2002 March AS Supp - iiblp.org

Conference Materials

The Institute of International Banking Law & Practice is a not-for-profit educational and research organization dedicated to the harmonization of letter of credit law and practice. Headquartered in the United States with Associate Directors in Singapore and Ireland and Associates and Fellows in more than 15 countries, the Institute sponsors, undertakes, and cooperates in projects, programmes, and publications related to letter of credit law and practice.

Since its formation in 1987, the Institute has been a leading force in the letter of credit world, bringing together bankers, lawyers, regulators, academics, and corporate users in forums and educational events. It has formulated widely used practice rules, worked with leading organizations, published books, and conducted highly influential programmes. The Institute has worked with organizations such as the UN Commission on International Trade Law, SWIFT, BAFT, the International Chamber of Commerce, ICC National Committees in more than 15 countries, and various trade organizations and academic institutions around the world. The Institute has also been at the forefront of combating commercial fraud, seeking to encourage the exchange of information and proactive educational activities. In addition to its work in the field of commercial fraud, the Institute has been involved in issues related to trade based financial crime compliance. Its model sanctions clause for letters of credit has been widely praised for its balance and restraint. It has offered seminars on trade based financial crime compliance in New York, Chicago, Tampa, Atlanta, London, Hong Kong, Dubai, and Stockholm.

You can learn more about the Institute’s products and services by visiting www.iiblp.org.

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Publications Seminars Resources

2021 CONFERENCE MATERIALS

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TABLE OF CONTENTS

2021 APAC Online Annual LC Survey Conference Programme ..................................................... 4APAC Online Annual LC Survey Conference Co-Sponsors ............................................................. 9Panelist Biographies .......................................................................................................................... 16

Links to Online ResourcesLinks to Online ResourcesLinks to Online ResourcesLinks to Online ResourcesLinks to Online Resources2021 APAC Online Annual LC Survey – Links to Informational Resources ................................. 31

Case Analysis & MaterialsCase Analysis & MaterialsCase Analysis & MaterialsCase Analysis & MaterialsCase Analysis & Materials“2020-2021 Letter of Credit Cases of Interest”

Prepared by Carter Klein, Jenner & Block LLP ........................................................................ 3 3

Bank of China Ltd, Singapore Br. v. BP Singapore Pte Ltdby Dr. SOH Chee Seng ................................................................................................................ 43

CAMA (Luoyang) Aviation Protective Equipment Co. v. UBAF (Hong Kong) Ltd.by Jun XU ...................................................................................................................................... 46

Leonardo S.p.A. v. Doha Bank Assurance Co. LLCby Dr. Karl MARXEN .................................................................................................................... 58

Louis Dreyfus Company Suisse SA v. International Bank of St. Petersburg ................................. 64

Punjab National Bank v. Malayan Banking Bhdby Dr. SOH Chee Seng ................................................................................................................ 66

Salam Air SAOC v. Latam Airlines Group SA ................................................................................. 72

United Coals, Inc. v. Attijariwafa Bankby Jacob MANNING ................................................................................................................... 73

Yapi Kredi v. Shenyang Yuanda Aluminum Industry Engineering Co.by Jun XU ...................................................................................................................................... 75

Additional ResourcesAdditional ResourcesAdditional ResourcesAdditional ResourcesAdditional ResourcesSpring 2021 ICC Opinions – Capsules ............................................................................................ 85

2021 APAC ONLINE ANNUAL LC SURVEY

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2021 APAC Online Annual LC Survey ProgrammeThursday-Friday, 22-23 July 2021

(Programme and panelist participation is as of 18 July and subject to change)

Thursday, 22 July

8:30 – 9:00 Online Check-In and Entry to Day 1 Session

9:00 – 9:10 Welcome and IntroductionWelcome Remarks: Michael BYRNE (IIBLP)

9:10 – 10:00 The Brave New World for Global Trade• Where Trade Is & Where We’re Headed: Light at the End of the Long, Dark

COVID Tunnel?• Alleged Unfair Standby LC Draws• Ripe or Hype? The Market for Secondary Risk Participation in Trade Finance

Deals• Force Majeure and ICC Rules: Lessons Learned• Fallout from Singapore’s Commodity Financing Scams

Moderator: Vin O’BRIEN (ICC UAE)Panelists: SOH Chee Seng (ABS; IIBLP); Girish HANUMEGOWDA (IHSMarkit); Jun XU (Bank of China); Laxman SANKARAN (TradeAssets)

10:00 – 10:40 A Sign of the Times: Signatures and Authentication• Signatures vs. Authentication: Lines Blurred• Documents Deemed to Have been Signed• Digital Negotiable Instruments• Risks & Benefits of Using Platform-Based Solutions for Digital Signatures

Moderator: Boon-Teck YEO (BofA)Panelists: Jun XU (Bank of China); Alan DAVIDSON (Univ. Queensland)

10:40 – 10:55 Virtual Coffee Break

10:55 – 11:35 Commercial LC Cases and Practice Considerations• Bank of China Ltd, Singapore Br. v. BP Singapore Pte Ltd [Singapore]• Punjab National Bank v. Malayan Banking Bhd [Malaysia]

o Negotiating Documents Based on Fax Copieso Acceptability of Freight Forwarder’s Bill of Lading


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o Court’s Acceptance (or not) of ICC Official Opinions as Evidence• United Coals, Inc. v. Attijariwafa Bank [USA]

o Bank Contracted/Promised to Issue LC• Galleria (Hong Kong) Ltd. v. DBS Bank [Hong Kong]

o Fraudulent B/Ls

Moderator: SOH Chee Seng (ABS; IIBLP)Panelists: TOH Kian Sing (Rajah & Tann); Boon Teck YEO (BofA); MichaelYAU (Eversheds)

11:35 – 12:05 Confronting LC Practice Controversies• Significant ICC Final Opinions from Fall 2020 and Spring 2021

Moderator: Khalil MATAR (Alinma Bank)Panelists: Gabriel SHAM (Consultant); Ahmir MANSOOR (MCB Bank)

12:05 – 12:35 Virtual Lunch Break

12:35 – 13:05 Applicant’s and Beneficiary’s CornerHow LC Banks can Better Serve Their Customers

Moderator: Sammy YU (JP Morgan)Panelists: Fabian TAN; Clara TOH

13:05 – 13:35 What about Automating Document Examination?• Examination Efficiency: Striking the Right Balance between Speed vs. Skill• Smart Use of OCR, AI, and Machine Learning• Third Party Documents: Digital or Not?• Regulatory Issues

Moderator: Tat Yeen YAP (MonetaGo)Panelists: Robert KOH (HSBC); Marc SMITH (Conpend)

13:35 – 13:45 Islamic Trade Finance: 2021 Status ReportSpeaker: Nizardeen K (CIB)


14:00 – 14:15 SWIFT Update• Cat 7 Changes Slated for November 2021• Message Type 765 – SBLC/DG and Authentication

Speaker: Mukta KADAM (SWIFT)


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14:15 – 14:50 Standbys: Time to Stand UpModerator: Vin O’BRIEN (ICC UAE)Panelists: Nesarul HOQUE (Mutual Trust Bank); Ana KAVTARADZE(Consultant); Ashish MADAN (Adam Smith Associates)

14:50 – 15:00 Summary, Lucky Draw, and Closing Remarks

Friday, 23 July

8:30 – 9:00 Online Check-In and Entry to Day 2 Session

9:00 – 9:05 Welcome and IntroductionWelcome Remarks: Michael BYRNE (IIBLP)

9:05 – 9:15 Introduction to Shipping & AIS• What is AIS and how does it work?• Ship, ships, and more ships

Co-Panelists: Michael BYRNE (IIBLP) and Rishad LILANI (IHS Markit)

9:15 – 9:55 Sanctions & Compliance• Russia | Iran | North Korea | Venezuela• Myanmar: real time dealings with business co-owned by a sanctioned military• China Anti-Sanctions Law• The Biden Administration: 6-month report card• OFAC enforcement trends for 2021 and beyond

Moderator: Alma ANGOTTI (Guidehouse)Panelists: Sally PENG (FTI Consulting); Nizardeen K (CIB)

9:55 – 10:25 ESG and Sustainable Trade Finance• ESG Due diligence and disclosures on supply chain impacts• ESG Risks and “Green Crime”• EBA’s draft RTS on ESG Disclosures• Identifying ESG risk via SWIFT KYC Registry• Green credits in practice

Moderator: Michael BYRNE (IIBLP); SOH Chee Seng (ABS, IIBLP)Panelists: Chi Hoong CHANG (HSBC); Kamran KHAN (Deutsche Bank)


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10:35 – 11:15 Standby & Guarantee Cases and Practice Considerations• Leonardo S.p.A v. Doha Bank Assurance Co. [Qatar]• Salam Air SAOC v. Latam Airlines Group SA [England]• Louis Dreyfus Company Suisse SA v. International Bank of St. Petersburg

[England]• Skanska USA Civil Southeast Inc. v. UP Community Fund, LLC [USA]• Standard Chartered Bank & Anor v. Registrar of Companies [England]• AXA InPL v. Chui Teng Constructions PL [Singapore]

Moderator: Dr. Alan DAVIDSON (University of Queensland)Panelists: Angelia CHIA (Mayor Brown); Andrew TAM (ANZ); Kim SEAH(Incisive Law); Michael YAU (Eversheds)

11:15 – 11:45 Introducing The ISDGP• “Authenticated”• When is a Guarantee Issued?• Advising Bank as Agent of Guarantor• Standard of Determining Compliance• Time Frame for Making of Payment

Moderator: SOH Chee Seng (ABS; IIBLP)Panelists: GAO Xiang (China U. of Political Science & Law); ZHU Hongsheng(CMBC)

11:45 – 12:15 Virtual Lunch Break

12:15 – 12:45 Guarantee & Standby Cases from the PRC• CAMA (Luoyang) Aviation Protective Equipment Co.

v. UBAF (Hong Kong) Ltd.• Yapi Kredi v. Shenyang Yuanda Aluminum Industry Engineering Co.

Moderator: SOH Chee Seng (ABS; IIBLP)Panelists: JIN Saibo (Beijing Jincheng Tongda & Neal); Jun XU (Bank of China)

12:45 – 13:25 2021 Developments in SCF• Off Balance Sheet, What are the Challenges?• What’s New and What are the Risks/Rewards?

Moderator: Chi Hoong CHANG (HSBC)Panelists: Angelia CHIA (Mayor Brown); K. Nizardeen (CIB); JohnTURNBULL (Bank ABC); Boon-Teck YEO (BofA)


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13:35 – 14:15 Digitalisation of Trade• Blockchain Platforms for LCs• Fintechs and Financial Institutions Collaboration• Mixed Presentations• Enforceability of Electronic Bills of Lading• Uniform Rules for Digital Trade Transactions (URDTT): How will they work

in practice?

Moderator: Vin O’BRIEN (ICC UAE)Panelists: Joel SCHREVENS (CHINA SYSTEMS); Andrea FROSININI(Hyperledger); Venkatraman P. (HSBC); Chi Hoong CHANG (HSBC)

14:15 – 14:45 Trade Based Money Laundering• Price checking and over/under invoicing• Open account trades• Complicated STR/SAR filings drive TBML• Time for STR/SAR reporting standards?

Moderator: Tat Yeen YAP (MonetaGo)Panelists: Fatima VALLAR (ING); Radish SINGH (Deloitte)

14:45 – 15:00 Summary, Lucky Draw, and Closing Remarks


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2021 APAC Online Annual LC Survey Sponsors

The Association of Banks in Singapore (ABS) plays an active role in promoting and representing theinterests of the commercial and investment banking community in Singapore. Established in 1973, it hasover the past 40 years, represented the interests of its members in through strategic engagement with itsstakeholders – banks, regulators and customers. The Association also works with its members to establishcommon grounds through benchmarking and setting banking guidelines that are in line with internationalbest practices as well as on projects that are of mutual benefit to face the challenges of the financial andbanking community in Singapore. The ABS also works closely with the authorities in supporting their rolein developing and maintaining a sound financial system in Singapore.

Today, ABS has a membership of 142 local/foreign banks and financial institutions.

Further information on ABS is available on the website: www.abs.org.sg.

Maritime and Trade Capabilities for Trade Finance & ComplianceRegulation covering Trade Finance continues to grow, from the latest OFAC advisory notices on North Korean illicit shipping practices to new guidelines on identifying and managing red flags from the Wolfsberg Group, Financial Action Task Force and the Monetary Authority of Singapore.

Understanding the levels of risk associated with any trade begins with the customer on-boarding process and the financing details and counterparties involved. There is also the detail of the trade; what commodity is being shipped, the destination of the shipment, the price of the commodity and its volume, tracking its journey in real-time and ensuring that documentation surrounding the transaction meets agreed standards.

IHS Markit is uniquely placed to help financial institutions uncover red flags through the use of rich datasets. Discover our unique product solutions that support all areas across the trade compliance workflow.

Know your customer (KYC) Who is your customer and what are their business activities? The ability to perform client due diligence on public and private entity information including corporate registration details, high-risk countries and industry assessments, financial information, company hierarchy and ownership is a major component in the validation process.

Document processing with OCR technology Manage the extraction of key data fields from trade documents The ability to digitise paper files used in documentary credits and other trade finance products is a core enhancement on the path to a more efficient trade finance operation, minimising the time and effort taken to detach and screen content against various sanction watch-lists.

