The High Court recently considered the consequences of the inclusion of a rogue ampersand (i.e. the symbol "&") in a party's name in a document to be presented under a letter of credit (LC). Should this relieve the LC's issuer from its duty to pay against a presentation of specified documents? The court decided that it did. Alexander Hewitt explains.

The autonomy principle

Banks issuing LCs deal in documents only. They are not concerned with goods, services or underlying transactions. They must only consider the face of the documents presented to them in deciding whether their duty to pay has been triggered. Under English law, there are some narrow and hard to establish exceptions to this "autonomy principle". These mainly involve specific types of fraud or illegality of which there is very strong evidence.

The doctrine of strict compliance

These limited exceptions to the autonomy principle apart, the issuer's duty to pay is triggered by a presentation of documents that appear to comply with the LC. Here "comply" means strictly comply. There is no room for documents that are almost the same, or just as good as those called for in the LC. The documents must appear strictly to comply.

One reason for this is there is no basis on which a bank can evaluate whether any non-compliance in the documents is material. Another is that the documents presented may need to be passed on to sub-buyers, customs or other officials ­­­— any of whom may require exactly conforming documents.

At the same time, the courts have sometimes treated some discrepancies as so trivial (an obvious typo in a telex number, for example) as not to fall foul of the doctrine of strict compliance. In other cases, the courts sometimes find more or less convincing reasons not to apply the doctrine overly rigidly. However, the approach taken in most cases is that strict compliance is necessary.

UCP 600 and ISBP

Almost every documentary LC is issued subject to two sets of International Chamber of Commerce (ICC) rules. These are the:

  • Uniform Customs and Practice for Documentary Credits (2007 revision) (UCP 600); and
  • International Standard Banking Practice (2013 revision) (ISBP).

Partly because of the doctrine of strict compliance, there was a time when 60 to 70 per cent of all presentations under documentary LCs were rejected for non-compliance. 

To try to reduce this rejection rate, recent versions of these ICC rules have gone into much detail about what sorts of apparent discrepancies in documents will or will not make a presentation non-compliant. Neither set of rules, however, deals with the situation that came up in Bulgrains & Co Limited v. Shinhan Bank [2013] EWHC 2498.

The rogue ampersand

In the Bulgrains case, the LC named the beneficiary as "Bulgrains Co Limited". In fact, the beneficiary's correct registered name was Bulgrains & Co Limited (i.e. including the ampersand). So, the LC contained an error.

Among other documents, the LC called for a commercial invoice from the beneficiary. However, the commercial invoice presented did not replicate the (incorrect) beneficiary's name used in the LC. Instead, the invoice presented referred to the beneficiary by its correct registered name — "Bulgrains & Co Limited" (but without the underlining added here for emphasis).

After the bank had rejected the documents, citing (among other things) the rogue ampersand in the commercial invoice, the parties took their resulting dispute to the High Court.

The court found the bank had been entitled to reject the documents — partly due to the rogue ampersand in the commercial invoice. Adopting the reasoning from a Singaporean case, the judge ruled that this was on the following grounds:

  • Any discrepancy in the name of the beneficiary of the LC is a very significant matter and could not be dismissed as non-material.
  • This would not apply if the discrepancy in the name was clearly and demonstrably a typo.
  • The rogue ampersand was not clearly and demonstrably a typo. So — unless it consulted the applicant for the LC — the only way the bank could check whether the apparent mistake in the beneficiary's name was a material discrepancy was to do a company search.
  • However, a bank examining documents presented under an LC had no duty to make any searches or otherwise look behind the face of the documents.

Law stated as at 5 December 2013.