terms and conditions to not be in compliance with the
terms of a letter of credit. However, the UCP has not provided any specific guidance
concerning these circumstances. It simply states that the carriage terms will not be
examined. The question is therefore can the bank still dishonour the presentation based
on the contradictions between the carriage terms and the credit terms? If not, does the
provision “contents of carriage terms will not be examined” mean that the bank is
going to disregard all the general carriage terms and will not give any effect to
whatever have been stated on the bill of lading? Before hassling to answer these
questions, the author would like to review the relevant ICC Opinions first.
In the ICC Opinion R646,559 the credit required presentation of a bill of lading marked
“freight pre-paid”. The presented bill of lading was so marked, but contained
pre-printed wording which qualified the “freight pre-paid” statement. The qualification,
though stated on the face of the bill of lading, was still classified as one of the general
carriage terms and conditions by the Banking Commission. Accordingly, the
qualification term was not to be examined and the bill of lading was not discrepant. In
the ICC Opinion R758,560 the credit required “bills of lading that on their face indicate
that goods may be released without presentation of an original bill of lading are not
acceptable”. However, the tendered bill of lading contained a delivery clause which
distinguished between the negotiable form and the non-negotiable form. It stated the
same presentation rule as the credit for the negotiable form, but contained an
inconsistent rule for the non-negotiable form, where the carrier might give delivery of
goods to the named consignee upon reasonable proof of identity. The Banking
558
For example, R758 in the ICC Opinions 2009-2011 concerned whether the bank should examine the
“delivery clause” shown above the carrier’s signature on the front of the bill of lading, which was also
linked with the letter of credit requirement in respect of delivery.
559
560
179
Commission considered the delivery clause on the face of the bill of lading as the
terms and conditions of carriage so that it would not be examined according to Article
20 (a) (v). Moreover, since the bill of lading was issued in a negotiable form, there was
no discrepancy for this specific bill of lading.
Regrettably, the above ICC Opinions did not manage to clarify the scope of “carriage
terms and conditions” as well as the meaning of Article 20 (a) (v). Although the
conclusion reached seemed reasonable for the specific case, the analysis leading to the
conclusion was vague and difficult to generalise.561 Taking the second case as an
example, if the credit calls for a straight bill of lading and expressly requires delivery
against presentation of the bill of lading, would the bank still be obliged to accept the
bill of lading with a contradictory “carriage term” on its face stating “delivery of the
goods upon reasonable proof of identity”?562 The conclusion is probably opposite to
the above ICC Opinion R758. Looking back to the general standards for documentary
examinations, a complying presentation must be in accordance with the terms of the
credit, the UCP and international standard banking practice.563 More specifically, data
in a document must not conflict with data coming from the same document, data in any
other stipulated document or the credit.564 Nothing in the UCP has attempted to grant
Article 20 (a) (v) paramount status over the bespoke terms in the credit. If the credit
explicitly prohibits delivery without presentation of the bill of lading, the term in the
bill of lading must not conflict with this requirement.
The above situation can also lead the banks to face with a practical dilemma. It has
been suggested that with respect to a nominated bank, the rule of not examining
carriage terms and conditions is absolute except when the terms of the bill of lading so
561
Kim Christensen, ‘The Reasoning behind Recent ICC Opinions’ (2009) 15(4) DCInsight 7, 7-8
562
Whether a straight bill of lading is a document of title and the relevant debate under English law is
not the issue concerned here. The scenario here is assuming the credit expressly requires delivery against
presentation of a straight bill of lading.
563
UCP600 Article 2, Article 14 (a)
564
UCP600 Article 14 (d). Even the non-documentary term stated in the credit which will be
disregarded by the bank under UCP600 Article 14(h) has overridden by Article 14 (d), i.e. there must be
no conflict between the non-documentary term itself and the terms in the required documents. See
detailed discussion in Part 4.5.2.2 section D of this thesis.
180
depart from the norm to justify the meaning of particular term or condition. 565
However, the issuing bank, who has agreed with its customer to include a carriage
condition in the credit, may not be entitled to treat the term issued by itself as a nullity.
Even though the carriage terms and conditions would be disregarded in determining
compliance of a presentation, an issuer who has promised its applicant that it will
honour upon certain carriage terms may have liability to its applicant for accepting a
contradictory term on the bill of lading. Therefore, the issuing bank would suffer the
most unfortunate situation, which means it is obliged to take up the documents
presented by the beneficiary but cannot be reimbursed from the applicant due to the
conflict between carriage terms and the credit terms.
In the author’s opinion, the root of the problems lies in that there is no clear scope for
the carriage terms and conditions regulated under Article 20 (a) (v). Article 20 (a) (v)
simply requires the existence of the carriage terms and states that banks will not
examine these terms; however, it fails to outline what belong to the carriage terms and
conditions under this article. It seems odd to indicate that some parts of a pre-printed
text will not be examined because they represent terms and conditions, while other
parts of the same pre-printed text clearly must be examined to check compliance with
Article 20. 566 It also sounds arbitrary that the bank is only entitled to examine
particular carriage terms mentioned within the UCP regime rather than any other terms
specially required by the credit, especially when those terms are vital to the parties’
security.567 If the UCP stops the bank from examining the delivery clause since it has
been regarded as a carriage term under Article 20 (a) (v), will it still make sense to
require a full set of bills of lading so as to guarantee the safety of delivery?
Clearly, radically contracting out Article 20 (a) (v) is not the best solution for the above
565
566
See ICC Opinions 2009-2011, R758, in which the delivery clause was stated in the same pre-printed
paragraph with the status of shipment and the number of bills of lading. The statement for the latter two
elements was examined by the bank without doubt.
567
For example, as stated in the ISBP No.745 section E6 (d), the bank needs to examine whether the on
board statement on the bill of lading is for the pre-carriage from the place of receipt to the port of
loading.
181
difficulties, since the bank is reluctant to waste time in scrutinising all the small print
and to undertake any corresponding responsibilities, even though it might be of benefit
for the bank’s own security.568 In the author’s opinion, the better approach is to tailor
the scope of general carriage terms covered by Article 20 (a) (v) and make it fit for the
practical needs. As the UCP specifically required, the bank needs to examine several
terms on the face of bill of lading, such as identity of the carrier, route of carriage, on
board statement, transhipment clauses and description of the goods etc.569 Apart from
these special terms, the credit should be able to speak out certain carriage terms which
have not been included in the UCP provisions and make those terms exclusive from the
coverage of Article 20 (a) (v). For example, if the credit expressly requires delivery
against presentation of a bill of lading, the bill of lading indicating that the carrier may
deliver the goods without production of an original bill will not be acceptable. 570 The
right interpretation of Article 20 (a) (v) must be that the content of carriage terms and
conditions will not be examined, unless the terms have been otherwise specified in the
credit.
Although reducing the scope of Article 20 (a) (v) may bring certain burdens on the
bank in the process of examination, comparing with the huge risk borne by the banks
and traders, the author believes it is still worth doing. 571 If this approach is adopted,
the result of Article 20 (a) (v) can only mean that the bank does not look at the general
terms and conditions of carriage save for anything already required by the credit. The
author suggests that the standard of examination for those carriage terms specified in
568
The bill of lading represents the carriage contract between the carrier and the third party bill of
lading holder, such as the bank. If the bank is stuck with the goods, it will have to rely on the bill of
lading terms to claim delivery and sue for damages against the carriers.
569
The UCP tends to exempt the bank from examining the small print on the reverse of a bill of lading,
even relating to those special terms.
570
The express clause in the credit can in some degree solve the gap left by the UCP600, in which the
delivery issue was not regarded as appropriate to be addressed according to the Drafting Group. See
(ICC Publication No.680, ICC 2007) 89. The express stipulation in the credit also solves the dilemma
faced by the straight bill of lading, since at the moment there is still no decisive answer regarding
production of a straight bill for delivery.
571
The author believes that transaction security provided by the documentary credit mechanism should
not be worse than the buyer’s position under the cash against document method. Even under the cash
against document circumstances, the buyer is hardly to accept a bill of lading carrying a clause regarding
delivery without production.
182
the credit must be the same as that used for the special terms mentioned in the UCP,
which means the bank is going to examine on the face of the bill of lading rather than
scrutinise all the small print on the reverse, unless the credit expressly contracts out
article 20 (a) (v) and requires the bank to do so.572
5.2.2.7 Transhipment clauses
It is common in practice for bills of lading to contain a clause conferring on the carrier
a right of transhipment. Furthermore, transhipment is routinely carried out in the
container trade where containers are often transferred between different vessels. In
recognition of these practices, UCP600 provides Article 20 (b)-(d) to specifically deal
with the transhipment issues. UCP600 Article 20 (b) defines transhipment as
“unloading from one vessel and reloading to another vessel during the carriage from
the port of loading to the port of discharge stated in the credit”.573 UCP600 Article 20
(c) combines the situations addressed by UCP500 Article 23 (c) and (d) together.574 By
omitting the preface “unless transhipment is prohibited by the terms of the credit” in
the UCP500 Article 23 (c), the UCP600 Article 20 (c) (i) starts with that banks will
accept bills of lading which “indicate that the goods will or may be transhipped
provided that the entire carriage is covered by one and the same bill of lading”.575
Article 20 (c) (ii) further states that even if transhipment is expressly prohibited by the
572
This standard is in accordance with the common law position, which held that the general practice of
banks was not to examine the small print on the back of the bill. See National Bank of Egypt v
Hannevig’s Bank (1919) 1 Ll L Rep 69 and British Imex Industries Ltd v Midland Bank Ltd [1958] 1 QB
542 (QB), also cited in Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2003] UKHL 12,
[2014] 1 AC 715 [77]
573
Transhipment may have another meaning in the context of Article 19 regarding transhipment
between different modes of transportation. In addition, as the ISBP No.745 section E17 provides, when a
bill of lading does not indicate unloading and reloading between loading port and discharge port, it is not
transhipment in the context of the credit and UCP Article 20.
574
UCP500 Article 23 (c) reads ‘unless transhipment is prohibited by the terms of the Credit, banks will
accept a bill of lading which indicates that the goods will be transhipped, provided that the entire ocean
carriage is covered by one and the same bill of lading.’ UCP500 Article 23 (d) reads ‘even if the Credit
prohibits transhipment, banks will accept a bill of lading which: (i) indicates that transhipment will take
place as long as the relevant cargo is shipped in Container(s), Trailer(s) and/or “LASH” barge(s) as
evidenced by the bill of lading, provided that the entire ocean carriage is covered by one and the same
bill of lading…’
575
Reading in the whole context of UCP600 Article 20 (c), the author believes that the omission of the
preface “unless transhipment is prohibited by the terms of the credit” in the UCP500 Article 23 (c)
should be for the purpose of conciseness. Article 20 (c) (i) will have no application if the credit prohibits
transhipment, since the situation will fall in the region of Article 20 (c) (ii).
183
credit, where the goods evidenced in the bill of lading have been shipped in a container,
trailer or LASH barge, a bill of lading indicating that transhipment will or may take
place is still acceptable. Lastly, UCP600 Article 20 (d) stipulates that clauses in a bill
of lading stating that the carrier reserves the right to tranship will be disregarded.576
It is clear to see that UCP600 is intended to accommodate the nature of modern

transportation in which containerized shipment frequently involves transhipment. The
default position of UCP600 is that transhipment is permitted unless expressly
prohibited by the credit. Even though the credit has prohibited transhipment, it is still
highly possible for the goods to be transhipped. However, the drafting of UCP600
transhipment provisions is somewhat complicated and through reviewing those clauses,
two different scenarios will be considered respectively, i.e. when the bill of lading
stating that the goods will be transhipped and when the bill of lading stating that the
goods may be transhipped. Firstly, concerning the situation when the bill of lading
stating that the goods will be transhipped, the entire carriage must be covered by one
and the same bill of lading. However, what is the true indication behind the
requirement of entire carriage coverage? Does it mean coverage of route or coverage
of liability? Secondly, regarding the scenario when the bill of lading indicating that the
goods may be transhipped, what are the interactions between Article 20 (c) and Article
20 (d)? Moreover, should the requirement of entire coverage still apply to the
situation when the bill of lading indicates that the goods may be transhipped?
A. Bills of lading stating that the goods will be transhipped
UCP600 Article 20 (c) covers the situation when the bill of lading states that the goods
will or may be transhipped. Unless the credit prohibits transhipment, UCP600 Article
20 (c) (i) stipulates that a bill of lading stating that goods will or may be transhipped is
acceptable, provided that “the entire carriage is covered by one and the same bill of
lading”. By contrast, UCP600 Article 20 (c) (ii), considering the circumstance when
576
The UCP however does not provide the meaning of “disregard”. It may signify that no attention
should be paid to what is being disregarded and liberty of transhipment clause may not be a basis for
refusal of a presentation.
184
the credit prohibits transhipment, omits the requirement of entire carriage being
covered by one the bill of lading, which was stated in its predecessor UCP500 Article
23 (d) (i). This deletion, of course, gives rise to the question of whether the
requirement should be still applied to Article 20 (c) (ii).577 It is suggested that since
there has been no policy change, the better interpretation of Article 20 (c) (ii) must be
that even where the credit prohibits transhipment, bills of lading stating that there will
or may be transhipment are acceptable as long as the goods have been shipped in a
container, trailer or LASH barge, provided that “the entire carriage is covered by one
and the same bill of lading”.578
As inferred above, when the bill of lading indicating that the goods will be transhipped,
Article 20 (c) requires one and the same bill of lading to cover the entire carriage. 579
Separate documents covering each leg of a journey would not be applicable, whether
the credit permits transhipment or not.580 However, it is not entirely clear what the
entire coverage means.581 Does this requirement simply mean that the bill of lading
must cover the entire carriage route, namely from the port of lading to the port of
discharge stated in the credit, despite the fact that the goods will be transhipped? If this
is the case, the requirement of entire coverage in Article 20 (c) seems not to add
anything more than what has been already stipulated under Article 20 (a) (iii).
Alternatively, the requirement of entire coverage may imply that there must only be
one contract of carriage and that the issuing carrier must undertake the liability for the
whole voyage, even if several carriers have involved for each part of the route. If this is
577
James Byrne, The Comparison of UCP600 & UCP500 (ICC 2007) 176; James Byrne, UCP600: An
Analytical Commentary (IIBLP 2010) 902
578
See Gary Collyer, Commentary on UCP600: Article by Article Analysis by the UCP600 Drafting
Group (ICC Publication No.680, ICC 2007) 176; same opinion in James Byrne, UCP600: An Analytical
Commentary (IIBLP 2010) 902, which describes the omission as a draft oversight. Jack was presuming
UCP600 Article 20 (c) (ii) is subject to the entire carriage being covered by one bill of lading although it
has not been spelled out in the article. See Ali Malek and David Quest, Jack: Documentary Credits (4th
edn, Tottel Publishing 2009) para 8.100
579
In this part, the author just focuses on the situation of “will” transhipment. The issue of entire
carriage concerning “may” transhipment will be discussed in the next part together with liberty of
transhipment clauses.
580
581
A full discussion for this point can be found in Charles Debattista, ‘The New UCP 600 - Changes to
the Tender of the Sellers's Shipping Documents under Letters of Credit’ [2007] JBL 329, 344-350
185
the case, the bank needs to make sure that there is no clause disclaiming carrier’s
liability after transhipment. However, this process will inevitably involve examination
for the general carriage terms and conditions which are supposed to be avoided under
Article 20 (a) (v).
Purely in terms of construction, it is suggested that redundancy is better than

self-conflict.582 The first interpretation, that Article 20 (c) (i) simply re-states the route
coverage of Article 20 (a) (iii), seems preferable than the second interpretation
concerning liability, which will cause an internal inconsistence with Article 20 (a) (v)
by ordering document checkers to examine terms and conditions of carriage. 583
However, considering the interests of the buyers and the banks who have stuck with
the goods, pure literal construction appears to be inappropriate, since they desire to
obtain recourse under the bill of lading against the carrier for any loss or damage
during the whole voyage. The rationale behind the second interpretation is consistent
with the common law principle that a sound bill of lading must provide a continuous
documentary cover during the whole journey. The principle was stated in Hansson v
Hamel and Horley Ltd,584 where the House of Lords decided that the bill of lading
issued by the subsequent carrier who only undertook liability regarding the second part
of journey, without any complementary promises to bind the prior carriers, was a bad
tender.
If the requirement of entire coverage under UCP600 Article 20 (c) is construed in line
with Hansson v Hamel, a bill of lading seeking to disclaim the carrier’s responsibility
after transhipment would definitely be rejected, or even more rigid, banks may only
accept the bills of lading which indicate that the issuing carrier undertakes liability in
respect of the whole voyage.585 Nevertheless, since the case of Hansson v Hamel was
582
Charles Debattista, ‘The New UCP 600 - Changes to the Tender of the Sellers's Shipping Documents
under Letters of Credit’ [2007] JBL 329, 344
583
This interpretation will benefit the seller’s interest and also lead to decreasing the number of
rejections.
584
Hansson v Hamel and Horley Ltd [1922] 2 AC 36 (HL) 44-46
585
Jack suggests that a bank should reject a bill of lading indicating that the goods will be transhipped
186
not payment by letter of credit, it has been questioned whether the decision under a
sale contract could be simply transplanted into construing the documentary
requirement under letters of credit so as to conclude that the bank would be liable for
accepting a bill of lading containing disclaimer for the issuing carrier’s responsibility
after transhipment.586 Moreover, in order to check what liability the issuing carrier is
undertaking, it is inevitable to examine the carriage terms and conditions, which are
supposed to be disregarded under Article 20 (a) (v). The conflict between request of the
entire carriage liability and Article 20 (a) (v) appears to be irreconcilable. It has been
suggested that the conflict leads to the literal interpretation that Article 20 (c) simply
requires the whole journey is covered by one bill of lading as already stated in Article
20 (a) (iii) and nothing has been added concerning liability.587
Without doubt, the literal interpretation will be very harsh on the buyer, since his
position vis-à-vis the carrier might, through a bill of lading accepted by the banks, be
worse than it would have been had he scrutinised the document by himself under a
cash against document sale. 588 Furthermore, a bill of lading does not provide a
continuous documentary cover will inevitably impair the bank’s security against the
carrier. The bank, who has stuck with the documents, may face with the situation that
there would be no recourse against the issuing carrier if the damage or lost occurred in
a leg of journey not performed by the issuing carrier. Therefore, it remains to be seen
which of these two interpretations is held to be correct. Based on the long term benefit
and the transaction security as illustrated above, the author prefers the second
interpretation, i.e. covering entire carriage means that the carrier will undertake his
liability for the entire voyage, although once again the ICC Banking Commission
but the carrier will cease being liable after transhipment. See Ali Malek and David Quest, Jack:
Documentary Credits (4th edn, Tottel Publishing 2009) para 8.101; also see Peter Ellinger and Dora Neo,
The Law and Practice of Documentary Letters of Credit (Hart Publishing 2010) 254, which also tends to
agree with the second interpretation.
586
See Charles Debattista, ‘The New UCP 600 - Changes to the Tender of the Sellers's Shipping
Documents under Letters of Credit’ [2007] JBL 329, fn 52
587
Anna-Mari Antoniou, ‘Complying Shipping Documents under UCP600’ (PhD thesis, University of
Southampton 2011) 83
588
Under cash against document sale, a bill of lading can only be a good tender if it states that the goods
will be transhipped but without disclaiming carrier’s responsibility after transhipment, whether the sale
contract permits transhipment or is silent as to this point.
187
needs to work out the scope of Article 20 (a) (v) and make it compatible with the
requirement under Article 20 (c).
B. Bills of lading stating that the goods may be transhipped
It is common for the bill of lading to contain a liberty of transhipment clause without
declaring that there will actually be transhipment. The liberty of transhipment clause
confers the carrier a right to tranship the goods, although the goods are not certain to
be transhipped. In recognition of this practice, UCP600 Article 20 (d) stipulates that
clauses in a bill of lading stating that the carrier reserves the right to tranship will be
disregarded. However, two questions arise from this short statement. Firstly, what if the
credit expressly prohibits transhipment? Secondly, is the bill of lading containing a
liberty of transhipment clause still subject to the requirement that the entire carriage is
covered by one and the same bill of lading?
The first question concerns whether the liberty of transhipment clause will pass across
the express prohibition in the credit. Apparently, a bill of lading stating that the carrier
reserves the right to tranship would conflict with the express prohibition for
transhipment in the credit. The conflict is specifically solved under UCP500 Article 23
(d) (ii) by stipulating that “even if the credit prohibits transhipment, banks will accept a
bill of lading which incorporates clauses stating that the carrier reserves the right to
tranship”. Nevertheless, the words “even if the credit prohibits transhipment” have
now been omitted under UCP600 Article 20 (d). It can be argued that since no attention
should be paid to what is being disregarded, the liberty of transhipment clauses in a bill
of lading which will be disregarded according to Article 20 (d) is supposed not to be a
basis for refusal of a presentation, even though when the credit prohibits
transhipment.589 This argument will lead to the same effect as stated in UCP500, i.e.
the bill of lading which reserves the right to tranship would still be acceptable even if
the credit prohibits transhipment.
589
188
However, one point cannot be omitted is the effect brought by Article 20 (c) on Article
20 (d). UCP600 Article 20 (c) not only concerns the situation when the bill of lading
stating that the goods will be transhipped, but also covered the scenarios when the bill
of lading indicating the goods may be transhipped. In essence, the bill of lading which
reserves right to tranship is indicating that the goods may be transhipped. When the
credit does not expressly prohibit transhipment, a bill of lading indicating that the
goods may be transhipped will be accepted under Article 20 (c) (i). When the credit
prohibits transhipment, Article 20 (c) (ii) allows the bank to accept a bill of lading
indicating that the goods may be transhipped, but only for the situation that the goods
have been shipped in a container, trailer or LASH barge. Reading Article 20 (c) in a
whole, if the credit prohibits transhipment, a bill of lading indicating that the goods
may be transhipped will not be acceptable, unless the goods have been carried in
certain conveyance. Clearly, if Article 20 (d) means to disregard the liberty of
transhipment clauses even when the credit prohibits transhipment, it will inevitably
cause a conflict with the interpretation of Article 20 (c). On the other hand, if Article
20 (d) only takes effect when the credit does not prohibit transhipment, it will
obviously become superfluous, since Article 20 (c) (i) has already covered when the
goods may be transhipped. The overlap for the situation of “the goods may be
transhipped” between Article 20 (c) and Article 20 (d) is “probably simply a matter of
oversight”590; however, it does cause a great difficulty in construing the application of
Article 20 (d) and redraft of the section seems indispensable.
The next question concentrates on whether Article 20 (d) is subject to the requirement
of entire coverage. There is no express reference in Article 20 (d) itself regarding to the
entire carriage; however, Article 20 (c) (i) which requires the entire carriage to be
covered by one and the same bill of lading, applies not only to bills of lading which
indicate that the goods will be transhipped, but also to bills of lading which indicate
that the goods may be transhipped, i.e. bills of lading in which the carrier reserves the
right to tranship. Therefore, once again, the question turns back to what “the entire
590
189
carriage to be covered by one and the same bill of lading” means. Does it simply
duplicate the requirement of Article 20 (a) (iii), i.e. the bill of lading needs to “indicate
shipment from the port of lading to the port of discharge”, or does it reflect the
common law principle in respect of providing a continuous documentary cover? If the
latter prevails, the bills of lading showing that the carrier reserves the right to tranship
under Article 20 (d) are arguably restricted by the requirement of entire coverage under
Article 20 (c) (i).
Hence, should a bank accept a bill of lading that gives the carrier liberty to tranship but
also disclaims the carrier’s responsibility after transhipment? The discussion at
common law before the UCP for this point is full of uncertainty. In Soproma SpA v
Marine Animal By-Products Corp,591 McNair J decided that at least if the liberty is
unexercised, the bill of lading is not objectionable. He stated:592
‘I should not be disposed to hold that a bill of lading otherwise