Vessel identification and sanctions screening Who is the owner and operator of the vessel identified in the transportation document? Vessels are often the subject of sanctions and it is important that checks by trade finance teams can reference all vessels and their owners who are associated with sanctioned activity. A ‘Seven Levels of Ownership’ is employed to determine if the vessels are connected with a sanctioned group or party on the OFAC, UN or EU watch-lists.

Vessel tracking – real-time and historical Where is the vessel going, where has it been, and has it engaged in any suspicious activity in high-risk locations? AIS vessel tracking technology allows customers to monitor the vessel on its current journey and also pinpoint its previous voyages as a means to identify any sanctioned port calls. Furthermore, the implementation of this technology also highlights activity by the vessel in terms of ship-to-ship cargo transfers or ‘going dark’.

Commodity classification & pricing What is the true cost of the goods being transported? All tradable commodities are assigned to their relevant Harmonised System (HS) code with a corresponding value and unit price assisting with the analysis of the true costs of traded goods. Our Global Trade Statistics uses official import and export statistics from sources around the world and compiles this into a comprehensive database of merchandise trade covering 200 countries.

Import and export statistics How to identify if the shipment of goods makes economic sense With an extensive trade database providing insights into the movement of goods around the world, a direct line of sight is available highlighting what a country exports and imports. Through the use of such an extensive dataset, trade finance practitioners can determine if a transportation document stating that coal is being shipped and discharged at Richards Bay, South Africa makes sound, economic sense.

Dual-use goods screening Can the commodity be used for both civilian and military purposes? The identification of an item as dual-use is difficult. Trying to determine if resin yarn or rubbing alcohol is used in the production process of a military item poses a challenge. To help in this process a multi-level mapping of commodity names and codes facilitates the search for a dual-use item on the European Union 428/2009 dual-use document.

Copyright © 2019 IHS Markit. All Rights Reserved 336902305-0419-MT

About IHS MarkitIHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 key business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions. Headquartered in London, IHS Markit is committed to sustainable, profitable growth.

To find out more about Maritime & Trade solutions from IHS Markit visit ihsmarkit.com/maritime_trade

customer care north and south america T +1 800 447 2273

+1 303 858 6187 (Outside US/Canada)

europe, middle east and africa

T +44 1344 328 300

asia pacific

T +604 291 3600

E [email protected]

http://www.ihsmarkit.com/maritime_trade


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Eversheds Sutherland has a long history of advising banks in relation to commodity, trade and exportfinance transactions, often linking up with various of our international offices.

Physical and financial trading in goods and commodities dominates the global economy. However, thecomplexity of the contractual, regulatory and financial landscape can create pitfalls for the unwary.

We have over 60 dedicated lawyers around the world who provide advice to banks, financial institutions,traders, brokers, ship owners, insurers, producers and industrial end users in connection with all aspects ofphysical and financial trading in hard and soft commodities. We also advise traders and other marketparticipants on the acquisition and management of distribution and warehousing assets, and have a leadinglitigation and international arbitration practice which is highly rated for its commodities work.

Focused on the key trading centres of London, Hong Kong and Geneva, but with offices in the fastgrowing or emerging economies of Asia, Central and Eastern Europe, and the Middle East, the Evershedsinternational trade and commodities team offers clients a global platform. Given our involvement in allaspects of the physical and financial supply chain we are also well placed to provide clients with a holisticview of the issues they face.

Our Hong Kong team has acted for over 27 domestic and international banks on developing their tradefinance and/or receivables purchase documentation and supply chain programmes. We regularly overseedrafting and negotiations of commercial contracts and the provision of related regulatory advice for banks,financial institutions and corporates across all sectors. We have also advised major banks in Hong Kongon the enforcement of security and lifting stop payment orders in the PRC, as well as on preparing investmentand derivatives product documentation for their corporate and retail customers.

For more information, contact Michael Yau, Partner: [email protected]


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Established in 1983, China Systems is known in the trade solutions industry for its scalable, future proofand cloud enabled technology platform Eximbills, which utilises an OpenAPI design to facilitate bothWebServices and Microservices platforms crucial for today’s multi-channel, hyper-connected, and highlyinteroperable environments. China Systems provides an integrated front-end and back-office platformcatering for internal and external deployment at a domestic, regional or global level. Eximbills, our provenflagship solution, can be tailored to adapt to changing real-world requirements in any business or regulatoryenvironment for Trade Finance, Payments, and Supply Chain Finance without the need for programmingmodification.

China Systems was judged Best Trade Finance Software Provider in the 2020 Leaders in Trade awardsof Global Trade Review magazine, the ninth time since 2006 that GTR has given this prestigious award toChina Systems.


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Coastline Solutions is a technology partner of the ICC responsible for the delivery of online training andinformation services. Banks, traders, logistics companies and law firms from over 120 countries use theseservices to save time, reduce costs, and keep their staff up to date with the latest international tradepractices.

Coastline’s services include:

ICC Digital Library – Trade Finance Channel

Coastline is ICC’s partner in the development and delivery of all of ICC’s Trade Financepublications through the ICC Digital Library (formerly DC-PRO).

Contents:ICC Trade Finance RulesICC OpinionsICC Docdex DecisionsIIBLP Legal Case SummariesDiscussion ForumNewsArticles on Trade FinanceAnd more…

Online Training:• TBFC: Trade Based Financial Crimes training• Sustainability in Trade and Trade Finance• Introduction to Trade Finance• ISBP Online: Comprehensive training in the revised ISBP 745• Collections Online Training: Comprehensive training in collections and URC 522• Mentor 600: Comprehensive training in letters of credit and UCP 600• DC Master: Advanced training in letters of credit• ISP Master: Advanced training in ISP98 and independent undertakings• URDG Master: Comprehensive training in Demand Guarantees and URDG 758• Incoterms® 2020 Online Training: Online Training in Incoterms® 2020• ICC Arbitration: Online Training in ICC Rules of Arbitration• Going Global - ICC Training on Trading Internationally (Available in English, Spanish and Portuguese)• URBPO Online Training: Online training in the new BPO Rules

Contact: www.coastlinesolutions.com


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Documentary Credit World (DCW) is the world’s only monthly journal dedicated to field of letter ofcredit law and practice. Published in partnership with BAFT, DCW is linked to the most important playersin the industry to bring its readers valuable information and the latest news of developments affectingcommercial LCs, standbys, and independent guarantees. From its focus on new rules, regulations, andelectronic innovations impacting traditional trade products to its regular discussion of recent court cases,DCW covers a host of topics and is essential for any serious trade finance professional. In addition toindividual subscriptions, DCW Global Licenses are available for bank-wide access.

To view our latest issue’s Table of Contents or for more information, contact DCW [email protected] or visit www.doccreditworld.com


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2021 APAC ONLINE ANNUAL LC SURVEYPANELIST AND SPEAKER BIOGRAPHIES

Panelist and speaker participation subject to change.No endorsements of any sort by organizations are made or implied.

Alma ANGOTTI is a Partner in Guidehouse’s Financial Services Segment,and Global Legislative and Regulatory Risk Lead. Alma is a recognized expertin compliance and investigations with an emphasis on anti-money laundering(AML), combatting the financing of terrorism (CFT) and economic sanctionscompliance.

Alma has over 10 years of consulting experience and has counselled her clientsin a variety of projects, managed gap analyses, compliance program reviews,risk assessments, remediation efforts, investigations, and historical transactionreviews. Her clients include large, complex, global financial institutions, globalpayments institutions, mid-sized banks, broker-dealers, and Fintech and digitalassets companies, hedge funds, casinos, and multinational corporations. Sheleads the firms cryptocurrency, digital assets and fintech projects.

Alma has also held interim senior compliance leadership positions at several global and regional financialinstitutions providing day-to-day management of their compliance programs and assisting them withremediation efforts, often in the context of a regulatory or criminal enforcement action. She has trained andadvised the financial services industry and regulators and government officials worldwide on AML, sanctions,CFT, and other regulatory compliance issues.

In her 25 years of experience in regulation and enforcement, Alma held senior enforcement positions at theU.S. Securities and Exchange Commission (SEC), U.S. Department of the Treasury’s Financial CrimesEnforcement Network (FinCEN) and FINRA (Financial Industry Regulatory Authority). In these positions,she was responsible for investigations and enforcement of the Bank Secrecy Act, the federal securitieslaws, and FINRA rules. At FinCEN and FINRA, she designed and lead the AML enforcement programs.

Chi Hoong CHANG is the APAC Lead Counsel for HSBC’s Global Tradeand Receivables Finance (GTRF) business. He is responsible for coordinating,developing, executing and leading the delivery of regional legal solutions whilstplaying a key role in shaping the legal risk management and governanceinfrastructure for GTRF in APAC. He has deep and broad experience as aninternational finance lawyer (Islamic and Conventional) working withinternational law firms like Simmons & Simmons, Norton Rose and Allen &Overy as well as international financial institutions. He has lived and worked inthe UK, Malaysia, Hong Kong, Singapore, UAE, and Vietnam. He joined HSBCfrom BNP Paribas where he was the Regional Legal Counsel (Director) forCorporate & Institutional Banking. Chi Hoong is a Barrister-at-Law (Lincoln’sInn) (non-practising) and is admitted to practice law in the United Kingdom,

Hong Kong, Singapore and Malaysia. Chi Hoong is Singapore’s representative to the ICC Banking CommissionTask Force on Guarantees.


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Angelia CHIA is a partner in the Singapore office of Mayer Brown and amember of the Global Finance Practice Group. Angelia has more than 20years of experience in Trade and Trade Finance spanning the globe includingfrom (i) the sale and purchase of goods (including commodities) and servicesacross various industry segments; (ii) the financing of trade using a variety offinancing products from traditional (or documentary trade) to open account(including supply chain finance techniques) and (iii) the mitigation or distributionof risks arising from trade (where her in-depth knowledge of trade financeproducts and processing ensures the organisation complies with its obligationsset out in the distribution agreements).

Angelia has a wealth of experience in different jurisdictions and howjurisdictional aspects impact industry rules (e.g., UCP600, URR725, URDG758and ISP98), laws on assignment of financial assets, laws pertaining to negotiableinstruments and enforcement over security. She has also been involved and resolved disputes (pre-litigation)deploying practical strategies in day-to-day issues faced by financial institutions.

Angelia’s unique advisory capability stems from her in-house experience in Cargill, JPMorgan and mostrecently Standard Chartered Bank where she was global head of legal for trade, ensuring she can providecomprehensive end-to-end advice covering the myriad of issues faced by clients as they manage the interplayof laws, regulations, industry rules, systems and policies in the confines of the organisation’s operationalrequirements. Angelia is an active member of the ICC Legal and BAFT Committees, is internationallyrecognised for her trade advisory experience and speaks English and Mandarin.

Alan DAVIDSON is a solicitor and barrister of the Supreme Court of NewSouth Wales and of the High Court of Australia and continues to practice as aconsultant. He is a member of the Law Faculty, University of Queensland. Hepracticed law for more than a decade before moving into academia full time.He has been acting Head of School at the Queensland University of Technologyand Associate Dean at James Cook University before commencing at theUniversity of Queensland in 1997.

Dr Davidson was appointed as Fellow of IIBLP in 2006. He specialises inInternational Trade Law and Electronic Commerce Law.

In 2011 Dr Davidson was invited to speak with Professor James Byrne at theUNCITRAL Colloquium on Electronic Commerce at UN Headquarters; his topic was Electronic Letters ofCredit. Since 2014 Dr Davidson has been a delegate at all UN sessions of Working Group IV (ElectronicCommerce), and in 2015 was invited to join its Panel of Experts. Dr Alan Davidson is a Director and Fellowof UNCITRAL National Co-ordination Committee Australia (UNCCA) and is its Education Director arrangingfor Australian Law students to attend UNCITRAL Working Groups (60+ to date).

Dr Davidson presents courses in International Trade Law, International Trade Finance Law and Law andTechnology. He has been a visiting academic in the USA, Thailand, Indonesia, Singapore and China. Hisbooks include Social Media and Electronic Commerce Law in two editions by Cambridge University Press;The Internet for Lawyers and The Internet for Accountants. He has more than 200 publications.


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Andrea FROSININI is Andrea is TFG’s in house Incoterms and shippingexpert, dealing with freight forwarding matters, customs practises and exportoperations.

Professor Xiang GAO is the immediate past Dean of the College ofComparative Law of the China University of Political Science & Law (CUPL)in the PRC, the Director for the Centre of International Banking Law & Practiceat CUPL. He is a member of the Legal Committee of the ICC BankingCommission and the Group of Experts in International Settlement of the ICCChina Banking Commission, the President of Beijing Banking Law Society, theExecutive Chairman of ICC China Commission for Commercial Law andPractice, an arbitrator for the China International Economic & Trade ArbitrationCommission and a member of the Advisory Council for the Institute ofInternational Banking Law and Practice in the US. He was a judge of theSupreme People’s Court of the PRC, drafter of the Rules of the SupremePeople’s Court concerning Several Issues in Adjudicating Letter of Credit Cases

in the PRC. He was consulted for the drafts of the Several Provisions of the Supreme People’s Courtconcerning Adjudicating Cases of Independent Guarantees in the PRC. His works on the law of letters ofcredit have been abstracted in law textbooks in the US and UK, and cited by courts in the US and Canada.

