Lloyd's Maritime and Commercial Law Quarterly
REJECTION OF DOCUMENTS TENDERED UNDER A LETTER OF CREDIT
Peter Ellinger
Fortis Bank v Indian Overseas Bank
Disputes in respect of letters of credit are usually settled out of court. Fortis Bank v Indian Overseas Bank
1 is one of the few recent decisions. In this case, a UK exporter sold steel scraps to an Indian importer. At the request of an Indian Government corporation,2 described in the letters of credit as the “facilitators”, Indian Overseas Bank (IOB) issued five letters of credit in favour of the exporter. All letters of credit incorporated UCP-6003 and were advised by Fortis Bank (London Branch), to whom negotiation was restricted.
Fortis negotiated three sets of documents tendered by the exporter and paid him the amount due. It sent these sets to IOB. Fortis also forwarded to IOB the documents tendered by the exporters under the remaining letters of credit.
IOB rejected the documents on the ground of non-compliance. In respect of one set, IOB advised that it was returning the documents to Fortis but, on the facts, held on to them for approximately six weeks before sending them back to Fortis. IOU determined to hold the other documents, pending Fortis’ instructions.
Hamblen J held that the documents were discrepant but that IOB’s failure to return the one set precluded it from relying on any discrepancies in respect of it. The Court of Appeal affirmed.
Three issues arose before the Court of Appeal. Two concerned discrepancies. The third related to the fact that IOB held on to some documents although it had indicated that it was going to return them.
One of the two alleged discrepancies related to the date of a bill of lading. The relevant letter of credit stipulated: “Period of presentation: within 21 days from BIL date … “. The document actually tendered stated: “Place and date of Issue: … Ipswich 14 November 2008” and “Shipped on Board Date: 31 October 2008”. Hamblen J held that the letter of credit expressly referred to the date of the bill of lading. Presentation within 21 days from that day was, accordingly, acceptable. The Court of Appeal agreed, notwithstanding UCP-600, Art.20(a)(ii), which required presentation within 21 days of the date of shipment as noted on the instrument. Thomas LJ pointed out that the provision of the instant letter of
1. [2011] EWCA Civ 58; [2011] 2 Lloyd’s Rep 33.
2. Presumably acting as confirmer.
3. The Uniform Customs and Practice for Documentary Credits, 2007 Revision, ICC Publication 515–516, which came into effect on 1 July 2007.
LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY
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