unobjectionable in form which did in fact cover the whole transit actually
performed would be a bad tender merely because it contained a liberty not
in fact exercised but which, if exercised, would not have given the buyers
continuous cover for the portion of the voyage not performed by the vessel
named in the bill of lading.’
However, the statement has given rise to a great difficulty, since the bank may have no
means of knowing at the time of tender whether the goods have actually been
transhipped or not. The approach is clearly contrary to the principle of autonomy,
because it will inevitably induce the bank to take account of a fact which might not be
apparent from the face of the documents presented to it, namely whether the
transhipment had been or would be actually taken. Moreover, the logic of the above
statement is also inconsistent with the nature of international sales. The buyer, who
591
592
Soproma SpA v Marine and Animal By-Products Corp [1966] 1 Lloyd’s Rep 367 (QB) 388-389
190
barely has any physical control over the goods, should be entitled to obtain a
continuous documentary cover over the bill of lading against the carrier for any
damage or loss occurred at sea.593
Based on the needs for a complete cover, it has been therefore suggested that ‘a liberty
to tranship, whether arising from the express terms of the credit or by reason of Article
20, does not affect the principle that the transport document must cover the whole
voyage.’594 It is inferred from this conclusion that a bill of lading issued by a carrier
which covers transport by more than one carrier, is acceptable only if the issuing
carrier undertakes liability in respect of the whole voyage. However, the position is not
easy to identify where a bill of lading gives a liberty to tranship in its small print with
saying that the carrier will no longer be contractually responsible for part of the voyage
if the transhipment is exercised. Since a bank will not examine the carriage terms and
conditions according to Article 20 (a) (v), how can a bank legitimately reject the bill of
lading which disclaims the carrier’s liability after transhipment in its small print? In the
absence of an authoritative judicial decision clarifying the meaning of entire carriage,
it is difficult to conclude whether a bank is obliged to check the documentary cover
provided by a bill of lading, since the inconsistency between continuous liability
coverage and not reading carriage terms seems to be irreconcilable.
Reading Article 20 (d) alone, a bank is supposed to accept a bill of lading in which the
carrier reserves the right to tranship despite the fact that the carrier may cease being
liable under the carriage contract after transhipment. As Article 20 (d) currently stands,
a bill with liberty of transhipment clauses will nonetheless be permitted, whether the
credit has allowed or prohibited transhipment.595 Mere prohibition in the credit will
not exclude transhipment. To avoid any form of transhipment, it will be necessary to
expressly exclude relevant UCP articles. Before the application of Article 20 (d) being
593
594
595
The position for this point under UCP500 is much clearer than UCP600, since UCP500 Article 23 (d)
expresses the acceptance for the bill of lading which contains liberty of transhipment clauses even if the
credit prohibits transhipment.
191
clarified, the best way for an applicant to completely prohibit transhipment in a
non-container transport would be to state that transhipment is prohibited and exclude
the application of Article 20 (d) at the same time.
C. Rethink for the transhipment section
It is clear that the UCP600 transhipment section is intended to justify the common
practice regarding to transhipment involved in carriage of goods by sea as well as to
reflect the realities of container transport. Accordingly, the transhipment section in the
UCP has been structured to render the unrealistic prohibition terms under the credit
ineffective unless the drafters of the credit pay considerable attention to modify the
UCP provisions radically. 596 Nevertheless, the main problem for the UCP600
transhipment rules is that they have failed to make them harmonised either within the
section itself or with other sections. The rules have not only overlapped between
Article 20 (c) and Article 20 (d) concerning liberty of transhipment, but more
importantly they have triggered tension in respect of examining the carriage terms and
conditions. However, the tension will be very difficult to eradicate, since in nature, the
transhipment terms are carriage terms per se. How can a bank assess the coverage of
carrier’s liability without digging into carriage terms and conditions? How can a bank
know that the goods may be transhipped without looking at carriage terms?
The first point that needs addressing is the requirement of entire carriage under Article
20 (c) (i). If “entire carriage” simply means that the bill of lading should indicate
shipment from the port of loading to the port of discharge as stated in Article 20 (a)
(iii), the deletion will not cause any loss, since the requirement remains the same even
when the bill of lading shows that the goods will or may be transhipped. On the other
hand, if “entire carriage” means carrier’s undertakings for the entire voyage, the
section still needs to be redrafted so as to harmonise with Article 20 (a) (v) that banks
will not examine carriage terms. It is impossible to get the best of both worlds. The
596
(ICC Publication No.680, ICC 2007) 93; James Byrne, UCP600: An Analytical Commentary (IIBLP
2010) 900
192
UCP may have to set up an exception for the banks to check the carriage terms with
respect to entire liability, or it may have to leave the issue completely out of the UCP
regime and let the parties decide what they want by diligently drafting the credits and
instructing their banks.
The second point that needs to be considered is when the credit prohibits
transhipment.597 In the author’s opinion, the common position should be, if the credit
prohibits transhipment, a bill of lading indicating that goods will or may be transhipped
would not be accepted unless the goods have been shipped in certain ways, such as in a
container, trailer or LASH barge, which make prohibition of transhipment unrealistic.
However, in order to ensure that the bill of lading does not contain such a clause
permitting the goods to be transhipped, the bank has to act against Article 20 (a) (v)
and check through carriage terms. On the other hand, if the bank primarily chooses to
disregard carriage terms, i.e. liberty of transhipment clauses as stipulated in Article 20
(d), a bill of lading which indicates that the goods may be transhipped would still be
accepted, even though the credit has specifically prohibited transhipment in a
non-containerised carriage. 598 This method will put the applicants who have
particularly asked for a non-transhipped bill of lading in a very unfair position and also
generate a chain of contractual problems. 599 Nevertheless, there seems no good
solution which can keep the transhipment section in the UCP regime without
challenging Article 20 (a) (v).600 If the UCP insists on bringing transhipment clauses
597
There will not be any concerns if the credit permits or is silent for transhipment, since unless
transhipment is prohibited by the credit, the bank will accept a bill of lading indicating that the goods
will/may be transhipped anyway.
598
Arguably, the UCP approach will leave buyer’s position worse than that under common law. The
position at common law is that a bill of lading which permits transhipment is acceptable provided, first,
that the bill of lading gives rights in respect of the entire carriage and secondly, that transhipment is not
prohibited by the terms of the credit. See Ali Malek and David Quest, Jack: Documentary Credits (4th
edn, Tottel Publishing 2009) para 8.100
599
Analogous to the disregard of non-documentary conditions, Article 20 (d) can also cause problems
concerning hierarchy of the terms as well as unbalanced terms between different parties. See Part 4.5.2
in Chapter 4 of this thesis.
600
It has been suggested in Anna-Mari Antoniou, ‘Complying Shipping Documents under UCP600’
(PhD thesis, University of Southampton 2011) 83-84 that, the UCP should remove out all the
transhipment rules and leave the transhipment issue to the credit terms if there are any specific
instructions. If the credit prohibits transhipment, the bank will follow the instruction to reject the bill of
lading showing that the goods will/may be transhipped. However, the author suspects that the ICC
Banking Commission is probably reluctant to relieve all the control in respect of transhipment under
193
into its rules, it has to set up an exception for the bank to check the relevant carriage
terms.
In conclusion, the current transhipment provisions provided by UCP600 are far from
satisfactory. Redrafting and clarifications are urgently needed. Apart from removing all
the overlapping and inconsistent parts, the author suspects that the transhipment
section may still be alive in the next version, but what effects the transhipment
provisions are going to bring into the UCP system really depend on the ambition of the
UCP.
5.2.3 Miscellaneous provisions
It is common in practice that a carrier will protect himself from liability by indicating
defects on the face of the transport document at the time that he takes charge of the
goods. Obviously, applicants and banks are unwilling to pay for a transport document
which contains a clause indicating the defects in the goods and leaves them no resource
against the carrier. Based on this assumption, the UCP600 Article 27 requires a clean
transport document, which is applicable not only to the ocean transport document, but
also to all the other types of transport document under UCP600. Meanwhile, the
UCP600 Article 26 addresses three types of standardised terms that commonly appear
on the transport document, namely those relating to deck stowage in Article 26 (a),
disclaiming the carrier’s liability for load, count and contents of shipment in Article 26
(b), and reference for additional charges in Article 26 (c). In common with Article 27,
Article 26 also expands its application to all transport documents instead of only
transport documents involving carriage by sea.
It should be noticed here that those miscellaneous articles are neither the core of the
UCP nor treated as a high priority in the process of documentary examinations;
however, it is necessary to mention as non-compliance of those rules would still lead to
UCP, especially for the situation when the prohibition is unrealistic, e.g. containerised carriage.
194
rejection. The author will therefore consider Article 26 (b) together with Article 27 and
address the miscellaneous provisions in the three following parts: clean transport
documents, on deck stowage, and freight and other charges.
5.2.3.1 Clean transport documents
UCP600 Article 27, which is substantially identical to UCP500 Article 32, mandates a
bank to only accept a clean transport document unless otherwise indicated in the credit.
When it is known that the type of goods to be shipped or their packaging may cause a
concern for obtaining a clean bill of lading, the terms of the documentary credit should
specifically cater for this.601 The UCP position is in accordance with that at common
law, which required clean bills in nearly all circumstances even if the credit was silent
on the point.602 Apart from setting up a definitive requirement for a clean transport
document, Article 27 also provides the meaning of being “clean”. It stipulates that “a
clean transport is one bearing no clause or notation expressly declaring a defective
condition of the goods or their packaging”.603 Hence, a clause on a bill of lading such
as “packaging is not sufficient for the sea journey” will definitely constitute a
discrepancy. Nevertheless, a clause such as “packaging may not be sufficient for the
sea journey” or words of similar effect will not render a bill of lading unclean under
UCP600, since it does not expressly declare a defective condition of the packaging. 604
Since Article 27 only focuses on the condition and packaging of the goods, clauses
concerning the quantity of goods will not make the bill unclean.605 Clauses such as
“weight and quantity unknown”, “shipper’s load and count” and “said by shipper to
601
For example, if shipping non-stainless steel, it is sensible for the credit to provide that the bills of
lading claused “oxidation” or “rust” are acceptable. Banks are only required to have the knowledge of
the banking industry practice rather than any customs of a particular trade.
602
British Imex Industries Ltd v Midland Bank Ltd [1958] 1 QB 542 (QB) 551
603
The UCP definition of “clean transport document” is substantially similar to that at common law.
Salmon J in British Imex Industries Ltd v Midland Bank Ltd [1958] 1 QB 542 (QB) 551 inclined to view
that “a clean bill of lading is one that does not contain any reservation as to the apparent goods order or
condition of the goods or the package”.
604
ISBP No.745, section E20 (b)
605
However, the quantity of the goods as a part of data on the transport document is restricted by Article
14 (d), which must not conflict with data on the other documents or the credit.
195
contain” are still acceptable. 606 In addition, Article 27 makes clear that it is
unnecessary that the word “clean” appears on a transport document, even when the
credit requires that transport document to be marked “clean on board”. Deletion of the
word “clean” does not expressly declare a defective condition of the goods or their
packaging.607 Therefore, the UCP will treat each bill of lading to be clean, unless it
bears an express clause or notation indicating that either the condition of the goods or
their packaging is defective.
However, the UCP600 Article 27 does not refer to the time to which any clause or
notation should relate. Under the common law case The Galatia,608 both Donaldson J
and the Court of Appeal held that a clean bill of lading must be the one in which there
is nothing to qualify the admission by the carrier that the goods were in apparent good
order and condition at the time of shipment. Having been clean at the time of shipment,
a bill of lading could not be rendered unclean by the notation added at a later stage
recording the fire damage after shipment. This conclusion makes perfect sense in the
context of international commercial sale, since risks normally pass to the buyer on or
from shipment. If there is any loss or damage to the goods after shipment, the buyer is
still obliged to take up the documents and then use recourse against the carrier or
insurer.609
The Galatia was not a documentary credit case. It is therefore doubted whether a
distinction should be drawn between a merchant who can determine the acceptability
of documents on the basis of knowledge of particular trade and a banker who is not
required to have such knowledge. However, matters of general commercial custom
such as those pertaining to bills of lading must be distinguished from a particular trade
usage of which a bank is not required to know or should ignore. 610 The bank should
take notice of the former as a matter of law. The time of shipment as the golden section
606
See UCP600 Article 26 (b)
607
ISBP No.745, section E21 (b)
608
M Golodetz & Co Inc v Czarnikow-Rionda Co Inc (The Galatia) [1980] 1 WLR 495 (CA)
609
Manbre Saccharine Co Ltd v Corn Products Co Ltd [1919] 1 KB 198
610
196
point between the carrier and the shipper’s liability is a crucial element that the bank
must refer to in deciding the cleanliness of a transport document. A different criterion
held by banks in judging a clean transport document will definitely cause a big mess
for the market, particularly for international chain sales, since the same transport
document which has been accepted by the buyer in the upstream transaction would
possibly be rejected by a bank in the downstream transaction.
It is also argued that where a document is in an unusual form and raises problems
which cannot be answered readily, the bank is entitled to reject the document. This is
perhaps why the UCP still does not react on the point long after the problem of The
Galatia. The clause on the bill of lading declaring any defective conditions appears to
make it unusual; however, by properly reading and understanding, it calls for no
inquiry or doubt upon the fact that the goods have been shipped in apparent good order
and condition, it should not be regarded to be unclean. 611 What the bank needs to do is
just use reasonable care to read the notation or clause on the bill of lading and making
its judgement concerning whether the bill of lading is claused before or after the time
of shipment. Due to the importance of following the basic rule in shipment sales, the
UCP has no choice other than tying the definition of a clean transport document to the
moment of shipment. Therefore, it is urgent for the UCP to redefine a clean transport
document in Article 27 as “a clean transport document is one bearing no clause or
notation expressly declaring a defective condition of the goods or their packaging at
the time of shipment”.
5.2.3.2 Stowage on deck
Due to a high risk of damage exposed by on deck cargo, Article 26 (a) stipulates that a
transport document must not indicate that the goods are or will be loaded on deck.612
611
M Golodetz & Co Inc v Czarnikow-Rionda Co Inc (The Galatia) [1980] 1 WLR 495 (CA) 510-511
612
The UCP position is in accordance with Article I (c) of the Hague-Visby Rules incorporated into
English law by the Carriage of Goods by Sea Act 1971. The definition of goods covered by the Act does
not include goods stated as being and are in fact carried on deck. Parties are free to contract on any
terms or conditions relating to the damage of such cargo.
197
Nevertheless, a clause on a transport document stating that the goods may be loaded on
deck is acceptable. It is clear from this article that the possibility of loading on deck is
allowed; however, any definitive statement regarding on deck stowage must be
prohibited unless the credit otherwise specifies. It is suggested that when it is known
that the type of goods to be shipped may give rise to goods being loaded on deck, the
terms of credit should cater for this.
Compared with the equivalent article [Article 31] under UCP500, the words “unless
otherwise stipulated in the credit” have been deleted. The reason for deletion is
because UCP600 Article 1 has already expressed that the rules under UCP can be
modified or excluded by the terms of credit. Article 26 (a) is arguably modified when a
credit specifically allows the goods to be loaded on deck. By contrast, what is the
position if the credit expressly prohibits loading on deck or calls for under-deck
loading?613 Is the transport document indicating that the goods may be loaded on deck
still acceptable? Clearly, under a cash against documents sale, where the sale contract
expressly prohibits deck stowage, a bill of lading stating that the goods will or may be
loaded on deck constitutes a bad tender. However, the answer is not straight-forward in
a letter of credit transaction subject to UCP600. It may be argued that the liberty of on
deck stowage clause in the bill of lading belongs to the carriage terms and conditions,
which should neither be examined by the bank nor treated as a discrepancy to reject the
documents according to Article 20 (a) (v). Once again, banks face with the tension
between the credit terms and the UCP terms. Until the ICC Banking Commission
provides a clarification, the only way to eliminate the possibility of on deck stowage is
to prohibit loading on deck and expressly modify Article 26 (a) in the credit at the
same time.
613
In Richard King, Guttidge & Megrah’s Law of Bankers’ Commercial Credit (8th edn, Europa
Publications 2001) 217, it mentioned that the terms of Article 31 [of UCP500, which is equivalent to
UCP600 Article 26 (a)] will apply even if the credit calls especially for shipment under deck and in such
a case it is not necessary for the bill of lading expressly to state this.
198
5.2.3.3 Freight and other charges
Unless the contract specifically requires certain type of bills of lading, the general rule
is that a seller has an option under a c.i.f. sale to provide either pre-paid bills of lading
or freight collect bills with a freight-deducted commercial invoice.614 The position
under a letter of credit is the same. Unless the credit expressly calls for a freight
prepaid transport document, a bank can accept a freight collect (or freight payable)
transport document, provided that it is not inconsistent with data in any other
documents presented, such as commercial invoice.615
Nevertheless, in practice, it is common for the credits to call for a freight prepaid
transport document, since such a document will provide the buyer with the security of
knowing that the carrier will not seek to exercise a lien over the goods for unpaid
freight. Where the credit requires the transport document to show freight prepaid, it
must indicate so. In Soproma SpA v Marine & Animal By-Products Corp,616 the bills
of lading marked “freight collect” was not regarded as a good tender under the credit
which called for “freight prepaid” bills of lading, since the bill of lading and the credit
terms were “mutually inconsistent”.617
In addition, the UCP600 Article 26 (c) provides that a transport document may bear a
reference, by stamp or otherwise, to charges additional to the freight. Clearly, when a
credit states that costs additional to freight are not acceptable, a bill of lading should
not indicate such charges have been or will be incurred.618 The ISBP No.745 section
E27 (c) further supplements that reference in a bill of lading to costs which may be
levied due to demurrage or detention should not count as an indication of costs
additional to freight.
614
Norsk Bjergningskompagni A/S v Owners of the Pantanassa (The Pantanassa) [1970]1 All ER 848,
855
615
ISBP No.745, section E26. The equivalent provision in UCP500 article 33 (a) was removed in
UCP600 itself.
616
617
Soproma SpA v Marine and Animal By-Products Corp [1966] 1 Lloyd’s Rep 367 (QB) 387
618
ISBP No.745, section E27 (a)
199
5.2.4 Bank’s security upon bills of lading
It is clear from the above part that the UCP600 has paid enormous attention to set out
requirements under Article 20 in respect of examining a bill of lading. Most
requirements under Article 20 however focus on the function of a bill of lading as a
receipt of the goods and reflect the bill of lading acting as evidence of the carriage
contract.619 Regrettably, the same as in UCP500 Article 23, the UCP600 does not deal
with the function of being a document of title. Article 20 touches neither the delivery
issue nor the form of the bill of lading, which are the two aspects closely related to the
bank’s security. It is true that nowadays few banks would rely solely on the security
provided by the transport documents.620 Nevertheless, the reality is, where the bank
pays inadvertently against irregular documents that are declined by the buyer, the bank
would be left with no recourse apart from seeking the security provided by the
presented documents.
Frankly speaking, the bank’s interest does not lie in getting the actual goods, what it
really wants is the right of stopping the default party to take delivery of the goods from
the carrier before payment. Furthermore, if the bank becomes unfortunately stuck with
the goods, it would want to make sure that it has the rights to ask physical delivery of
the goods from the carrier and resell the goods in exchange for the money already paid.
In the least ideal situation, if the carrier has damaged or lost the cargo, the bank who
has stuck with the goods may want to claim his loss from the carrier so that the title to
sue the carrier will be another right desired by the bank. In the following part, the
author will review the bank’s security offered by a negotiable bill of lading in English
law by tying in the position under UCP600 from two perspectives, i.e. right of delivery
and right of disposal.
619
For the requirements linked with the receipt function, see UCP600 Article 20 (a) (ii). For the
evidence of carriage contract, see Article 20 (a) (i), Article 20 (a) (iii), Article 20 (a) (v), Article 20 (a)
(vi) and Article 20 (b)-(d)
620
Publications 2001) para 8.01
200
5.2.4.1 Presentation rule and rights of controlling delivery
As reviewed in Part 5.2.1 concerning the legal status of bills of lading, a negotiable bill
of lading, being a document of title at common law, can provide the holder a
constructive possession of the goods. Given the right to delivery claimed by the holder
of the bill of lading who might be the unknown third party through transfer of the bill,
it follows that presentation of the bill should be “an essential evidential precondition to
delivery of the goods”.621 It has long been established at common law that in absence
of an exclusion clause protecting the carrier, the carrier is not entitled to deliver goods
without the production of the bill of lading, even to the consignee in the bill of
lading.622 However, the carrier would be exempted from the liability towards the true
cargo owner as long as it released the goods against presentation of one bill of lading
out of a set.623 Therefore, in order to stop the unpaid party from taking delivery of the
goods from the carrier, it is essential for the bank to hold all the original copies of the
bills of lading.
The UCP600 Article 20 (a) (iv), which calls for a full set of the bills of lading if issued
in more than one original, has effectively stopped the competing claims to delivery
brought by third parties against the carrier. Nevertheless, tender of the full set is the
only restraint set out by the UCP600 in respect of the delivery issue and the defence
line can be easily broken into by a delivery clause in the bill of lading which permits
the carrier to deliver the goods by proof of identity. The delivery clause in a bill of
lading, which is arguably regarded as a term and condition of the carriage contract, is
supposed to be ignored by the bank according to UCP600 Article 20 (a) (v). Since
621
Charles Debattista, Bills of Lading in Export Trade (3rd edn, Tottel Publishing 2009) para 2.16
622
The carrier who has delivered the goods without presentation of the bill can constitute a breach of
contract and risk an action in conversion. There are many authorities concerning production of B/L for
delivery. The earliest one can be found in The Stettin (1889) 14 PD 142, 147. The doctrine was followed
by Sze Hai Tong Bank v Rambler Cycle Co [1959] AC 576, in which this breach was considered as
fundamental and deprived the carrier of all contractual exclusions/limitations. In Kuwait Petroleum Corp
v I & D Oil Carriers Ltd (The Houda) [1994] 2 Lloyd’s Rep 541 (CA), the Court of Appeal concluded
that there should not be any exceptions to the simple rule concerning delivery against presentation.
623
It is common ground that if one bill of lading is realised, the others are void. See Glyn Mills Currie v
East and West India Dock (1882) 7 App Cas 591, in which the carrier was held to be not liable to deliver
the goods against presentation of one original copy of the bills of lading.
201
there is no presentation rule for delivery established by the UCP, the bank’s security
provided by a full set of bills of lading will be largely weakened by the delivery clause
in the bill of lading.624
5.2.4.2 Rights to claim delivery and title to sue
The negotiable bill of lading, being a document of title, can offer the bank a strong
position against the default party at common law. Before 1992, the law of bailment and
the Bill of Lading Act 1855 s.1 can offer the bill of lading holder a right to claim
delivery and a cause of action against the carrier for damage to the goods; however,
both of the actions require a proprietary link with the goods and the bank find itself
with insufficient protection as a pledgee who does not own the property of the
goods. 625 From 1992, the Carriage of Goods by Sea Act (COGSA1992), which
replaced the Bill of Lading Act 1855 and removed the proprietary link, has built a
contractual relationship between the carrier and the bill of lading holder for
justification of the right of suit and the right of delivery. 626 COGSA1992 Article 2 (1)
(a) transfers the “lawful bill of lading holder”627 all rights of suit under the contract of
carriage against the carrier.628 In other words, the Act also vests in the lawful bill of
lading holder the contractual rights to claim delivery.629
In order to claim delivery and obtain the right of suit against the carrier, the bank must
make sure itself to fall within the scope of COGSA1992 as a lawful holder.630 Where a
624
As we can see in the next part, the tension between the presentation rule and the delivery clause
under a negotiable bill of lading is not as prominent as the situation concerning a straight bill of lading.
625
Sewell v Burdick (1884) 10 App Cas 74 (HL) 105
626
It has been suggested that the presentation rule for delivery of goods under bills of lading remains
unchanged in COGSA1992 although there is no express statement. COGSA1992 s 5 (2) defines the bill
of lading holder must be a person with possession of the bill, which strongly indicates the common law
rule of presentation against delivery under the Act. See Charles Debattista, Bills of Lading in Export
Trade (3rd edn, Tottel Publishing 2009) para 2.17
627
However, the definition of lawful holder is far from simple. See Paul Todd, ‘Bank as Holder under
Carriage of Goods by Sea Act 1992’ [2013] LMCLQ 275
628
The contract of carriage here means “the contract contained in or evidenced by that bill of lading”.
See COGSA 1992 s 5 (1)(a)
629
630
If an unpaid bank cannot justify itself as a consignee or an endorsee under COGSA1992, the only
recourse from contractual point of view at common law is to apply implied contract established by
Brandt v Liverpool [1924] 1 KB 575 (CA). However, Brandt v Liverpool is only limited to damage or
202
bank is the consignee or endorsee of an order bill of lading or holding a bearer bill of
lading, it has a contractual right to claim delivery against the carrier under COGSA
1992.631 If the bill of lading is made out to the order of the confirming bank, the
unpaid bank may need the cooperation of the confirming bank to endorse the bill of
lading, and vice versa. However, if the bill of lading is made out to the order of the
buyer, the situation might be more difficult, since the defaulting buyer is usually
reluctant to co-operate with the unpaid bank.632 There is nothing in the UCP600
Article 20 as to the form of the bill, for example whether it be made out to bearer, or to
order, and if the latter, to whose order. The ISBP indicates various forms of the bill of
lading that might be presented in a documentary credit transaction, including “to
order”, “to order of the shipper”, “to order of (named consignee)” and “to order of
issuing bank or applicant”. However, the ISBP does not make any specific
requirements except for presenting a “to order” or “to order of the shipper” bill of
lading, which has to be endorsed by or on behalf of the shipper.633
Therefore, in the absence of stipulation in the credit, the bank is not entitled or bound
to consider the name of the consignee or the order party on the transport documents.
However, due to the close connection between the bank’s security and the form of
transport documents, the bank may seek to stipulate in the credit to ask for a form of
bill of lading which can offer the maximum security to it. The safest form for the bank
is to insist at the time of application that the bill of lading must be made out to the
bank’s order as consignee. Alternatively, the most common but satisfactory form in
practice would be for the shipped bill of lading to be made out to shipper’s order and
endorsed in blank or in favour of the intermediary bank. Having the documents drawn
in the way suggested will put the bank in a reasonably easy position to obtain physical
delivery of the goods and to resell them, as well as to claim against the carrier for any
short delivery situation. If the goods have been lost, no such contract can be implied. See The Aramis
[1989] 1 Lloyd’s Rep 213 (CA)
631
COGSA1992 s 5 (2)
632
The bill of lading which is made out to the order of the buyer may have property consequences so as
to further reduce the security of the bank in tort.
633
ISBP No.745, section E13 (a), which is the same paragraph copied from the ISBP No.681, para.102
203
damages.634
5.2.4.3 Right to sale and pledge
The person within the list of COGSA1992 has the right to claim delivery of the goods
and the title to sue against the carrier; however, it does not necessarily mean that he
can effectively resell the goods and transfer those rights to another party, which depend
on whether the held transport document is regarded as a document of title at common
law or not. A negotiable bill of lading, being a document of title at common law,
without doubt can confer a bill of lading holder the right to dispose the goods as well
as transfer the documents. Provided that the bills of lading are drawn to the order of the
bank or are indorsed to the order of the bank, the bank holding the bill of lading can
easily take possession of the goods and sell them by transfer of the bill of lading.
Where the bills of lading are drawn in favour of the buyer or other consignee without
endorsement to the bank, as we will see as follows, the bank may still benefit from
transfer of a bill of lading by the law merchant but its power of sale will be ineffective.
The security arising from possession of documents of title operates a pledge.635 The
bill of lading becomes pledged to the bank when it is delivered in pursuance of the
terms of a credit.636 ‘The bank’s security by way of pledge does not, however, depend
on the contract between the buyer and his bank. It depends on the ability of the seller to
pledge the documents of title on behalf of the buyer or with his consent.’637 It is
634
It should be noted that COGSA 92 has a double edge. Although conferring the contractual rights
against the carrier does not impose contractual duties on the bill of lading holder, the excise of those
rights will trigger the claimant’s liabilities under carriage contract. See COGSA1992 s.3. If the bank
takes or demands delivery of goods or makes a contractual claim in respect of those goods, the bank will
become liable on the contract of carriage towards the carrier.
635
Normally the actual possession of the goods by the pledgee is required, but the bill of lading as a
document of title, which can transfer the possession of the goods, is one exception to this rule. See
Official Assignee of Madras v Mercantile Bank of India Ltd [1935] AC 53
636
The pledge is usually expressly stated in the agreement between the issuing bank and the applicant
contained in the application form. For the intermediary bank, it normally has an implied pledge when it
pays or negotiates documents presented to it by the seller. See The Stone Gemini [1999] 2 Lloyd’s Rep
255
637
Publications 2001) para 8-04 See Ross Smyth Co Ltd v TD Bailey, Son Co (1940) 67 Ll L Rep 147 (HL)
156
204
therefore essential that the seller retain the general property in the goods at the date of
presentation and only if he does the bank can have a pledge. 638 A power of sale is
inherent in the pledge and if a bank would not receive reimbursement, it can take
possession of the goods and sell them pursuant to the right given by the pledge. 639 The
bank can also get recourse from pledge when it is stuck with deficient documents
which have been declined by the buyer.
It is clear that the pledgee has a special interest in the goods, which includes the right
to take possession of the goods and the right of resale. However, can a bank which
holds the possessory title as a pledgee prevent the buyer in the first place from
claiming delivery of the goods from the carrier? The pledge does not seem to add
anything further to the bank’s security when the bank is already qualified as a lawful
bill of lading holder under COGSA1992 s.5 (2).640 The problem is whether the bank
still has the right of delivery and the right of disposal as a pledgee where the bill is to
the order of a party other than the bank and the bank is not an endorsee. Since there is
no evidence on the bill of lading itself that the bank is the right party to get the delivery,
it is unlikely that the bank will be able to convince the carrier that he is entitled to have
possession of the goods. In the carrier’s point of view, COGSA1992 is probably a more
reliable route to follow to determine the right of delivery. In those circumstances, the
bank’s security provided by a pledge is largely restricted by COGSA1992. Unless the
bank is able to persuade the carrier and defeat the potential competing party whose
name is shown on the bill of lading, it is difficult to realise its security by reselling the
goods.641
From the above analysis, it is evident that a negotiable bill of lading, being a document
of title at common law, can provide the bank a great deal of security against the carrier
638
The Future Express [1993] 2 Lloyd’s Rep 542 (CA)
639
Rosenberg v International Banking Corp (1923) 14 Ll L Rep 344 (CA) 347, in which Scrutton LJ
held that the pledge would give bankers an independent right of sale so as to secure the amount which
they have advanced.
640
That is when the bank as a consignee or endorsee of a “to order” bill of lading, or holder of a “to
bearer” bill of lading.
641
Ali Malek and David Quest, Jack: Documentary Credits (4th edn, Tottel Publishing 2009) 252
205
and the unpaid party, including rights of delivery and rights of resale. The UCP600
regime, by contrast, does not pay much attention in emphasising the bank’s security
provided by the bill of lading. The drafting of the UCP aims to deliver a set of
standards for mechanical documentary examination rather than concern much on the
security issue behind the screen. Taking account of Article 20 requirements in Part
5.2.3, the UCP600 has well demonstrated the bill of lading’s function as a receipt of
the goods and incidentally mentioned its function as evidence of carriage contract.
Nevertheless, the characteristic of bill of lading being a document of title has been
hardly touched by the UCP provisions. The UCP seems to push banks to look for the
creditworthiness of the parties with whom they deal, and to further arrange the security
in funds, rather than to seek the security provided by the documents to be presented
under the credit. This trend will become more obvious in respect of the alternative
forms of transport documents that the author will look into next.
5.3 Sea Waybills
Sea waybills look remarkably similar to bills of lading. A sea waybill is not a bill of
lading, but it shares the characteristics of bills of lading as a receipt for goods and
evidence of the carriage contract.642 Different from the traditional bill of lading, a sea
waybill is not regarded as document of title at common law and cannot represent
constructive possession of the goods. Therefore, the consignee on sea waybills obtains
delivery upon proof of identity rather than production of the original document.643 A
sea waybill is not a negotiable (i.e. transferable) document, so it normally directly
identifies the person to whom delivery of the goods is to be made by the carrier, rather
than marked “to order”.644 Hence, sea waybills are often used in trades involving short
642
The description of the goods on a sea waybill however cannot bind the carrier as that applies to bills
of lading. See COGSA 1971 s 1(6) (b) and COGSA 1992 s 4
643
This is only likely to work if the identity of the consignee is unlikely to change, or if it does change
the carrier can reliably be informed of the change, and can satisfy himself as to the identity of the person
to whom he is to make delivery, without the need for a document of title to be presented.
644
However, according to COGSA 1992 s 5 (3), the identity of the person to whom the goods are
deliverable can be varied in accordance with the terms of the document after its issue. Therefore, a
shipper of goods described in a sea waybill can, prior to discharge, instruct the carrier to deliver the
goods to someone other than the person named on the sea waybill. See COGSA 1992 s 2 (5)
206
sea voyages and there is no likelihood of the goods being re-sold during transit.645 The
advantage of resorting to a sea waybill is that it overcomes a major problem arising
from using bills of lading, i.e. when the vessel arrives at the port of discharge before
the arrival of the documentation.
Responding to “an increasing commercial trend towards the non-negotiable