Girish HANUMEGOWDA is the Asia Regional Subject Matter Expert forTrade Compliance solutions at IHS Markit based out of the Singapore office.His role is to provide solutions to customers by helping them address thechallenges faced with respect to Trade Finance and to help them achievetransparency through incorporating technological solutions. He has around tenyears of experience in the banking sector across varied roles of RelationshipManagement, Corporate Lending, Trade Finance, Regulatory Compliance andAnti Money Laundering. Previously, he was leading the Corporate BankingCompliance team at ICICI Bank Limited, Singapore. He holds a degree inElectronics & Communication Engineering and MBA in Finance & Banking.


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ATM Nesarul HOQUE is Vice President at Mutual Trust Bank Limited(MTB) with responsibility for looking after MTB Financial Institutions alongwith Offshore Banking activities. Prior to joining at MTB, he was with theBank Asia Limited at the inception of his banking career in 2005 as ManagementTrainee. In his experience since, he has dealt with a wide range of facets in theInternational Trade Banking Business.

Mr. Hoque has achieved several professional certifications, including hisCertificate for Documentary Credit Specialists (CDCS) in 2009, Certificate inInternational Trade and Finance (CITF) in 2011, and Certificate for Specialistsin Demand Guarantee (CSDG) in 2015 from the London Institute of Banking& Finance (LIBF), UK. He has also been awarded as a Certified Trade FinanceProfessional (CTFP) by ICC Academy, Certified Standby & Guarantee Professional (CSGP) by the Instituteof International Banking Law and Practice (IIBLP) in 2017, and gained his Certificate in Trade FinanceCompliance (CTFC) in 2020.

Mr. Hoque is accredited as a panel of experts member of ICC’s Documentary Instruments Dispute ResolutionExpertise (DOCDEX) Services. He has written numerous articles on issues pertinent to the documentarycredit business and currently is Contributing Editor of Trade Service Updates (formally known as LC Monitor),a quarterly LC Magazine, and an Editorial Advisory Member of Documentary Credit World (DCW), themonthly journal published by IIBLP. Mr. Hoque is also a regular research member on various trade servicerelated issues organized by Bangladesh Institute of Bank Management (BIBM). He has frequently appearedas a speaker and panel member at various international trade seminars, workshops, and conferences held inBangladesh and abroad.

An MBA with specialization in management from the University of Chittagong, the leading public universityof Bangladesh, Mr. Hoque had also earned his BBA from the same institution.

Saibo JIN, lawyer, litigator, arbitrator, and lecturer of PR China, is SeniorPartner at Beijing Jincheng Tongda & Neal Law Firm. He received his Masterof Laws (LL.M.) and Ph.D. from University of International Business andEconomics (UIBE) in Beijing. Mr. Jin was admitted to the bar of China andbegan his practice in Zhejiang Province in 1993. Mr. Jin has co-tutored at theLaw School of Tsinghua University and Beijing University, giving lectures onInternational Standard Banking Practice. In 2000, he was a visiting scholar atthe School of Law of University of Arizona.

Jin is vice director of the Banking & Securities Commission of the All ChinaLawyers Association (ACLA), assisting the Association in drafting Guidelinesfor Letter of Credit Litigations in China, vice director of the Commercial BankingCommittee of Beijing Lawyers Association (BLA), director of Research Center

of Banking Law & Practices, Shanghai Law Society (SBL&P), and a former vice director of CIETAC’sSpecial Arbitration Commission on Financing Disputes, assisting CIETAC in drafting Arbitration Rules onFinancing Disputes. He a member of the Task Force of Guarantee of the ICC Banking Commission and amember of the Legal Committee of FCI. He also serves as a member of the Chinese delegation on


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UNCITRAL WORKING GROUP 6 on Security Interests and is a member of the FCI delegation on theUNIDROIT project on Model Law of Factoring.

Jin has been invited to attend discussions of the PRC Supreme People’s Court relating to the drafting of thejudicial interpretation Provisions of Some Issues Concerning the Trial of Cases of Disputes over Letters ofCredit (PRC New LC Rules). In March 2012, he presented to the PRC Supreme People’s Court his firstproposed draft of the Provisions on Some Issues Regarding the Trial of Disputes over Demand IndependentGuarantees (New Rules of Independent Guarantees in China). He is participating on the Expert Team onAssignment and pledging of receivables and Factoring Contract in New China Civil Code. Jin’s main practice area is disputes on International Trade, LCs, Guarantees, Standby LC, NegotiableInstruments, Factoring, Forfeiting, Anti Commercial and Financial Fraud and other Crime such as MoneyLaundering.

As an invited expert, Jin has regularly participated in the Institute of International Banking Law & Practice’sAnnual Survey of LC Law & Practice conference series in US, Europe, HK, Singapore and Beijing, deliveringhis opinions on trade financing, international commerce, and banking law of PRC.

Mukta KADAM is a 14-year plus experienced BFSI expert, who has workedwith many service based companies as SWIFT Payments and Trade Financeanalyst helping various large Indian and multinational banks. With comprehensiveunderstanding of SWIFT MTs and ISO20022 messaging Standards formats,she possesses robust domain expertise in the business areas of Payments, Cashmanagement and Trade Finance space accolades even by the Corporatecustomers.

In her current role working with SWIFT, she is involved in the development ofSWIFT Standards for Trade Finance which are undergoing significant changesover the recent years as per industry demand. To pave the way for TradeDigitalisation, her active interaction with various industry experts and the

contribution to harmonise and standardise the various formats used for data exchange, is significant.

Mukta holds a bachelor’s degree in Engineering in Computer Science and is based out of Mumbai. She isfluent in Hindi, English and Marathi.

Ana KAVTARADZE is an Advisor to Commercial Director at BASISBANKGeorgia, in charge of Strategic Business Development of the Bank’s Business.With 16+ years’ experience in trade finance, supply chain finance (SCF), globalbanking, client relationship management, business strategy formulation, as wellas cutting-edge innovation and digitalization Ana has expanded Global Bankingnetwork bringing in full scope business cooperation opportunities including Trade,Funding, Treasury, and Correspondent Banking.

Laterally to her banking carrier in her private consultancy capacity, Ana hasprovided technical advisory to Private and Public Sectors with focus on marketdevelopment, implementing effective, innovative and digital business solutions


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in international trade, transaction banking, transport/logistics, customs, e-services on Trade and Supply Chainfinance domain involving complex banking/funding structures and de-risking techniques.

Ana has broad experience cooperating with commercial banks and financial institution worldwide and strongknowledge and coverage in the regional business environment. Over the years, she has been a frequentspeaker at Global Banking events and conferences worldwide. Ana has been a regular provider of workshopsand webinars globally for corporates, SME’s, trade finance professionals, bankers as well as governmentagencies and regulators.

Passionate towards development of International Banking and Trade & SCF Business, Ana has organizedand managed various global events related to Trade and Supply Chain Finance held in Tbilisi throughout thelast five years, including playing an instrumental managing role in ICC Georgia & ICC China’s partnershipin the ‘Silk Road Technical Trade Forum’, the ICC Banking Commission Meeting Technical Meeting inTbilisi, and the FCI Factoring Conference.

Previously, Ana headed the Trade and Structured Finance Department at one of the largest UK premiumlisted bank in Georgia, Bank of Georgia (BOG), for over a decade. She has represented as an ExecutiveMember of Banking Commission, International Chamber of Commerce (ICC) Paris, 2017-2021, and as anEditorial Advisory Board Member of Documentary Credit World and Trade & Investment Commissionco-chair, ICC Georgia, since 2021. Ana graduated with honors from Tbilisi State University, Georgia withMaster’s Degree in Banking and Finance.

Kamran KHAN is Managing Director and Head of Environment, Social andGovernance (ESG) for Asia Pacific at Deutsche Bank. In this newly establishedclient - facing position, he is responsibility for defining and executing the bank’sESG strategy in the region across all business divisions.

Prior to joining Deutsche Bank, Mr. Khan established Infra-Tech Capital, animpact fund investing in companies utilizing technology to provide infrastructureservices and achieve UN Sustainable Development Goals. In 2013 he wasappointed by the Obama White House to serve as the head of global investmentsand operations at the US Millennium Challenge Corporation, where he manageda USD 10bn portfolio and led a USD 1.5-2bn annual investment program globally.

Previously, Mr. Khan held senior executive roles at the World Bank and helped establish the World BankGroup regional hub in Singapore, comprising the World Bank, International Finance Corporation (IFC) andMultilateral Insurance & Guarantee Agency (MIGA). Prior to his time at the World Bank, Mr. Khanworked on M&A transactions and advisory mandates at JP Morgan and LEK. He also served as a USForeign Service Officer with the US Agency for International Development (USAID), where he led operationsfor the project finance and guarantees facility.

Mr. Khan served as an Advisor on Infrastructure Finance to APEC, ASEAN, and the G-20. He is amember of the Senior Advisory Board at Fudan University Fintech Centre in Shanghai with a mandate toadvise on Belt and Road Initiative projects. He has also served on the Board of Advisors at a variety ofmarket-leading companies using technology to achieve ESG goals. He is a frequent speaker at events suchas World Economic Forum, ASEAN Summit, APEC Summit, and in major international media.


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Robert KOH has extensive experience in trade banking, having worked inseveral international trade banks across the Asia Pacific Region. He bringswith him a wealth of trade experience, spanning from traditional core tradeproducts to specialist trade products like supply chain, receivables finance,structured trade and commodities. He also has deep experience in managingtrade-based financial crime risks. He headed the trade banking operations inHSBC for Hong Kong and Macau for 6 years and is currently leading theGlobal Trade Transformation project for HSBC in the Asia Pacific Region. Heis a regular panelist on the Hong Kong Annual Survey and the Guarantee andStandby Forum.

Rishad LILANI is Associate Director at IHS Markit with over 15 years ofprofessional experience, including ten years in client-facing roles focusing onSales & Relationship Management/Consulting.

Ashish MADAN has over two decades of experience in the trade financebusiness, with special focus on Letters of Credit. He runs a boutique tradeadvisory firm, Adam Smith Associates Pvt ltd, based in India. The firm offersadvisory, structuring and management services related to trade finance,commodities funding, structured trade finance other trade related servicesincluding logistics -with India and Asia as centerpieces of operations. The firmhas run prestigious receivable financing mandates for large number of corporatesincluding multinationals.

Ashish’s educational qualifications include an M.SC. in Finance (EconomicPolicy) from SOAS University of London. Additionally, he holds a Masters inFinance and Control (MFC) and BA Economics (Honors) from University ofDelhi.

He is co-author of the book, REVIEW OF COURT JUDGMENTS ON LETTERS OF CREDIT, (co-authored with VincentO Brien, Member-ICC Banking Commission) published by LexisNexis. Ashish provides consultancy serviceson a regular basis to banks, law firms and large commodity firms.

He is a member of International Chamber of Commerce (ICC) India - Working Group on Banking andFinance.


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Ahmir MANSOOR is a seasoned banker with strong focus in InternationalTrade Finance and Foreign Exchange. He has worked for over 30 years withextensive experience in foreign and local banks in Pakistan, U.A.E, Egypt &UK in various roles and assignments such as Head of Trade/Operation Manager& Auditor. He has conducted numerous workshops & seminars on the subjectof ICC’s Uniform Customs & Practice for Documentary Credits (UCP 600),Uniform Rules for Demand Guarantees (URDG 758), Incoterms 2010, ISBP745, Trade Based Money Laundering, Trade Finance Fraud and Letters ofCredit related issues confronting banks, Importers and Exporters, providingcustomize in-house training programme for MNCs. He also has a distinctionof being a member of the ICC Banking Commission of the InternationalChamber of Commerce since 2003.

He is an MBA from Sheffield Business School (UK), a qualified DAIBP & a Certified International TradeSpecialist—Institute of International Trade of Ireland & Electronic Business School of Ireland (eBSI). He isalso Docdex expert since 2004 and a member of ICC Financial Crime Risk and Policy. He has written manyarticles on topics relating to Documentary Credits, Guarantees which were duly recognised and published ina leading industry journal ‘Documentary Credit World’, IBP journal and Value Chain.

Khalil MATAR CDCS, CCSA, CRMA, CIA, CFSA, MBA is Deputy GeneralManager, Internal Audit Group, Alinma Bank, Saudi Arabia. Mr. Matar hasbeen involved in trade finance since 1992. He worked for a number of banks inthe Middle East. He contributed articles to renowned international trade financepublications and websites including Documentary Credit World, DocumentaryCredit Insight and DCProfessional. He conducted several training sessions ina number of locations in Asia, North America, Europe and Africa on tradefinance, internal auditing and operational risk management. He is a member ofthe IIBLP Middle East Advisory Board, and member of Council on InternationalStandby Practices (CISP).

K Nizardeen is an Executive Committee Member of ICC Banking Commission.Well known Islamic Trade Finance expert. COO of FIB, Malaysia andpreviously the Head of Transaction Banking at Emirates Islamic (Bank), Dubai,United Arab Emirates (ENBD Group). Prior to joining EI, he has held severalsimilar positions in leading banks such as COO, Country Head of Operations,Head of Service Delivery, Head of Credit & Finance Operations and Head ofTrade & Corporate Services. A Certified Documentary Credit Specialist(CDCS) and a holder of Certificate in Trade Finance Compliance (CTFC) –IFS, University College, UK and a qualified Trade Finance banker with anMBA in Banking and Finance.

