On March 12 2002 the Commercial Chamber of the Supreme Court made reference to the International Chamber of Commerce (ICC) rules on documentary credit in order to determine the obligations of a notifying bank.
Banco Santander, upon the order of a Spanish company, gave a documentary credit in favour of a French company. A French bank was chosen to notify the credit to the French beneficiary and transfer the documents for payment.
Although the credit expired on September 7 1993, the French bank transmitted a request for payment on September 9. However, Banco Santander refused to pay the French beneficiary.
The French beneficiary company claimed damages against the notifying bank on the ground that it had failed to request the documents within the required time, as the beneficiary had sent a message requesting payment before the date of maturity.
The Supreme Court upheld the decision of the court of appeal, referring to Article 13 of the ICC rules and the obligations of the notifying bank. Unless credit terms contain special obligations, the notifying bank is required only to verify the apparent authenticity of the credit.
On the facts, the court of appeal considered that the French bank was not acting as an agent for the beneficiary of the documentary credit. Consequently, the notifying bank did not fail to meet its obligations and the beneficiary's claim for damages was unsuccessful.
The parties to a documentary credit agreement should ensure that they specify the obligations of the various intermediary banks even if the agreement refers to the ICC rules on documentary credit, as these rules do not cover every related question that might arise on the issue.
For further information on this topic please contact Philippe Blaquier-Cirelli at Jeantet et Associés by telephone (+33 1 45 05 81 85) or by fax (+33 1 45 05 82 28) or by email ([email protected]).