sea-waybill”, requirements for sea waybills were introduced by ICC Banking
Commission into UCP500 Article 24 for the first time, which are mostly succeeded by
UCP600 Article 21.646 UCP600 Article 21, however, is essentially identical to the
provisions for bills of lading in UCP 600 Article 20, except for the substitution of the
words “non-negotiable sea waybill” for “bill of lading”.647 The new ISBP No.745 also
for the first time explains the UCP requirements for sea waybills, although it literally
repeats every item stated in the section for bills of lading.648 The reason for separating
a “non-negotiable sea waybill” article in the UCP is because the ICC National
Committees felt it unwise to combine two documents into one article under UCP, in
which sea waybills are not negotiable and bills of lading are most likely to be
negotiable.649 The origin of separating the two documents by judging whether the
document is a document of title, however, has not been expressly presented in the
UCP.650 Moreover, under UCP, the bank is supposed to value substance of a document
645
Even twenty-five years ago, Lloyd L.J. observed that on the North Atlantic route, perhaps 70 per
cent of all liner goods were carried on sea waybills. See Sir Anthony Lloyd, ‘The Bill of Lading: Do We
Really Need It?’ [1989] LMCLQ 47, 49
646
It does not seem that the banking community has taken to them wholeheartedly; rather, they have
had to respond to events, especially concerning the less security offered to banks by sea waybills
comparing with that under bills of lading. See Paul Todd, Bills of Lading and Bankers Documentary
Credits (4th edn, Informa Publishing 2007) para 8.21
647
It may have been assumed that a sea waybill was simply a non-negotiable bill of lading, a
proposition that must now be regarded as questionable in the light of the recent House of Lords decision
in JI MacWilliam Co Inc v Mediterranean Shipping Co SA (The Rafaela S) [2005] UKHL 11, [2005] 2
AC 423
648
ISBP No.745, section F
649
(ICC Publication No.680, ICC 2007) 97. The author feels the word “non-negotiable” adding in front of
sea waybill is superfluous, since sea waybills are not qualified as documents of title without contrary
proof of custom at common law and should always be non-negotiable.
650
The UCP does not contain the delivery requirement which would link to the concept of document of
title.
207
rather than form and has to accept a document “however named”.651
It is suspected that the ineffective division between bills of lading and sea waybills in
the UCP may cause difficulties to the bank in the process of examination. Assuming
the applicant specifically requires a bill of lading in the credit due to its nature of being
a document of title, tendering a sea waybill should be rejected by the bank.
Nevertheless, based on the identical requirements stipulated in the UCP, the bank
cannot in essence distinguish between the bill of lading and the sea waybill. The most
obvious differences between those documents may lie in their forms and titles.652 A
document made out “to order” is apparent to be negotiable and hence a bill of
653
lading. Comparatively, a document made out to a named consignee is
non-negotiable but it may be either a straight bill of lading as we will discuss in the
next part or a sea waybill. While, the easiest way to distinguish those two types of
non-negotiable documents is to look at their titles marked as a bill of lading or a sea
waybill.654 However, if the bank is instructed neither to look at the title of a document
nor to concern the issue of document of title outside UCP, how is the bank supposed to
distinguish between a straight bill of lading and a sea waybill?
Identical to Article 20, a sea waybill under Article 21 covering a port-to-port shipment,
needs to be signed by the same parties as to the bill of lading and must indicate all the
shipment details. By mirror-imaging Article 20, some provisions however have lost the
original sense and been inappropriate to set out in Article 21.655 For example, Article
651
UCP600 Articles 20 (a) and 21 (a)
652
This difference in form even applies between a straight bill of lading and a sea waybill, which in
most times are distinguished by their titles.
653
The words “to order” are not necessarily shown on a negotiable bill of lading. The bill of lading will
still be regarded as a negotiable bill if it states analogous wording such as “consignee or to his or their
assigns” or be made out “to bearer”. See Stephen Girvin, ‘Bills of Lading and Straight Bills of Lading:
Principles and Practice’ [2006] JBL 86
654
See JI MacWilliam Co Inc v Mediterranean Shipping Co SA (The Rafaela S) [2005] UKHL 11,
[2005] 2 AC 423 [5] and Voss v APL Co Pte Ltd [2002] 2 Lloyd’s Rep 707 [48] Another way to
distinguish between a straight bill and a sea waybill is to consider their nature and delivery rules, i.e. a
straight bill is most likely to be required to be presented in order for delivery to take place whereas a sea
waybill is not needed. However, this feature is not expressed by the UCP and likely to be regarded as
carriage terms which should be ignored by the bank.
655
The same issue occurs in the ISBP No.745 section F, which literally repeats all the provisions in
section E for bills of lading.
208
21 (a) (iv) requires the full set of sea waybills if more than one copy has been issued.
Different from bills of lading, sea waybills are not regarded as documents of title and
no physical possession of the document is actually needed to get access the goods. The
person who asks for the goods need only prove his identity as the named consignee on
a sea waybill. Reservation of sea waybills cannot protect the parties’ delivery rights
and therefore, there is absolutely no necessity for Article 21 to set up the same “full
set” requirement as that under bills of lading.656 Another example can be seen from
Article 21 (a) (vi), which requires that a sea waybill contains no indication to subject to
a charterparty. The corresponding article can be found in Article 20 (a) (vi) for bills of
lading. If a bill of lading contains a reference to a charterparty, the bank will examine it
under Article 22 “Charter Party Bill of Lading”, unless the credit prohibits presenting a
charterparty bill. What is the outcome for a sea waybill then if it contains a reference to
a charterparty? Should it be checked under Article 22 as a bill of lading or be rejected
and left out of the UCP? Clearly, blindly copying requirements for bills of lading is not
a correct way to regulate sea waybills and some provisions in Article 21 need to be
reviewed.
5.3.2 Bank’s security upon sea waybills
Since sea waybills share the characteristics of bills of lading as a receipt for goods and
evidence of the carriage contract, it is possible for banks to obtain reasonable
security.657 However, as waybills are not documents of title, a bank which advances
money against a waybill will not, merely by virtue of holding the document, obtain the
security of either property or constructive possession of the goods. Therefore,
possession of a full set of waybills by the bank (which is not a consignee) cannot stop
the unpaid parties from taking delivery of the goods, since the carrier will make
delivery to the named consignee whether or not the document is presented. The
656
Although sea waybills are not needed for getting access to the goods, the bank or the applicant may
still want one copy in order to have a record of what was shipped and of the terms upon which they had
been carried. However, there is definitely no need to ask for a full set.
657
The description of the goods on a sea waybill however cannot bind the carrier as that applies to bills
of lading. See COGSA 1971 s 1(6) (b) and COGSA 1992 s 4
209
delivery obligations are contractually enforceable by the named consignee, by virtue of
the Carriage of Goods by Sea Act 1992. COGSA 1992 s.2 (1) (b) confers the person for
the time being658 named as consignee on a sea waybill all rights of suit and rights of
delivery despite the fact that he does not hold a document giving him a bailor’s right to
possession at common law.659
Since the named consignee can obtain delivery of the goods without production of the
waybill, the bank who wants to prevent an unpaid buyer taking possession of the goods,
will normally require itself to be named in the waybill as the consignee and the buyer
as the notify party.660 Being named as consignee would not, of itself, make the bank
liable towards the carrier for any obligations under the carriage contract, unless the
bank makes a contractual claim in respect of those goods. 661 However, on closer
examination, being named as a consignee cannot adequately secure the bank against
non-payment, since the bank’s right to claim delivery against the carrier exists only as
the consignee for the time being. 662 Unless the carriage contract prohibits, the
consignor of a sea waybill can alter the identity of the consignee at any time until
discharge.663 Hence, it is suggested that a bank who does not want his contractual right
to be defeated by alternative delivery instructions given by the seller/consignor is
better off taking certain precautions.
If the bank makes itself as the consignor of a sea waybill, it will ensure its status as the
consignee as well as hold the right to alter the identity of the consignee. Nevertheless,
it is unrealistic to achieve approval from the seller and the buyer, who also wants to
ensure their own security. Moreover, the bank as the consignor of a sea waybill will
658
The person can be the original consignee or the person to whom the shipper later instructs the carrier
to deliver the goods. See COGSA 1992 s 5 (3)
659
COGSA 1992 s 2 (1) (b) However, the Act has not made the sea waybill a document of title at
common law.
660
The bank can then assign its rights as consignee to the buyer on receipt of payment and notify the
carrier enabling the buyer to obtain delivery. See Ali Malek and David Quest, Jack: Documentary
Credits (4th edn, Tottel Publishing 2009) para 8.106
661
COGSA 1992 s 3
662
COGSA 1992 s 5 (3)
663
COGSA 1992 s 2 (5)
210
become a direct party to the contract of carriage, with rights and liabilities at the same
time. For these reasons, the bank may prefer to seek a way to restrict the consignor’s
right of alteration, rather than become a consignor by itself. ‘This may be done by
inclusion of a non-disposal clause in the waybill (often called a NODIP clause) where
by the consignor irrevocably gives up the right to vary the identity of the consignee
during transit.’664 Alternatively, a clause may state that one change of identity is
permitted. The advantage of allowing one change is that a bank advancing money
under a documentary credit can initially be made as a consignee and a change to the
purchaser can be made after the bank has been reimbursed. ‘From the bank’s point of
view, this would avoid the risk of an untimely alternation by the shipper without
incurring contingent liabilities towards the carrier through assuming the status of
consignor.’665
The above measures taken by the bank can only guarantee its security in terms of
rights of delivery; however, as the sea waybill is not regarded as a document of title,
the bank cannot transfer the rights of delivery to an on-buyer through mere transfer of
the document. Furthermore, the delivery of the sea waybill to the bank will not
constitute a pledge of the goods – it will at most constitute a pledge of the documents
and an equitable pledge of the goods.666 The bank may become the pledgee of the
documents so long as the documents are in its possession, but it cannot prevent the
carrier from delivering the goods to the named consignee nor get the power of resale
over the goods. Clearly, the transfer of a sea waybill launches no legal consequences to
the bank, so in this respect the security provided by a sea waybill is much inferior to
that under a bill of lading.
664
However, The position might not be so acceptable to the other parties. The seller, who would be left in a
difficult position if the documents are rejected under the credit, often, wants to restrict the effect of the
clause upon the acceptance of the waybill by the bank.
665
Charles Debattista, ‘Banks and the Carriage of Goods by Sea: Secure Transport Documents and the
UCP500’ (1994) 7 JIBFL 329, 334
666
Publications 2001) paras 8-05, 8-06
211
In summary, the UCP600 Article 21, copied from Article 20 in UCP 500, although a
little inappropriately, only focuses on the documentary functions of being a receipt and
binding the carrier to representations therein. There is nothing in UCP600 Article 21
addressing the security issue and the form of a sea waybill, for example requiring the
bank to be named as consignee. It is difficult to see how a bank not named as
consignee can retain security until it is paid. It is suggested that the bank should put
special instructions relating to its security in the application form and subsequently
turn them into the documentary credit terms.667 In absence of these terms, a bank is
still obliged to accept a sea waybill stating the seller as consignor and the buyer as
consignee under UCP600, which hardly provides any security to the bank.
It seems that the sea waybill is ideal where security is not a major concern and there is
no intention to re-sell. It is especially useful for short voyages where documentary
delays would cause problems. However, with respect to the bank’s security in a
documentary credit, the sea waybill is not a good substitute for the traditional bill of
lading. A bank should only accept a waybill either if reimbursement is unlikely to be a
problem, or if some of special instructions are inserted.
5.4 Straight Bills of Lading
Apart from the traditional negotiable bills of lading dealt with in Part 5.2, there is an
alternative type of bills of lading which are made out to a named consignee, so called
non-negotiable bills of lading or straight bills of lading. 668 The straight bills are
commonly used today where a negotiable document is not required, for example where
the identity of the consignee is known from the outset, and the goods are not likely to
be re-sold. The straight bill of lading however is not separately listed in the main
content of UCP600. In terms of its unique nature and controversial status, the author
believes it is necessary to create a separate part in this chapter for it. In this part, the
667
However, there is a problem concerning how to force these terms. The term may be categorised as a
carriage term and condition so as not to be checked by the bank. See UCP600 Article 21 (a) (v)
668
For a general introduction of a straight bill, see Guenter Treitel, ‘The Legal Status of Straight Bill of
Lading’ (2003) 119 LQR 608
212
author will not delve into the carriage debates to consider whether straight bills of
lading should be documents of title or not and the corresponding revisions to carriage
of goods by sea. Instead, the author will only focus on two questions surrounding the
day-to-day letter of credit transactions relating to the bank’s security: firstly, which
UCP Article should be applied to examine a straight bill of lading, and secondly, how
to deal with the delivery clause in a straight bill of lading?
5.4.1 Finding the right UCP Article for straight bills of lading
A straight bill of lading is not expressly mentioned in the main content of the UCP;
however, there has been a clue in the ISBP considering it. The ISBP No.745 section
E12 stipulates, when a credit requires a bill of lading to evidence that goods are
consigned to a named entity, i.e. a straight bill of lading, the bill of lading should not
contain the expression “to order” preceding or following the named entity, whether
typed or pre-printed.669 Section E13 (b) provides, when a credit requires a bill of
lading to evidence that goods are consigned to “order of (named entity)”, it is not to
indicate that the goods are straight consigned to that named entity. Clearly, the ISBP
indicates that UCP600 Article 20 covers both negotiable bills of lading and straight
bills of lading.
It is supposed to be easy to distinguish between a negotiable bill and a straight bill by

virtue of the different format set out in the consignee box. However, the problem lies in
how to differentiate a straight bill from a sea waybill. In respect of the identical
provisions laid out in Article 20 and Article 21, it probably does not matter if the credit
does not specifically request a straight bill of lading. Where a credit expressly asks for
a straight bill of lading, the bank has to reject a sea waybill. As analysed in the part
concerning sea waybills, the superficial way to distinguish between the two is to look
at what title has been used. Nevertheless, as a test of substance, the bank should also
concern the matters connecting with the root of the nature, such as whether the
669
The same provision is shown in the ISBP No.681, para.101
213
document is issued in more than one original, and whether it states expressly that
delivery is to be made only against its production.
5.4.2 Delivery issue and bank’s security
Since there are no corresponding provisions considering delivery issues in the UCP, we
will still start from the common law position and then reflect on the outcome on the
UCP. It is advisable to divide the delivery issue into two aspects, namely who is
entitled to claim delivery and how to claim delivery. The first question is quite
straightforward. A straight bill of lading is traditionally considered to be
non-negotiable (i.e. non-transferable) since it is incapable of transfer by endorsement
or, as a bearer bill, by delivery.670 The COGSA 1992 therefore does not treat it to be a
bill of lading, but as construed by the Law Commissions, the Act confers the consignee
under straight bills of lading a contractual right to delivery of the goods through
COGSA1992 s.2 (1) (b), i.e. the section dealing with sea waybills.671 Hence, the bank
who makes itself as the consignee on a sea waybill obtains a right of delivery and a
right of suit against the carrier.672
The second issue considering how to claim delivery under a straight bill of lading is far
more complicated due to linking with the concept of document of title. The House of
Lords decision in The Rafaela S673 has held that a straight bill should be considered as
a bill of lading rather than a sea waybill for the purposes of the COGSA 1971 and is a
document of title since its rights are transferred by delivery, albeit only once. The
question of whether a consignee in a straight bill of lading was entitled to obtain
delivery by simple proof of identity without presentation of the bill of lading was only
670
COGSA 1992, s 1 (2) (a)
671
See Law Commission, Rights of Suit in Respect of the Carriage of Goods by Sea (Law Com No 196,
1991) para 2.50
672
The bank may face with the same risk concerning the consignee as the time being, since the
consignor can still reserve the right to alter a consignee before discharge as that under sea waybills. See
COGSA 1992 s.2 (5). However, similar to the position under a sea waybill, this consequence might be
avoided by appropriate contractual stipulation.
673
JI MacWilliam Co Inc v Mediterranean Shipping Co SA (The Rafaela S) [2005] UKHL 11, [2005] 2
AC 423
214
raised in obiter. The straight bill in question contained an attestation clause requiring
delivery upon presentation and the court confirmed that one bill must be presented in
order to obtain delivery of the goods. Further than that, Lord Bingham held that:674
‘I have no difficulty in regarding it [the straight bill] as a document of title,

given that on its express terms it must be presented to obtain delivery of the
goods. But like Rix LJ (para 145)675 I would, if it were necessary to do so,
hold that production of the bill is a necessary pre-condition of requiring
delivery even where there is no express provision to that effect.’
Singapore courts went even further than the obiter support for this proposition in the
English courts.676 In Voss Peer v APL Co Pte Ltd,677 the Singapore Court of Appeal
decided that production of a straight bill is necessary for delivery of the goods,
regardless of whether there is an attestation clause. It held that although the
characteristic of transferability was absent, there was no reason why one should
thereby infer that the parties had intended to do away with the other main characteristic,
i.e. delivery upon presentation.678 It is therefore strongly arguable that straight bills of
lading differ from order bills because they are not negotiable, but also differ from
seaway bills because presentation is nonetheless required.
An issue left by the courts is the effect of a delivery clause which specifies that where
the bill is used in its straight, non-order form, the carrier can deliver the goods to the
named consignee without presentation of the bill on reasonable proof of identity. Such
a clause would be contractually valid, although the presence of such a clause might
674
JI MacWilliam Co Inc v Mediterranean Shipping Co SA (The Rafaela S) [2005] UKHL 11, [2005] 2
AC 423 [20] also see [45] (per Lord Steyn)
675
JI MacWilliam Co Inc v Mediterranean Shipping Co SA (The Rafaela S) [2003] EWCA Civ 556,
[2004] QB 702 [145] (per Rix LJ), in which Rix LJ stated that “it seems to me to be undesirable to have
a different rule for different kinds of bills of lading.”
676
This viewpoint appears to be supported by ‘Provisions of the Supreme People’s Court on Several
Issues concerning the Application of Law during the Trial of Cases about Delivery of Goods without an
Original Bill of Lading’ (PRC, 2009)
677
Voss v APL Co Pte Ltd [2002] 2 Lloyd’s Rep 707
678
Voss v APL Co Pte Ltd [2002] 2 Lloyd’s Rep 707 [48]
215
have the consequence of affecting the status of the bill of lading as a document of
title.679 However, this clause will inevitably endanger the bank’s security and make the
boundary between a straight bill and a sea waybill ambiguous. Clearly, if the goods can
be delivered upon proof of identity, the bank holding the full set of bills of lading will
not stop the unpaid party from delivery. Therefore, the requirement of tendering a full
set of bills of lading in the UCP600 Article 20 (a) (iv) will completely lose its security
effect.
In addition, the bank will probably face with an unsolved dilemma if the credit
expressly states that “bills of lading indicating that goods may be released without
presentation are not acceptable”, which obviously conflicts with the delivery clause in
the bill of lading permitting delivery upon proof of identity. Exactly the same issue
occurred in the ICC Opinion R758, 680 in which the ICC Banking Commission
considered the delivery clause in the bill of lading as “terms and conditions of
carriage” so as not to be examined according to the UCP600 Article 20 (a) (v).
Moreover, since the delivery clause in that case was only addressed to non-negotiable
bills and the bill of lading actually issued was a negotiable bill, the ICC Banking
Commission held that there was no discrepancy for this specific bill. Nevertheless, one
may wonder what the result should be if the bill of lading in question was a
non-negotiable bill. Should the bank reject the straight bill in that it contains a delivery
clause which is inconsistent with the credit terms, or should the bank ignore the
inconsistency since the delivery clause belongs to terms and conditions subject to
article 20 (a) (v)? These questions however are awaiting further consideration by the
ICC.
It is at least clear at the current stage that unless the credit expressly prohibits it, bills
of lading, whether negotiable or straight, with a delivery clause permitting delivery
without presentation, can be validly tendered under a letter of credit governed by the
679
JI MacWilliam Co Inc v Mediterranean Shipping Co SA (The Rafaela S) [2003] EWCA Civ 556,
[2004] QB 702 [142] (per Rix LJ)
680
216
UCP600. The ICC Drafting Group refused to stipulate that the bill of lading must be a
document of title, because it is a legal issue and the UCP are voluntary rules of
contract. 681 It is also concerned with the setup of international uniform practice
without causing huge conflict with domestic laws.682 However, in the meantime, the
bank has to sacrifice its own security provided by bills of lading as documents of title
and only obtain the same level of security as with sea waybills. In the author’s opinion,
it should not be too difficult to solve the delivery issue in Article 20 by stating that:
‘Bills of lading indicating that the carrier may give delivery of the goods without
production of an original bill of lading is not acceptable’.683 As the UCP itself claims,
they are voluntary rules and the parties can still contract out as appropriate. The new
provision will bring a slight effect on Article 20 (a) (v), but the bank still does not
examine the carriage terms and conditions save for anything already required by the
UCP, i.e. delivery clause. Stoppage or innovation, it is hard to predict which choice is
better, but the latter definitely is beneficial for the bank’s security.
5.5 Charter Party Bills of Lading
Charterparty bills of lading are marine bills of lading which are issued subject to the
terms of a charterparty. The frequent use of bills of lading referring to charterparties,
particularly in the commodity trades, persuaded the ICC to introduce the provisions for
charterparty bills in the UCP 500 Article 25, which has been reproduced in the UCP
600 Article 22. It is necessary to clarify here that a bill of lading seeks to incorporate
terms from charterparty that does not affect the nature of the bill of lading as a
document of title and consequently a bank’s security at common law remains at the
same level as that under bills of lading.684 Hence, in this part, the author will mainly
focus on the UCP Article 22 requirements and reveal the UCP terms which may have
impacts on a bank’s security.
681
682
Not all states recognise straight bills of lading as documents of title, e.g. US. See also Janet Ulph,
‘The UCP 600: Documentary Credits in the 21st Century’ [2007] JBL 355, 369
683
As analysed above, Article 20 covers both negotiable and straight bills of lading.
684
However, the bank’s contractual position vis-à-vis the carrier may be affected by the terms
incorporated from the charterparty.
217
5.5.1.1 Application of Article 22
Under UCP600, if the credit calls for a charterparty bill of lading, the bill must contain
an indication that it is subject to a charterparty. However, charterparty bills are not
acceptable unless the credit expressly calls for or permits them to be presented.685 This
position follows the banking practice as established in the common law case Enrico
Furst & Co v W E Fischer Ltd,686 which held that on the evidence of banking witness,
where the credit called for payment against bills of lading, banks did not treat as a
good tender for bills of lading incorporated the terms of a charterparty.
A transport document, however named, containing any indication that it is subject to,
or any reference to, a charterparty is deemed to be a charterparty bill of lading under
UCP600.687 For example, freight payable as per charterparty will be an indication that
it is subject to a charterparty.688 Comparatively, a transport document only with an
associated name, e.g. Congenbill, without any indication or reference to a charterparty
is not a charterparty bill of lading.689 Having analysed the bill of lading under Article
20 extensively, here the author only makes a few points concerning the differences
between Article 20 and Article 22.
685
ISBP No.745 section G1. The position remains the same with UCP500 article 25 (a). For a different
voice, see Charles Charles Debattista, ‘Banks and the Carriage of Goods by Sea: Secure Transport
Documents and the UCP500’ (1994) 7 JIBFL 329, 335
686
Enrico Furst & Co v W E Fischer Ltd [1960] 2 Lloyd’s Rep 340 (QB) 345-346 By contrast, the
position under a c.i.f. contract is that a charterparty bill of lading must be accepted by the buyer, even if
the charterparty is not tendered, at any rate if it is on an unamended standard form commonly used in the
trade. See SIAT Di Del Ferro v Tradax Overseas SA [1978] 2 Lloyd’s Rep 470 (QB) 492
687
ISBP No.745 section G2(a) It should be noticed that the definition in the UCP covers both “true”
charterparty bills, i.e. household name bills of lading for use with particular charterparties and any other
bills of lading which incorporate charterparty terms. However, in the shipping market, charterparty bills
only refer to the former rather than the latter. See Charles Debattista, ‘The New UCP 600 - Changes to
the Tender of the Sellers's Shipping Documents under Letters of Credit’ [2007] JBL 329, 350
688
ISBP No.745 section G2(b) The same decision can be found in the ICC Opinions 2005-2008, R647
(2)
689
ISBP No.745 section G3 The same decision can be found in the ICC Opinions 2005-2008, R648.
Based on the same point, in the author’s opinion, the ICC Opinions 2005-2008, R647 (3) is supposed to
be a wrong decision.
218
5.5.1.2 Specific requirements under Article 22
Different from Article 20 for bills of lading, Article 22 does not require charterparty
bills to identify the carrier, since ‘the identification of the carrier [is] unnecessary when
the contract of carriage is concluded under a charterparty contract’.690 Apart from
signature by the master, owner or agent as stated in the UCP500 Article 25, UCP600
Article 22 newly recognises a new way of signing a charterparty bill, i.e. signed by or
on behalf of the charterer. It should be noticed that the bank’s security may be
weakened for holding a charterer’s bill of lading, since under a c.i.f. sale, the seller
who as the beneficiary of the credit is likely to be a charterer and he can easily
fabricate a clean bill of lading even without shipping any goods on board. However, as
stated in Chapter 2, it is not the UCP’s job to defend against fraud. If the bank wants to
prevent the risk, it must expressly prohibit the bill of lading signed by charterers in the
credit and modify the UCP600 Article 22 (a). Another significant difference from
Article 20 regarding bills of lading is that the provisions relating to transhipment are
omitted in Article 22, due to normally one vessel under a charterparty.691 It has been
suggested that just as under bills of lading, charterparty bills should also cover the
whole of the carriage, although no express requirement under Article 22 and it is
unrealistic for bank to examine the term.692
5.5.2 Charterparty under Charterparty bills
Rather surprisingly, there is no restriction as to the terms of the carriage contract in the
UCP600 Article 22, perhaps because they cannot realistically be inspected, but
UCP600 Article 22 (b) precludes banks from examining the charterparty contracts even
690
Nevertheless, when the banks seek to realise the security represented by the bill of lading, it would
discover that identification of carrier where goods are carried on a chartered vessel is a far more
complicated issue. See Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2003] UKHL 12,
[2004] 1 AC 715
691
However, the justification may not be suitable for the second type of charterparty bills, i.e. bills of
lading which only contain a reference to charterparty terms rather than used together with a charterparty.
692
See Ali Malek and David Quest, Jack: Documentary Credits (4th edn, Tottel Publishing 2009) para
8.109 The same problems exist here as those under bills of lading, such as how to examine the
requirement without looking into the carriage terms.
219
if they are required to be presented by the terms of the credit. ISBP No.745 section
G27 newly provides a further clarification that ‘unless UCP600 sub-Article 22 (b) is
specifically excluded and the credit specifically indicates the data that are to be
examined and to what extent, banks do not examine any content of a charter party
contract, even when such contract is required as a stipulated document under the
credit.’ It is justifiable for relieving the bank’s responsibility in examining
charterparties, since different from the position under sale contracts, there is no reason
for a bank to be aware of the terms of even commonly-used charterparties without
amendment, nor of which charterparties are used for particular trades.693 Yet the terms
of the carriage contract, which the bank may not examine, can obviously affect its
security.694 Charterparty terms incorporated into the bill of lading, e.g. demurrage
terms, may also be material to the unpaid bank decision as to whether or not to claim
delivery of the goods. It is a pity to let the opportunity pass without examination.
However, the UCP leaves the issue in dark if the bank does examine the carriage terms
and find discrepancies in them.
In conclusion, UCP600 Article 22 is not badly drafted. It basically follows the structure
of UCP 500 Article 20 concerning bills of lading with some necessary changes to
accommodate the characteristics of a charterparty bill, but it shares the deficiencies in
common with UCP 500 Article 20. The charterparty bills of lading themselves have not
weakened the bank’s security; however, the bank’s security has been slightly restricted
by the UCP provisions in respect of not examining carriage terms.
5.6 Multimodal Transport Documents
With the modern trade development, the traditional bill of lading which only covers the
port-to-port shipment is not well suited to combined transport operations, where the
693
Position under sale contracts can be found in Finska Cellulosaforeningen v Westfield Paper Co Ltd
(1940) 68 Ll L Rep 75 (KB) and SIAT Di Del Ferro v Tradax Overseas SA [1978] 2 Lloyd’s Rep 470
(QB)
694
Since the bank does not check the carriage terms contained in the charterparty under the letter of
credit, the buyer may wish to reserve his right of recourse against the seller.
220
transport is from an inland terminal in one country to an inland terminal in another.695
Meanwhile, the development of containerisation has significantly increased the
importance of combined transport operations. Parties who are played in modern
international trade also desire to hold a single document covering the entire carriage,
regardless of which mode of transport or means of conveyance is involved during the
journey. Therefore, multimodal transport documents which can envisage the entire
carriage of the goods by more than one means of transport are more and more popular
nowadays. With the purpose of emphasising the increasing use of multimodal transport
documents in the trade community, the Drafting Group has placed Article 19 as the
first transport document article in the UCP600. However, the provisions in Article 19
are mostly mirror imaged with the provisions under Article 20 regarding bills of lading.
For this reason, the author decided to discuss the requirements for the bills of lading in
the first part of this chapter, and now focuses on the differences between Article 19 as a
derivative and Article 20 as an original.
In UCP 600, multimodal transport documents are covered by Article 19, which is
headed as “Transport Document Covering at Least Two Different Modes of
Transport”.696 The article applies to a document, however named, that appears to
cover transportation by at least two different modes of transportation. The
requirements under Article 19 share many features in common with Article 20
regarding bills of lading. For example, the document must indicate the name of the
carrier and be signed by the carrier, master or agent as the same as under bills of
lading.697 Article 19 (a) (iv) also requires to tender the full set of transport documents
if more than one is issued. Similar to Article 20, Article 19 (a) (vi) does not permit a
695
It usually involves three or more carriage in the total operation, namely, one sea and two land legs.
696
According to the UCP Drafting Group, this type of transport document is a relatively new concept
and still lacks specific name recognition, so that the Drafting Group feels reluctant to give a fixed name
for this type of document. See Gary Collyer, Commentary on UCP600: Article by Article Analysis by the
UCP600 Drafting Group (ICC Publication No.680, ICC 2007) 81; ISBP No.745, section D2
697
See Article 19 (a) (i). It is still possible for the freight forwarder to issue and sign a multimodal
transport document, but he has to act as the agent of the carrier rather for the shipper.
221
multimodal transport document containing an indication that it is subject to a
charterparty. 698 However, there are two important aspects, reflecting the essential
differences between multimodal transport documents and bills of lading.
The first difference is that UCP 600 Article 19 accepts the document indicating that the
goods being dispatched, taken in charge or shipped on board. Unlike Article 20, Article
19 does not require an on board notation as a default position for most of the time due
to the feature of multimodal transport operations. Nevertheless, a dated on board
notation is clearly required when the credit so requests.699 Moreover, in line with the
bill of lading, the on board notation is also required when the document evidences the
first leg of the carriage as a sea shipment from the place stated in the credit.700 In this
event, the criteria for an on board notation under a bill of lading as previously
discussed in Part 5.2.2 will apply to a multimodal transport document. 701 Therefore,
except from an express requirement in the credit and evidence of the first part of
journey by sea carriage, a combined transport document will be accepted even if it
does not state that goods are shipped on board a named vessel.
The second aspect is regarding transhipment. Unlike the transhipment from one vessel
to another at sea under bills of lading described in Article 20 (b), transhipment in
Article 19 (b) envisages a wider coverage, which means unloading from one means of
conveyance to another means of conveyance (whether or not in different modes of
transport) during the whole carriage. Based on the needs of transhipment under
multimodal carriage, Article 19 (c) stipulates even if the credit prohibits transhipment,
the document showing that transhipment will or may take place is still acceptable,
698
It is not often to see the relevance of charterparty terms in a multimodal document though. However,
it is unclear when the credit does not prohibit charterparty bill of lading, or even permits the reference to
charterparty, whether the bank is obliged to reject a multimodal transport document containing a single
reference to the charterparty under Article 19. Surely, the bank cannot use Article 22 concerning
charterparty bills as a backup article and resort to it.
699
700
ICC Opinions 2005-2008, R641, which decision has been incorporated into ICC Banking
Commission, Recommendations of the Banking Commission in respect of the Requirements for an On
Board Notation (Document No 470/1128 rev final, 22 April 2010) 8 and ISBP No.745, section D7.
701
ISBP No.745, section D7, D8
222
provided that the entire carriage is covered by one and the same transport document.
Comparing with the transhipment provisions in Article 20, the wording of Article 19 (c)
is much clearer. Even though there is still no clarification for the meaning of entire
carriage as previously discussed under the section of bills of lading, since the
multimodal transport document is conceptually developed from the through bill of
lading,702 it has been strongly argued that the contractual carrier needs to undertake the
entire liability under a multimodal transport document. 703 The inference of entire
liability is definitely favourable for the traders; however, once again, the bank will face
with an unsolved puzzle, namely, how to assess the carrier’s entire liability without
examining the carriage terms.
5.6.2 Bank’s security upon multimodal transport documents
Due to the massive legal issues involved in this new developing area, in this part, the
author will only develop discussion on multimodal transport documents which clearly
involve a part of sea carriage and a bill of lading. It is normal for the multimodal
transport document to state that the goods have been received rather than shipped on
the date which the document is issued. The ISBP No.745 requires an on board notation
only for the circumstance when the first leg of the carriage is a sea shipment. Therefore,
the bills of lading, issued for the second or later leg of the journey in combined
transport operations, are usually in “received for shipment” form. From the above
discussion regarding to bank’s security, it has been clear that the shipped bills of lading,
which are recognised as documents of title at common law, can offer the bank the
maximum security guarantee. However, the received bills of lading were treated very
differently at common law since they could not be regarded as documents of title
702
The essence of the through bill of lading is that one carrier (probably the ocean carrier) takes on
obligations for the whole voyage, but with a liberty to sub-contract on-carriage from the port of
transhipment. The carrier who undertakes obligations for the entire voyage will be the contracting carrier.
The cargo-owner will be able to sue him in contract, if there is a breach of carriage contract, whether or
not he is the actual carrier of the goods at the point of the breach. See Paul Todd, Bills of Lading and
Bankers Documentary Credits (4th edn, Informa Publishing 2007) para 3.13 and para 3.24
703
See Paul Todd, Bills of Lading and Bankers Documentary Credits (4th edn, Informa Publishing 2007)
para 8.26
223
without proof of custom.704
Prior to COGSA1992, it was doubtful whether the named consignee or the endorsee of
a received bill can obtain a right of delivery against the carrier. Since COGSA 1992 s.1
(2) (b), which categorised received bills of lading into bills of lading in the Act, the
lawful holder of the bill of lading, i.e. the named consignee or the endorsee of a
received bill, has obtained a contractual right of delivery and a title of suit against the
carrier. However, COGSA 1992 makes no express provision for multimodal transport
documents. Assuming the same rule under received bills of lading applies to
multimodal transport documents, a lawful holder of a bill of lading envisaging
transport by more than one mode of transport will have the right of suit and the right of
delivery whether the document states that the goods have been shipped or received for
shipment.
Since Lickbarrow v Mason705 established that only shipped bills of lading which can
confirm the shipment status are documents of title at common law, it is consequently
said that combined transport documents would not be considered as documents of title
without proof of custom. 706 However, the conclusion seems difficult in modern
carriage, especially taking account of the widespread use of multimodal transport. If
the multimodal transport document is not a document of title, holding a full set of
documents as required by Article 19 (a) (v) will become worthless to the bank, since
other parties can claim delivery without presentation of the document. It will also
conflict with COGSA1992 which requires the bill of lading holder with possession of
the document.707 Moreover, the ISBP No.745 section D16 covers both a “straight”
multimodal transport document and “to order” multimodal transport document, which
704
Lickbarrow v Mason (1794) 5 TR 683 and Diamond Alkali Export v Bourgeois [1921] 3 KB 443
705
Lickbarrow v Mason (1794) 5 TR 683
706
The issue of whether a received for shipment bill of lading is a document of title was treated as an
open question. See Richard King, Guttidge & Megrah’s Law of Bankers’ Commercial Credit (8th edn,
Europa Publications 2001) para 8-05 fn 11; Michael Bridge (ed), Benjamin’s Sale of Goods (8th edn,
Sweet and Maxwell 2010) para 21-074; Paul Todd, Bills of Lading and Bankers Documentary Credits
(4th edn, Informa Publishing 2007) para 7.110
707
COGSA1992, s 5(2)
224
clearly recognises the possibility of transfer of multimodal transport documents.
In summary, it is still not entirely clear to what extent a multimodal transport document
can provide the bank’s security. COGSA 1992 has granted the holder of a received bill
of lading a title to sue the carrier and rights to claim delivery; however, it does not
mention the position under multimodal transport documents at all. The UCP600
together with the new ISBP, to some degree, has strengthened the bank’s security by
copying provisions from the bills of lading. It might have a leeway to argue that
multimodal transport documents are transferable in modern views and offer the bank
the same level of security as under traditional bills of lading.708
5.7 Conclusions
In this chapter, the author has examined the most important “specific” documents in
the documentary credits examination – transport documents which are wholly or partly
involved with sea carriage. The author has started from the bill of lading as a standard
base to analyse the UCP requirements and review the various aspects of banks’ security
it can offer. Other alternative forms of transport document, including sea waybills,
straight bills, charterparty bills and multimodal transport documents have all been
analysed for their specific problems and the different levels of security provided to the
bank.
Generally speaking, the UCP600 and its affiliation including the new ISBP No.745
have provided detailed guidance for the bank to examine the transport documents,
especially concerning their functions as the receipt of the goods and the evidence of
shipment. However, there are a few historical problems still remaining in the current
UCP, such as not examining the carriage terms and conditions. The boundary between
the “special terms” which are supposed to be checked by the bank and the “general
terms” which are supposed to be disregarded by the bank is very vague, sometimes
708
225
even impossible to set up. The attitude for transhipment clauses is a good example to
demonstrate the struggle within the UCP system. Comparing with UCP500 and the
previous version of ISBP, the current status is much better, but more efforts still need
to be continuously made by the ICC.
As we can see, in recent years, changes in commercial practice have forced banks
under documentary credits to accept documentation apart from the traditional shipped
bill of lading. The use of alternative forms of documentation, in certain types of trade,
may benefit to the trading parties; however, they were not devised in the interests of
the banking community. A bank that accepts any document other than a traditional
shipped bill of lading is thereby accepting a lesser degree of security offered by the
document.
The author admits that nowadays banks are more likely to look for the creditworthiness
of the parties and to arrange extra security in funds, than to rely on the security
provided by the tendered documents under the credit. However, in the author’s opinion,
the original documentary security provided to banks cannot be regarded as unimportant,
especially where the bank has mistakenly paid on documents. In those circumstances,
the bank will have no right of indemnity apart from utilising the documents stuck in its
hands. With respect to banks’ security, the UCP600 pays little attention, especially
referring to rights of delivery and rights of resale. The individual bank may therefore
seek to insist that the credit stipulates presentation of a transport document in a form
that gives it maximum security.
226
Chapter 6 Rejection of Presented Documents
6.1 Introduction
The previous chapters have dealt with the initial obligation upon banks with regard to
the presented documents, i.e. examination of documents, which includes general
examinations and special requirements. After examining the presented documents, the
bank must honour or negotiate the conforming documents.709 On the contrary, if the
bank determines that the documents are not compliant, it may think of refusing to
honour or negotiate the presentation.710 This will trigger the next stage of obligations
on the bank in relation to dealing with the presented documents, i.e. obligations
concerning rejection, which will be focused on in this chapter.
Before starting the main chapter, it is necessary to clarify the specific banking parties
involved into the obligations concerning rejection. At a glance of the current UCP600
Article 16, it is clear that three types of banks are mentioned, including the issuing
bank, the confirming bank and the nominated bank. However, if one goes through
carefully, it is easy to find that only the issuing bank has been referred to in Article 16
(b)711 for seeking a pre-refusal waiver. Moreover, only the issuing bank and the
confirming bank have expressly fallen into the scope of preclusion rule in Article 16
(f) 712 . It seems the legal parties might be frequently changed under different
circumstances. Nonetheless, in this chapter, the author aims to cover all the banks’
obligations dealing with the rejection of discrepant documents. Therefore, when a bank
is mentioned, it can be any one of the three banks. Naturally, the author will also
709
UCP600 Article 15
710
UCP600 Article 16 (a) provides: ‘When a nominated bank acting on its nomination, a confirming
bank, if any, or the issuing bank determines that a presentation does not comply, it may refuse to honour
or negotiate.’
711
The UCP600 Article 16 (b) only mentions ‘when an issuing bank determines that a presentation does
not comply…’
712
The UCP600 Article 16 (f) stresses that ‘If an issuing bank or a confirming bank fails to act in
accordance with the provisions of this article…’
227
specifically analyse the legal situation faced by an individual bank concerning different
scenarios when there is a need to distinguish them either in the UCP or in practice.
The structure of this chapter will follow the practical measures taken for rejecting a
documentary presentation and the stipulations in UCP600 Article 16 will be addressed
respectively. The initial step for the bank is to determine whether a non-compliant
presentation will lead to refusal or dishonour. As stipulated in the UCP600 Article 16
(b), the bank may in its sole judgement approach the applicant for a waiver after
determining non-compliance. Therefore, the discussion in Part 6.2 will centre on
evaluating the role of the bank, as well as analysing in what degree the bank should be
permitted to consult with the applicant for a waiver. After the refusal has been
determined, the bank must subsequently serve a notice of refusal to the presenter. As
required in UCP600 Article 16 (d), the notice must be sent within a strict time limit by
the specified mode, which will be considered in Part 6.3. Consequently, the
requirement for the content and formalities of a notice of refusal in Article 16 (c) will
be carefully reviewed in Part 6.4. More importantly, the most controversial provision,
Article 16 (c) (iii), which relates to the specific statements in a notice of refusal, will be
examined by verbatim in this part. In addition, further actions following a notice of
refusal, which may also fall under the ambit of the bank’s obligations on rejection, are
necessarily analysed in Part 6.5. Last but not least, the draconian consequence of
breaching provisions under Article 16, i.e. the preclusion rule drawn in the UCP600
Article 16 (f), will be tested in Part 6.6 concerning different scenarios.
6.2 Consultation with the applicant
Since applicants are prepared to waive discrepancies in the majority of cases in