He is a member of DCW Advisory Board (Documentary Credit World) USA,Advisory Group member of Dubai Multi Commodity Centre (DMCC), Advisory Board member of LC


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Monitor, a member of ICC working group on Digitization (revising eUCP and eURC) and Vice Chair of ICCUAE. He is also a well-known speaker, writer of several articles on UCP/Islamic banking, and an experttrainer.

He conducts training on Trade Finance, Islamic Banking, Operations, CDCS and AML (TBML). He hasextensive experience in system implementations and product implementation. Invented and implemented thefirst Islamic online internet end-to-end trade platform for Islamic Trade Finance and also implementedBlockchain technology for Islamic goods inspection.

Vincent O’BRIEN is Member Executive Committee of ICC BankingCommission and Director of the International Chamber of Commerce, UnitedArab Emirates.

He has been actively involved in trade finance for more than a quarter of acentury and has delivered technical assistance for trade finance in more than100 countries. Vincent’s primary activity is trade facilitation with the majorMultilateral Development Banks and his recognized specialty is trade relateddispute resolution where he often acts as Expert Witness in Trade Disputesand Legal Cases.

Vincent also holds the position of Associate Director of the Institute ofInternational Banking Law and Practice (IIBLP) and acts as Advisor on Innovation and Market Intelligenceat China Systems Corporation. He may be contacted at: [email protected]

Sally PENG is a Managing Director in the Export Controls & Sanctions practiceat FTI Consulting and is based in Hong Kong. She is an expert in export controlsand economic sanctions, international trade strategy, and global supply chainoptimisation and compliance.

Sally has extensive experience advising public-listed companies on their complexencryption programmes under US and Hong Kong laws and in other AsiaPacific jurisdictions, including representing her clients in front of relevantgovernment agencies in those jurisdictions. She also advises several China-based clients regarding US sanctions regulations and has preformed on-siteimpact analysis. In addition, she works closely with her clients’ legal,procurement and logistics teams to build best-in-class Export Control andSanction compliance programmes. Her industry coverage includes banks,

telecommunications, national defense contractors, heavy machinery, and research universities.

Sally has been a trusted advisor for many MNCs on their international trade and customs issues. She servedas team leader for several global retailers in large-scale customs duty-saving projects in over ten Asiancountries. She also assisted multiple Asia-based companies in defending antidumping and countervailingcases with US Department of Commerce and US Customs and Border Protection (CBP). During the on-going US-China trade war, Sally is sought after by her clients to advise them on mitigating strategies against


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US section 301 and 232 retaliation tariffs, free trade agreements, trade preference programmes and countryof origin issues. Her industry coverage includes apparel, footwear, handbag & leather goods, hardline goodsand consumer electronics.

Sally takes her passion for international trade beyond individual companies, having participated in negotiationsof the Trans-Pacific Partnership (TPP) and Regional Comprehensive Economic Partnership (RCEP), aswell as serving as a key member on numerous trade missions, including to China, Vietnam, Indonesia, Cambodia,Bangladesh, and various African countries. She is also highly involved in the American Chamber of Commercein Hong Kong, serving on several committees, including as Co-Chair of the Apparel, Footwear & SupplyChain Committee. She is also a Senior Advisor to the Hong Kong General Chamber of Textiles Limited.

Prior to FTI Consulting, Sally was based in Beijing & Hong Kong for over ten years and served as the AsiaPacific practice leader of a US-based law firm focused on International Trade and Customs.

Sally holds a J.D. from the University of Florida Levin College of Law, a Diploma from Peking UniversityLaw School in Beijing, and a B.A. from National Chengchi University College of Law. She is a nativeMandarin speaker and is fluent in English.

Kaushika RUWANGALLA is currently the Global Head of Financial CrimeCompliance of HSBC’s Global Trade & Receivables Finance business, theworld’s largest trade finance bank.

He has broad-ranging experience in Risk at a senior leadership level acrossTrade Finance, Payments, Commercial Banking and Retail Banking.

Kaushika has previously held positions of Global Head of Sanctions for HSBC’sCommercial Banking & Transaction Banking business and Regional ChiefControl Officer for Europe covering all risks as the business head of risk.

He Co-Chairs the ICC Banking Commission’s Compliance & Policy Groupand have been on the Advisory Board of RUSI’s publication of Financial Crime

relating to FTZs. Kaushika is also a regular panelist on Financial Crime Compliance events by the ICC andLIBF, among others.

Joel SCHREVENS is Global Solutions Director at China Systems, responsiblefor Product Strategy on Trade and Supply Chain Finance. He is the main contactfor organisations such as SWIFT, Contour and Marco Polo and other businessand technology partners.

Thirty years ago, Joel started his career at KBC Bank, where he worked forseven years in their Foreign Trade Operations. He is still grateful that he wasgiven the opportunity by the bank to take a leading role in the automation oftheir trade back-office operations. It provided him with a blend of business,operational and technical expertise and also the mind-set to continuously thinkabout how to optimise intra- and interbank business processes and customerservice.


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While he is ‘notoriously’ known for his attention to detail, he takes some pride in his ability and creativity tothink at the trade ecosystem level. He is passionate about the potential of new technology, but is alsoconvinced that, as our data processing environments will become increasingly hybrid, it is essential to wellunderstand the present in order to efficiently handle a long period of transformation and create a bright futurefor Trade.

Kim T.K. SEAH holds law degrees from the University of Singapore andHarvard Law School. After completing postgraduate studies in the U.S.A. asa Fulbright Scholar, he was a full-time academic at the Faculty of Law of theNational University of Singapore teaching courses in Banking, Company Lawand Employment Law. He was Vice-Dean of the Law Faculty before leavingfor private law practice.

Mr Seah has been a practising lawyer for more than 30 years and is currentlya Consultant to Incisive Law LLC - the Singapore law arm of the internationallaw firm Ince & Co, well-known for its maritime, insurance and finance practices.Mr Seah is the long-time legal adviser to the Association of Banks in Singapore(ABS), a Fellow & Principal Mediator of the Singapore Mediation Centre (SMC)and a member of the Panel of Experts, International Chamber of Commerce(ICC) Rules for Documentary Instruments Dispute Resolution Expertise (DOCDEX). He is a member ofthe ICC Banking Commission. Mr Seah’s practice encompasses Banking & Finance, Corporate, Commercialand Employment Law.

Gabriel SHAM is currently an independent consultant based in Singaporeproviding trade finance training and advice mainly to banks. Formerly Head ofTrade Services Asia, GTS Product, for Royal Bank of Scotland.

Radish SINGH leads the Anti-Money Laundering (“AML”) team withinDeloitte Forensic in Singapore and Southeast Asia. She has extensive experiencein Compliance and AML, corporate governance, risk and financial servicesregulations.


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Marc SMITH is a Financial Services Technology Entrepreneur with morethan 15 years of experience in optimizing Trade Finance Transaction processingand compliance. With the mission is to help Banks on their journey from paperto digital trade, Conpend provides technology enabled Document Examination,Compliance and AML using Artificial Intelligence to save time and reducerisk.

SOH Chee Seng is Non-Exclusive Technical Consultant on Trade FinanceIssues for the Association of Banks in Singapore and some international banksin Asia Pacific. He has more than 25 years experience in trade financeoperations with local and foreign banks in Singapore and Malaysia. He servedas a member of the UCP600 Drafting Group commissioned by the ICC BankingCommission to revise UCP500. He served as a member of the task force oninternational standard banking practice for documentary credits. Dr. Soh isalso a member of the Panel of Experts, International Chambers of Commerce(ICC) Rules for Documentary Credit Dispute Resolution Expertise (DOCDEX).

Dr Soh has been invited by a number of financial institutions and bankersassociations in South East Asia to conduct workshops on international trade

finance, risks in trade finance, ISBP, UCP, ISP98 and Incoterms 2010. He received his Bachelor of Commercedegree with first class honours major in Economics from Nanyang University, Singapore, in 1973.

He received his PhD in Law from the China University of Political Science and Law in 2011. Dr Soh is alsoco-author of UCP600: AN ANALYTICAL COMMENTARY with Late Prof. James E. Byrne.

Andrew TAM is heads a team of senior lawyers in Hong Kong and Singaporewho provide legal coverage for lending, trade, supply chain, and payments &cash businesses for ANZ across its international footprint. The team providespragmatic commercial deal structuring and execution coverage and alsoproactively advises on strategic product governance issues eg. capital allocation,documentation and process simplification initiatives.

He is a current member of the ICC Legal Committee and has 20 years privatepractice and in-house experience from leading law firms and financialinstitutions. Andrew also has experience in acquisition financings, projectfinancings, export credit agency supported financings, syndicated loantransactions.

Andrew is Australian Chinese and has been in Hong Kong for over a decade. He is an avid rugby enthusiastand has been coaching junior rugby in Hong Kong for over 10 years.


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Fabian TAN is the finance manager for a large international trading entity based in Singapore. Prior to hiscurrent role, Fabian also led a finance team in an international oil trading firm covering all aspects of finance.He was also a manager with PwC Singapore specializing in Oil & Gas assurance.

TOH Kian Sing is a Partner and Head of the Shipping and Admiralty PracticeGroup, Messrs Rajah & Tann LLP. He was appointed a Senior Counsel of theSingapore Court of Singapore in 2007.

He advises banks in letters of credit documentation and acts for both local andoff-shore banks as well as trading houses in letters of credit litigation. He hasalso managed letters of credit litigation in other jurisdictions, like New York,South Korea, the United Kingdom, Malaysia, France and Iraq. Apart from hisletters of credit practice, Toh Kian Sing has a very active practice in Shippingand commodity litigation. He has published extensively on shipping law as wellas authored a book on admiralty law.

He finished at the top of his graduating class in the Faculty of Law of the National University of Singapore,before gaining a Bachelor of Civil Law, First Class Honours, from the University of Oxford.

Fatima VALLAR is a trade finance operations – compliance specialist at ING (Philippines).

Venkatraman P is Global Product Head of Documentary Trade at HSBC,Hong Kong. Experienced in Product Management and building MVPs ofproduct enhancements with a demonstrated history of working in the financialservices industry, he is skilled in Portfolio Management, Credit Risk, Banking,Commercial Banking, Team Management, and is actively engaged in drivinginnovation in digitising the trade business using block chain and future technology.


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XU Jun is Deputy General Manager of the Global Transaction Banking Dept.at Bank of China, Jiangsu Br, China, and has 29 years’ experience in the tradefinance field in domestic and overseas banks.

Ms. XU is a member of the ICC Banking Commission Executive Committee,ICC Market Intelligent Team, ICC Global Survey of Trade Finance EditorialTeam, Global Supply Chain Finance Forum, ICC Guidance Paper on the impactof COVID-19 on trade finance transactions issued subject to ICC rules’ DraftingGroup, ICC China Banking Committee Forfeiting and Factoring Expert Team,DCW Editorial Advisory Board, Asia Advisory Council of IIBLP; Co-leaderof ICC SCF Rules Drafting Team; ICC DOCDEX expert, and leader of theICC China Banking Committee Translation Expert Team.

Ms. XU is the writer of dozens of professional books/papers and translator of ICC publications. She has alsobeen an invited speaker/panelist in events sponsored by ICC, WTOUNCITRAL, and IIBLP.

Tat Yeen YAP is Head of Product Asia-Pacific at MonetaGo, a financialtechnology company involved in the provision of blockchain-based techniquesfor trade finance fraud mitigation. Prior to joining fintech, he had three decadesof experience working in commercial banks, in the areas of credit, clientcoverage and transaction banking. He has been involved in several industryworking groups on trade finance: as a drafting group member eUCP Version2.0 and eURC Version 1.0; as a member of the ICC workgroup on documentexamination automation, presently as leader of the Human Workforce for theFuture working group; as a working group member of the Global Supply ChainFinance Forum; and as Co-Sherpa of the Digital Trade Finance Lab of theAsia-Pacific Financial Forum.

Michael YAU is the Asia Head of Banking & Finance practice at EvershedsSutherland. His experience covers a broad range of banking and finance matters,including corporate lending, receivables and supply chain financing, securitiesand investment products, digital banking, cash management and paymentservices, derivatives and ISDA documentation, loans distribution andparticipation, banking regulation and compliance and various general bankingmatters.

He has also represented various banks in banking disputes, asset recovery,debt restructuring, receivership and liquidation and is familiar with securityenforcement and insolvency issues encountered in the process (both contentiousand non-contentious).

Michael has worked with many local and international banks on a diverse range of China-related financematters, including cross-border lending and taking security, onshore and offshore collaboration financingstructures and related foreign exchange control compliance. He is also a frequent speaker in training workshopsfor bankers in both Hong Kong and overseas on various banking and finance topics. Michael was recognisedas a leading Banking & Finance lawyer by Chambers Asia 2013-2014 and Chambers Global 2013.


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Boon-Teck YEO, as Director and Assistant General Counsel of the LegalDepartment in Bank of America, supports the Global Transaction Servicesbusiness, covering 12 locations in the Asia Pacific region (where Bank ofAmerica has a presence). His coverage includes advising on legal issues,exploring solutions and managing risk on matters relating to Trade Servicesand Trade Finance, Liquidity Management, and Corporate Cards. Boon-Teckspent 10 years working in the Hong Kong branch of Bank of America, beforerelocating to the Singapore branch in December 2020.

Trained as a banking and finance attorney in Singapore, Boon-Teck has alsoworked in a magic circle firm in Hong Kong covering asset-based lending,debt capital markets and general banking. Boon-Teck is a graduate from QueenMary College (University of London) with an LLB, and is qualified to practiselaw in Singapore and Hong Kong.

Sammy YU is the Executive Director and Head of Asia Trade Operation ofJP Morgan Chase Bank N.A. He manages the end to end trade transactionsprocessing including Trade Client Services in Asia Pacific region with 13countries, he also supports the trade digitalization and transformation programof the bank.

Sammy held various leadership roles in Trade operations and Audit in Citi andBank of America for over 20 years based in Hong Kong, China and Malaysia,he was the Cash and Trade Operation head of Deutsche Bank Hong Kongbefore joining JP Morgan. Besides, Sammy is the Executive Committee memberof the Hong Kong International Chamber of Commerce.

ZHU Hongsheng is General Manager of Trade Finance Products in theTransaction Banking Department of China Minsheng Banking Corp. in Beijing.He is a member of the ICC’s ISDGP Drafting Group (now Working Group), amember of the Task Force Group on Guarantees of the ICC BankingCommission, a member of the ICC DocDex Group, and Chair of the ICCChina Expert Group on Guarantees.


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2021 APAC ONLINE ANNUAL LC SURVEYLINKS TO INFORMATIONAL RESOURCES AVAILABLE ONLINE

Thursday, 22 July

The Brave New (Normal) World for Global Trade

• Guidance paper on the impact of COVID-19 on trade finance transactions issued subject toICC rulesICC document, 7 April 2020:https://iccwbo.org/publication/guidance-paper-on-the-impact-of-covid-19-on-trade-finance-transactions-issued-subject-to-icc-rules/?_cldee=Y3NieXJuZXNAaWlibHAub3Jn&recipientid=contact-1b88ca396f30e911a9a7000d3ab38ab1-b538284eb0fa4d7fa571e28e21ea399f&esid=412e4c4f-c795-ea11-a811-000d3abaad31

• Interpretative Paper on the correct interpretation of the first paragraph of UCP600 article 35ICC document, 29 May 2020:https://iccwbo.org/publication/interpretative-paper-on-the-correct-interpretation-of-the-first-paragraph-of-ucp-600-article-35

• Code of Best Practices for Commodity FinancingABS document, 30 November 2020:https://abs.org.sg/industry-guidelines/commodity-financing

What about Automating Document Examination?

• Automation of Document Examination under Documentary Credits: A Guidance PaperICC document, June 2021:https://traydstream.com/wp-content/uploads/2021/06/2021_icc_automation_issuebrief.pdf

Friday, 23 July

Sanctions & Compliance

• Addendum to Guidance Paper on the use of Sanctions Clauses 2014ICC document, 7 May 2020:https://iccwbo.org/publication/addendum-to-guidance-paper-on-the-use-of-sanctions-clauses-2014/

• IIBLP Sanctions ClauseIIBLP, October 2008:https://iiblp.org/sanctions-clause/

https://iccwbo.org/publication/guidance-paper-on-the-impact-of-covid-19-on-trade-finance-transactions-issued-subject-to-icc-rules/?_cldee=Y3NieXJuZXNAaWlibHAub3Jn&recipientid=contact-1b88ca396f30e911a9a7000d3ab38ab1-b538284eb0fa4d7fa571e28e21ea399f&esid=412e4c4f-c795-ea11-a811-000d3abaad31

https://iccwbo.org/publication/interpretative-paper-on-the-correct-interpretation-of-the-first-paragraph-of-ucp-600-article-35

https://abs.org.sg/industry-guidelines/commodity-financing

https://traydstream.com/wp-content/uploads/2021/06/2021_icc_automation_issuebrief.pdf

https://iiblp.org/sanctions-clause/

https://iccwbo.org/publication/addendum-to-guidance-paper-on-the-use-of-sanctions-clauses-2014/


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• Black Gold: Exposing North Korea's Oil Procurement NetworksRUSI, 22 March 2021:https://rusi.org/explore-our-research/publications/special-resources/project-sandstone-special-report-black-gold-exposing-north-koreas-oil-procurement-networks

Standby & Guarantee Cases and Practice Considerations• Standard Chartered Bank & Anor v. Registrar of Companies [England]Full Text:https://www.bailii.org/ew/cases/EWHC/Ch/2021/1566.html

• AXA InPL v. Chui Teng Constructions PL [Singapore]Full Text:https://www.elitigation.sg/gdviewer/SUPCT/gd/2021_SGCA_62

2021 Developments in SCF

• Position Paper on Drafting ICC Rules for Supply Chain FinanceICC document, 26 January 2021:find here

Digitalisation of Trade

eUCP Version 2.0 (text of rules)ICC document, May 2019:https://cdn.iccwbo.org/content/uploads/sites/3/2019/06/icc-uniform-customs-practice-credits-v2-0.pdf

• Supplement to the ‘Commentary on eUCP Version 2.0 and eURC Version 1.0 (eRules)ICC document, December 2019:https://iccwbo.org/content/uploads/sites/3/2019/12/2019-icc-ks-supplement-to-the-commentary-on-eucp-version-2-0-and-eurc-version-1-0-erules.pdf

• The Legal Status of Electronic Bills of LadingClyde & Co, October 2018:https://www.clydeco.com/en/about/news/2018/10/clyde-co-launches-report-on-the-legal-status-of-el

https://iccwbo.org/content/uploads/sites/3/2021/02/20210125-position-paper-on-drafting-icc-rules-for-supply-chain.pdf#:~:text=On%20December%205%2C%202018%2C%20the%20ICC%20Banking%20Commission,to%20%E2%80%9CUniform%20Rules%20for%20Digital%20Trade%20Transactions%20%28URDTT%29%E2%80%9D.


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2020-2021 Letter of Credit Cases of Interest1

Prepared by Carter Klein, Jenner & Block LLP2

DISCREPANCY DEFENSES, NONDOCUMENTARY CONDITIONS AND PRECLUSION

1. Natixis Funding Corp. v. GenOn Mid-Atlantic, LLC, 121 N.Y.S.3d 34 (N.Y. App. Div. 2020),app. den. 2020 WL5183267 (Ct. App. 2020) affirms multiple summary judgment decisions infavor of multiple beneficiaries whose presentations under substantially similar standby lettersof credit refused on the ground that insufficient funds were available to meet the amountsdrawn and denies reformation by mistake. Lower court rejected fraud claims.

Issues for Discussion:

• Does this case involve how an issuer should draft a letter of credit to protect the issuerfrom undue exposure? In that regard, is it like Nissho Iwai Europe, Plc v. Korea First Bank, 99N.Y.2d 115, 782 N.E.2d 55 (2002)?

• Is a draft for more than the available amount of the letter of credit a discrepancy or shouldthe issuer honor the presentation up to the amount available for drawing under the credit?

2. MAM Apparel & Textile, Ltd. v. NCL Worldwide Logistics USA, Inc., 2020 WL 4336362(E.D.N.Y. 2020) provides a textbook case of the issuing bank’s dishonor of drawing documentsfor their failure to comply with requirements specified in two commercial letters of credit. TheBangladeshi beneficiary provided an air waybill instead of ocean bill of lading and failed topresent a signed telefax and an authenticated SWIFT message stating that the shipment hadbeen inspected and was authorized. The court also discusses preclusion timing and givingnotice of reasons for dishonor under UCP600 Arts. 16(c) and 16(d). (CLC)

Note: Court takes judicial notice of SWIFT Field 77B NOTIFY message of dishonor as satisfyingUCP requirements to notify of dishonor and that documents are being held pending applicantwaiver or instruction of the beneficiary.

3. Punjab National Bank v. Malayan Banking Bhd, (Malayan Court of Appeal, June 18, 2020)reversing Malay High court decision (Nov. 13, 2018) (case summary here). A commercial letterof credit (CLC) for USD 1,962,500 was issued by PNB to the beneficiary to pay againstdocuments for the beneficiary’s sale of coiled copper wire to the applicant. The letter of creditcalled for several documents, including a signed onboard ocean bill of lading (B/L) but statedthat a freight forwarders B/L was not acceptable. A proposed amendment was sent after theCLC was sent by PNB adding a documentary requirement of an SGS certificate of weight and

1. Cases with the letters “CLC” after the case discussion are commercial letter of credit cases. All othersare standby letter of credit or bank guarantee cases.

2. James Barnes of Baker & McKenzie and Carter Klein are co-authors of the UCC Article 5 Letters of CreditSurvey of 2020 cases to appear in the American Bar Association’s Business Lawyer Fall 2021 edition. Manyof the summaries are derived from Mr. Barnes’ contributions to that survey. Christopher Byrnes of IIBLP hasreviewed and edited the case write-ups and supplied foreign cases for comment to include in this write-up of2020 cases.


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quality. The amendment was not acted upon by the beneficiary. RBS was nominated firstadvising bank. MBB was nominated second advising bank. Wells Fargo NY branch wasremitting bank for MBB as negotiating bank. The CLC was negotiable with any bank in Malaya.MBB received and “negotiated” fax draw documents, but received the faithful originals the nextday, including a B/L which PNB argued was a freight forwarders B/L, and presented by courierthe draw documents to PNB. PNB dishonored. Its timely notice of dishonor was sent to WellsFargo, the remitting bank and not to MBB as presenting bank, but stated that refusal was on thegrounds per UCP Article 23 which dealt with air waybills. A fuller notice of dishonor was sent tothe presenting bank after five business days after presentment.

The beneficiary asked MBB to seek a waiver which the applicant did not agree to. The trial andHigh Court in Malaysia held that the dishonor was wrongful. The High Court cited from a UCPOpinions which stated that a prohibition of a freight forwarders B/L was not meaningful andshould be disregarded. It also ruled that (a) the proposed amendment to the letter of creditrequiring an SGS certificate was not accepted and therefore did not bind the beneficiary topresent one, and (b) that the notice to the remitting bank was ineffective because it (i) was notthe presenting bank and (ii) defective by referring to UCP 23 as the ground for refusal. TheCourt of Appels in Malaysia reversed the two lower courts on the grounds that the provisionprohibiting freight forwarders bills of lading was fundamental and designed to prevent fraud andmischief, that the notice of refusal to the remitting bank was sufficient, and that negotiation offaxed documents was also conducive to fraud and mischief and should not be allowed. Thecourt also adversely commented on the fact that the beneficiary was not called as a witness.(CLC)

Issues to Discuss include but are not limited to:

a. Can a notice of dishonor to a remitting bank which is not the presenter of documentseffective under UCP Art. 16?

b. Does the answer change if the presenting bank says communications concerningdocuments should made to it and only remittance transfers should go to the remittancebank?

c. Does the answer change if the presenting bank has actual notice from the remitting bankof the notice of refusal?

d. Should a notice of dishonor be held to the same strict standard of compliance that banksrequired of documents to conform to the terms of the letter of credit?

e. How does ISBP745 E4 apply to override a prohibition against use of freight forwardersB/L?

f. Does the exception to the ISBP745 E4 override apply when the issuer specifies not onlyare FFB/Ls not accepted but that a full set signed clean on board ocean B/Ls must bepresented, or is more specificity required?


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g. Can a proposed amendment to a letter of credit be deemed accepted if issued before theoriginal letter of credit is advised or if the amendment is not affirmatively not rejected?

h. Can a nominated bank “negotiate” faxed presentation documents under a letter of credit?

i. Can and should a request by the nominated bank to the issuing bank to request from theapplicant a waiver of asserted discrepancies be regarded as a waiver and estoppel toclaim wrongful dishonor?

j. Was the Court of Appeals correct in its reasons and ruling reversing the trial and HighCourt decisions against the issuer?

4. Leonardo S.p.A v. Doha Bank Assurance Co., 2020 QIC (A) 1 (Civil and Commercial Courtof Qatar Commercial Centers, March 16, 2020) (case summary here). This is a suit for wrongfuldishonor on two bank guarantees – an advance pay guarantee for €12,210,000 and a performanceguarantee for €4,070,000. The beneficiary drew on them after notifying the subcontractor-applicant that it was cancelling its subcontract for radar installation for failure to perform. Theguarantor bank unsuccessfully argued that the demand was noncompliant because thebeneficiary did not attach to its demand a copy of e demand made on its subcontractor forpayment, and that insufficient information was given in the demand regarding the extent of thealleged breaches under the subcontract and the applicant allowed to remedy the allegedbreaches. The court found no requirement in the guarantors for supplying the guarantor withthe notices and information the guarantor claimed were insufficient under the demand it received,citing URDG Art. 7 (nondocumentary conditions are to be disregarded). The court also heldthat he issuer was precluded for raising with the court particular discrepancies because ofURDG Art. 24(f) – failure to list objections in notice of rejection of the demand. The issuer alsoargued that the amount drawing as excessive because of a reduction clause in the guaranteeby amounts invoiced by the subcontractor to the beneficiary. The court rejected this claimbecause to do the invoices had to be presented to the guarantor bank had to be approved,certified and signed by the beneficiary. They were not.


• Do and should banks allow reductions or cancellations of their guarantees or letters ofcredit based on presentation to the issuer by the applicant of documents specified in the letterof credit for doing so?

• How does URDG Art. 15(a) apply or not apply to this case?