practice, consultation with the applicant for seeking a pre-refusal waiver is an
extremely important step. 713 The UCP600 Article 16 (b) provides that ‘when an
713
Professor Mann’s survey indicated that ‘documentary compliance was woefully low (as low as 27%),
but that applicants were waiving discrepancies at a high rate (well over 90%).’ in ‘The strict compliance
rule in a recession’ DCInsight 10-12/2009, vol.15 No.4, p.8; also see Michael Bridge (ed), Benjamin’s
Sale of Goods (8th edn, Sweet and Maxwell 2010) para 23-173, fn 594 and Ali Malek and David Quest,
228
issuing bank determines that a presentation does not comply, it may in its sole
judgment approach the applicant for a waiver of the discrepancies.’ Clearly, Article 16
(b) only grants the issuing bank a choice to seek for a waiver from the applicant before
serving a notice of refusal. The fate of the presentation is still up to the bank’s sole
determination even if the bank has received a pre-refusal waiver from the applicant.
Although in appearance, Article 16 (b) is a choice offered to the bank; in reality, it may
contain a double-edged effect on the bank, since Article 16 (b) requires the bank to
make an independent determination. That means a bank is obliged to use its sole
judgement to examine and determine a presentation in the whole process of seeking a
pre-refusal waiver from the applicant. In addition, the bank is restricted by the time
limit of approaching the applicant, which allows a maximum of five banking days in
the UCP600. In a word, the bank has its discretion, but in the meantime it has to fulfil
the obligations indicated in the UCP.
6.2.1 Legal capacity of approaching an applicant
The UCP600 Article 16 (b) expressly states that an issuing bank is entitled to approach
its applicant after determining a non-compliant presentation but before sending a
conclusive notice of refusal. However, the UCP600 does not mention whether a
confirming bank or a non-confirming nominated bank is entitled to approach the
issuing bank or the applicant for a pre-refusal waiver.
Concerning the case law position, there are not English cases highlighted drawing on
this specific issue; while, the judge in a recent Hong Kong case did touch the point. In
Total Energy Asia Ltd v Standard Charted Bank (Hong Kong) Ltd 714, the plaintiff
beneficiary contended that the defendant confirming bank wrongfully refused to make
payment pursuant to an irrevocable letter of credit. The core issue in the case is
whether the confirming bank had complied with its obligations of refusal under
Jack: Documentary Credits (4th edn, Tottel Publishing 2009) para 5.54
714
Total Energy Asia Ltd v Standard Charted Bank (Hong Kong) Ltd [2007] 1 HKLRD 871; [2006]
HKCU 2134
229
UCP500 Article 14 (d). The thorny questions before the Court were whether the
confirming bank was entitled to approach the applicant to ask for a pre-refusal wavier,
and moreover whether the rejection served was unequivocal as required. The judge
recognised that an issuing bank was the only legal party to approach the applicant for a
pre-refusal waiver in the UCP500; however, the judge further held that ‘there appears
to be no reason in principle why in practice a confirming bank is unable to, or is
otherwise precluded from, seeking/suggesting the procuring of a waiver from the
applicant, however inappropriate or practically risky this course may be…’ 715
Subsequently, the judge proposed a concomitant question that the confirming bank
who sought a pre-refusal waiver would render a risk of equivocal refusal.
The author tentatively believes that, there is no difference in nature for a nominated
bank which directly seeks a pre-refusal waiver from the presenter, although it is not a
party concerned by UCP600 Article 16 (b).716 Unlike the arguments in Total Energy
Asia, the author cannot see any conditional or equivocal situations if a nominated bank
would have followed the procedures of giving a notice of refusal as the issuing bank
did. The essential question in the Total Energy Asia case should be whether the
nominated bank had sent an unequivocal notice of refusal, rather than whether the
nominated bank was entitled to approach the applicant for a pre-refusal waiver.
Nonetheless, the only significant distinction compared with the status of an issuing
bank is that a nominated bank has to seek a pre-refusal waiver from both the applicant
and the issuing bank within the time limit.717 The reason is that the issuing bank may
still be entitled to refuse the presentation even on the basis of those discrepancies
already waived by the applicant.718 Therefore, from this point, the judge was right to
715
HKCU 2134 [110]
716
The nominated bank in this part includes two kinds of bank, which are confirming bank and
non-confirming nominated bank.
717
If the nominated bank cannot fulfil the requirement for time limit, it will trigger the preclusion rule.
Thus, a nominated bank must get access to both the applicant and the issuing bank within five banking
days. The author considers that the time limit will be the most difficult barrier to a nominated bank in
practice.
718
The issuing bank is not bound by the waiver of applicant and the view of nominated bank. It has
separate obligation to make its sole determination. See detailed explanation in Part 6.2.2.
230
conclude in Total Energy Asia that there would be an inherent risk for a nominated
bank which sought a pre-refusal waiver directly with the applicant.
Even if a nominated bank cannot get access to the applicant directly for a waiver of
discrepancies, it can still send the issuing bank an advice of discrepancies and request
the issuing bank to approach the applicant for a waiver.719 Since the terms in which it
communicated the waiver may well constitute consent to amendment of the credit, the
issuing bank is not entitled to put forward the discrepancies which have been
waived.720 Nevertheless, the applicant and the issuing bank are still likely to reject the
documents based on other grounds. 721 In respect of ambiguous documents, a
nominated bank is better to choose payment under reserve or against an indemnity,
which can secure his position against rejection of the issuing bank.
From another perspective, it is probably safer for a nominated bank to seek a

post-refusal waiver from the applicant instead of struggling with the pre-refusal
situation. A post-refusal waiver is that the applicant would waive the found
discrepancies after the nominated bank sends out a refusal notice, which is illustrated
in the UCP600 Article 16 (c) (iii) (b)722. Apart from different time allowance given for
seeking the two types of waiver, a nominated bank, which sends a notice of refusal
with a statement of waiting for a post-refusal waiver, is also granted by the UCP600
Article 16 (c). According to Article 16, a nominated bank would be deemed to send a
satisfactory refusal, if it has unequivocally expressed its refusal intention and then sent
a notice of refusal with the option of seeking a post-refusal waiver as Article 16 (c) (iii)
(b). As stated in Total Energy Asia, ‘since the documents have already been refused, it
does not operate under the shadow of the preclusion rule...’723 More interestingly, the
719
720
ibid
721
722
The UCP600 Article 16 (c) (iii) (b) states ‘that the issuing bank is holding the documents until it
receives a waiver from the applicant and agrees to accept it, or receives further instructions from the
presenter prior to agreeing to accept a waiver.’
723
231
party addressed in Article 16 (c) (iii) (b) only relates to the issuing bank, which implies
that the nominated bank is only obliged to forward the discrepant documents to the
issuing bank and the issuing bank will hold the documents pending for a post-refusal
waiver or any prior instructions. Therefore, the nominated bank will not be involved
into seeking a post-refusal waiver since the issuing bank has to deal with the further
actions. Consequently, if a nominated bank chooses Article 16 (c) (iii) (b) to seek a
post-refusal waiver, it will be easy to achieve an unconditional notice of refusal. That
is why in Total Energy Asia the judge insistently suggested the nominated bank should
change from seeking a pre-refusal waiver in Article 16 (b) to waiting for a post-refusal
waiver in Article 16 (c) (iii) (b).
In practice, ‘it is unlikely that in these circumstances any rational confirming bank
would seek a pre-refusal waiver.’724 The reason is not only that seeking a pre-refusal
waiver across the chain of transmission is time-consuming, but also that a nominated
bank normally does not have the same interest as the issuing bank towards the success
of the transaction or relationship with the applicant. Therefore, it is better practice for
the nominated bank to promptly refuse the presentation and put them back into
circulation as soon as possible, so that the beneficiary may have an opportunity to put
them right within the period of the credit.725 Alternatively, the nominated bank can
make payment conditionally, which means to choose payment under reserve or against
indemnity.
Nonetheless, in principle, the UCP does not expressly prohibit a nominated bank
approaching the applicant for seeking a pre-refusal waiver. Moreover, it is still worth
mentioning the question, since in most cases a nominated bank would be the first stop
to deal with the documents presented by the beneficiary. If a nominated bank is going
HKCU 2134 [129] The sentence desires to state the importance of the time and format of serving a
notice of refusal. Actually, as decided in Fortis Bank v Indian Overseas Bank [2011] EWCA Civ 58,
[2011] 2 All ER (Comm) 288, the preclusion rule also includes bank’s further actions which should be in
accordance with the statement in the notice of refusal.
724
HKCU 2134 [122]
725
232
to seek a pre-refusal waiver from the applicant, it would also need to consider the
issuing bank’s opinion by sending an advice of discrepancies. Since the chain of
transmission would be time-consuming and a nominated bank’s position is also
restricted by the time limit, it is better for the nominated bank to unequivocally reject
the discrepant documents and to wait for receiving a post-refusal waiver under Article
16 (c) (iii) (b).
6.2.2 Bank’s discretion and restriction to approach an applicant
6.2.2.1 Sole judgement
The UCP600 Article 16 (b) expressly confers a right on the issuing bank to approach
the applicant for a waiver of the found discrepancies after it has determined a
non-complying presentation.726 The issuing bank “may” approach the applicant for a
waiver of the discrepancies signifies that the bank has discretion to choose whether to
approach the applicant or not. Approaching the applicant for a waiver is a right rather
than an obligation on the bank, as long as the determination is based on its sole
judgement. Hence, the bank is not obliged to approach the applicant for a waiver at the
request of whomever.727 Furthermore, the bank has rights to deal with the presentation
based on its sole judgement, even receiving a pre-refusal waiver from the applicant. ‘In
previous opinions, the ICC Banking Commission has decreed that the receipt by an
issuing bank of a waiver from the applicant does not bind the issuing bank to honour
the documents.’728 ‘If an issuing bank chooses not to agree to the waiver granted by
the applicant, it would be entitled to request a refund of the amount that has already
been reimbursed and any associated interest…’729 Obviously, there are no obligations
726
As analysis in Part 6.2.1, the author tentatively thinks that UCP600 Article 16 (b) can also apply to
other types of bank, such as the confirming bank and the non-confirming negotiated bank.
727
The status of discretion has been confirmed by Bankers Trust Co v State Bank of India [1991] 2
Lloyd’s Rep 443 (CA) under the UCP400, and then been introduced into the UCP500 and UCP600.
728
729
ibid
233
on the bank to issue a reminder or communicate with the applicant in the light of an
approaching deadline.730
Apparently, consultation with the applicant in the bank’s sole judgement is a privilege
granted by the UCP600. However, the conferred right also places thorny obligations on
the bank, and meanwhile the bank’s discretion is always accompanied with implied
restrictions set out the UCP600 Article 16 (b). Firstly, a condition precedent for
consultation with the applicant in Article 16 (b) is that the bank has determined a
non-complying presentation, i.e. bank’s independent examination and determination
must be in a prior place. Consultation is different from delegation, so that the bank
cannot delegate a right to the applicant to further examine documents. According to
Article 14 (a) of the UCP600, the responsibility of independent examination should lie
on the banks. Moreover, with respect to the autonomous spirit of the UCP, the bank
should determine a presentation in its sole judgement, rather than on the basis of an
applicant’s wishes.731 The only purpose to approach the applicant is to query for a
waiver concerning the discrepancies which have been found by the bank. ‘While the
bank may consult the customer for the limited purpose set out, it is still the bank which
has to make the decision whether to reject.’732 As Benjamin analyses, ‘abrogation of
that responsibility by delegating examination or decision-making to the applicant will
incur preclusion.’ 733 Therefore, the bank should be extremely cautious when
approaching the applicant to ask for a waiver.
730
ICC Opinions 1995-2001, R410; See also Bankers Trust Co v State Bank of India [1991] 2 Lloyd’s
Rep.443 (CA) 456 (per Sir John Megaw)
731
No.696, ICC 2008) No.254 See Bankers Trust Co v State Bank of India [1991] 2 Lloyd’s Rep.443 (CA)
455; Credit Agricole Indosuez v Credit Suisse First Boston [2001] All ER (Comm) 1088 (QB) [15] See
also Bayerische Vereinsbank AG v National Bank of Pakistan [1997] 1 Lloyd’s Rep 59 (QB) 69 in which
held that the bank was only as a post-box to convey the applicant’s decisions to the beneficiary.
732
733
Delegating determination will infringe Article 16 (b) which requires independent determination.
Moreover, further examination taken by the applicant will be in a great possible to over the time limit in
Article 16 (b). Both of them will possibly trigger the preclusion rule.
234
Obviously, in the vast majority of cases, consultation can be done quickly by a
telephone call or fax transmission, so that in theory there is no need to send all the
documents to the applicant for inspection. ‘In practice, however, banks will often go
further and forward all, or at least the offending, documents to the applicant.’734 It is
unclear to what extend this can be justified since there is no clue in the UCP to prevent
forwarding documents for consultation. However, most of the courts would be very
sensitive as to whether there is any chance for the applicant to examine the documents
once they have been forwarded.735 In the Bankers Trust736 case, the Court of Appeal
recognised that in some unusual circumstances, documentation would be submitted to
the applicant for seeking the applicant’s opinion. Nevertheless, such a submission was
only for the applicant to consider the found discrepancies in the whole context of
documents, rather than to retake a further examination. 737 As a result, how to
recognise the “unusual circumstances” and define the complexity of found
discrepancies will be the key issues to justify the bank’s actions in forwarding the
documents. If the discrepancy is only a matter of wording, quoting the relevant words
appears to be sufficient. Alternatively, if the discrepancy cannot be discovered without
looking into the context of documents, forwarding the relevant documents or even the
documents in their entirety will be necessary.
It is self-evident that establishment of reasonable standards should be fallen into a

matter of fact and would be varied from case to case. Arguably, this matter may be
beyond the consideration of the UCP600. Although it seems to come across a
bottleneck to identify to what extent should the bank release documents to the
applicant, in author’s view, the UCP system endeavours to solve this problem through
734
Michael Bridge (ed), Benjamin’s Sale of Goods (8th edn, Sweet and Maxwell 2010) para 23-175 For
security reason, the bank may forward the annoying documents to the applicant, in case the applicant
finds the new discrepancies later and refuses to reimburse it.
735
In Cooperative Centrale Raiffeisen-Boerenleenbank BA v Sumitomo Bank (The Royan) [1987] 1
Lloyd's Rep 345 (QB), Gatehouse J inferred that ‘the buyers would conduct a further examination of the
documents when the evidence only supported a finding that the buyers might conduct a further
examination.’ Cited and distinguished by Bankers Trust Co v State Bank of India [1991] 2 Lloyd’s Rep
443
736
Bankers Trust Co v State Bank of India [1991] 2 Lloyd’s Rep 443
737
ibid 455
235
detouring from the other side, i.e. providing the time limit for consultation. Learning
from the case law, in Bankers Trust738, the judge based his decision on the reasonable
time criterion to conclude that the issuing bank had breached its obligations for
independent determination. It is much more advisable to quantify the time limit than to
categorise the various discrepancies by judging each fact. That is probably the reason
that after the UCP400, the restriction for consulting time was involved instead of
distinguishing between conducts of consultation.739
6.2.2.2 Time limit
As analysed above, the first implied obligation on the bank in Article 16 (b) concerns
independent determination in the whole process of approaching the applicant for a
pre-refusal waiver. While, the second requirement imposed on the bank in the Article
16 (b) is to follow the time limit set out in the UCP600 Article 14 (b), which signifies
that consultation with the applicant will not extend the limit of five banking days. The
author would like to deal with two following issues with respect to the time limit. First
and foremost, what is the nature of consultation time and what should not be done
during this period? Secondly, the UCP only gives the outer limit to the bank, but how
long precisely should be taken as the consultation time?
Dated back to UCP400, apart from a general reasonable time for examination and
determination, there was nothing mentioning about the consultation time. 740
Nonetheless, as a landmark case under UCP400, in Bankers Trust v State Bank of
India,741 based on the practical importance and high value of consultation, a majority
of judges concluded that consultation with the applicant for a pre-notice waiver should
belong to the process of making a determination. 742 Thus, a reasonable time for
consultation should be permitted within the ambit of the reasonable time required by
738
ibid. It will be analysed in the following time limit part.
739
UCP500 Article 14 (c) and UCP600 Article 16 (b)
740
UCP400 Article 16
741
Bankers Trust Co v State Bank of India [1991] 1 Lloyd's Rep 587, affd [1991] 2 Lloyd’s Rep 443
742
Only Lloyd LJ disagreed with this conclusion, while other judges in the Court of Appeal as well as
Hirst J in the first instance court supported this point.
236
determination provided that the consultation would be necessary in its nature.
Moreover, all the judges defined the nature of consultation and reached an agreement
that ‘Article 16 [under UCP400] did not contemplate a period of time for the applicant
to go through the documents to see if it could find further discrepancies.’743 The court
confirmed that it was the bank’s responsibility to examine documents alone and make
an independent determination, even if the bank may consult the applicant for the
limited purpose allowed by practice.
Clearly, the Bankers Trust case not only stressed the necessity of consultation, but also
affirmed that the consultation time should be permitted during the process of
determination, which has then been expressly introduced into the UCP500 and the
UCP600. Furthermore, the case defined that the nature of consultation time should be
spent for discrepancies already found rather than for further examination. Therefore, it
is not too difficult to assess whether the issuing bank has breached its obligations
through analysing the nature of the time taken for consultation. Obviously, judging
whether the consultation time has been reasonably spent could be easier than analysing
the necessity of forwarding the documents through categorising different types of
discrepancies as analysed above. In consequence, the outer time limit for consultation
has been subsequently involved into the UCP500 and the UCP600.744
However, as the only regrettable point left in the Bankers Trust case, both the UCP
system and the case law did not state a set of standards to measure how long the
consultation time should take. In the UCP400, ‘the reasonable time allowed to the
issuing bank is composed of two components, namely, (i) time for the bank to examine
the documents and (ii) time for the bank to determine whether to accept or reject the
documents.’ 745 As mentioned above, one of the most important contributions in
743
744
The outer time limit in the UCP500 Article 14 is seven banking days, while in the UCP600 Article
16 is five banking days.
745
Bankers Trust Co v State Bank of India [1991] 2 Lloyd’s Rep 443 (CA) 450 UCP400 Article 14 (c)
and Article 14 (d) It seems that there was a separate standard with time for sending a notice, which
called “without delay” in the UCP400. However, the nature of without unreasonable delay is to make
237
Bankers Trust is to clarify that the time spent on consultation should belong to the time
of determination. Without doubt, “reasonable time” was the only criterion to measure
the consultation time in the UCP400. Regarding to UCP500, the most significant
change was to establish an outer time limit for banks, which was seven banking days.
Banks should examine all the documents, determine the presentation and send a notice
if refused within seven banking days following the day of receipt. 746 Nevertheless, the
UCP500 did not state the time division for each action and still kept the “reasonable
time” and “without delay” as the criteria to measure the time taken. In addition, the
UCP500 initially recognised that the pre-notice consultation should be a part of
determination and it cannot extend over the seven banking days limit. Essentially, the
standard to measure the time of consultation was still “reasonable time” in the UCP500,
with adding seven banking days outer limit.
‘(Since) the determination in individual cases of whether a bank had acted within a
“reasonable time” or “without delay” gave rise to considerable uncertainty and much
litigation, the introduction of a fixed period is therefore a welcome development.’747
In the UCP600, a “reasonable time” and “without delay” have been totally omitted.
Instead of them, as the only measurement, a fixed five banking days following the day
of presentation has been involved.748 Meanwhile, UCP600 Article 16 (b) expressly
stipulates that the time for consultation should not extend the period mentioned in
Article 14 (b), i.e. a maximum of five banking days. Unexpectedly, the words
“maximum” added before the five banking days has caused confusion and
controversies in academia. As already discussed in Chapter 3,749 the core issue centres
on whether “a maximum of five banking days” stands for a fixed period or signifies a
shorter reasonable period. Thus, as a tandem sequence, the time for consultation would
be affected by this uncertain situation. It is suspicious that whether the consultation
sure sending a notice of refusal within a reasonable time.