5. Skanska USA Civil Southeast Inc. v. UP Community Fund, LLC 2020 WL 6572641 (W.D.N.C.Nov. 9, 2020) (full text here). Rejected the nonbank issuer’s argument that its undertaking,although labeled “Irrevocable Letter of Credit”, should be analyzed under suretyship law basedon the inclusion of a nondocumentary condition. While US UCC §5-108(g) requiresnondocumentary letter of credit conditions to be disregarded, the court specifically rejected theissuer’s argument that a statement in the draw certificate that the beneficiary was entitled todraw pursuant to a specified subcontract removed the undertaking from UCC Article 5 andconverted the undertaking to a suretyship arrangement.

https://scholar.google.com/scholar_case?case=10879163407707380397&q=5.%09Skanska+USA+Civil+Southeast+Inc.+v.+UP+Community+Fund,+LLC+&hl=en&lr=lang_en&as_sdt=20000006&as_vis=1


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Issue for Discussion:

• What nondocumentary conditions are acceptable in a letter of credit, e.g., expiration date,receipt of funds, incorporation of rules, place of presentation, etc?

6. Jr. Food Stores, Inc. v. Hartland Construction Group, LLC, 2020 WL 1442889 (W.D. Ky.Mar. 24, 2020). Holds that the letter of credit issuer was not bound by the underlying constructioncontract’s arbitration requirement because the issuer did not agree to arbitrate and the letter ofcredit at issue required actions concerning it to be brought in Kentucky courts. The AIA contractwhich contained an arbitration provision was referenced in but not incorporated into the letter ofcredit. The court relied heavily on a jurisdiction clause in the letter of credit that provided fordisputes concerning the letter of credit to be heard in Kentucky courts.


• How often and when is it appropriate for an issuer, applicant or beneficiary to insist on achoice of jurisdiction clause in a letter of credit?

• Under what circumstances should an issuer agree to arbitration of letter of credit disputes?

7. Marquette Transportation Finance, LLC v. Soleil Chartered Bank, 2020 WL 122975(S.D.N.Y.). Summary judgment granted against issuer for wrongful dishonor of otherwiseconforming draw on a letter of credit that contained a requirement that a copy of the defaultnotice to the draw documents “shall be subject to verification” by the issuing bank. Court heldthat the condition was ambiguous and not binding on the beneficiary.


• Should the court have said that issuer verification is a nondocumentary condition which theissuer should have ignored? See ISP Rule 4.11; UCP Art. 14(h); UCC §5-108(g)

• Should a bank issue or beneficiary accept a letter of credit with such a condition?

INJUNCTION AGAINST DRAW FOR FRAUD

8. Salam Air SAOC v. Latam Airlines Group SA, 2020 EWHC 2414 (Case No. CL-2020-000552(Sept. 8, 2020) (full text here; case report here). The plaintiff was the lessee of three aircraftleases supported by letters of credit. The airplanes were returned early to the lessor due to thecovid-19 virus and government orders making their use as intended by the lessee illegal. Thelessee then filed an ex parte action to enjoin the lessor-beneficiary from drawing under theletters of credit on the ground of commercial frustration. Under the leases, the lessee bore fullrisk of any loss, destruction, hijacking, theft, condemnation, confiscation, seizure or repudiationof or damage to the aircraft and for any other occurrence of whatever kind which deprives theoperator of the aircraft of its use, possession or enjoyment. The English High Court recitedprecedent which stated that enjoining a letter of credit required exceptional circumstances, thatletters of credit are vital for capital raises, enjoining a letter of credit violates the autonomy of the

https://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/Comm/2020/2414.html&query=(Salam)+AND+(Air)+AND+(SAOC)+AND+(v.)+AND+(Latam)+AND+(Airlines)+AND+(Group)+AND+(SA)


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credit separating it from the underlying commercial transaction, and subject to presentingconforming documents, the letter of credit is the equivalent of cash. The court acknowledgedthat draws under a letters of credit can be enjoined for fraud of an instrument presented or theunderlying transaction, but found no fraud alleged or shown.


• Is commercial frustration recognized as ground for enjoining a draw on a letter of credit inEngland or elsewhere?

• Should the result be the same in denying injunctive relief if the aircraft lease did not statethat all risks of interruption of use of the aircraft were on the lessee?

• Is there a different a different standard for enjoining a draw by the beneficiary vs. enjoininga payment under the letter of credit by the issuer?

9. El Ad US Holding Group, Inc. v. American International Group, Inc. 2020 NY Slip Op33819, 2020 WL 6746629 (N.Y. Sup. Ct., Nov. 17, 2020). Denies injunctive relief to prevent theinsurance company beneficiaries from drawing on a $5,000,000 standby letter of credit postedas security for the applicant’s indemnity liability for claims and premiums. The court reviewedthe requirements of US UCC §5-109(b) and determined that the draw was not fraudulent butinstead was a contractual dispute over the calculation of amounts due based on payroll andclaims losses.


• Can a false statement of default called for by the letter of credit be grounds for injunctiverelief to prevent a draw from being made or honored?

10. GP3 II, L.L.C. v. Bank of the West, 467 F.Supp.3d 765 (W.D. Mo. 2020). Involved a temporaryrestraining order (”TRO”) under US UCC §5-109(b) issued against the issuing bank from honoringand the beneficiary from drawing on a standby letter of credit securing the nearly $20 millionprice for piping ordered for a New Mexico water project. The court reviewed the requirements ofUCC §5-109(b) and determined, based on the evidence, that the contracted for pipe for whichthe beneficiary wanted to draw under the letter of credit was not in the possession of thebeneficiary and probably did not exist.


• How far must an applicant go to show fraud to enjoin the beneficiary?

• Can a party that purchases an invoice from the beneficiary that the letter of credit supportspayment of and that party also is an assignee of proceeds of the letter of credit, object to aninjunction against a drawing under the letter of credit as one of the protected parties exemptfrom injunctive relief for fraud by the beneficiary under UCC §5-109.


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11. Emergency Medical Services Authority v. American Medical Response AmbulanceService, Inc., 2020 WL 8513148 (N.D. Okla. Dec. 4, 2020). Plaintiff requested injunctive reliefagainst a draw on a $5,000,000 standby letter of credit securing obligations for dividing upgovernment payments for ambulance services in Oklahoma City and Tulsa. The court deniedinjunctive relief without reference to US UCC §5-109 because the plaintiff did not make a strongcase to show likelihood of success on the merits.

ISSUER INSOLVENCY

12. Granite Re, Inc. v. National Credit Union Admin. Board, 956 F. 3d 1041 (8th Cir. 2020).Involved the NCUA as receiver rejecting liability on an undrawn standby letter of credit posted tosecure insurance indemnity obligations of a contractor for outstanding surety bonds. TheEighth Circuit held that the beneficiary of a valid letter of credit may realize damages prior to thedate of the conservatorship as a result of its reliance on the letter of credit. The appellate courtrejected the views of the NCUA and the district court that an undrawn letter of credit in areceivership of the issuer does not support a cognizable claim against the assets of the insolventcredit union.


• How does this case compare with the US FDIC Policy Statement on Collateralized Lettersof Credit in the receivership of an insolvent bank issuer? That Policy, which was rescinded bythe FDIC on Dec. 23, 2019, contained language that letters of credit could be rejected by thereceiver in most cases because they were unliquidated contingent obligations.3

13. Lexon Insurance Co. v. FDIC, 2020 WL 972708 (E.D.La., Feb. 28, 2020) (appeal to 5thCircuit pending). Involved a repudiation of two standby letters of credit by the FDIC as thebank’s receiver that supported approximately $10,000,000 in bonds because no draw hadoccurred at the time of the receivership. Prior to receivership, the bank entered into a consentorder by which it agreed not to extend, directly or indirectly, any additional credit to or for thebenefit of any borrower whose extension of credit is classified doubtful and/or substandardunless the Bank’s board signed a detailed written statement giving reasons why failure to extendsuch credit would be detrimental to the best interests of the bank. The bank failed to send outnonrenewal notices on the two letters of credit supporting bonds even though the bond creditwas substandard. The bondholders sued the FDIC on the ground that it had a duty to enforcethe consent order to protect the bondholders. The court held the FDIC had no such duty.

POST HONOR CLAIMS RESULTING FROM A DRAW UNDER A LETTER OF CREDIT

14. ADA-ES, Inc. v. Big Rivers Electric Corp., 2020 WL 6877740 (W.D. Ky. Nov 23, 2020). BigRiver (beneficiary) drew $807,651 under a standby letter of credit posted by ADA (applicant)supporting applicant’s contract to provide and install an emissions reduction system forbeneficiary’s power plant. The court determined that beneficiary invalidly tested the systemsold and installed by applicant and inexcusably withheld from applicant the final contract paymentof $563,382. The legal effect of this action put beneficiary, not applicant, in breach.)


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• Is this a US UCC §5-110 breach of warranty case or a breach of contract case? Does itmatter? What about the award of attorneys’ fees under UCC §5-111(e)?

15. Solferini, as Trustee of Corradi S.P.A. v. Corradi USA, Inc., 2020 WL 1511315 (E.D. Tex,Mar. 30, 2020). The defendant U.S. subsidiary of a now bankrupt Italian corporation benefitedfrom a drawing under a standby letter of credit posted by the parent to secure loans for thebenefit of its subsidiary. The trustee for the bankrupt Italian parent claimed that the proceedswere the parent’s money and should be repaid as if it were a loan. The court denied recoveryon the ground that the funds were those of the issuing bank.


• Is this, or should this have been, a case of subrogation under either UCC §5-117 or undercommon law subrogation rights?

16. EFLO Energy v. Devon Energy Corp., 2020 WL 4925741 (W.D.Okla. March 9, 2020). EFLO(applicant) posted a standby letter of credit to Devon Energy (beneficiary) to support an exchangeof oil and gas properties. Beneficiary threatened to draw on the letter of credit unless it wasextended within a two-week period. Four days before the two-week period ended, beneficiarydrew under the letter of credit. Applicant claimed fraud and misrepresentation. The court wasskeptical that applicant could show damages more than four days’ of efforts to secure anextension or replacement letter of credit.


• Would an extend-or-draw provision work in this situation?

17. Emergency Medical Services Authority v. American Medical Response AmbulanceService, Inc., 2021 WL 1298927 *N.D. Okla. Apr. 7, 2021). After the plaintiff’s preliminaryinjunction request was denied, the defendant drew on the $5,000,000 standby letter of creditsecuring plaintiff’s payment obligations under a contract dividing ambulance services in Tulsaand Oklahoma City. Even though the court denied a preliminary injunction against the draw, itrefused to dismiss plaintiff’s complaint that the draw was wrongful.

18. Cassidy v. Signature Bank, 2021 IL App (1st) 191781-U (Mar. 25, 2021). Bank took two IRAsof an individual as collateral for two letters of credit used to support the applicant’s constructionbusiness as well as other business loans. When the business closed, the bank set off thedeposits constituting the IRA accounts against the business loans even though the letters ofcredit were not drawn upon. The court stated that the bank could not do so, since the IRAsrepresented special deposits.


• Why didn’t the pledging of the IRAs to secure the letters of credit disqualify them fromconstituting special deposits?


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FAILURE TO FURNISH LETTER OF CREDIT

19. Source Giant Springs, Inc. v. Greenberg Investment, LLC, 2021 WL 1087501 (D. Mont.Feb. 21, 2021). Many cases are filed claiming breach of contract for failure to provide a letter ofcredit, but few require the defendant to provide a letter of credit. This case does in a defaultjudgment order. The defendant signed a purchase agreement which required it to provide adraft standby letter of credit to secure a contract for the purchase of a company and onceapproved, to cause an original of the letter of credit to be issued. The court ordered the defaultingdefendant to do so.

LETTERS OF CREDIT IN LEASE TRANSACTIONS

20. Backal Hospitality Group LLC v. 627 West 42nd Retail LLC, 2020 WL 4464323 (N.Y. CountySup. Ct., Aug 3, 2020). The Tenant leased a conference center from the beneficiary landlord,had to close its business due to the Covid 19 virus and turned the keys over the landlord. Thelandlord then drew on the tenant’s LC which supported the tenant’s obligations under the lease.The tenant filed mandatory injunction to return to it the letter of credit proceeds or post a bondfor them due to virus and surrender of keys. The lease was well drafted in favor of the landlord,including anti-waiver clauses and reservation of all rights upon surrender the keys to and/orvacating the premises and terminating the lease.

21. 228E58STR LLC v. Koleksiyon Mobilya San A.S., 2020 WL 4260959 (S.D.N.Y. July 23,2020). Lease guarantor unsuccessfully argued that its guaranty was a “good guy” guaranty,pursuant to which defendant’s liability is limited to the amounts owed by tenant to the landlordthrough the surrender date. The guarantor’s guaranty was supported by a “clean, automaticallyself-renewing, non-expiring, irrevocable and freely transferable letter of credit” secured.

22. Thor 680 Madison Ave. LLC v. Qatar Luxury Group S.P.C., 2020 WL 2748496 (S.D.N.Y.May 27, 2020). Lessee unsuccessfully argued that the landlord’s drawing $12 million under astandby letter of credit posted by an affiliate guarantor to support the lease constituted anelection of remedies under the lease.

23. BP 510 Madison LLC v. Prosiris Capital Management LLC, 66 Misc.3d 1210(A), 120 N.Y.S.3d718 (Civil Crt. Jan. 16, 2020). Court refused to count the landlord’s $1.3 million draw on astandby letter of credit posted to support the lease as a reduction of amount necessary for thetenant to post to stay execution of the court’s judgment of unpaid holdover rent.

24. Dietzek v. Voorhees White Horse, LP, 2020 WL 3579668 (N.J. Super A.D. July 1, 2020).Lessee requested the court to require the landlord to submit documentation to the issuing bankto reduce the tenant’s standby letter of credit posted as a security deposit for the lease. Thelessee argued that the letter or credit should be reduced for each year elapsed on the lease.Because the lease did not require reduction of the letter of credit for each year the lessee paidrent, the court did not order it.


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LETTERS OF CREDIT IN BANKRUPTCY

25. In re Kimmel’s Coal and Packaging, Inc., 2020 WL 5576960 (Bankr. M.D. Pa. June 1, 2020).Issuing bank’s two standby letters of credit supported coal mining reclamation obligations underpermits on land not owned but mined by the bankrupt debtors. The Bankruptcy Code §363 saleorder did not obligate the purchaser to replace or assume liability for the debtor’s outstandingletters of credit unless the mining permits and leases for the mining properties were transferredto the buyer, which they were not. However, the sale order provided for transfer of all of thedebtor’s assets free and clear of all liens and mortgages, including the issuing bank’s liens.Issuer was left with outstanding unreplaced and uncollateralized letters of credit supportingcoal mining reclamation obligations.

26. In re RTW Retailwinds, 2020 WL 7330061 (Bankr. D.N.J. Dec. 8, 2020). Outstanding standbyletters of credit to insurance companies totaling $6.1 million secured the debtor’s workers’compensation and other obligations that were mistakenly listed on a schedule to the sale orderindicating that they were to be replaced by the purchaser of the debtor’s assets. Even thoughthe purchaser did not assume the contracts or obligations which the letters of credit supported,the court upheld its obligation to replace them under the wording of the asset purchaseagreement.

27. In re Duro Dyne National Corp., 2020 WL 6270691 (D.N.J. Oct. 29, 2020). Showed how toproperly word and structure a §363 order and sale to have the buyer assume and replaceletters of credit. The sale order identified which letters of credit on lease obligations were to bereplaced or cash collateralized by the purchaser and which ones were not to be replaced orassumed by the purchaser. For letters of credit assumed by the purchaser, the purchaseralso assumed the indemnity obligations with respect to them.

28. In re Lucky Brand Dungarees, LLC, 2020 WL 4698654 (Bankr. D.Del. Aug. 12, 2020). The§363 sale order was specific as to which letters of credit would be cash collateralized at 105%or replaced by the buyer. For avoidance of doubt, the buyer was to have no liability to replace,settle, or collateralize any standby letter of credit: (i) to the extent the inventory relating to it hasbeen included in the calculation of the debtor’s inventory being purchased or (ii) that related toa debtor’s lease unless and until the lease was assumed by the buyer.

JURISDICTION OVER ISSUER

29. United Coals, Inc. v. Attijariwafa Bank, 2020 WL 1866426 (N.D.W.Va. Apr. 14, 2020) (fulltext here; case summary here). A Moroccan bank was sued in West Virginia for allegedlyrepresenting to a West Virginia coal seller that the bank would issue to it a letter of credit tosupport a Moroccan buyer’s order to purchase coal from the coal seller. The court held theallegations showed sufficient contacts in West Virginia by the issuing bank’s representatives tocome within the jurisdiction of that state’s courts under its long arm statute. (CLC)


• What good practices should issuers put in place to avoid suit or liability for purportedlyrepresenting or agreeing to furnish a letter of credit?

https://scholar.google.com/scholar_case?case=844735849912428675&q=United+Coals,+Inc.+v.+Attijariwafa+Bank&hl=en&lr=lang_en&as_sdt=20000006&as_vis=1


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LETTER OF CREDIT SCAMS

30. Booth Creek Management Corporation v. New Executive Group Limited, 2020 WL4760163 (Tex.App. Aug. 18, 2020). Involved an investment in two sham 750 million letters ofcredit based on phony SWIFT transcripts.

31. U.S. v. Taylor, 2020 WL 2078301 (N.D.Cal. Apr. 29, 2020). Involved a letter of credit fraudscheme for potentially tens of millions of dollars by generation of false letterhead, phonycontracts, SWIFT verbiage, fake financial documents, a website containing false information, avariety of email accounts, and several false identities.

32. United States v. Smith, 2020 WL 6568865 (W.D.Tenn. Nov. 9, 2020). Defendant was convictedfor conspiracy to defraud a bank by participating in a scheme to convert $3.9 million of checkkiting losses into a loan backed by a forged letter of credit.

33. Adolas, LLC v. Alexander Andrews & Associates, LLC, 2020 WL 1274494 (D.Col. Mar. 17,2020). Involved a $2 million advance fee scam paid into a law firm escrow account that wasquickly emptied and not used to procure an $18 million letter of credit for supposed purchase ofsugar in Brazil for sale and delivery to Djibouti, Africa.

June 2021 ■ Documentary Credit World 11

LITIGALITIGALITIGALITIGALITIGATION DIGESTTION DIGESTTION DIGESTTION DIGESTTION DIGEST

* Dr. Soh Chee Seng is Technical Consultant to the Association of Banks inSingapore (ABS), Associate Director of the Institute of International BankingLaw & Practice, and a Contributing Editor of Documentary Credit World.

Bank of China Ltd, Singapore Branchv. BP Singapore Pte Ltd

[2021] SGHC 120 (Singapore)

Abstracted by Dr. SOH Chee Seng*

Topics: Commodity Financing; Bills of Exchange;Fraud; Fraudulent Misrepresentation;Negligent Misrepresentation; Misstatement;Conspiracy; Unjust Enrichment

Type of Lawsuit: Issuing Bank sued Beneficiary to rescind threeletters of credit and recover funds paid and/ordamages and other relief.

Parties: Plaintiff/Issuing Bank – Bank of China Ltd,Singapore Branch (Counsel: Jason Chan SC,Tan Xeauwei, Melissa Mak, Afzal Ali,Marrissa Miralini Karuna, and RachealWong Shu Yi of Allen & Gledhill LLP)

First Defendant/Beneficiary – BP SingaporePte Ltd (Counsel: Harpreet Singh NehalSC, Jordan Tan, and Victor Leong,instructed by Audent Chambers LLC; andChew Kei-Jin, Samantha Ch’ng, and TyneLam of Ascendant Legal LLC)

Applicant – Hin Leong Trading (Pte) Ltd

Second Defendant – O K Lim, ManagingDirector of Hin Leong and Ocean Tankers(Pte) Ltd

Third and Fourth Defendants – O K Lim’sdaughter and son, shareholders anddirectors of Hin Leong and Ocean Tankers

UnderlyingTransaction: Sale of gasoil under a repurchase arrangement.

12 Documentary Credit World ■ June 2021


Dr. SOH Chee Seng

Instruments: Three commercial letters of credit subject toUCP600.

Decision: The High Court of Singapore, Maniam, JC,rejected an appeal by Beneficiary to strike offfraud accusation levelled by Issuing Bank.

Factual Summary:Bank of China Ltd, Singapore Branch (Issuing Bank) provided

credit facilities to Hin Leong Trading (Pte) Ltd (Applicant) for thepurpose of financing Applicant’s purchase of petroleum productsfrom sellers acceptable to the Issuing Bank. In early 2020, threecommercial letters of credit were issued in favour of BPSingapore Pte Ltd (Beneficiary). Each LC was issued in respect ofthe purchase of gasoil under a purported contract betweenApplicant and Beneficiary. Each purported purchase contract wason a back-to-back basis in which Applicant purported to sell toBeneficiary the same quantity of gasoil and Beneficiary purportedto sell back to Applicant at a higher price. Issuing Bank did not know of the nature of this back-to-back arrangement.

The LCs required presentation of commercial invoices and letters of indemnity (LOIs) issued byBeneficiary in a form prescribed under the LCs if the shipping documents were not available uponnegotiation, the shipping documents being: a full set of the original bills of lading plus three non-negotiable copies, a copy of the certificate of quality, a copy of the certificate of quantity, and a copyof the certificate of origin.

Beneficiary presented commercial invoices and LOIs under the LCs to Issuing Bank for payment.As on the face of the documents they appeared to comply with the terms and conditions of the LCs,Issuing Bank honoured the documents and paid Beneficiary.

On 27 April 2020, Applicant fell into financial distress and was placed under interim judicialmanagement and subsequently under judicial management on 7 August 2020. By 8 March 2021 whenit was wound up, Applicant had not reimbursed Issuing Bank the money which Issuing Bank paidBeneficiary under the LCs.

On 22 June 2020, the interim judicial managers issued a report (IJM Report) stating that they haduncovered a significant number of irregularities of Applicant’s transactions. The IJM Report detailed27 back-to-back transactions involving cargo that did not exist. Three of those transactions and LCsare those in respect of which Issuing Bank had honoured and paid Beneficiary USD 125 million.

Issuing Bank sued Beneficiary to rescind the three LCs and recover the money paid and/ordamages and other relief. Issuing Bank asserted four causes of action against Beneficiary:

1. Fraud, i.e. deceit and/or fraudulent misrepresentation;

June 2021 ■ Documentary Credit World 13

2. Negligence, i.e. negligent misrepresentation/misstatement;

3. Conspiracy (with the individual defendants, or any of them); and

4. Unjust Enrichment.

Issuing Bank also claimed against the individual defendants damages for inducing breach ofcontract and/or conspiracy.

Beneficiary applied to dismiss all claims on the basis that Issuing Bank’s statement of claimdiscloses no reasonable cause of action against it.

Judgement:The registrar who heard the application dismissed Issuing Bank’s negligence claim and its claim in

unjust enrichment independent of fraud. He permitted Issuing Bank to continue with its claimsagainst Beneficiary in fraud, conspiracy, and unjust enrichment involving fraud. Issuing Bank andBeneficiary both appealed.

Legal Analysis:1. Does Issuing Bank have a reasonable cause of action in negligence?: The High Court viewed

that the commercial invoices and LOIs were issued and presented by Beneficiary to Issuing Bank toobtain payment under the LCs. Although Beneficiary was not a third party, that does not necessarilymean it was under no duty of care to Issuing Bank. Issuing Bank’s negligence claim againstBeneficiary does have some prospect of success. The High Court reversed the registrar’s decision todismiss that claim.

2. Does Issuing Bank have a reasonable cause of action in fraud?: The High Court consideredthat Issuing Bank did have an arguable case on whether Beneficiary was fraudulent, at least in thesense of Beneficiary being reckless in not caring whether the goods existed and/or lacking an honestbelief in the existence of the goods. The Judge agreed with the registrar that Issuing Bank’s fraudclaim should not be dismissed.

3. Conspiracy: On appeal, Beneficiary contended that even if the fraud claim were allowed tostand, the conspiracy claim should be struck out because Issuing Bank had not identified theindividuals in Beneficiary who allegedly engaged in the conspiracy. The Judge rejected this notionand agreed with the registrar that Issuing Bank’s claim on conspiracy should not be struck out.

4. Unjust Enrichment: The registrar dismissed this claim in part and allowed Issuing Bank toassert unjust enrichment further to its claim in fraud, but not independent of fraud.

The High Court allowed Issuing Bank’s appeal and dismissed Beneficiary’s appeal.

Comments:The conclusion by the Judge does not make any judgement on the allegations claimed by Issuing

Bank but rather allows Issuing Bank’s lawsuit to proceed. It seems that the burden on beneficiariesin this case and other cases related to the Hin Leong debacle could be far–reaching, especially if LC-required documents are issued and presented by beneficiaries under LCs. ■


12 Documentary Credit World ■ May 2021


CAMA (Luoyang) Aviation Protective Equipment Co.v. UBAF (Hong Kong) Limited

[2018] (Supreme Court Civil Retrial No. 1216)[P.R. China]

Abstracted by Jun XU1

Topics: Independent Bank Guarantee; Injunction;Effectiveness; URDG758; Fraud; AdvancePayment Guarantee; Performance Guarantee;Good Faith; Abusive Demand; Discrepancy;Extend or Pay Request; Payment Suspension;Non-Documentary Condition; Jurisdiction;Separate Demand

Type of Lawsuit: Instructing Party and Transferee of SubcontractAgreement sued Beneficiary, Guarantor,Supplier and Sub-Supplier and requested courtto prohibit Counter Guarantor from honoringGuarantor’s claim due to independentguarantee fraud. The trial court, the HenanHigh People’s Court, dismissed the action.Plaintiffs appealed to the Supreme People’sCourt of P.R. China.

Parties: Appellant/Plaintiff/Instructing Party –CAMA (Luoyang) Aviation ProtectiveEquipment Co., P.R. China

Appellant/Plaintiff/Transferee of SubcontractAgreement – Luoyang AviationEngineering Construction Co., P.R. China

Appellee/Defendant/Beneficiary/Contractor –Korea Hyundai Engineering andConstruction Co., Korea

Appellee/Defendant/Applicant/Supplier –Qatar Hyojong Industrial Co., Qatar

1. Jun Xu is Deputy General Manager at Bank of China, Jiangsu Branch,China. She is a member of ICC Banking Commission’s Executive Committee,ICC Market Intelligent Team, ICC Global Survey of Trade Finance EditorialTeam, Global Supply Chain Finance Forum(GSCFF), ICC China BankingCommittee Forfeiting and Factoring Expert Team. She is also co-leader of ICCSCF Rules Drafting Team, ICC DOCDEX expert, team leader of ICC ChinaBanking Committee Translation Expert Team, and a DCW Editorial AdvisoryBoard member.