746
UCP500 Article 13 (b); Article 14 (b), (c) and (d)
747
See also elements concerned about “reasonable time” in Chapter 3 of this thesis.
748
UCP600 Article 14 (b); Article 16 (b) and (d)
749
See Part 3.5.2 above
238
time under the UCP600 should be based on the previous criterion of “reasonable time”.
Simultaneously, it is also arguable whether the bank should be immune from being
penalised with delay in the process of consultation as long as it could complete all the
procedures within five banking days.
According to the author’s reasoning provided in Chapter 3, the author is prone to adopt
a proper quantified period instead of an uncertain reasonable time as the criterion for
timing rules. In the author’s view, the word “maximum” does not aim to legally
involve a potential shorter time as contested by some commenters. The UCP600,
which endeavours to eliminate the uncertainty brought by the criterion of reasonable
time, just adopts a way of precise statement by means of “maximum”, so as to indicate
that there are still some other obligations taken into account by the bank within the
allowed five banking days. Essentially, a maximum of five banking days allows five
banking days for the bank to fulfil its obligations, even if there may be a little room for
latent delay occurred in theory. Such theoretical delay could be caused by bank’s own
negative actions. Nevertheless, the delay cannot be tolerated even within the ambit of
five banking days if it is caused by delegating the applicant to re-examine the
documents, since the act of delegation would obviously breach the bank’s obligations
concerning independent examination and determination.750
Since there are no specific expressions in the UCP600 concerning how to divide the
permitted time for examination and sending a notice of refusal, the bank might
negligently abuse the remaining time. It is clear that the UCP600 has tried to avoid
some adverse impact by virtue of reducing the time limit to five banking days, but it
cannot totally eliminate the latent risk in theory. Based on the importance of
pre-refusal consultation in modern documentary credit transactions and its tricky
practical application, the author tentatively suggests that the ICC Banking Commission
should set out a more specific instruction to guide the action of consultation and
supplement the gap in the UCP600, especially in the aspect of time division.
750
239
According to the international market practice, consultation time spent with the
applicant in 24 hours, under some unusual circumstances no more than 48 hours,
would be regarded as reasonable.751 Moreover, this length would be also suitable for
the proportion taken in the existing five banking days. However, without doubt, until
the ICC Banking Commission serves further clarifications, the safe route for the bank
is to fulfil the consultation as soon as possible within the ambit of five banking days.
6.3 Time and mode of giving a notice of refusal
After consulting the applicant with found discrepancies, if the bank insists on
dishonouring the presentation, it is obliged to send a notice of refusal to illustrate the
rejection. Before digging into the substantial content of a notice of refusal provided by
UCP600 Article 16 (c), the author would like to describe and discuss the external
conditions for serving a notice of refusal, including time and mode of sending a refusal
notice, which are stipulated together in the UCP600 Article 16 (d). Article 16 (d)
stipulates that ‘the notice required in sub-article 16 (c) must be given by
telecommunication or, if that is not possible, by other expeditious means no later than
the close of the fifth banking day following the day of presentation.’
6.3.1 Time for giving a notice of refusal
One of the most controversial issues in the UCP system centres on the timing rules. As
a component, the time for giving a notice of refusal belongs to the timing group in the
UCP system. There is no need to elaborate the importance of time limit for each party,
including banks and traders. In a word, time means money. The bank would
successfully get reimbursement by virtue of fulfilling its obligations within the time
limit. The beneficiary may increase the opportunity to present the compliant
documents within the time allowance and get payment. When the bank determines to
dishonour a presentation, it should serve a notice of refusal to notify the presenter
751
In Bankers Trust Co v State Bank of India [1991] 2 Lloyd’s Rep 443 (CA), Sir John Megaw agreed
that 24 hours for the consultation with the applicant was regarded as being reasonable. In special
circumstance, it could be extended to 48 hours.
240
within a certain period of time. This practice has been stipulated since UCP400 Article
16 (d), which stated that the bank should give a notice of refusal “without delay” after
making a determination. In UCP500 Article 14 (d) (i), it expressed that if the bank
decided to refuse the documents, it must give a notice to that effect “without delay but
no later than the close of the seventh banking day”. While in UCP600 Article 16 (d), it
has deleted the criterion of “without delay” and requires giving a notice of refusal “no
later than the close of the fifth banking day following the day of presentation”.
Obviously, the criterion for time of notification has changed and developed from time
to time. Up to now, it is still one of the most ambiguous and controversial issues in the
UCP system and in practice.
As a leading case under UCP400, in Seaconsar (Far East) Ltd v Bank Markazi
Jomhouri Islami Iran,752 the judge interpreted the meaning of “without delay” to give
a notice of refusal. The Court held that:753
‘where a decision to reject documents is made at or about the close of

business on a Friday…we would expect the obligation to give notice without
delay to require that it be given on the Monday, which was the next banking
day… It may well be that in other cases the obligation requires notice to be
given on the same day as the decision is taken.’
Surprisingly, in this case the judge held that the defendant bank had given the
notification without delay even though it was sent out on Tuesday. The reason was that
the plaintiff could not prove any unreasonable delay from the time of determination to
notification. Arguably, the true criterion supported by the Court was “without
unreasonable delay”. 754 In other words, it means the bank should duly fulfil its
obligations in a reasonable time, even if there is any delay caused beyond its control.
752
Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1999] 1 Lloyd’s Rep 36 (CA)
753
754
That criterion was also held by Rafsanjan Pistachio Producers Co-operative v Bank Leumi (UK) plc
[1992] 1 Lloyd’s Rep 513 (QB) 531
241
Although the criterion to judge “without delay” is quite similar with the method of
“reasonable time”, giving a notice of refusal “without delay” is still a separate and
additional obligation on the bank from that of examining and determining presentation
within reasonable time.755 Therefore, the bank which has rapidly done examination
cannot be exempt from the liability caused by an unreasonable delay in notification. It
is for the party alleging delay, normally the beneficiary, to prove it.756 However, in
practice, it is extremely difficult for the beneficiary to master the evidence to prove it.
Since the beneficiary does not have information about when examination and
determination has been completed, naturally the beneficiary is not clear from what
time to start calculating the time only for notification. Consequently, in theory, the
criterion of “without delay” has clarified separate obligations on the bank referring to
different procedures. Nonetheless, it seems impracticable to the alleged beneficiary,
who is in an adverse position, to prove the delay in notification.
The UCP600 Article 16 (d), which manages to eliminate the disadvantages of “without
delay”, stipulates that the notification should be given no later than the close of the
fifth banking day following the day of presentation. It is suggested that Article 16 (d)
should be read in tandem with the UCP600 Article 14 (b) and Article 16 (b), which are
sharing the same time limit to take examination and make a decision.757 Adopting this
interpretation, these three provisions dealing with the common subject should be
connected together, which means the bank should examine the presented documents,
decide whether to accept or refuse the presentation, and send a required notice of
755
This view was also supported under UCP500 by Credit Agricole Indosuez v Muslim Commercial Bank
Ltd [2000] 1 All ER (Comm) 172 (CA)
756
Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1999] 1 Lloyd’s Rep 36 (CA) 42 For
the second presentation in this case, the plaintiff could not prove why the unreasonable delay had
occurred, so that he lost this point even if the time of notification was the one business day after, rather
than the same day or the following business day.
757
242
refusal if it decides to reject the documents, within a maximum of five banking days or
no later than the close of the fifth banking day.758
While omitting the criterion of “without delay”, the UCP600 does not express whether
sending a notice of refusal should constitute a separate obligation from examining the
documents as its previous versions. In the author’s opinion, the answer should be
affirmative, in that there are different actions taken by the bank and in each action
there is possibility to cause delay or act negligently. Nevertheless, the time division
within the maximum five banking days for each action is the point to be considered.
With omission of “without delay”, it reinforces the argument that the bank would fulfil
its obligations as long as it sends a notice of refusal before the close of the fifth
banking day.759 The implication is that five banking days are the safe harbour for the
bank. By contrast, the words “no later than” in the Article 16 (d) have brought the
same effects as “maximum” in the Article 14 (b). Therefore, it goes back to the above
discussion concerning whether the five banking days constitute the safe harbour for the
bank.760 It is an unexpected result of development in the UCP600, because it has
brought a new part of uncertainty in academia while trying to get rid of the other.761
6.3.2 Mode of giving a notice of refusal
The other external requirement focused by the UCP system concerning serving a
satisfactory notice of refusal lies in the mode of notice. The mode of sending a notice
under UCP600 Article 14 (d) is telecommunication, or if that is not possible, by other
758
See Figure 4 in Part 3.5.2
759
Jack suggests that ‘in the context of Article 16 it is sufficient that the bank refusing the documents
should complete the acts which it has itself to carry out to give notice not later than the close of the fifth
banking day…’ Thus, there is no need to guarantee that the notice should be received before the close of
the fifth banking day when using non-telecommunication methods. See Ali Malek and David Quest,
Jack: Documentary Credits (4th edn, Tottel Publishing 2009) para 5.60
760
See Part 3.5.2 and Part 6.2.2 above. In addition, if the five banking days are not safe harbour and the
bank should send a notice of refusal within some reasonable time, the burden of proof concerning delay
in notification remains to be seen. As above analysis, it is extremely difficult for the alleged beneficiary
to prove a delay in the bank transactions. Therefore, the author tentatively concerns inversion of burden
of proof, which the bank will give evidence to explain why there is no unreasonable delay.
761
It will be a thorny task for the ICC Drafting Committee to clarify the meaning of “maximum” and
“no later than” in theory. However, as Professor Ellinger suggests above, in practice, five banking days
is a very short time for the bank to complete so many actions and fulfil all the obligations.
243
expeditious means. 762 Clearly, the aim of adopting telecommunication or other
expeditious means is to make sure the beneficiary could know his position as soon as
possible, so that the beneficiary would have more opportunity to correct discrepancies
and make a representation before the expiry date of a documentary credit. The
preferred mode is telecommunication, and if not possible, the bank must choose some
other expeditious means without delay.
The case law also emphasised that a notice by post or by courier should not be
permissible if the method of telecommunication was available.763 Nevertheless, it has
also given latitude regarding the mode of sending a notice. In Rafsanjan Pistachio
Producers Cooperative v Bank Leumi (UK) Ltd,764 Hirst J stated that ‘… it would be
undesirable to construe Article 16 (d) [in UCP400, equivalent to UCP600 Article 16]
in a manner which obliged a bank to use a particular form of telecommunication. A
telephone call might sometimes be the best mode.’ 765 Moreover, considering the
importance of authentication, the judge suggested it would be better to follow up with
a written communication as a record. However, it is necessary to note that the written
confirmation cannot be used to cure defects in the previous telephone notice, for the
reason of requiring a single notice of refusal with all discrepancies.766
Moreover, in Seaconsar Far East Ltd v Bank Markazi Jomhour Islami Iran,767 it was
implied that the notice can be given via voice instead of informing another person at
distance. There is no need to send a further notice by telecommunication, ‘if a senior
official of the beneficiary, under whose aegis the documents were presented, is present
762
See also UCP400 Article 16 (d) and UCP500 Article 14 (d) (i)
763
Hing Yip Hing Fat Co Ltd v Daiwa Bank Ltd [1991] 2 HKLR 35; Bayerische Vereinsbank AG v
National Bank of Pakistan [1997] 1 Lloyd’s Rep 59 (QB) 70 In Seaconsar Far East Ltd v Bank Markazi
Jomhouri Islami Iran [1999] 1 Lloyd’s Rep 36 (CA) 39, the judge held that ‘the bank must first decide
whether telecommunication is possible, and if not must choose some other expeditious means, and in
either case the bank must act without delay.’
764
Rafsanjan Pistachio Producers Cooperative v Bank Leumi (UK) Ltd [1992] 1 Lloyd’s Rep 513 (QB)
765
531
766
See Hing Yip Hing Fat Co Ltd v Daiwa Bank Ltd [1991] 2 HKLR 35 This will be discussed in the
next part.
767
Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1999] 1 Lloyd’s Rep 36 (CA)
244
at the bank to receive notice.’768 While, apart from failures caused by force majeure,
‘the risk of the bank’s chosen form of telecommunication malfunctioning lies with the
refusing bank.’769 Hence, it is suggested that a prudent bank should allow sufficient
time for resorting to an alternative mode of communication within the maximum time
limit.770 In addition, a prudent bank should leave certain written records to prove that
there is no fault or negligence of the bank to send the refusal notice.771
6.4 Format and content in a notice of refusal
After considering the external conditions set out by the UCP600 Article 16 (d), the
author in this part considers the format and content of a notice of refusal, which are
specifically stipulated in the UCP600 Article 16 (c). 772 The reason for the UCP
providing every detail of a refusal notice is derived from the guarantee of
conscientiousness. Since the rigor in the documentary credits is a double-edged sword,
it not only requires the bank to examine the presented documents with strict
compliance, but also aims at the bank to precisely fulfil its obligations. Generally
speaking, the nature of Article 16 (c) lies in overseeing the conducts of banks and
protecting the benefits of traders. It can not only counterbalance the rigorous impacts
brought by the doctrine of strict compliance during examination, but also further
guarantee the proper operation of documentary credits.
Analogous to the principle of irrevocability under opening of a documentary credit, the

principle of irreversibility functions in serving a notice of refusal, i.e. there is only one
768
769
Michael Bridge (ed), Benjamin’s Sale of Goods (8th edn, Sweet and Maxwell 2010) para 23-179 See
the UCP600 Article 36 concerning force majeure.
770
771
The bank might use the UCP600 Article 35 para.1 ‘Disclaimer on Transmission’ as a defence.
772
UCP600 Article 16 (c) stipulates: ‘When a nominated bank acting on its nomination, a confirming
bank, if any, or the issuing bank decides to refuse to honour or negotiate, it must give a single notice to
that effect to the presenter. The notice must state: i. that the bank is refusing to honour or negotiate; and
ii. each discrepancy in respect of which the bank refuses to honour or negotiate; and iii. a) that the bank
is holding the documents pending further instructions from the presenter; or b) that the issuing bank is
holding the documents until it receives a waiver from the applicant and agrees to accept it, or receives
further instructions from the presenter prior to agreeing to accept a waiver; or c) that the bank is
returning the documents; or d) that the bank is acting in accordance with instructions previously
received from the presenter.’
245
chance for a bank to state its view. As required in the UCP600 Article 16 (c), when the
bank decides to refuse to honour or negotiate, it must send a single notice of refusal
with each discrepancy found in the documents. Moreover, the bank must state in a
notice of refusal which option of conduct is chosen. After that, the bank has to
irreversibly act in accordance with the disposal statement in a notice of refusal.773 On
the basis of provisions in the UCP600 Article 16 (c), in the following parts the author
will sequentially interpret each aspect of the bank’s obligations regarding serving a
notice of refusal.
6.4.1 A single notice
When the bank decides to honour or negotiate, it must give a single notice to the
presenter as required by UCP600 Article 16 (c). The essence of “a single notice” is to
provide the bank only one opportunity to state its view in respect of each presentation.
The significance of requiring a single notice is to avoid unnecessary confusion and
troubles caused by the following notices, so that the beneficiary can correct the found
discrepancies as soon as possible and make a representation rapidly. Although there
was no express requirement for “a single notice” in the UCP500, the case law has
illustrated that a single notice would be in accordance with the purpose of certainty
under documentary credits.774 Similar to the principle of irrevocability analysed in
Chapter 2, the principle of irreversibility, which takes effects in the process of
documentary credit operation, can effectively prevent the bank to add further
discrepancies or cure previous invalid points by a subsequent notice of refusal. A
fortiori, the bank which has initially accepted the presentation cannot change its mind
and issue a notice of refusal later, even if there is enough time left to do so under
Article 16 (d).775
773
ICC Opinions 1995-2001, R421, R429 See also Fortis Bank v Indian Overseas Bank [2011] EWCA
Civ 58, [2011] 2 All ER (Comm) 288
774
Gary Collyer (ed), More Queries and Responses on Documentary Credits - Opinions of the ICC
Banking Commission 1997 (ICC Publication No.596, ICC 1998) R27
775
United Bank Ltd v Banque Nationale de Paris [1991] SGHC 78, [1992] 2 SLR 64, 76
246
When the bank has sent several notices of refusal, the subsequent notices including
further discrepancies will be ignored, and the refusing bank would only be entitled to
rely on the first notice.776 Without doubt, a second notice cannot supersede the first
one even if the first one has been disregarded or garbled in transmission.777 However,
if a second notice just clarifies the content of the first notice and the first notice itself is
fully valid on its original terms even without the benefit of the subsequent notice, the
second notice is probably permissible.778
It is worth noting that not every communication from a refusing bank will constitute a
refusal notice of Article 16 (c) and some of them are merely advice of discrepancies.779
It is difficult to identify what should precisely constitute a relevant notice. In Total
Energy Asia Ltd v Standard Charted Bank (Hong Kong) Ltd,780 Stone J held that an
initial fax which listed all discrepancies, combined with a following telephone call
which expressed refusal and disposal of documents was sufficient to constitute a valid
rejection under UCP500. However, the judge stressed that ‘this was acceptable only if
the one, the conversation, unequivocally referred to and incorporated the other, that is,
the faxed 2nd advice.’781 Admittedly, if the bank has to choose this method, ‘it is
suggested that very clear words of incorporation would be required.’782 Without doubt,
it is advisable for the bank to send a single notice of refusal in order to avoid any risks
and disputes arising from separate communications, especially under the express
requirement of “a single notice” in the UCP600.
776
ICC Opinions 1995-2001, R271; ICC Unpublished Opinions 1995-2004, R530
777
Cooperative Centrale Raiffeisen-Baerenleenbank BA v Bank of China [2004] HKC 119 [66]
778
Kumagai-Zenecon Construction Pte Ltd v Arab Bank Plc [1997] SGCA 41, [1997] 2 SLR (R) 1020
[29]-[31]
779
Agricole Indosuez v Credit Suisse First Boston [2001] All ER (Comm) 1088 [15]; Cooperative
Centrale Raiffeisen-Boerenleenbank BA v Sumitomo Bank (The Royan ) [1988] 2 Lloyd’s Rep 250 (CA)
254
780
HKCU 2134 [94]
781
ibid [90]
782
247
6.4.2 Express statement of refusal
The UCP600 Article 16 (c) (i) expressly requires that a notice of refusal ‘must state
that the bank is refusing to honour or negotiate.’ It is an additional formality compared
with the UCP500, which contained no such explicit requirement. ‘Under UCP500
Article 14 (d), it was sufficient that the notice unambiguously communicate that the
documents were being refused.’ 783 It is suggested that the refusing bank should
express its own intention of refusal rather than simply report the decision of the
applicant who declines to be a waiver.784 However, without an express statement of
refusal, the intention of the refusing bank is always controversial and disputable.
In Voest-Alpine Trading USA Corp v Bank of China785, the bank did not explicitly state
that it was rejecting the documents. Instead, it sent the following statement: ‘We are
contacting the applicant of the relative discrepancies. Holding documents at your risks
and disposal.’ The Court concluded that this statement was merely “a status report”
rather than a valid notice of refusal, in that it left an open possibility that the allegedly
discrepant documents might have been accepted in future. 786 Nonetheless, the
ambiguous and uncertain circumstances above would not happen under UCP600 by
virtue of involving a distinct requirement of express refusal. It is not necessary to state
the exact word of “refuse”, but the minimum requirement is that the intention of
refusal should be expressed in the notice. Without doubt, the onus should lie on the
refusing bank to communicate its intention in explicit and unambiguous terms to
signify the refusal. It is a popular development of the UCP600, since it has removed
uncertainty and clarified the practical situation.
783
784
Bayerische Vereinsbank AG v National Bank of Pakistan [1997] 1 Lloyd’s Rep 59 (QB); ICC
Opinions 2005-2008, R694
785
Voest-Alpine Trading USA Corp v Bank of China 288 F 3rd 262 (5th Cir 2000) 266
786
The post-refusal waiver was not permitted before the UCP600, so that there was no excuse of
waiting a post-refusal waiver for the refusing bank. By contrast, in Cooperative Centrale
Raiffeisen-Boerenleenbank BA v Sumitomo Bank (The Royan) [1987] 1 Lloyd's Rep 345 (QB), the
refusing bank stated: ‘Please consider these documents at your disposal until we receive our Principle’s
instructions concerning the discrepancies mentioned in your schedules.’ The Court of Appeal reversed
the award of the first instance and concluded that this notice constituted a rejection of the documents.
248
6.4.3 Each discrepancy
The UCP600 Article 16 (c) (ii) requires that a notice of refusal ‘must state each
discrepancy in respect of which the bank refuses to honour or negotiate.’787 “Each
discrepancy” in the UCP600 does not make any significant differences with “all
discrepancies” in its previous edition.788 The essence of “each discrepancy” is to
highlight that the bank has only one chance to state discrepancies in its notice of
refusal. This provision shares the same purpose with the requirement of “a single
notice’, which is to improve the efficiency of documentary transactions and to leave
more opportunities for the beneficiary to make a representation.789 Obviously, the
principle of irreversibility is applied to the statement of “each discrepancy”, so that ‘a
bank will be estopped from subsequent reliance on a ground for dishonour if it did not
specify that ground in its initial dishonour.’ 790 Similarly, the bank has to be
responsible for wrongful refusal in respect of initially ill-founded discrepancies, even if
there are other genuine discrepancies in the presented documents. Should the rejected
documents be represented, the bank is only entitled to claim the uncured discrepancies
which are previously listed in the notice of refusal rather than any fresh discrepancies
absent from the original notice.
In addition, there is an implied obligation on the bank that the identified discrepancies
must be stated with sufficient clarity and precision. Although the UCP600 has not
expressly mentioned this point, the requirement is actually in accordance with the spirit
of stating “each discrepancy”, which aims to clearly communicate all the discrepancies
787
The Common Law position is different from the UCP. Under Common Law, a bank would be able to
rely on subsequent discrepancies unless the beneficiary shows he has relied on the first communication
to take some actions. (See Kydon Compania Naviera Co v National Westminster Bank Ltd (The Lena)
[1981] 1 Lloyd's Rep 68 (QB))
788
UCP600 Article 14 (d) (ii) See also Gary Collyer, Commentary on UCP600: Article by Article
Analysis by the UCP600 Drafting Group (ICC Publication No.680, ICC 2007) 145
789
In some exceptional circumstances, the Court may allow the bank to send a second notice to confirm
the first communication. However, the second notice cannot add more discrepancies and make a benefit
for the first notice.
790
Kerr-McGee Chemical Corp v Federal Deposit Insurance Corp 872 F 2D (11th Cir 1989) See also
Bankers Trust Co v State Bank of India [1991] 2 Lloyd’s Rep 443; Hing Yip Hing Fat Co Ltd v Daiwa
Bank Ltd [1991] 2 HKLR 35
249
with the presenters and let them rectify the discrepancies as soon as possible. In Korea
Exchange Bank v Standard Chartered Bank,791 the court held that the notice of refusal
stating that “Certificate of origin Form A presented and shows content inconsistent
with other documents” was inadequate, because the presenter was not clear what would
need to be rectified.792 It is worth noting that the obligation to state each discrepancy
with precision should lie on the refusing bank. Arguably, the requirement of “a single
notice” will prevent the bank from sending a subsequent communication with
clarification to make up the ambiguities in the original notice.793 As a result, the
refusing bank should carefully list each discrepancy with precision on a single notice
of refusal.
An exceptional circumstance regarding the statement of discrepancy is when the

presentation is out of time. It has been established that a presentation after the expiry
date of the credit is not a discrepancy which must be stated in the notice. 794 Late
presentation after the expiry date is a matter dealt separately in the UCP, which does
not belong to provisions regarding documentary examination.795 However, Professor
Ellinger doubts that the situation might be changed under UCP600 since ‘the definition
of “a complying presentation” [in the UCP600] is wide enough to cover documentary
requirements and other terms of the credit which are not documentary in nature, such
as expiry date.’796 Therefore, ‘to be safe, a bank that decides to reject a presentation
should state all the discrepancies, whether documentary or otherwise, so as to avoid
any risk of being prejudiced by the preclusion in Article 16 (f).’797 Although Professor
791
Korea Exchange Bank v Standard Chartered Bank [2005] SGHC 220, [2006] 1 SLR 565 [12]
792
By contrast, for example, “Documents show gross weight inconsistent with each other” suffices. See
ICC Opinions 2005-2008, R672; ICC Unpublished Opinions 1995-2004, R578
793
See ICC DOCDEX Decisions 1997-2003, No.223; ICC Opinions 2005-2008, R272
794
Bayerische Vereinsbank AG v National Bank of Pakistan [1997] 1 Lloyd’s Rep 59 (QB) 67
795
For example, the UCP500 Articles 43-45dealt with a presentation after the expiry date, which fell
apart from Articles 13-14 stipulated examining and determining presentation. In the UCP600, Article 29
also deals with presentation out of time.
796
797
250
Ellinger puts forward his point on the grounds of bank security, with full respect, the
author still doubts the practicality.
The author still proposes that the late presentation does not belong to the scope of
discrepancy covered under Article 16. If the bank receives a presentation out of date
and agrees to examine the documents, then the bank will be deemed to have applied a
waiver and should be estopped from using the expiry date as a defence during the
period of examination and determination. In addition, as analysed above, the purpose
of stating each discrepancy is to leave more opportunities to the beneficiary to make a
new presentation which could rectify all the found discrepancies. After the credit has
expired, there should be no more representation under the credit. Thus, regarding the
out of time presentation as one of discrepancies is not in accordance with the intention
of UCP600 Article 16. Furthermore, the expiration of a presentation is so evident to the
beneficiary that mentioning it in the notice of refusal is not even necessary. Therefore,
in the author’s opinion, a presentation out of time should not belong to a kind of
discrepancy that falls under the scope of UCP600 Article 16 (c) (ii).
6.4.4 Disposal of rejected documents
UCP600 Article 16 (c) (iii) offers four options for the bank concerning disposal of
documents stated in a notice of refusal.798 Among them, Options (a) and (c) follow the
previous version provided in the UCP500 Article 14 (d) (ii),799 while Options (b) and
(d) are new developments in the UCP600 based on practical needs. Essentially, the
presented documents after rejection should belong to the property of the presenter, so
that ‘the bank is required to act in a manner that respects the ownership of the
798
Article 16 (c) (iii) states: ‘a) that the bank is holding the documents pending further instructions from
the presenter; or b) that the issuing bank is holding the documents until it receives a waiver from the
applicant and agrees to accept it, or receives further instructions from the presenter prior to agreeing to
accept a waiver; or c) that the bank is returning the documents; or d) that the bank is acting in
accordance with instructions previously received from the presenter.’
799
UCP500 Article 14 (d) (ii) states: ‘Such notice must state all discrepancies in respect of which the
bank refuses the documents and must also state whether it is holding the documents at the disposal of, or
is returning them to, the presenter.’
251
documents by the beneficiary.’800 Clearly, since the beneficiary can easily control the
refused documents, major controversies will not be incurred by choosing Options (a),
(c) and (d), which respectively relate to returning documents, following the presenter’s
instructions and holding the documents pending instructions from the presenter.
Nonetheless, Option (b), which stipulates that the bank will hold the documents
pending a decision of the applicant as the post-refusal waiver, may not be constituted
as an unconditional disposal of the documents. In this case, the bank will refuse the
immediate payment first and leave the door open for the applicant who might become a
post-refusal waiver. This method was previously considered as “a continuing threat of
conversion of documents” by the case law. 801 However, as analysed below, the
assertion is contrary to the best practice and market expectations, since in the majority
cases the applicants prefer to give up the discrepancies. Moreover, it is much easier
and far more secure for the bank to ask for a post-refusal waiver than to approach a
pre-refusal waiver.802 As Professor Byrne analysed, to conclude that the bank cannot
hold the documents pending a post-refusal waiver would be a regrettable interpretation,
which places formality over substance.803 Consequently, in the author’s view, it is a
significant development in the UCP600 which formally recognises that there is an
option for the bank to hold the documents pending for a post-refusal waiver.804
800
801
Credit Industriel et Commercial v China Merchants Bank [2002] EWHC 973 (Comm) In this case,
the notice stated “Should the disc being accepted by the applicant, we shall release the docs to them
without further notice to you unless yr instructions to the contrary received prior to our payment”. The
judge decided that the notice fails to indicate that the documents are being returned to or held at the
disposal of the presenter. Moreover, the conditional nature of this rejection cannot be saved by the
potential acceptance. See also ICC Unpublished Opinions 1995-2004, R540; ICC Opinions 2005-2008,
R634
802
The reasons for “much easier and securer” are from two aspects. Firstly, the Court will not be
suspicious that whether the bank has taken its sole determination or delegated the obligation of
examination to the applicant, since the bank who seeks a post-refusal waiver has to consult with
applicant after its sole determination. Secondly, the time limit for approaching a pre-refusal waiver is no
later than five banking days, and the bank which is over the time limit will be precluded to alleging any
discrepancies. By contrast, there is no time limit for the bank who is approaching the applicant for a
post-notice waiver
803
804
The legal party in the Option (b) to approach the applicant for a post-refusal waiver is only the
issuing bank. Though the other nominated bank might be entitled to seek a post-refusal waiver in theory,
the optimal party is the issuing bank because it can make a conclusive decision concerning the payment.
Meanwhile, there is no time limit to approach a post-refusal waiver, so that the barrier for a nominated
bank which skips an issuing bank to directly approach the applicant will be eliminated.
252
In addition, similar to other elements in a notice of refusal, such as “express refusal”,
“a single notice” and “each discrepancy”, the principle of irreversibility is also applied
to the disposal statement. If the bank desires to change from Option (a) to Option (b)
due to receiving a subsequent waiver from the applicant, it must obtain an approval
from the presenter before releasing the documents to the applicant; otherwise, it will
constitute inconsistence with the statement in the previous notice and will suffer the
liability associated with that action. 805 Nevertheless, Article 16 (e), as a new
development in the UCP600, is trying to solve the practical problem met by the bank
which has selected to hold the documents. Art. 16 (e) stipulates that the bank which
has chosen Option (a) or (b) is entitled to return the documents to the presenter at any
time. It resolves the previous difficulty that there was no international practice
concerning the length of time for a bank to return the documents unless receiving
further instructions from the presenter.806 Thus, in the author’s view, Article 16 (e) has
effectively solved the dilemma, since the bank would not be obliged to get permission
before returning the retained documents to the presenter anymore.807
It is obvious that the bank should cover the status of all the presented documents
whichever option has been chosen. Failing to include one set of presented documents
in the statement will constitute a deficient notice.808 More importantly, the presented
documents must be disposed unconditionally in a notice of refusal. In Bankers Trust
case, the issuing bank sent a notice which stated “The documents will be at your
disposal when you have paid”. 809 Lloyd LJ held that the notice was discrepant,
because it was contrary to the purpose of Article 16 (d) [equivalent to Article 16 (c)]
which aimed to put back the rejected documents in circulation as soon as possible.
805
ICC Opinions 1995-2001, R421, R429, also see Part 6.5.1 below.
806
807
Due to principle of irreversibility, the rule is clear that any disposal option cannot be changed
without permission from the presenter. Article 16 (e) therefore seems to cause an exceptional situation
from the rule. With Article 16 (e), the bank can easily change from the “hold” option to the “return”
option, i.e. changing from Option (a) or (b) to Option (c). However, the statement in Article 16 (e) does
meet with the commercial needs.
808
Bayerische Vereinsbank AG v National Bank of Pakistan [1997] 1 Lloyd’s Rep 59 (QB)
809
253
Lloyd LJ further clarified that ‘neither Article 16 itself, nor the special terms of this
credit, entitled the issuing bank to retain the documents as security for repayment by
the defendants.’810 Meanwhile, Lloyd LJ compared this case with The Royan811, in
which the bank had unconditionally disposed the documents. The statement of “These
documents at your disposal until we receive our Principal’s instructions…” just
expressed the hope to come to an agreement between traders in the future, and actually
the documents were still at the disposal of seller until reaching an agreement.
Therefore, Lloyd LJ concluded that,812
‘the difference between a telex saying that documents are being held at the
disposal of the sellers until something happens, and a telex saying that
documents will be at the disposal of the sellers when [or after] something
happens may seem narrow. But the difference is critical. In the one case the
documents are held unconditionally at the disposal of the sellers. In the other
case, not.’
Clearly, the position of UCP600 Article 16 (c) (iii) Option (b) is in line with the above
justification, since Option (b) indicates that the bank is holding the rejected documents
at the disposal of the seller until the applicant agrees to accept the discrepancies.
Moreover, Option (b) also stipulates that the bank is obliged to act according to the
presenter’s instructions prior to agreeing to accept a waiver. It actually grants the
presenter a choice in respect of whether to remain in the same transaction. Therefore,
the documents are still held unconditionally at the disposal of the seller up to the
moment that the applicant waives the discrepancies. The presenter, which has been
fully informed the situation by the disposal statement in the notice of refusal, can
promptly instruct the bank of his decision. It should be noted that apart from waiting
for a post-refusal waiver as stated in Option (b), the bank has to send a notice with
810
811
Cooperative Centrale Raiffeisen-Boerenleenbank BA v Sumitomo Bank (The Royan) [1988] 2 Lloyd's
Rep 250 (CA)
812
254
unconditional disposal statement, by either holding the documents on the presenter’s
behalf or return the documents to the presenter.
6.5 Post-notice obligations on the bank
The points mentioned above concentrate on the disputes arising from the disposal
statements on a notice of refusal itself. However, the bank is still obliged to comply
with its disposal statement and fulfill its post-notice obligations, i.e. taking actions or
inactions in accordance with the statements on a notice of refusal. The reason is that
the rejected documents, especially those functioning as the document of title, are
tightly connected with the beneficiary’s rights and security. Thus, if there are any
divergence between further actions taken by the bank and the disposal statement, the
beneficiary might lose opportunities to re-present the conforming documents before the
credit expiry date or suffer huge economic loss. Based on the practical needs and
market expectations, the author will endeavor to analyse the existing situations and
interpret each aspect of post-notice obligations on a bank with regard to the most
recent case, so as to achieve the goal of supplementing this incomplete area in the
current UCP system.
6.5.1 Compliance with statements in the notice of refusal
After serving a notice of refusal, the bank must act in compliance with the disposal
statement on its notice, no matter which option the bank has chosen. Taking the
UCP500 as an example, Article 14 (e) expresses that the preclusion rule will be
triggered when the bank “fails to hold the documents at the proposal of, or return them
to the presenter”. In Credit Industriel et Commercial v China Merchant Bank,813 the
preclusion rule in the UCP500 took effect on the post-notice obligations. Based on a
security suspicion, the issuing bank refused to release the documents to the presenter’s
officer, even though it had received the “return” instruction from the presenter. The
court concluded that the consideration of security was not a legitimate justification,
813
Credit Industriel et Commercial v China Merchants Bank [2002] EWHC 973 (Comm)
255
and the issuing bank had failed to act in accordance with the disposal statement on its
notice. As a result, the issuing bank was precluded from relying on any alleged
discrepancies by virtue of the UCP500 Article 14 (e).
Another illustration can be found in one of the ICC opinions under the UCP500.814
The issuing bank had provided a qualified notice of refusal, which stated “Documents
at your disposal, we await instructions”. However, after the “return” instruction, the
presenter only received part of the presented documents with the omission of 1/3 bills
of lading and two invoices. The ICC Banking Commission concluded that the issuing
bank was required to return the documents in the same number and content as received.
Failure by the issuing bank to hold documents at the disposal of the presenter would
preclude the issuing bank from claiming that the documents were not in compliance
with the terms and conditions of the credit. Therefore, the issuing bank was obliged to
honour the documents and indemnify the loss caused to the presenter.
Compared with the UCP500 Article 14 (e), the preclusion rule in the UCP600 Article
16 (f) has deleted certain words for achieving conciseness. It merely refers to the effect
of failing to act in accordance with the provisions stated in the Article 16. However,
there are no words in the UCP600 Article 16, which have specifically mentioned the
effect of failing to hold the documents at the proposal of, or return them to the
presenter. Unexpectedly, the deliberate omission of the words causes unnecessary
controversies and various suspicions in academia. Professor Ellinger argues that ‘the
omission could be due to the inclusion of two additional options in Article 16(c) (iii)
and in any event, the language of Article 16 (f) is wide enough to cover any
failure…’815 By contrast, Professor Byrne infers that ‘the removal of this provision
arguably takes it outside the scope of the UCP600 preclusion rule.’816
814
Gary Collyer & Ron Katz (eds), Unpublished opinions of the ICC Banking Commission 1995-2004
(ICC Publication No.660, 2005) R546
815
816
256
The English courts just solved this confusion by virtue of interpretations in Fortis Bank
& Stemcor v Indian Overseas Bank,817 in which the court for the first time clarified the
bank’s post-notice obligations under the structure of UCP600. In Fortis Bank, the
issuing bank had duly served a qualified notice of refusal, but in fact it failed to
arrange the return of documents with reasonable promptness to the presenter in
accordance with its disposal statement. Based on “the best practice and the reasonable
expectations of experienced market practitioners”,818 both the court of first instance
and the Court of Appeal concluded that the actions or inactions of the issuing bank
subsequent to a “return/hold” notice should fall under the obligations imposed by
Article 16. Therefore, the issuing bank, which failed to act in compliance with its
disposal statements, would “be precluded from claiming that the documents do not
constitute a complying presentation”819. It is clear that both courts have provided a
right conclusion, which would satisfy the market expectations, as well as properly
follow the spirit of the UCP600. The conclusion also reflects the application of the
principle of irreversibility, namely, the bank which only has one chance to make an
unambiguous choice when rejecting the documents under Article 16 is required to act
on it.
However, the methods adopted by each court to interpret the UCP600 seemed a little
divergent. The Court of Appeal was reluctant to recognise the method of implication
adopted by Hamblen J in the first instance. Thomas LJ held that ‘there would be real
difficulties in using a rule of national law as to the implication of terms (if distinct from
a method of construction) to write an obligation into the UCP.’820 He emphasised that
an obligation to act in accordance with the statement of refusal notice should be as a
matter of necessity, either through interpreting the UCP600 or in respect of the
817
Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm), [2010] 2 All ER (Comm) 28 affd
[2011] EWCA Civ 58, [2011] 2 All ER (Comm) 288
818
Suggested by Sir Thomas Bingham in Glencore International AG v Bank of China [1996] 1 Lloyd's
Rep 135 (CA) 148
819
UCP600 Article 16 (f)
820
Fortis Bank v Indian Overseas Bank [2011] EWCA Civ 58, [2011] 2 All ER (Comm) 288 [55]
257
commercial needs. 821 Therefore, the Court of Appeal decided to choose a less
intrusive way, the purposive interpretation, to achieve the same result. In the author’s
opinion, the method adopted by the Court of Appeal did give much more certainty than
the way of implication. Since the UCP aims to provide a practical and efficient
framework to assist parties involved in documentary credits, banks are required to
reasonably act on the wording of the UCP rather than to behave as a lawyer to evaluate
the implication of each term.
In conclusion, there is no doubt that the issuing bank has the obligations to act in
accordance with its disposal statement in Article 16. Clearly, for UCP600, omission of
reference words from the preclusion rule under UCP500 is hardly reaching the impact
of precision and certainty. Conversely, it has brought judicial creation of obligations
within the UCP framework, which may give rise to uncertainty and excessive
speculation. For this reason, the omission of words in the UCP Article 16 (f) may
become one of “unsatisfactory deletions” and causes unnecessary misunderstanding.822
Since ‘interpretation must be the exception rather than the rule’, 823 the author
tentatively suggests that express words should be inserted into the article to ensure the
performance of the post-notice obligations. The express wording for imposing
post-notice obligations can be added into Article 16 (c), i.e. “… it must give a single
notice to that effect to the presenter and precisely act in accordance with this notice
with reasonable promptness.” Alternatively, the express wording can be kept in Article
16 (f), i.e. “… fails to hold the documents at the disposal of or return them to the
presenter, it shall be precluded from claiming…”824
821
ibid [37] The Court of Appeal proved that Article 16 (e) is only necessary when an obligation to act
in accordance with the notice has been imposed by Article 16 (c).
822
James Byrne and Lee Davis, ‘New Rules for Commercial LCs under UCP600’ in James Byrne (ed)
2008 Annual Survey of Letter of Credit Law & Practice (IIBLP 2008) 33-37
823
Andrea Lista, ‘The Need for Speed: Court of Appeal Interprets UCP 600’ (2011) 11(4) STL 1, 3
824
UCP500 Article 14 (e)
258
6.5.2 Time and mode to perform the post-notice obligations
There are no express provisions in the UCP600 concerning the time and mode to
perform the post-notice obligations. It is suggested that the refusing bank needs to
return the presented documents or follow the further instructions from the presenter
within a period of time according to its disposal statements. However, ‘where there is a
contractual obligation which needs to be performed within a period of time but that
period has not been expressed it will generally be implied that it is required to be
performed within a reasonable time.’ 825 Moreover, a reasonable time means the
documents should be returned “with reasonable promptness” in the international
banking context.826
Timeous performance is considerably important to international trade. ‘As the

documents are property of the beneficiary before the issuing bank accepts them/pays
under the L/C, it is perfectly legitimate for the beneficiary to demand return of the
documents and to make re-presentation, so long as the relevant time limits permit
it.’827 Hence, returning documents within reasonable promptness will provide more
opportunities for the beneficiary to rectify and re-present the documents. Meanwhile, it
may avoid the beneficiary’s financial losses for demurrage or storage costs and
promote the business efficiency to resell. Consequently, this requirement indeed
“reflects the best practice and reasonable expectations of market practitioners”.828
In addition, timeous performance does comply with the spirit of the UCP600 and
succeeds with the established principles in the past. Referring to the ICC DOCDEX
Decision No. 242 subject to UCP500, the experts suggested that ‘the timely return of
dishonoured commercial documents required priority processing.’ 829 Meanwhile,
825
Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm), [2010] 2 All ER (Comm) 28 [72]
826
ibid [71]
827
531
828
829
ibid [73]
259
experts maintained that the issuing bank was obliged to act in accordance with the
“minimal standard”, namely, “documents should be returned without delay and by
expeditious means” once the “return” notice was sent. 830 The Fortis Bank case
essentially affirmed the expert opinions and applied them to the bank’s obligations
under UCP600. Hamblen J concluded that the issuing bank had an obligation to
comply with its disposal statement to return the presented documents with “reasonable
promptness” under UCP600 Article 16. In addition, Hamblen J defined the scope of
performing the post-notice obligations in relation to a “return” or “hold” notice.
‘Whilst the statement made is that the issuing bank “is” returning the documents that
would not be understood as meaning that it is already in the process of doing so.’831
Similarly, the “hold” notice is only limited to the obligation that the issuing bank will
comply promptly with further instructions and dispatch the documents by expeditious
means, rather than that ‘the issuing bank has established the means for prompt
compliance with any future instruction for the return of the documents.’832
Subsequently, Jonathan Hirst in the High Court made a breakthrough concerning this
point.833 Considering the expert’s views within the context of UCP600, he suggested
that ‘the obligation to return the documents within reasonable promptness must be
considered in the context where UCP 600 set a five banking day limit for the paying
bank to decide whether to accept or reject the documents – a more onerous task than
making arrangements to return the documents – and in the light of the commercial
importance of getting the documents back to the presenter. On the other hand an
obligation to act with reasonable promptness is not the same as a duty to act
immediately, and it implies some flexibility before a bank is to be treated as precluded
from taking an important point.’834 Therefore, balancing these factors, Jonathan Hirst
830
ibid [74] However, the experts do not have the authority to establish a standard for an exact time
period to return documents once the notice is sent.
831
ibid [78]
832
ibid [79]
833
Fortis Bank & Stemcor v Indian Overseas Bank [2011] EWHC (Comm) 538, which is the latest trial
regarding to the damage issue.
834
ibid [34] Obviously, the post-obligations should be separate from the obligations of examination and
determination, so that the time limit should be calculated separately against the time limit in Article 14(b)
260
held that ‘in the absence of special extenuating circumstances, a bank which failed to
despatch the documents within three banking days would have failed to act within
reasonable promptness.’835
Obviously, the implication of above judgement is that the bank should fulfil the
post-notice obligations to return the documents or follow the further instructions from
the presenter within three banking days. Meanwhile, the “special extenuating
circumstances” mentioned by the judge will leave certain reasonable latitude for
variation and flexibility. However, the burden of proof would lie on the refusing bank
which asserts “special extenuating circumstances”. Compared with the previous
situations, the presenter, who claims that there was an unreasonable delay caused by
the refusing bank, would normally bear the burden of proof. Currently, the time
criterion for performing the post-notice obligations is self-evident, so that it turns to the
refusing bank to illustrate the circumstances causing delay. Furthermore, in the
author’s view, the refusing bank still needs to prove that it has fulfilled due diligence
even under special circumstances. It appears to constitute a balanced position between
the refusing bank and the presenter. More responsibility will be taken by the refusing
bank which controls the process of performance, and more protection will be given to
the presenter which comparatively stands in a weak position.
Although the Fortis Bank case has made a significant improvement regarding the time
issue of the post-notice obligations, it did not clearly emphasise the means to return the
documents or the ways to follow the further instructions. In the author’s opinion, the
means of despatch can be analogous to the manner of serving a rejection notice. Thus,
the issuing bank should fulfil the obligations by courier or if that is not possible, by
other expeditious means. However, the refusing bank is not bound by whether the
documents will safely arrive within the period of time. 836 Under the particular
and Article 16(d).

835
ibid [35]
836
The issuing bank does not have an obligation to guarantee the documents will arrive with reasonable
promptness. The only obligation imposed on the bank is that it should choose the most expeditious
261
circumstances, the bank is entitled to use the force majeure clause in the UCP600
Article 36 as a legitimate excuse for the circumstances beyond its control.
6.5.3 Conditions of the returned documents
The condition of the refused documents is a crucial point for both traders and banks, in
that their interests and security are highly connected with these documents, especially
certain documents which represent documents of title, such as bills of lading. Although
both the UCP and the English Courts did not particularly stress the condition of the
returned documents, it is self-evident that the bank should return all the presented
documents at the same time and the minimum limit is to return the documents in the
same manner as they were received.837 It is clear that the authorisation of instructions
from the presenter cannot be a legitimate excuse for the bank to retain the documents,
especially after the UCP600 Article 16 (e) expressly states that the bank choosing a
“hold” notice is entitled to return the documents to the presenter at any time. 838
However, whether there is a necessity to re-endorse the refused documents is still a
controversial issue at the moment. There is no express requirement under Article 16 as
to whether the refusing bank should re-endorse the bill of lading back to the presenter
when returning it, which has been previously endorsed in favour of the refusing bank.
Apparently, absent from re-endorsement, the presenter may suffer practical difficulties,
because he is not a legal party to ask for delivery of goods from the carrier and he is
also not entitled to claim any loss caused by the carrier.839
means to return or despatch the discrepant documents within reasonable promptness.

837
Credit Industriel et Commercial v China Merchants Bank [2002] EWHC 973 (Comm) [77] See also
ICC Opinions 2009-2011, R744. In this case, the Banking Commission pointed out that the bank which
privately endorsed the rejected bill of lading to the applicant had breached the obligation under the
UCP600 Article 16 (c) (iii), since it could not return the rejected documents in the same form as
received.
838
In Credit Industriel et Commercial v China Merchants Bank [2002] EWHC 973 (Comm), the judge
stressed the inconsistent actions taken by the issuing bank and concluded that the authorisation was not a
legitimate point for the issuing bank to retain the documents.
839
By virtue of the Carriage of Goods by Sea Act 1992 (COGSA 1992) s 2 (1) (a), the lawful holder of
a bill of lading has been transferred all rights of suit under the contract of carriage.
262
The reference concerning the conditions of the returned documents can be reflected
from the ICC Opinions R214. The confirming bank argued that ‘although the
documents have been physically remitted to the confirming bank, they were, from a
legal point of view, not returned (documents were not endorsed by the issuing bank
back to the confirming bank).’840 Nevertheless, the expert gave the opinion that ‘the
confirming bank has no right to object to the procedure followed by the issuing bank,
and the confirming bank cannot expect the issuing bank to endorse documents which it
has not agreed to take up under the documentary credit.’841 Moreover, since the
refused documents are recognised as the property of presenter, the refusing bank has
no authority to make any changes to them. As Benjamin’s Sales of Goods suggests,
‘the obligation is physically to return the documents; there is no concept of “return in
law”.’842 In respect of Opinion R214, the author in Jack in Documentary Credits also
recognises that ‘if the issuing bank rejects the documents, it is under no obligation to
indorse them over to the presenter, even though this may cause difficulties to the
presenter in recovering the goods.’ 843 Furthermore, based on the very harsh
consequences that would be borne out without re-endorsement, ‘it might be argued on
the contrary that a term for re-endorsement could be implied into the issuing bank’s
contract with the beneficiary.’844 In Fortis Bank v Indian Overseas Bank845, Hamblen
J endeavoured to distinguish the current situation with the facts of Opinion R214. He
acknowledged that the presenting bank cannot complain for non-endorsement after
receiving the documents in respect of the Opinion R214; however, for the current case,
Hamblen J held that the presenter was entitled to get re-endorsed documents since the
request was sent prior to the return of the documents.
Regrettably, the Court inferred this conclusion through analysing the facts of the
individual case and it did not strongly affirm that the bank was obliged to re-endorse
840
841
ibid
842
843
844
ibid
845
263
the refused documents according to the presenter’s instructions. Meanwhile, in the
author’s opinion, it is a thorny task to construe re-endorsement as an implied term in
the contract between the beneficiary and the issuing bank, since uncertainty will be
generated without evaluating the intention of parties. Nonetheless, it is true that ‘the
UCP is designed to facilitate the making of payment against documents in international
trade; it should not be construed as encouraging the paralysis that would result from a
bill of lading remaining endorsed in favour of a party with no interest in either
claiming the goods the bill represents or negotiating the bill with a party that has such
an interest.’846
It is impossible for the UCP to include all the existing controversies in practice,
although the UCP was designed to be a complete self-contained code. As a result, on
the basis of current UCP provisions, the author tentatively proposes a solution to the
dilemma between the certainty and efficiency. In the author’s opinion, the solution
could be found from modifying contracts. On the one hand, the bank can insert a
clause into the letter of credit, which declares that the bank has no liability or
responsibility for the legal effect of re-endorsement according to the presenter’s
instructions. That clause is fit for the principle of autonomy under documentary credits,
in that the bank is presumed as an innocent third party without any knowledge to the
debates resulted from the underlying facts of re-endorsement.847 On the other hand,
the beneficiary, who may meet with difficulties without endorsement, should insert a
re-endorsement clause into the sale contract, so that the applicant has to follow the sale
contract and make a re-endorsement clause into the contract of application involved
with the issuing bank.848 Consequently, the certainty of contract can be guaranteed, as
well as the goal of facilitating transactions can be achieved.
846
Michael Bridge (ed), Benjamin’s Sale of Goods (8th edn, Sweet and Maxwell 2010) para.23.184
847
For example, sometimes the beneficiary is a different person from the presenter when the presenter
has transferred his right to get the deferred payment to another person in order to obtain financing
immediately. Thus, in this circumstance, the re-endorsement back to the presenter rather to the actual
beneficiary is likely to trigger a controversy.
848
The confirming bank also needs to be cautious because sometimes the confirming bank may
negotiate the documents without recourse prior to forwarding the documents to the issuing bank for
reimbursement. If the issuing bank refuses the documents, the problematic documents will belong to the
264
6.6 The preclusion rule
As the UCP600 Article 16 (f) stipulated, ‘if an issuing bank or a confirming bank fails
to act in accordance with the provisions of this article [Article 16], it shall be precluded
from claiming that the documents do not constitute a complying presentation.’
Obviously, the consequence of the preclusion rule is rather powerful since an issuing
or confirming bank is obliged to honour or negotiate regardless of whether the
presentation is compliant, and also regardless of whether it has a right to ask for
reimbursement. ‘In the absence of any real detriment to the presenting party, one may
wonder whether a court would give this provision a rigid, literal interpretation such
that even a minor, technical breach is fatal to the bank’s right to rely on the
non-compliance of the presentation.’849 One reason is that the preclusion rule as “a
fitting pro-beneficiary rule” could ‘counterbalance the usually pro-issuer rule of strict
compliance’. 850 Moreover, in the context of international trade, the nature of
international transactions is dealing with documents which represent for the contracted
goods. The application of the preclusion rule will force the bank to obey the UCP
provisions precisely and create more opportunities for the presenters to re-present the
cured documents. Even if the discrepancies pointed out by the bank cannot be cured,
the application of the preclusion rule can still hasten the speed to release the refused
documents to the presenter. 851 Therefore, from a commercial perspective, the
preclusion rule with draconian consequences has perfectly satisfied the needs of
markets.
However, two issues concerning the preclusion rule need to be analysed here. Firstly,
the preclusion rule does not take effect on any other UCP600 provisions apart from
confirming bank and the dilemma of re-endorsement will be faced by the confirming bank. Therefore, it
is advisable for the confirming bank to insert the analogous clause into a bank-to-bank contract with the
issuing bank.
849
Publishing 2010) p.245
850
John F. Dolan, The Law of Letters of Credit: Commercial and Standby Credit (4th edn, A S Pratt 2007)
Vol.1, p.6-83
851
See Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm)
265
Article 16. The only criterion to attract the preclusion rule is that an issuing or
confirming bank fails to comply with the provisions in Article 16. Therefore, in order
to determine the scope of the preclusion rule, it is extremely essential to clarify the
content of obligations under UCP600 Article 16. Secondly, the legal party which is
bound by the preclusion rule stated in the UCP is either an issuing bank or a
confirming bank. A non-confirming nominated bank, since it makes no promise to
honour or negotiate the documents, is not subject to the preclusion rule. Nonetheless,
the legal consequence caused by a non-confirming nominated bank still requires
discussion, especially at the time of failing to perform the obligations under Article 16.
These issues will be discussed in the following parts.
6.6.1 Scope of the preclusion rule
It is self-evident that each express point under the UCP600 Article 16 (c) and (d) is
bound by the preclusion rule, which covers timing, mode of communication, form and
content of a refusal notice. Since a minor breach is sufficient to trigger the preclusion
rule with draconian consequences, the bank should be extremely cautious to fulfil its
obligations and follow the suggestions given in the above parts respectively. However,
there are still several questions left in relation to the scope of the preclusion rule,
especially for those which cannot be easily observed from the appearance of the words.
6.6.1.1 Residual issues covered by the preclusion rule
The first issue is whether the default of independent determination should belong to the
scope of the preclusion rule. It is clear that the bank, which breaches the obligation to
examine and determine the compliance of a presentation as required by Article 14 (a),
would not attract preclusion. Although Article 16 does not directly stipulate such
provision, it proceeds on the basis that a bank has independently determined a
non-compliant presentation. In particular, Article 16 (b) states that an issuing bank may
in its sole judgement approach the applicant for a waiver of the discrepancies. It seems
to imply that the bank should perform its obligation of determination independently
266
and the purpose to approach the applicant is only for seeking a waiver. Arguably, if the
bank invites the applicant to play any role in the process of determination or blindly
follows an instruction from the applicant to refuse documents, the bank defaults on its
obligations under UCP and the actions commit further infringements to Article 16.
Accordingly, in the author’s opinion, the action of relegating an issuing bank to the
status of “post office” should fall into the scope of preclusion rule.852
The second problem is whether the wording of the preclusion rule in the UCP600
Article 16 (f) should extend to the failure to handle documents in accordance with the
notice of refusal. This controversy is derived from an unsatisfactory deletion of the
words compared with the preclusion rule under the UCP500 Article 14 (e)853, which
expressly includes both the failure of acting in accordance with the provisions of
Article 14 and the failure of taking further actions following a disposal statement. ‘This
omission could be due to the inclusion of two additional options in Article 16(c) (iii)
and in any event, the language of Article 16(f) is wide enough to cover any failure to
hold documents at the disposal of or to return the documents to the presenting party if
either of these options is indicated in the notice of refusal.’854 Furthermore, in the
Fortis Bank855 case, the judge affirmed that the omission in wording was not intended
to change the scope of the preclusion rule, since this decision would reflect the best
practice and the expectations of practitioners. ‘The effect of not returning the
documents or doing as the presenter instructs has very similar consequences to a delay
in making a decision on the documents – the presenter cannot deal with the goods.’856
Consequently, despite the fact that the preclusion rule is considerably more abridged
than its previous version, the failure to handle documents in accordance with the
statement in a notice of refusal should definitely be covered.
852
Michael Bridge (ed), Benjamin’s Sale of Goods (8th edn, Sweet and Maxwell 2010) para.23.189
853
The UCP500 Article 14 (e) states: ‘If the Issuing Bank and/or Confirming Bank, if any, fails to act in
accordance with the provisions of this Article and/or fails to hold the documents at the disposal of, or
return them to the presenter, the Issuing Bank and/or Confirming Bank, if any, shall be precluded from
claiming that the documents are not in compliance with the terms and conditions of the Credit.’
854
Publishing 2010) p.245
855
Fortis Bank & Stemcor v Indian Overseas Bank [2011] EWCA Civ 58
856
Fortis Bank & Stemcor v Indian Overseas Bank [2011] EWCA Civ 58, para.44
267
6.6.1.2 Issues not covered by the preclusion rule
The most significant controversy centred on the scope of preclusion rule is whether the
examination time in the UCP600 Article 14 (b)857 should be covered. Apparently,
under UCP600, the time of examination in Article 14 (b) co-exists with the time rules
in the Article 16. Due to sharing the same maximum five banking days, it is suggested
that Article 14 (b) should be read in tandem with Article 16 (b) and Article 16 (d).
Surprisingly, the express wording in the preclusion rule has already defined its
application within “the provisions of this article”, i.e. Article 16 itself. However, this
issue has only emerged since the UCP500 revision, because under UCP400 the time
rules were not divided into two articles and partially separated from the preclusion
rule.858 Even though the provision regarding the time of examination had been moved
out from the ambit of the preclusion rule in the UCP500, the remaining effect of the
UCP400 was still overwhelming.859 Moreover, the UCC Revised Article 5, which
followed similar time frames as those under the UCP500, clearly indicated that late
examination should be covered by the scope of the preclusion rule.860 Hence, the
majority of commenters believed that there was a glitch in the UCP500 drafting and
the preclusion rule was still entitled to be triggered by late examination set out another
article.861 Nonetheless, even assuming that late examination would be covered by the
preclusion rule in the UCP500, the only scenario for applying this argument was when
the late examination occurred over a permitted reasonable time but no more than the
outer limit of seven banking days.
857
The UCP600 Article 14 (b) stipulates: ‘A nominated bank acting on its nomination, a confirming
bank, if any, and the issuing bank shall each have a maximum of five banking days following the day of
presentation to determine if a presentation is complying. This period is not curtailed or otherwise
affected by the occurrence on or after the date of presentation of any expiry date or last day for
presentation.’
858
The UCP400 Article 16 (c) stipulated that the bank should examine documents within a reasonable
time, and the UCP400 Article 16 (d) provided that the bank was obliged to send a notice of refusal
without delay to the presenter when there was a rejection. The preclusion rule in the UCP400 Article 16
(e) expressly included both of above aspects.
859
The provision concerning time of examination was set out in the UCP500 Article 13 (a); however,
the time for sending a refusal notice was provided by the UCP500 Article 14 (d) and the preclusion rule
was settled down in the Article 14 (e).
860
UCC Revised Section 5-108 (b) and (c). See John F. Dolan, ‘Letters of credit: a comparison of UCP
500 and the new U.S. Article 5’ J.B.L. 1999, Nov, 521-537, p.530-531
861
John F. Dolan, The Law of Letters of Credit: Commercial and Standby Credit (4th edn, A S Pratt 2007)
Vol.1, para.6.88
268
Furthermore, the situation was not fixed or improved in the UCP600, and conversely it
has become more ambiguous since the concept of “reasonable time” was replaced with
the word of “maximum”. The continuous use of singular reference to “this article” in
the UCP600 Article 16 (f) indicates that the drafters are not intended to apply the
preclusion rule to Article 14.862 In other words, it is hardly to see that the remaining
effect from the UCP400 is still overwhelming after the dramatic changes in time rules
through UCP500 and UCP600. Furthermore, in the author’s opinion, the new time
frame in the Article 14 (b) provided less room to apply the preclusion rule. Failure to
take examination within five banking days would also breach the following procedure
with respect to sending a notice of refusal under Article 16 (d), so that the preclusion
rule will be automatically triggered. Therefore, the only arguable scenario is whether
the preclusion rule should arise when the delay of examination occurs within the five
banking days, provided the word of “maximum” implies the documents examination
should be taken within a “reasonable time” in nature rather than a fixed
five-banking-day period. However, as analysed above, the author is reluctant to accept
that the criterion of “reasonable time” is still involved into the UCP600 time rules. The
word of “maximum” only indicates that the drafters tend to adopt a tactful way to
illustrate the allowed time limit. As a result, in the author’s view, the only hypothesis
for applying the preclusion rule to Article 14 (b) cannot be verified with absolute
certainty. Meanwhile, the author believes that the application of the preclusion rule to
the same five banking days in the UCP600 Article 16 (d) has re-affirmed the drafter’s
intention regarding a fixed period. The UCP may endeavour to distinguish the duty of
examination with the following procedures by separating the examination time from
Article 16 covered by the preclusion rule. Consequently, Article 14 (b) would not fall
into the scope of preclusion rule under UCP600; however, arguably the same result
will be achieved through taking effect of breach the same time limit in the Article 16
(d).
862
James E. Byrne, The Comparison of UCP600 & UCP500 (ICC 2007) p.134
269
Apart from examination time in the Article 14 (b), it is arguable that the presentation
out of time should not belong to the discrepancy covered by the scope of the preclusion
rule.863 Although the lateness of a presentation can be detected from the appearance of
the documents, it is suggested that, once the last date for presentation has elapsed or
the credit expires, the bank is released from all obligations arising under the
documentary credit, including those under Article 16.864 However, even if the UCP
does not apply, the bank can still honour or negotiate a late presentation under
common law. Once the bank determines to waive its right, the doctrine of estoppel at
common law will prevent the bank from relying on the lateness of the presentation
anew, and the bank has to reasonably fulfil its obligations under the common law.865
6.6.2 Legal consequences concerning failures of a non-confirming nominated bank
On the basis of literal reading of the UCP600 Article 16 (f), the preclusion rule would
not apply to non-confirming nominated banks, in that they make no promise to honour
or negotiate the documents under UCP. By contrast, Article 16 (c)-(d) expressly
imposes the obligations of sending a notice of refusal on a nominated bank. In practice,
a non-confirming nominated bank is always delegated by an issuing bank to perform
the obligations of examination and determination. In respect of the UCP600, the
nominated bank should fulfil its obligations in accordance with Article 14 and Article
16; however, Article 16 (f) does not include the adverse consequences for a
non-confirming nominated bank which fails to act in compliance with Article 16. In
such a case, under English law at least, a nominated bank which does checking,
accepting and payment is regarded as the agent of the issuing bank. 866 If the
nominated bank fails to comply with the provisions under Article 16, ‘the effect may
be to bar the issuing bank from contending against the beneficiary that the documents
863
See the detailed analysis concerning presentation out of time in the above part 5.4.3.
864
Bayerische Vereinsbank AG v National Bank of Pakistan [1997] 1 Lloyd’s Rep 59 (QB) 67, also
supported by the US authority LeaseAmerica Corp v Norwest Bank Duluth NA 940 F 2D 345 (8th Circ
1991) and Todi Exports v Amrav Sportswear Inc 1997 US Dist LEXIS 1425
865
(QB); Floating Dock Ltd v Hong Kong & Shanghai Banking Corp [1986] 1 Lloyd’s Rep 65 (QB)
866
Bank of Baroda v Vysya Bank Ltd [1994] 2 Lloyd’s Rep 87 (QB) 91
270
do not comply.’867 Therefore, the issuing bank may incur preclusion under Article 16
(f) resulting from the failure of the non-confirming nominated bank. Although the
issuing bank will be bound as against the presenter by the actions of the nominated
bank, it is entitled to recover its ultimate loss from the nominated bank, which breaches
the duty as the issuing bank’s agent.
Nonetheless, it is worth noting that the rule of disclaimer in the UCP600 Article 37,
which expresses that ‘a bank utilizing the services of another bank for the purpose of
giving effect to the instructions of the applicant does so for the account and at the risk
of the applicant.’868 Clearly, it cannot be a defence for the issuing bank to exempt
from the liability as a principal under this circumstance. It is obviously unfair to
impose all the liabilities, which are derived from the negligence of a nominated bank,
on an indirect and innocent applicant. Moreover, the application of the disclaimer rule
appears to conflict with the purpose of UCP which aims to place the obligations of
examination and determination on the nominated banks. For those reasons, it is
suggested that ‘a solution may be construe Article 37 as confined to failures to follow
instructions relating to the opening of a credit and not extending to the credit’s
realisation.’869 Consequently, the preclusion rule in Article 16 (f) can be triggered by
the failure of a non-confirming nominated bank; however, the issuing bank, as the
principal of the nominated bank, will suffer this draconian consequence directly.
6.7 Conclusions
In this chapter, on the basis of the UCP600 Article 16, the author has endeavoured to
analyse and clarify the bank’s obligations on rejection of the presented documents.
Compared with the previous UCP revisions and the case law, the author has detected
certain merits and deficiencies concerning the existing UCP600 regime. Furthermore,
867
also supported by Peter Ellinger and Dora Neo, The Law and Practice of Documentary Letters of Credit
(Hart Publishing 2010) 120
868
869
Michael Bridge (ed), Benjamin’s Sale of Goods (8th edn, Sweet and Maxwell 2010) para 23-193; Ali
Malek and David Quest, Jack: Documentary Credits (4th edn, Tottel Publishing 2009) para 5.44
271
the author has tentatively made suggestions towards the academic and practical
controversies, in order to supplement the gaps between the UCP and the market
expectations. Compared with its predecessors, the great progress made by the UCP600
has to be recognised. Nonetheless, in some aspects, the developments are still not
sufficient and further improvements will still be needed.
Firstly, regarding consultation in Article 16 (b), issues involved with the consulting
parties, the consulting time and consulting methods should be further considered. The
bank should keep in mind that a condition precedent for consultation with the applicant
in Article 16 (b) is its independent examination and determination, so that in the
author’s opinion, the bank which delegates examination or decision-making to the
applicant will incur preclusion. Moreover, since the ICC Banking Commission did not
issue guidance for the time of consultation, the safe route for the bank is to fulfil the
consultation as soon as possible within the ambit of five banking days. The author
tentatively suggests that the ICC Banking Commission would set out an express
instruction in its opinion for the consultation time, such as 24 to 48 hours. In addition,
although the UCP does not express it, the author cannot see reasons in principle why
the rational nominated bank cannot be a party to approach the applicant for a
pre-refusal waiver. However, the nominated bank which chooses to approach the
applicant will bear a high legal risk and consume the limited time available for
documentary rejection. Comparatively, the more advisable method in practice for the
nominated bank is to unequivocally reject the discrepant documents and forward the
documents to the issuing bank, which is entitled to wait to receive a post-refusal
waiver as outlined in Article 16 (c) (iii) (b).
Secondly, the outstanding issue concerning the external conditions to serve a refusal
notice in Article 16 (d) still centres on the time rules. The ambiguity remains on
whether the five banking days are a safe harbour. Due to sharing the same subject with
Article 14 (b), the exact situation in Article 16 (d) also needs to be urgently clarified by
the ICC. Until the ICC Banking Commission clarifies, the bank should send a notice of
272
refusal promptly within five banking days, as long as it has concluded non-compliance.
Furthermore, since the risk of choosing a mode lies with the refusing bank, a prudent
bank should leave sufficient time for resorting to an alternative mode within the
maximum time limit.
Thirdly, the content in Article 16 (c) and Article 16 (f) does not seem sufficient enough
to cope with the practical market needs. For instance, there are no express words with
respect to bank’s post-notice obligations, although these obligations are fatal to the
parties involved in documentary credits. The English courts have confirmed that the
bank which failed to act in compliance with its disposal statement would be precluded
from claiming discrepancies in the documents. The author tentatively suggests that at
least one sentence concerning timely fulfilment of disposal statements should be added
either in the main content of Article 16 (c) or in the preclusion rule of Article 16 (f).
Moreover, with regard to the time and mode for the bank to perform the post-notice
obligations, it is suggested that the bank should choose the most expeditious means to
return or despatch the discrepant documents and with reasonable promptness. While,
with respect to the conditions of the returned documents, the minimum limit is to
return all the presented documents in the same manner as they were received. Whether
or not there is a necessity to re-endorse the refused documents is still a controversial
issue which urgently needs some official opinions from the ICC. In the author’s
opinion, until receiving the clarification from the ICC, the parties would also be able to
temporarily escape from this dilemma by modifying their contracts so as to achieve the
position in line with their expectations.
Last but not least, since a minor breach is sufficient to trigger the preclusion rule with
draconian consequences, the bank should be extremely cautious to fulfil each
obligation stipulated in Article 16. Meanwhile, in the author’s view, the scope of
preclusion should include the default of independent determination and the failure to
handle documents in accordance with the notice of refusal. By contrast, the author
proposes that, neither delay caused for pure document examination, nor the
273
presentation out of time should incur preclusion. In addition, although the
non-confirming nominated bank is not an express party referring by the preclusion rule
in the UCP600 Article 16 (f), its failure to act in accordance with Article 16 can still
trigger preclusion, but the consequences will be with the issuing bank which acts as its
principal.
274
Chapter 7 Way Forward
7.1 Overview of the thesis
Letters of credit as the life-blood of international commerce have bridged the

international trade between different countries, while the UCP, which is often regarded
as “soft regulation” has provided a solid backing for the operation of documentary
credits and nowadays has been universally incorporated into nearly all letters of credit.
Since the first version published in 1933, the UCP has been generally revised every
decade, so as to keep track of modern developments and reflect the best market
practice. The current revision, UCP600 published in 2007, has achieved a great success
and to some degree improved significantly compared with its predecessors.
Nevertheless, as mentioned in Chapter 2 of this thesis, there are still historical residuals
which deter the smooth operation of documentary credits, and there are also
ambiguous statements which are inconsistent with the goal of certainty. Therefore, the
author believes that it is the right time to review the performance of UCP600 and
contribute sensible suggestions for the next UCP revision.
Needless to say, reviewing and revising all the UCP600 rules is a daunting task and
unrealistic to achieve within one thesis. As a recognised means of settlement, it is clear
that the most important role for documentary credits is to provide payment assurance
for international traders. Document examination and rejection, as two vital but
controversial parts in a documentary credit operation, not only directly influence the
cash flow but also closely link with bank’s obligations under the credit. Hence, the
author has particularly concentrated on the issues of document examination and
rejection under documentary credits in this thesis, and further examined whether the
provisions of UCP600 regarding these two areas are satisfactory and sufficient. The
main question that subsequently arises in this thesis is: On what standards does a bank
need to examine the presented documents so as to make a right decision, and if the
275
documents were deficient, what requirements does a bank need to meet for making a
valid rejection? By virtue of analysing this question, the gaps between the UCP600
provisions and the market expectations for the area of documentary examination and
rejection have become obvious.
In order to answer this question, this thesis has brought the aid of other ICC sources
which are frequently used and referred by the court to solve the documentary credit
disputes, such as the latest revision of ISBP, the ICC Opinions and DOCDEX decisions.
Moreover, the author has also borrowed the experience from the English case law,
which can supply dynamic and vivid examples for the documentary credit practice.
Therefore, after a general introduction in Chapter 1, the author has illustrated the
sources used for interpretation of UCP600 and also reviewed the relationship between
the UCP and common law in Chapter 2. Meanwhile, Chapter 2 has also revealed the
contractual relationship related to a documentary credit transaction and two
fundamental principles in a documentary credit operation. As we have seen, the
contractual relationship and fundamental principles have significantly affected the
bank’s position in the process of document examination and rejection.
Chapter 3, 4 and 5 of this thesis aims to answer the first research question: on what
standards should a bank examine the presented documents so as to make a right
decision? Chapter 3 has started with what constitutes a complying presentation under
UCP600 Article 14 (a) and further analysed the overall requirements laid down for
document examination under letters of credit, including doctrine of strict compliance,
reasonable care and time for examination. On the basis of the different treatments
provided by the UCP, the thesis has divided the presented documents into two
categories, namely, generic documents mainly regulated by the UCP600 Article 14 and
special documents specifically listed in other articles. In the interests of conciseness,
this thesis has only selected to deal with the most important type of special documents
in international trade, i.e. transport documents which are wholly or partly involved
with sea carriage under UCP600 Article 19-22. The standards for examining general
276
documents have been discussed in Chapter 4, while the standards for examining
transport documents as well as relevant bank’s security have been scrutinised in
Chapter 5.
After analysing the standards for document examination, a second question has
become apparent: If the presented documents cannot constitute a complying
presentation, how can a bank effectively and validly reject the documents? Chapter 6
has investigated bank’s obligations on rejection of documents under documentary
credits, which are primarily paralleled with the provisions in UCP600 Article 16. Up to
here, the issues concerning document examination and rejection under UCP600 have
been adequately addressed. Through describing the current rules and examining their
practical performance, the loopholes in the UCP600 system have been clearly observed.
Nevertheless, the merits of this thesis are not limited in finding the problems, but in
endeavouring to solve the problems through providing certain feasible suggestions. As
we will see in the following part regarding the way forward, some of the suggestions
remain minor, which only refer to wording clarifications or interpretations, while
others may involve fundamental changes for the ICC to consider in future reform.
7.2 Summary and the way forward
7.2.1 General requirements for document examination
7.2.1.1 Document examination and autonomy
The basic duty of any bank participating in a letter of credit transaction arises when it
examines the documents and determines whether it will honour or negotiate those
presented documents. According to the general rule for document examination laid
down in the UCP600 Article 14 (a), the bank must examine a presentation to determine,
on the basis of the documents alone, whether or not the documents appear on their face
to constitute a complying presentation. Clearly, the rule has effectively linked bank’s
documentary examination with the principle of autonomy, which was discussed in
277
Chapter 2 as a fundamental principle throughout the documentary credit operations. It
is long established both in the UCP and at common law that a bank should
independently examine the documents without concerning any extraneous matters. The
autonomous nature of letters of credit is proclaimed in UCP600 Article 4 (a) and
UCP600 Article 5 declares that banks deal with documents rather than goods, services
or a performance to which the documents may relate. The only debatable point is
UCP600 Article 4 (b), under which ‘an issuing bank should discourage any attempt by
the applicant to include, as an integral part of the credit, copies of the underlying
contract, proforma invoice and the like’. Although Article 4 (b) drives in the right
direction, it has been drafted in a very subtle way and it is difficult to use as an
enforceable contractual term, especially in front of applicants who are in a strong
bargaining position. Therefore, the author suggests that the ICC Banking Commission
re-consider the purpose behind Article 4 (b) and redraft it in an effective manner.
As a result of autonomy, a bank bears no responsibility for the accuracy or genuineness

of tendered documents, provided that the documents appear on their face to be
compliant. The expression “on their face” in Article 14 (a) should not be literally
interpreted as only examining the front of any document and overlooking the back of a
document without a justification.870 On the other hand, the bank is not entitled to
examine the documents beyond their appearance and the issue of discrepancy should
not depend upon the degree of inquisitiveness within the bank. In the author’s opinion,
the commercial approach should only be applicable for the purpose of interpreting the
contractual terms, rather than judging the acceptability of a presented document.
Analysing the commercial purpose behind a document in order to measure the
materiality of the discrepancy will inevitably jeopardise the principle of autonomy. The
bank is obliged and restricted to assess the documents on their appearance, irrespective
of any underlying facts and extraneous matters. However, the distinction should be
drawn between analysing the commercial purpose behind the scene and holding a
870
For example, terms and conditions of carriage as stipulated in Article 20 (a) (v), which is usually
contained on the back of the bill of lading.
278
general common sense approach based on a bank’s expertise and experience. The test
can be extracted from the case law: ‘a tender of documents which, properly read and
understood, calls for further inquiry or are such as to invite litigation is clearly a bad
tender.’871
7.2.1.2 Reasonable care and strict compliance
The key for initiating the payment mechanism under a documentary credit is that the
presented documents have constituted a complying presentation. As UCP600 Article 2
stipulates, ‘complying presentation means a presentation that is in accordance with the
terms and conditions of the credit, the applicable provisions of these rules and
international standard banking practice.’ It should be noted that the definition avoids a
direct reference to the ISBP and arguably any appropriate international banking
practice has a chance to be referred to here. It is clear though the definition of being a
complying presentation has laid the foundation for the test applied in Article 14,
respecting the bank’s duty to examine the documents. However, two questions arise
here concerning the historical essentials which have taken place in the process of
document examination. Firstly, does the notion of reasonable care still take a part in
bank’s document examination and how can it fit into the UCP regime? Secondly, does
the traditional common law doctrine of strict compliance still affect document
examinations and how can it accommodate to the UCP objectives?
Concerning the first question, the author believes that the notion of reasonable care still
exists in the UCP system, but it has been indicated in an implicit way so as not to
interrupt the general document examination. The deletion of “reasonable care” from
UCP600 must be interpreted as emphasising and clarifying a strict duty on bank’s
examination, rather than a duty to exercise due care. The omission of express words in
the UCP600 does not lead to any substantial difference in the way of performance. The
reasonable care stipulation will be called for when the bank needs to exercise its
871
M Golodetz & Co Inc v Czarnikow-Rionda Co Inc (The Galatia) [1980] 1 WLR 495 (CA) 510,
applied the rationale from Hansson v Hamel & Horley [1922] 2 AC 36 (HL) 46
279
professional judgment to decide an ambiguous or indefinite point in the presented
documents. Therefore, in the author’s opinion, the deletion of express words in Article
14 (a) aims to clarify that, ‘“reasonable care” is simply the degree of care that would
be exercised in particular circumstances by a bank in handling the presented
documents, rather than an effective defence that would excuse the bank’s liability for
accepting a non-compliant document.
In respect of the second question, the author suggests that the doctrine of strict
compliance, which has been traditionally articulated by common law to govern the law
of letters of credit, largely remains intact under the UCP system. Although there is no
express reference in the UCP, observing from the established cases incorporated the
UCP, the doctrine still has a determinative influence on judging the compliance of a
document as well as deciding the fate of document presentation. The doctrine of strict
compliance has been tested in three different scenarios, namely, technicalities, the de
minimis rule and typographical errors. Technical discrepancies seem not be tolerated
by the rule of strict compliance, although insisting strict compliance would give little
scope for recognising the merits. Regarding the de minimis tolerance, the UCP600 has
publicly inserted the provisions to allow certain differences concerning the credit
amount, quantity and unit prices.872 Apart from these express terms, it is arguable that
the maxim of de minimis non curat lex still cannot apply in other aspects, such as the
situation regarding temperature description in the Soproma SpA 873 case. As to
typographical errors, the ISBP arguably is not sufficient to solve the mess and different
courts have delivered various rulings.
It is clear that ‘the requirement of strict compliance is not equivalent to a test of exact
literal compliance in all circumstances and as regards all documents.’ 874 Some
margin must and can be allowed. By contrast, the approach of substantial compliance,
which measures the discrepancies by their commercial materiality, would be conducive
872
See UCP500 Article 39 and UCP600 Article 30
873
874
280
to uncertainty and incompatible with the autonomous tenets of documentary credits.
The application of strict compliance can not only effectively support the process of
document examination, but also provide certainty for the system. Hence, rather than
rejecting the rule of strict compliance, both the English courts and the UCP drafters
have fashioned rules that counterbalance the somewhat harsh results out of strict
compliance.875 The approach of wider strict compliance has succeeded the nature of
strict compliance, but provides tolerance on certain trivial variations from the
requirements of the credit, for instance, an obvious typographical error, an
imperceptible divergence or a trivial discrepancy which would be unmistakably
recognised by a reasonable banker.
Both the English courts and the UCP provisions have recognised that a slight margin
must and can be allowed as mentioned above. In the author’s opinion, the UCP system
has absorbed the essence of strict compliance but developed it in its own regime to
counterbalance the harsh result of strict compliance. It requires “a complying
presentation” as a whole rather than asking for a respective compliance of each
document, and references of judging a complying presentation are not completely
restricted. As we have seen in Chapter 4 for examining generic documents, the
requirements for descriptions and data in the documents have been minimised to “no
conflict” rather than “correspondence”. Nonetheless, in order to validate those
relaxations, the doctrine of strict compliance itself has to be maintained in the first
place. Apart from the above tolerable situations, the bank still takes its own risk to
make any deviations from strict compliance. While, the mission of courts lies in
delivering a reasonable interpretation concerning the level of strictness, as well as
leaving the doctrine of strict compliance unscathed, so as to correspond with the
spirit of the UCP.
875
2007) para 6-15
281
7.2.1.3 Time for document examination
The last point among the general requirements for document examination is the time
issue, which has been stipulated in the UCP600 Article 14 (b) but jointly connected
with Article 16 (b) and 16 (d). A significant change applies to the time given to banks
for document examination. It has been changed from the “reasonable time not to
exceed seven banking days” under UCP500 to “a maximum of five banking days”
under UCP600. The notorious notion of “reasonable time” has been expressly cut off
from the new rule; however, the word “maximum” triggers a new round of
controversies in academia and ignites the last hope for involving “reasonable time”.
The author is not convinced by the arguments of unfairness and hidden delay in case of
setting up a fixed period, especially while the UCP has been endeavouring to eliminate
the uncertainty caused by the “reasonable time” test. Consequently, the author suggests
that the ICC Banking Commission should take an urgent attempt to clarify the
intention behind the Article 14 (b) and boldly confirm a fixed timeframe for document
examination.
7.2.2 Standards for examining generic documents
Following the discussion of general requirements for document examination in Chapter

3, Chapter 4 focuses on analysing the standards for examining generic documents876 in
a documentary credit presentation. UCP600 Article 14 covers almost all the standards
for examining the miscellaneous documents presented under a documentary credit
transaction. Different from other academic works, the author has conducted a
layer-by-layer analysis to reveal the standards covered by Article 14 and the relevant
ISBP provisions. The chapter starts from illustrating the standards for examining a
single document and then gradually drilling down to the interactions among documents.
It has been divided into four parts, which include descriptions in a single document, the
content of data in a generic document, the linkage issue and mismatched quantity of
876
The generic document means those documents which have not been specifically listed and
distinctively treated in the UCP600.
282
anticipated documents.
7.2.2.1 Description of the goods in a document
In respect of examining descriptions in a single document, the author has distinguished

the two different standards provided by the UCP600, namely, “correspondence rule”
specified in Article 18 (c) for a commercial invoice877 and “no conflict rule” stipulated
in Article 14 (e) for all the others. Clearly, “correspondence” is much stricter than the
requirement of “no conflict”, but it is still a test that values for substance rather than
demanding a mirror image or duplication. From this perspective, the test of
“correspondence” is in accordance with the spirit of strict compliance at common law,
which does not require literal compliance either. Nevertheless, as we have seen, all the
documents apart from commercial invoices are subject to the rule of “no conflict” in
the UCP600, which to some degree reflects relaxation to the common law doctrine of
strict compliance. It is suggested that a discrepancy in the description of the goods will
be justified only to the situation where there is a true and positive conflict in the
substance of the description, rather than an apparent and superficial inconsistency.
Without doubt, the relaxation led by the “no conflict” requirement is benefit for
reducing unnecessary inconsistencies, as well as decreasing the rate of rejection.
As Article 14 (e) stipulates, in documents other than the commercial invoice, the
description of the goods, “if stated, may be in general terms” not conflicting with their
description in the credit.’ By using the words “if stated” in Article 14 (e), it emphasises
that there is even no need for a description of the goods to appear on every document.
By stating the descriptions “in general terms”, it is unclear whether the permissible
level of generality in wording is limited by the need for the wording still to function as
a description of the goods. However, the author believes that Article 14 (e) gives
877
Commercial invoices are supposed to belong to the category of special documents, but here the
author uses them to compare and distinguish the different standards for description of the goods laid
down by the UCP. Note that only description of the goods in a commercial invoice is subject to the
correspondence rule, and other data in a commercial invoice are arguably subject to “no conflict” data
rule in the UCP600 Article 14 (d) as follows.
283
“latitude in description, but not in identification”.878 As discussed in the following
part regarding the linkage issue, if the description of the goods aims to serve as a
linkage tying the document with the same transaction under the credit, the
identification of the goods must be unequivocal however general the terms used in the
description.
7.2.2.2 Data in a document
Concerning requirements for content in a generic document, UCP600 Article 14 (d)

stipulates ‘data in a document, when read in context with the credit, the document itself
and international standard banking practice, need not be identical to, but must not
conflict with, data in that document, any other stipulated document or the credit.’
Although an obvious contradiction cannot be tolerated by the bank, the “no conflict”
rule in Article 14 (d) does not call for the bank to pick up the inconsistent data
mechanically, and on the contrary it requires the bank to properly examine the data in
context with reasonable care. Furthermore, Article 14 (f) states that if a credit requires
a generic document without stipulating its data content, banks will accept the presented
document if its content appears to fulfil the function of the required document and
otherwise complies with Article 14 (d). The requirement of fulfilling the function is,
nevertheless, a question of substance rather than form or title of the document. It also
depends on the view of a reasonable banker and the attitude of the judge. However, it is
not clear whether the issue of linkage may be used as an essential element to judge
“fulfilling the function”.
7.2.2.3 The linkage issue
Obviously, the UCP600 has adopted a more relaxed regime than strict compliance to
examine generic documents. It only requires no conflict between data and whatever the
data contained in a document, it has to fulfil the function of the required document.
Nevertheless, in the author’s opinion, due to the nature of documentary sale, the
878
284
relaxation should be restricted to a certain reasonable latitude and it is of great
importance to insert the requirement of linkage into the current documentary
compliance regime. The author suggests that the supposition of “no conflict” is built on
the premise of linkage, which means either the goods with part (or general)
descriptions in a single document can be identified as the goods from the same
transaction with the credit, or a generic document with no descriptions of the goods
bears the other necessary link to the same transaction.
Although the requirements for examining generic documents under Article 14 are
intended to be less demanding than those under the doctrine of strict compliance, for
the purpose of transaction security, the author still suggests at the minimum level, the
presented document must contain “a sufficient link” with the credit or other presented
documents so as to make the document identifiable for the specific transaction.879 The
sufficiency of linkage should be satisfied as long as the document in issue clearly
forms part of a set of documents or unequivocally links to the subject of the credit.
Therefore, the requirements for examining a generic document should be that there is
no conflicting data in its content but the document must be able to unequivocally relate
to the transaction. In any cases, the interpretation can only be the exception rather than
the rule. Hence, there is an urgent need for the ICC Banking Commission to clarify the
status of linkage in the UCP system. The author tentatively suggests that the linkage
requirement can either be expressly illuminated in the UCP600 Article 14 (f) by
supplementing the “function” rule, or be generated into a new ISBP provision which
would widely apply to any generic documents other than to the certificate of origin
only.
7.2.2.4 Mismatch in number of presented documents
Apart from examining the content of documents, the chapter also considers the
mismatch of quantity between the documents which the credit has called for and those
879
285
actually tendered by the beneficiary. For the surplus document put into a presentation,
the UCP600 Article 14 (g) stipulates that the document which is not required by the
credit will be disregarded. Clearly, the surplus document cannot be used as a basis for
curing a discrepancy or refusing a presentation. However, in practice, the controversies
may be triggered in determining whether an unlisted document in a bundle of
presented documents is a so-called “surplus” document or not. If the surplus document
is considered as an integral part of the required document, it will be examined under
the “no conflict data” rule in the UCP600 Article 14 (d) rather than be ignored under
Article 14 (g). The emergence of combined documents can also trigger another
quantity mismatch for the number of presented documents. If a credit asks for two
separate documents, presenting a combined document instead will not be allowed in
most cases. However, a requirement of a combined document might be taken over by
presenting two separate documents as long as they have fulfilled the function of the
required document.
Last but not least, a distorted mismatch can be triggered by the existence of
non-documentary conditions. With such a term, the conditions in the credit will be
more than the number of documents it has actually called for. The UCP measure is to
cure such a mismatch by intentionally disregarding the non-documentary conditions as
stated in Article 14 (h). Nevertheless, since the non-documentary condition might be
fundamental to the operation of a credit or it might reflect the true intention of the
parties, the courts have been reluctant to ignore such a term as the UCP expected. On
the basis of difficulties met both in law and in practice, the “disregard rule” in the
UCP600 Article 14 (h) hardly achieves its desired effect. Therefore, the author
attempts to solve the issue of non-documentary conditions through improving the
common law “evidence approach”, i.e. requesting a documentary proof to satisfy the
surplus condition in the credit. The core idea of “evidence approach” lies in effectively
transferring the passive resistance to the positive reaction, and it can well balance the
parties’ interest as well as reflect the commercial expectations. The ideal outcome, of
course, is that banks should not accept instructions to issue or to confirm credits
286
containing non-documentary conditions. However, the author believes the pathway to
the ideal outcome should be achieved by the “evidence approach” rather than the
“disregard rule” set out in the current UCP.
7.2.3 Standards for examining transport documents and impacts on bank’s security
The overall standards for banks in a documentary examination and the requirements of
examining generic documents under UCP600 have been analysed in Chapter 3 and
Chapter 4 above. In Chapter 5, the author has transferred attention to the requirements
set out by UCP for examining the “specific” documents – transport documents. The
transport document is one type of the documents invariably required to be presented
under a commercial letter of credit, and moreover, it is closely linked with the bank’s
security. Due to the length of the thesis, the author only focuses on the sea-carriage
related transport documents stipulated in the UCP600 Article 19-22, including bills of
lading, seaway bills, charterparty bills of lading and multimodal transport documents.
7.2.3.1 Bills of Lading
A bill of lading under UCP600 Article 20, however named, only covers a port-to-port
shipment. It is indicated in the ISBP that Article 20 is to be applied to both negotiable
and non-negotiable (straight) bills of lading. A bill of lading should not only state the
carrier’s name, but also identify such a name as the carrier. Nonetheless, a document
checker will not be in a position to determine the real status of the signing company
behind the scene. As long as a bill of lading which can pass through the two tests under
Article 20 (a) (i), i.e. identifying the carrier and following the rule of signature, it will
be accepted by banks. It is however not clear under UCP600 whether banks could
reject documents which failed to identify the carrier on the front of the document, even
though the identity of the carrier might be indicated on the back of the document.
A shipped on board bill of lading is required under Article 20 (a) (ii), which is in line
with the position at common law. There are two ways to satisfy the requirement for a
287
shipped bill of lading, namely, by pre-printed wording or by an on board notation. The
baseline is that unless the “shipped on board” statement on the bill of lading evidently
applies to the vessel at the required port of loading, a specific on board notation is
needed. The latest ISBP has established a set of rules to ascertain that the “shipped on
board” statement is linked with the sea carriage at the required port of loading, rather
than with the pre-carriage of the goods between a place of receipt and the port of
loading. Nevertheless, it seems that as long as the on board notation can correct the
inconsistent place of loading and make sure that the notated port is compliant with the
credit, the bill of lading covering more than one mode of transport will still be accepted
under Article 20. Arguably, in order to distinguish a bill of lading containing
pre-carriage details with a multimodal transport document, the ICC Banking
Commission shifts the emphasis to the on board statement. However, the mixture of
different modes of transport covered by a bill of lading may undermine the scope of
Article 20, and moreover the practical difficulty for judging the need for an on board
notation may be triggered when the credit only draws a geographical area without
specifying the port of loading. Consequently, the ISBP has mainly provided practical
guidance for the bankers in the process of documentary examination, rather than
solving the problem fundamentally.
The UCP600 Article 20 (a) (v) requires a bill of lading to contain terms and conditions
of carriage, but those terms will not be examined by the bank. Unfortunately, the UCP
does not specify whether the terms and conditions are to appear on the front or reverse
of the document, nor does it provide guidance as to the scope of carriage terms and
conditions under Article 20 (a) (v). Another issue arises when the general carriage
terms contradict with the letter of credit terms or render the requirement of the credit
meaningless. Nothing in the UCP has attempted to grant Article 20 (a) (v) paramount
status over the bespoke terms in the credit. If the credit explicitly prohibits delivery
without presentation of the bill of lading, can the bank accept a bill of lading with the
term indicating delivery upon identity by claiming Article 20 (a) (v)? It sounds
arbitrary if the bank is only to examine particular carriage terms mentioned within the
288
UCP regime, such as transhipment, and to ignore other carriage terms specially
required by the credit, especially for the terms being vital to the parties’ security.
Clearly, radically contracting out Article 20 (a) (v) is not the best solution for solving
the difficulties, since the bank is reluctant to waste time in scrutinising all the small
print and to undertake any corresponding responsibilities. In author’s opinion, the
better approach is to tailor the scope of general carriage terms covered under Article 20
(a) (v). The proper interpretation of Article 20 (a) (v) should be that the content of
carriage terms and conditions will not be examined, unless the terms have been
otherwise specified in the credit. If the approach is adopted, the result of Article 20 (a)
(v) can only mean that the bank does not look at the general terms and conditions of
carriage save for anything addressed by the credit.
The UCP600 Article 20 (b) - (d) specifically deals with transhipment under a bill of
lading. The default position of UCP600 is that transhipment is permitted unless
expressly prohibited by the credit. Even though the credit has prohibited transhipment,
it is still highly possible for the goods to be transhipped. However, the drafting of
UCP600 transhipment provisions is somewhat complicated and inconsistent in many
respects. Firstly, it is not clear for the true indication behind the requirement of
“covering entire carriage”. Does the requirement simply reiterate the entire route
stipulated in Article 20 (a) (iii) or does it ask for the carrier to undertake the liability
for the whole voyage as that at common law? It remains to be seen which of these two
interpretations is held to be correct by the ICC. If the ICC chooses the later, it would
have to concern the compatibility between this requirement and Article 20 (a) (v), in
which the bank is supposed not to check the carriage terms and conditions. Secondly,
the overlap between Article 20 (c) and Article 20 (d) concerning the liberty of
transhipment causes great confusion and redraft of the section seems indispensable.
Moreover, the UCP600 does not shed light on whether a bill of lading containing a
liberty of transhipment clause can be accepted if the credit has expressly prohibited
transhipment. Again, the situation triggers the tension with not examining the carriage
terms and conditions under Article 20 (a) (v). However, there seems no good solution
289
to keep the transhipment section in the UCP regime without challenging Article 20 (a)
(v), since transhipment terms are carriage terms per se.
Taking account of the above Article 20 requirements, it is evident that the drafting of
the UCP600 seems aim to deliver a set of standards for mechanical documentary
examination rather than concerning themselves much on the security issue behind the
scene. The UCP600 has well demonstrated the bill of lading’s function as a receipt of
the goods and incidentally mentioned its function as evidence of carriage contract;
however, neither the delivery issue nor the form of the bill of lading which are closely
related to the bank’s security have been addressed. In the author’s opinion, the delivery
issue in Article 20 can be fairly easily to fix by stating that: ‘Bills of lading indicating
that the carrier may give delivery of the goods without production of an original bill of
lading is not acceptable’. The UCP seems to push banks to look for the
creditworthiness of the parties with whom they deal, and to further arrange the security
in funds, than to seek the security provided by the documents under the credit.
Stoppage or innovation, it is hardly to predict which choice is better, but the latter
definitely is of benefit for the bank’s security.
7.2.3.2 Other variants
Seaway bills are stipulated by UCP600 Article 21, which is essentially identical to the
provisions for bills of lading under UCP 600 Article 20, except for the substitution of
the words “bill of lading” to “non-negotiable sea waybill”. It is suggested that the
ineffective division between bills of lading and sea waybills in the UCP may cause the
difficulty in process of examination. Moreover, by mirror-imaging Article 20, some
provisions however have lost the original sense and been inappropriate to set out in
Article 21, such as requiring a full set of seaway bills. Clearly, blindly copying
requirements for bills of lading is not a correct way to regulate sea waybills and
tailored provisions are needed for seaway bills in the next UCP revision. Similarly,
there is nothing in the UCP600 Article 21 addressing the security issue and the form of
290
a sea waybill. Due to the different nature from the bills of lading, the seaway bills
themselves can hardly provide any security to the bank in the absence of special
arrangements.
For charterparty bills of lading, the UCP600 Article 22 has been reasonably drafted. It
basically follows the structure of Article 20 concerning bills of lading with necessary
changes to accommodate the characteristics of a charterparty bill, but it shares the
common deficiencies as those under Article 20. The charterparty bills of lading
themselves have not weakened the bank’s security; however, the bank’s security has
been slightly restricted by the UCP provisions in respect of not examining carriage
terms and conditions.
In respect of multimodal transport documents under Article 19, most problems are
repetitive as those under Article 20 concerning bills of lading, namely the issue of on
board notation and the meaning of entire carriage cover. Based on the current state, it is
still not entire clear to what extent a multimodal transport document can provide the
bank’s security. The UCP600 together with the new ISBP, to some degree, has
strengthened the bank’s security by restating provisions for the bills of lading.
Therefore, it might have a leeway to argue that multimodal transport documents are
transferable in modern views and can offer the bank the same level of security as
traditional bills of lading. The future development of multimodal carriage may
necessitate the ICC Banking Commission refurbishing the provisions in the next
decade.
7.2.4 Rejection of presented documents
The above chapters all concentrate on the requirements for document examination,
whether generic documents or special documents. In the last main Chapter of the thesis,
the attention has been placed on the result of examination and the further step after
examination, namely, document rejection. The rejection regime is provided in UCP600
291
Article 16. The provisions in Article 16 have been constantly developed; however,
there are still a few points need to be considered.
Firstly, regarding consultation of a pre-refusal waiver in Article 16 (b), the UCP only
mentions an issuing bank’s position to seek a pre-refusal waiver. The author cannot see
the reasons in principle why a rational nominated bank cannot be a party to approach
the applicant for a pre-refusal waiver, although in practice it is unlikely for a
nominated bank to do so and in theory a nominated bank needs to seek pre-refusal
waivers from both the issuing bank by sending an advice of discrepancies and the
applicant. Moreover, the time for seeking a pre-refusal waiver is limited to five
banking days as stated in Article 14 (b). However, without an official clarification
concerning whether Article 14 (b) grant a definite fixed period, the safe route for the
bank is to fulfil the consultation as soon as possible. In addition, the bank should keep
in mind that a condition precedent for consultation with the applicant in Article 16 (b)
is its independent examination and determination, so in the author’s opinion, the bank
which delegates examination or decision-making to the applicant will incur preclusion.
Secondly, the outstanding issue concerning the external conditions to serve a refusal
notice in Article 16 (d) still centres on the time rules. The ambiguity remains on
whether the period of five banking days is a safe harbour. Until the ICC Banking
Commission responds to this issue, it is advisable that the bank should send a notice of
refusal promptly, although the author supports the notion of a fixed period as stated in
Chapter 3 above. Furthermore, since the risk of choosing a mode lies with the refusing
bank, a prudent bank should leave sufficient time for resorting to an alternative mode
within the maximum time limit. It appears that the case law has adopted a flexible
interpretation regarding the modes for sending a refusal notice.
Thirdly, the content in Article 16 (c) and Article 16 (f) does not seem sufficient enough
to cope with the practical needs of traders. For instance, there are no express words
with respect to a bank’s post-notice obligations, even though these obligations are fatal
292
to the parties involved in documentary credit transactions. The English courts have
imposed the post-notice obligations on the bank and held that the bank which failed to
act in compliance with its disposal statement would be precluded from claiming
discrepancies in the documents.880 The author suggests that at least one sentence
concerning timely fulfilment of disposal statements should be added either in Article
16 (c) regarding the notice requirements or in the preclusion rule of Article 16 (f).
Moreover, in respect of the time and mode for the bank to perform the post-notice
obligations, it is suggested that the bank should choose the most expeditious means to
return the discrepant documents within reasonable promptness. While, with respect to
the conditions of the returned documents, the minimum limit is to return all the
presented documents in the same manner as they were received. Whether there is a
necessity to re-endorse the refused documents, is still a controversial issue so far which
urgently needs official opinions from the ICC.
Last but not least, in the author’s view, the scope of preclusion should include the
default of independent determination and the failure to handle documents in
accordance with the notice of refusal. By contrast, the author proposes that
presentation out of time should not be counted as a discrepancy covered by Article 16
so as to incur preclusion. In addition, although the non-confirming nominated bank is
not an express party referred to by the preclusion rule in UCP600 Article 16 (f), its
failure to act in accordance with Article 16 can still trigger preclusion, and the
consequence will be put on the issuing bank which acts as its principal.
It is worth noting that the ICC Banking Commission should be more cautious to
modify the words previously written in the UCP, since unsatisfactory deletions might
cause unnecessary misunderstanding. Moreover, the ICC Banking Commission should
endeavour to clarify the ambiguous points and codify the best practice. Practical
bankers cannot be treated in the same way as qualified lawyers who would be able to
880
Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm), [2010] 2 All ER (Comm) 28, affd
[2011] EWCA Civ 58, [2011] 2 All ER (Comm) 288
293
measure the legal implication and impact. Therefore, the ICC should continuously
attempt to fit the reasonable expectations of market practitioners and draft the UCP
provisions with certainty. In the last resort, at the current stage, the banks and traders
can modify their individual credits and contract out the uncertain provisions in the
UCP600.
7.3 Innovative proposals for future thinking
As mentioned above, most of the current imperfections that reside in the UCP600 can
be cured by unequivocal clarifications and interpretations; however, some might need a
thorough review and correspondingly more radical changes. In this part, the author will
summarise the points analysed in this thesis which may provoke innovative reform of
the current UCP provisions, and furthermore the author will propose a direction for the
future draft.
Proposal 1: Add linkage test into generic document examinations
According to the literal interpretation of UCP600 Article 14, a generic document can
be accepted by the bank whether it contains a description of the goods or not, as long
as it does not contain any conflicting data compared with the documentary credit.
Nevertheless, in terms of transaction security, the latitude of relaxation should be in
description rather than in identification, so that the document must be identifiable for a
particular letter of credit transaction via linkage, whether by adding certain
descriptions to the goods or by containing the data specifically linked to the transaction.
In the author’s opinion, the linkage test is supposed to be regarded as a premise to the
existing “no conflict” rule. Hence, the UCP should be redrafted to the effect that a
generic document with no conflict data is acceptable but the document must be able to
unequivocally relate to the transaction.
Proposal 2: Change the strategy towards non-documentary conditions
294
It is clear to see from the previous analysis that the “disregard rule” for
non-documentary conditions in the UCP600 Article 14 (h) hardly achieves its desired
effect, especially when the non-documentary condition is fundamentally important to
the operation of a credit. Moreover, it can arouse a severe conflict in interpretations
between a bespoke term and an incorporated term. The author in this thesis tentatively
proposes to solve the dilemma of non-documentary conditions through a different
strategy, i.e. the common law “evidence approach”. The “evidence approach” can
effectively transfer the passive resistance to the positive reaction via requesting
documentary proof for the condition listed in the credit. This approach supposes to be a
sensible pathway to eliminate the unsound practice of non-documentary conditions,
since it can well balance the parties’ responsibilities as well as reflect the commercial
expectations. As a result, when a bank meets with a non-documentary condition in the
process of document examination, it is supposed to check whether the corresponding
documentary proof tendered by the presenter is satisfactory rather than blindly ignore
the condition.
Proposal 3: Tailor the scope of carriage terms and condition in transport articles
In order to avoid the heavy burden of scrutinising all of the small print and taking
unpredictable responsibilities, most of the transport articles in the UCP600, like Article
20 (a) (v), state that the bank will not examine carriage terms and conditions. However,
there is nothing in the UCP which has granted this group of provisions a paramount
status over the bespoke terms in the credit. Once again, the conflict between bespoke
terms and incorporated terms needs to be reconciled. It also sounds rather arbitrary that
the bank has to examine particular carriage terms mentioned in the UCP, such as
transhipment clauses, and to ignore other carriage terms specifically required by the
credit, especially for the terms reflecting the parties’ intention. In the author’s opinion,
there is an urgent need to define and tailor the scope of carriage terms and conditions
covered under the UCP transport articles. The author proposes that the content of
295
carriage terms and conditions will not be examined by the bank, unless the terms have
been otherwise specified in the credit. If the approach is adopted, the result of Article
20 (a) (v) can only mean that the bank does not look at the general terms and
conditions of carriage contained in a bill of lading save for anything specially
addressed by the credit.
Proposal 4: Rethink the necessity and consistency of including transhipment

provisions
It seems the UCP600 allows transhipment unless it is expressly prohibited by the credit;
however, the provisions regarding transhipment in the UCP600 have not been clearly
drafted and contain a lot of self-inconsistencies. Firstly, both Article 20 (c) and Article
20 (d) cover the situation that the goods may be transhipped. Secondly, it is not clear
for the true indication behind the requirement of “covering entire carriage”. Does it
mean the entire coverage of liability under the common law or just geographically
from the port of loading to the port of discharge? The problem is that, if the bank is
going to check the liberty of a transhipment clause and the carrier’s liability for the
entire carriage, it will inevitably look into the content of carriage terms and conditions,
which is disclaimed by Article 20 (a) (v). As the transhipment terms are carriage terms
per se, the author feels incapable of proposing an ideal provision for addition into the
UCP unless contracting out of the disclaimer clause in Article 20 (a) (v). In the
author’s opinion, future thinking must focus on whether it is truly necessary to insert
transhipment provisions into the UCP and how to keep them reconciled with other
provisions.
Proposal 5: Address delivery issue in the bills of lading articles
The UCP has well established that a full set of bills of lading must be presented if more
than one copy was issued; however, due to the fear of conflicting with national laws,
the issue of delivery has never been addressed in the UCP. Without setting up the rule
296
of delivery against production of bills of lading, the “full set” requirement arguably
loses its sense. In the author’s opinion, the delivery issue in Article 20 can be addressed
by stating that: ‘Bills of lading indicating that the carrier may give delivery of the
goods without production of an original bill of lading is not acceptable’. As mentioned
in Proposal 3, the scope of Article 20 (a) (v) should be tailored so that the bank does
not check the general carriage terms and conditions, unless specifically requested by
the credit and the UCP. Therefore, the delivery issue which is particularly addressed by
the UCP will not cause the conflict in the process of bank’s examination.
Proposal 6: Consider incorporating maritime features into transport articles
Neither UCP500 nor UCP600 effectively distinguishes the different types of transport
documents in its provisions. For example, provisions concerning sea waybills in
Article 21 are nearly identical to those in Article 20 for bills of lading. By
mirror-imaging Article 20, some provisions however have lost the original sense and
been inappropriately set out in Article 21, such as requiring a full set of seaway bills.
Therefore, the author suggests that extra care needs to be given with respect to the
individual maritime feature in the next version’s drafting.
Proposal 7: Clarify the scope of preclusion rule
The preclusion rule set out in the UCP can trigger a draconian consequence to the bank
who has failed to perform their obligations under Article 16, namely, the bank will
have to stop claiming any discrepancies in the presented documents and pay for them.
Nevertheless, based on the ambiguous statements stipulated in Article 16, it is not clear
what kinds of default are supposed to trigger the preclusion rule. The author proposes
that the scope of the preclusion rule should include the default of independent
determination and the failure to handle documents in accordance with the notice of
refusal as the English courts suggested. By contrast, the author argues that presentation
out of time should not be counted as a discrepancy covered by Article 16 so as to incur
297
preclusion. For the non-confirming nominated bank, although it is not an express party
referred to by the preclusion rule in UCP600, its failure to act in accordance with
Article 16 should still trigger preclusion, and the consequence will be put on the
issuing bank which acts as its principal.
298
Concluding Remarks
The international nature of letter of credit transactions, coupled with the fact that the
system has to operate speedily and smoothly throughout the modern business world,
provides the drive required for harmonisation and unification of the applicable banking
practice and of the relevant legal principles. The fact that the UCP constitute a set of
standard terms and conditions rather than an independent source of law does not,
however, diminish their effectiveness in transactions in which they are incorporated by
reference. There is no doubt that the 2007 Revision – UCP600 – is progressive. In
many regards, it has tightened the language and clarified obscurities left in the past.
Nevertheless, concerning the subject-matter under this thesis - document examination
and rejection, the UCP600 ought not to be regarded as innovative.
In general, the UCP600 adheres closely to the pattern and spirit of the earlier revisions.
The latest ISBP revision has contributed significantly in terms of explaining the
requirements for document examination, but it has not aimed to change the existing
position under UCP600. The UCP600 and the corresponding ISBP constitute a step in
the right direction but a great deal of work has been left for future clarification and
redraft. Some improvements, undoubtedly, will be required in consequence of future
developments in technology and business practice. However, many residual
imperfections have not been tackled by the current UCP600. This thesis has therefore
contributed in identifying the current loopholes and putting forward the corresponding
suggestions for the issues regarding document examination and rejection.
In the first place, the draftsmen set out to proscribe certain practices but, regrettably,
did not perfect the prohibitions by adding “teeth” to the respective provisions. A
striking example is bank’s efforts in discouraging non-documentary condition terms in
the credit. Secondly, the draftsmen have not properly dealt with the conflict between
the credit terms and the UCP provisions. Since the UCP provisions in most cases have
299
not granted themselves a paramount status, how can a bank disregard a special term in
the credit without hesitation? Thirdly, there is still ambiguous drafting and obvious
gaps left by the UCP, such as the time for document examination and the bank’s
post-notice obligations. Last but not least, the UCP600 still leave chronic issues
untouched, even they may closely relate to bank’s security, such as the delivery
problem under rules governing the transport documents and the linkage issue under
document examination.
In summary, the UCP600 has achieved progressive merits, but it is still necessary to
update the provisions in the light of the experience of world-wide practice. In order to
quell the above controversies and effectively reflect the volatile field of commercial
law, both innovation and progression is needed for the next UCP revision. Most
problems addressed above need official clarifications and interpretations, but some of
the provisions, such as those relating to non-documentary conditions and
transshipment clauses, are better to be redrafted. Although the UCP is a compromising
product based on a world-wide reach, there is no reason that experiences from case law
which has reflected the dynamic market practice cannot be brought into the next UCP
revision.
300
BIBLIOGRAPHY
English Legislation
Bill of Lading Act 1855

Carriage of Goods by Sea Act 1971
Carriage of Goods by Sea Act 1992
Foreign Legislation
Uniform Commercial Code Revised Article 5 (US, 1995)

Rules of the Supreme People’s Court on Hearing Letter of Credit Dispute Cases (PRC,
2006)
Provisions of the Supreme People’s Court on Several Issues concerning the
Application of Law during the Trial of Cases about Delivery of Goods without an
Original Bill of Lading (PRC, 2009)
ICC Documents
ICC, Uniform Customs and Practice for Documentary Credits (ICC Publication
No.600, ICC 2007)
No.500, ICC 1993)
No.400, ICC 1983)
ICC, International Standard Banking Practice for the Examination of Documents
under Documentary Credits 2007 Revision for UCP600 (ICC Publication No.745, ICC
2013)
i
2007)
2003)
ICC Banking Commission, Recommendations of the Banking Commission in respect of
the Requirements for an On Board Notation (Document No 470/1128 rev final, 22
April 2010)
ICC Banking Commission, An ICC Banking Commission Recommendation:
Discrepant Documents, Waiver and Notice (Document No 470/952 rev2, 9 April 2002)
ICC Banking Commission, Position Papers No 1, 2, 3, 4 on UCP 500 Uniform
Customs and Practice for Documentary Credits (1 September 1994)
ICC Banking Commission, Decisions 1975-1979 of the ICC Banking Commission
ICC Banking Commission, Opinions (1980-1981) of the ICC Banking Commission
Collyer G and Katz R (eds), Collected DOCDEX Decisions 1997-2003 (ICC
Publication No.665, ICC 2004)
Collyer G and Katz R (eds), ICC Banking Commission Collected Opinions 1995-2001
Collyer G and Katz R (eds), ICC Banking Commission Opinions 2005-2008 (ICC
Collyer G and Katz R (eds), ICC Banking Commission Opinions 2009-2011 (ICC
Collyer G (ed), More Queries and Responses on Documentary Credits - Opinions of
the ICC Banking Commission 1997 (ICC Publication No.596, ICC 1998)
ii
Collyer G (ed), Opinions of the ICC Banking Commission on UCP 500 (1995-1996)
Collyer G and Katz R (eds), Unpublished Opinions of the ICC Banking Commission
1995-2004 (ICC Publication No.660, ICC 2005)
Wheble B (ed), Opinions (1987-1988) of the ICC Banking Commission (ICC
Books
Beale H (ed), Chitty on Contracts, vol 1(30th edn, Sweet and Maxwell 2008)
Bridge M (ed), Benjamin’s Sale of Goods (8th edn, Sweet and Maxwell 2010)
Busto C, UCP500 & UCP400 Compared (ICC Publication No.511, ICC 1993)
Byrne J, The Comparison of UCP600 & UCP500 (ICC 2007)
Byrne J, UCP600: An Analytical Commentary (IIBLP 2010)
Collyer G, Commentary on UCP600: Article by Article Analysis by the UCP600
Drafting Group (ICC Publication No.680, ICC 2007)
Debattista C, Bills of Lading in Export Trade (3rd edn, Tottel Publishing 2009)
Dolan J, The Law of Letters of Credit: Commercial and Standby Credit, vol 1 (4th edn,
A S Pratt 2007)
Ellinger P and Neo D, The Law and Practice of Documentary Letters of Credit (Hart
Publishing 2010)
Fung K, Leading Court Cases on Letters of Credit (ICC Publication No.658, ICC
2005)
Girvin S, Carriage of Goods by Sea (2nd edn, Oxford University Press 2011)
King R, Guttidge & Megrah’s Law of Bankers’ Commercial Credit (8th edn, Europa
Publications 2001)
Lorenzon F, Sasson: CIF and FOB Contracts (5th edn, Sweet & Maxwell 2012)
Malek A and Quest D, Jack: Documentary Credits (4th edn, Tottel Publishing 2009)
Megrah M, Gutteridge & Megrah’s Law of Bankers’ Commercial Credit (7th edn,
Europa Publications 1984)
iii
Todd P, Bills of Lading and Bankers Documentary Credits (4th edn, Informa
Publishing 2007)
Wheble B, UCP 1974/1983 Revisions Compared and Explained (ICC Publication
No.411, ICC 1984)
Articles
Adodo E, ‘Non-documentary Requirements in Letters of Credit Transactions: What is

the Bank’s Obligation Today?’ [2008] JBL103
Adodo E, ‘A Presentee Bank’s Duty When Examining a Tender of Documents under
the Uniform Customs and Practice for Documentary Credits 600’ (2009) 24(11) JIBLR
566
Antoniou A, ‘Complying Shipping Documents under UCP600’ (PhD thesis, University
of Southampton 2011)
Barnes J, ‘Non-documentary Conditions and the L/C Independence Principle’ (2008)
14(4) DCInsight 11
Byrne J and Davis L, ‘New Rules for Commercial LCs under UCP600’ in James Byrne
(ed) 2008 Annual Survey of Letter of Credit Law & Practice (IIBLP 2008)
Cheffins B, ‘Using Theory to Study Law: A Company Law Perspective’ (1999) 58(1)
CJL 197
Chynoweth P, ‘Legal Research’ in Andrew Knight and Les Ruddock (eds), Advanced
Research Methods in the Built Environment (Wiley-Blackwell 2008)
Christensen K, ‘The Reasoning behind Recent ICC Opinions’ (2009) 15(4) DCInsight
7
Collyer G, ‘A Look Back at the UCP Revision’ (2006) 12(4) DCInsight 1
Debattista C, ‘Banks and the Carriage of Goods by Sea: Secure Transport Documents
and the UCP500’ (1994) 7 JIBFL 329
Debattista C, ‘The New UCP 600 - Changes to the Tender of the Sellers's Shipping
Documents under Letters of Credit’ [2007] JBL 329
Dolan J, ‘Weakening the Letter of Credit Product: the New Uniform Customs and
iv
Practice for Documentary Credits’ [1994] IBLJ 149
Dolan J, ‘Letters of Credit: a Comparison of UCP 500 and the New US Article 5’
[1999] JBL 521
Dolan J, ‘The Strict Compliance Rule in a Recession’ (2009) 15(4) DCInsight 8
Dole R, ‘The Essence of a Letter of Credit under Revised U.C.C. Article 5: Permissible
and Impermissible Non-documentary Conditions Affecting Honor’ (1998-1999) 35
Hous L Rev 1079
Downes P, ‘UCP600: Not So Strict Compliance’ (2007) 22(4) JIBFL 196
Duncan N and Hutchinson T, ‘Defining and Describing What We Do: Doctrinal Legal
Research’ (2012) 17(1) Deakin L Rev 83
Ellinger P, ‘The Doctrine of Strict Compliance: Its Development and Current
Construction’ in Francis Rose (ed), Lex Mercatoria: Essays on International
Commercial Law in Honour of Francis Reynolds (LLP 2000)
Ellinger P, ‘The UCP-500: Considering a New Revision’ [2004] LMCLQ 30
Ellinger P, ‘Use of Some ICC Guidelines’ [2004] JBL 704
Fayers R, ‘Non-documentary Conditions and the Oliver Case’ (2008) 14(4) DCInsight
13
Girvin S, ‘Bills of Lading and Straight Bills of Lading: Principles and Practice’ [2006]
JBL 86
Goode R, ‘Abstract Payment Undertakings and the Rules of the International Chamber
of Commerce’ (1995) 39 St Louis L J 725
Isaacs M and Barnett M, ‘International Trade Finance - Letters of Credit, UCP 600 and
Examination of Documents’ (2007) 22(12) JIBLR 660
Lista A, ‘The Need for Speed: Court of Appeal Interprets UCP 600’ (2011) 11(4) STL 1
Lloyd A, ‘The Bill of Lading: Do We Really Need It?’ [1989] LMCLQ 47
Posner R, ‘Legal Scholarship Today’ (2001-2002) 115 Harv L Rev 1314
Roane K, ‘Hanil Bank v PT Bank Negara Indonesia (Persero): Continuing the
Quandary of Documentary Compliance under International Letters of Credit’
(2004-2005) 41 Hous L Rev 1053
Taylor D, ‘How the UCP Has Evolved Since the 1920s’ (2008) 14(2) DCInsight 8
v
Todd P, ‘Bank as Holder under Carriage of Goods by Sea Act 1992’ [2013] LMCLQ
275
Treitel G, ‘The Legal Status of Straight Bill of Lading’ (2003) 119 LQR 608
Ulph J, ‘The UCP 600: Documentary Credits in the 21st Century’ [2007] JBL 355
Other Sources
Gary Collyer, ‘Responses to 9 “Key Issues” Help Shape the UCP 600’ Coastline
Newsletter (Issue 2, August 2006) <www.coastlinesolutions.com/issue02.htm>
accessed 10 April 2013
Law Commission, Rights of Suit in Respect of the Carriage of Goods by Sea (Law
Com No 196, 1991)
STIPRO, ‘Report of the Use of Export Letters of Credit 2001/2002’ SITPRO’s Letter of
Credit Report (London, 11 April 2003) 2
<www.gov.uk/government/organisations/sitpro> accessed 10 March 2011
vi

Thesis On Ucp

Uploaded by

Copyright:

Available Formats

Thesis On Ucp

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Thesis On Ucp

Uploaded by

Copyright:

Available Formats

University of Southampton Research Repository

AUTHOR (year of submission) "Full thesis title", University of Southampton, name

FACULTY OF BUSINESS & LAW

Document Examination and Rejection Under UCP 600

Thesis for the degree of Doctor of Philosophy

Thesis for the degree of Doctor of Philosophy

DOCUMENT EXAMINATION AND REJECTION UNDER UCP 600

Letters of credit, which are a well-recognised payment instrument, have bridged

Chapter 1 General Introduction ................................................................................. 1

DOCUMENT EXAMINATION AND REJECTION UNDER UCP 600

5. I have acknowledged all main sources of help;

7. Parts of this work have been published as:

Jingbo Zhang, ‘Banks’ Post-notice Obligations in the Documentary Credits under

1.1 Research background

With a gradually increasing market share, the International Chamber of Commerce

1.1.1 The economic basis

Since the documentary credit is a kind of financial product in nature, it is necessary to

1.1.2 Regulatory superstructure9

1.2 Aims and contributions

This thesis will be devoted to clarifying the requirements on document examination

1.3 Main issues and methodology

As an uncertain or ambiguous provision can often be more easily interpreted when

1.4 Structure and connections

Chapter 2 constitutes an academic introduction in respect of documentary credits and

Chapter 5 deals with the requirements of examining special documents categorised by

In international commercial sales, the seller may be unwilling to despatch goods

2.2 Documentary credits in outline

2.3 A series of contractual relationships

2.3.1 The contracts

The contractual relationships between parties involved in a documentary credit

2.3.2 Contracts autonomous but interconnected

In respect to the point of “interconnected”, two issues need to be considered. Firstly, it

AC 168 (HL) 182-183

2.4 UCP and other sources for documentary credits

2.4.1 UCP600 and its development

In order to encourage a uniformity of banking practice and reduce the differences

2.4.2 Nature and application of UCP

2.4.3 Other sources for documentary credits

2.4.3.1 International Standard Banking Practice

As we will see in Chapter 3, the UCP600 Article 2 refers to international standard

2.4.3.2 Other ICC publications and expert evidence

The ICC Commission on Banking Technique and Practice (referred to as “ICC

2.4.4 UCP and Case Law

It is acknowledged the first revision of UCP to be generally accepted by the English

2.4.5 Construction of UCP within a documentary credit

2.5 Two fundamental principles

Two cardinal features, irrevocability and autonomy, fundamentally contribute to the

2.5.1 Principle of irrevocability

The independent nature of the credit is reinforced by virtue of UCP600 Article 5,

Documents examination is the utmost important procedure in the circulation of

Although the general requirements for document examination are continuously

3.2 General standard for examination—Article 14 (a)

3.2.1 Appearance of documents

‘The fact that a document presented by the beneficiary under a documentary

Nevertheless, the English common law has developed a straightforward method to

3.2.2 References for a “complying presentation”

However, whether the ISBP should be regarded as either a definitive or exhaustive

3.3 Requirement of reasonable care

Before further analysing the criteria to constitute a complying presentation, it is