May 2021 ■ Documentary Credit World 13


Appellee/Defendant/Applicant/Sub-Supplier –Luoyang Aviation Construction (Qatar)Co., P.R. China

Appellee/Defendant/Guarantor –UBAF (Hong Kong) Limited, Hong Kong

Counter Guarantor – Bank of China, HenanBranch, P.R. China

Sub-Supplier’s Bank – Commercial Bank ofQatar

Presenting Bank – Korea Exchange Bank, Korea

Underlying XUTransaction: Supply and assembly services of steel pipe piles.

Bank Guarantees: Counter performance guarantee and counter advance payment guarantee forUSD5,980,833.40 each. Performance guarantee and advance payment guarantee.Counter guarantees and guarantees were issued subject to URDG758.

Decision: The Supreme People’s Court of P.R. China reversed the decision of trial court andordered Counter Guarantor to terminate payment to Guarantor under the counteradvance payment guarantee, but make payment under the counter performanceguarantee, and dismissed other claims by Appellants.

Rationale: Guarantor committed guarantee fraud and did not act in “good faith” when itdemanded payment from Counter Guarantor based on Beneficiary’s presentationunder the local guarantee inasmuch as the presentation was discrepant. Whenthere is no evidence of Guarantor fraud in its demand and Counter Guarantordoes not honor Guarantor’s demand as a result of the injunction order, CounterGuarantor is not necessarily exempted from its payment obligations and shallhonor a complying presentation once the injunction order expires or is lifted.

Factual Summary:On 2 November 2010, Beneficiary signed a contract with Supplier for the supply of steel pipe piles

for USD59,808,334, with 10% of the total contract price required as advance payment. The contractrequired Supplier to provide an unconditional and irrevocable performance bank guarantee and anadvance payment bank guarantee each for 10% of the contract price.

After Supplier signed a Subcontract Agreement with Sub-Supplier, on 8 December 2010 Sub-Supplier signed an Agreement of Transfer with Transferee, who was responsible for the performanceof the Subcontract Agreement and the advance payment and project payment under the SubcontractAgreement were to be transferred directly to Transferee. Issuance of bank guarantees was to besought by Transferee or its affiliates.



On 31 December 2010, Counter Guarantor issued a counter performance guarantee and a counteradvance payment guarantee (counter guarantees) on the instruction of Transferee in favor ofGuarantor with Supplier and Sub-Supplier as the guaranteed parties (Co-Applicants). Both counterguarantees were to expire 30 January 2012. The counter advance payment guarantee was to becomeoperative following receipt by Sub-Supplier of the advance payment of USD5,980,833.40 fromBeneficiary through Supplier. Counter Guarantor stated under both counter guarantees that theywould be paid “[u]pon receipt by us of your first demand through authenticated SWIFT messagequoting our counter-guarantee reference number and issuing date and stating that you have receiveda first demand in writing for payment under your advance payment [performance] guarantee inaccordance with the terms the guarantee quoted above.”

That day, Guarantor issued the requested performance guarantee and advance payment guarantee(local guarantees) in favor of Beneficiary. The advance payment guarantee stipulated that it shouldbecome effective from the time of actual receipt by Supplier of the advance payment fromBeneficiary. It also stated it would expire on 31 December 2011 or at such time as Beneficiary mightinform Guarantor of completion of the performance contract, whichever came earlier.

(1) Demand under the Advance Payment GuaranteeOn 14 January 2011, in response to Guarantor’s inquiry, Counter Guarantor informed Guarantor

by SWIFT of the Sub-Supplier’s account information as account no. 45***001 with Commercial Bank ofQatar (hereafter account no. 001).

On 11 February 2011, Guarantor notified Counter Guarantor that Commercial Bank of Qatar hadinformed it that Supplier had paid USD5,980,833.40 into Sub-Supplier’s account no. 45***051(hereafter account no. 051). Guarantor stated that the counter advance payment guarantee thereforebecame effective on the day of crediting the advance payment to Sub-Supplier’s account.

On 6 December 2011, Counter Guarantor informed Guarantor by SWIFT that it had receivedpayment suspension orders under the counter guarantees on 5 December 2011. Counter Guarantoralso stated that Sub-Supplier had notified it of non-receipt of the advance payment from Supplier,and requested Guarantor to confirm whether Supplier had paid the advance payment to Sub-Supplier’s account no. 001 at Commercial Bank of Qatar.

The same day, Beneficiary claimed under the advance payment guarantee from Guarantor throughKorea Exchange Bank (Presenting Bank), stating that Supplier and Sub-Supplier violated theircontractual obligations.

On 9 December 2011, Guarantor claimed via SWIFT under the counter advance payment guaranteefrom Counter Guarantor, advising of its receipt of Beneficiary’s first demand in writing. Guarantorfurther stated that the counter advance payment guarantee had become effective, as CommercialBank of Qatar had confirmed transfer of the total advance payment amount from Supplier’s accountto Sub-Supplier’s account held with them in three installments in February 2011.

On 14 December 2011, Guarantor sent its refusal notice to Presenting Bank stating: “(a) Thefollowing discrepancy, namely that, contrary to Article 15 of Uniform Rules for Demand Guarantees(ICC Publication No. 758), your client’s demand is not supported by a statement, by your client as



the beneficiary, indicating in what respect Supplier and Sub-supplier as a consortium [Co-Applicants]are in breach of their obligations under the underlying relationship, and (b) evidence provided to usthat your client’s demand was made fraudulently.”

On 15 December 2011, Counter Guarantor rejected Guarantor’s 9 December demand by SWIFTMT799 for the following discrepancies: “Your demand does not state that ‘we have received a firstdemand in writing for payment under our advance payment guarantee in accordance with the termsof the guarantee.’” Counter Guarantor also informed that Luoyang Intermediate People’s Court hadissued a court injunction due to the infringement dispute. The same day, Guarantor sent a reviseddemand by SWIFT to Counter Guarantor stating “we have received a first demand in writing forpayment under our advance payment guarantee in accordance with the guarantee quoted above.”

On 21 December 2011, Counter Guarantor informed Guarantor via SWIFT that it was unable tomake payment due to the court injunction. Meanwhile, Beneficiary filed a lawsuit against Guarantorwith the Hong Kong SAR High Court under the advance payment guarantee and Guarantorpetitioned to list Counter Guarantor as the third party. Hong Kong SAR High Court upheld CounterGuarantor’s objection to jurisdiction.

On 24 October 2012, Court of First Instance of Hong Kong SAR High Court issued its decision(No. HCA 175/2012)2 and ordered Guarantor to pay USD5,552,787.75 with interest to Beneficiaryunder the advance payment guarantee. According to the court’s order, Guarantor paid the principalamount, interest, commissions, and legal costs in several installments over the next 13 months.

2. Hyundai Engineering & Construction Co. v. UBAF (Hong Kong) Ltd. [2012] HKCFI 1628, HCA 175/2012 [Hong Kong],2013 ANNUAL REVIEW OF INTERNATIONAL BANKING LAW & PRACTICE, p. 414-415, (reprinted below).

Hyundai Engineering & Construction Co. v. UBAF (Hong Kong) Ltd.[2012] HKCFI 1628, HCA 175/2012 [Hong Kong]

Topics: Injunction; Choice of Law; Jurisdiction, Multiple Suits; Counter Guarantees; URDG758Article 34(a), URDG758 Article 35(a)

Note: In connection with the supply of steel piles through a series of subcontracts by LuoyangAviation Engineering Construction Co. Ltd (Applicant/Sub-Supplier), a Mainland ChineseCompany, Hyundai Engineering & Construction Co. (Beneficiary/Contractor), a Korean Company,made an advance payment of USD 5,980,833.40. To assure performance, UBAF (Hong Kong) Ltd(Guarantor) issued an advance payment guarantee and a performance guarantee in favor ofContractor subject to URDG 758.

The Advance Payment Guarantee of USD 5,980,833.40 provided for honour “upon receipt by[Guarantor] of a first demand in writing stating the following information: (i) the referencenumber and date of the guarantee under which the claim is made; (ii) the amount which isclaimed; and (iii) the supplier ... and [Sub-Supplier/Applicant] as a consortium is in breach of itsobligation under the Contract.”

To induce Guarantor to issue the guarantees, Sub-Supplier obtained two counter guarantees infavor of Guarantor issued by Bank of China, Henan Branch (Counter Guarantor).



When Applicant/Sub-Supplier failed to deliver the goods, Beneficiary/Contractor demandedpayment under the Advance Payment Guarantee. Although it was conceded that at least onedemand complied, Guarantor failed to honour its undertaking because Sub-Supplier had obtainedan injunction in the courts of Henan Province, China, against Beneficiary/Contractor and theCounter Guarantor against drawing on it or honouring it and later filed a civil complaint.

Subsequently, Beneficiary sued Guarantor for wrongful dishonour in Hong Kong and movedfor summary judgment whereupon Guarantor applied for a stay of proceedings in deference tothe Mainland China litigation. The Hong Kong SAR High Court, Lok, J., granted summaryjudgment in favor of Beneficiary and dismissed the application for a stay of proceedings.

Citing case law, the Judge ruled that the only manner in which a party could dispute a drawingon an irrevocable LC was on the basis of fraud because an LC is not dependent on the merit ofthe underlying contract and that all that is required is that the documents be in order. The Judgealso ruled that the Applicant/Sub-Supplier and Guarantor had failed to meet the applicableheightened test for fraud stating, “particularly cogent evidence is required to establish the fraudexception.” (¶20) The Judge ruled that in the matter at hand, “the defence of fraud here is just amere allegation without sufficient proof.” (¶22) The Judge also reasoned that “[t]he demand forpayment dated 19 December 2011 states that [Supplier to Sub-Supplier] has failed to meet thecontractual delivery schedule as provided for in the Contract. It also refers to the fact that theadvance payment of US$ 5.98 million has not been returned. The question then has to be asked iswhether there is evidence to suggest that [Beneficiary/Contractor] could not have honestlybelieved in the validity of this demand.” (¶24)

The Judge stated that “since there is no reason given by the Mainland Court for its decision, Ido not know the factual and legal basis as to why the Mainland Court has granted the Injunctionagainst the relevant defendants. As I have mentioned above, the materials contained in the CivilComplaint hardly support an allegation or inference of fraud, and I do not know whether theMainland laws on the issues of fraud and performance bond are the same as those in Hong Kong.Hence in my judgment, [Guarantor] has simply failed to discharge the burden of establishing ameritorious defence in the present case.” (¶33)

The Judge also noted that “[t]he Advance Payment Guarantee was governed by [URDG758].Since the [Advance Payment Guarantee] was issued by [Guarantor] in Hong Kong, the governinglaw is Hong Kong law (see: Article 34(a) of [URDG758]) and there is an exclusive jurisdictionclause in favour of the Hong Kong courts in relation to any dispute between [Beneficiary/Contractor] and [Guarantor] relating to the [Advance Payment Guarantee] (see: Article 35(a) of[URDG 758]). Given such circumstances, [Guarantor] has simply failed to demonstrate that theMainland Court is clearly and distinctly the more appropriate forum to adjudicate [Beneficiary/Contractor]’s claim.” (¶36)

Guarantor had also argued that it was excused from its obligations because it had not beenpaid on the Counter Guarantees in its favor. The Judge stated that the failure of the CounterGuarantee “is not a valid reason ... since Article 5 of [URDG758] provides that the twoinstruments are separate and independent. Hence, to the extent that the Mainland proceedingsare relevant to the [Counter] Guarantees and the ability of [Counter Guarantor] to effect paymentthereon, this has no relevance to this case.” (¶42) ■

[JEB/sb]



(2) Demand under the Performance GuaranteeA few weeks after claiming under the advance payment guarantee, on 29 December 2011,

Beneficiary claimed under the performance guarantee from Guarantor, again through KoreaExchange Bank (Presenting Bank), due to violation of the contract by Supplier and Sub-Supplier, andrequested Guarantor to pay or, alternatively, to extend the expiry date to 31 March 2012.

Guarantor sent a demand by SWIFT to Counter Guarantor on 30 December 2011, informing of itsreceipt of Beneficiary’s complying demand under the performance guarantee and requested CounterGuarantor to make payment or, alternatively, to extend the expiry date of the counter performanceguarantee to 30 April 2012.

On 10 and 21 January 2012, Counter Guarantor notified Guarantor via SWIFT that it was unable tomake payment due to the injunction order issued on 5 December 2011 by Henan IntermediaryPeople’s Court.

On 12 January 2012, Guarantor informed Presenting Bank that it would neither payUSD5,980,833.40, nor extend the expiry date to 31 March 2012. Referring to URDG758 Article 23(a),Guarantor stated that it would suspend payment for a period not exceeding 30 calendar daysfollowing its receipt of the demand due to the extension or payment request by Beneficiary andpayment would not be made before 28 January 2012.

After Guarantor paid Beneficiary under the performance guarantee on 3 July 2013, Guarantoragain sought payment from Counter Guarantor, stating that it had honored Beneficiary’s validdemand and that the Hong Kong SAR High Court had examined all evidence presented to LuoyangIntermediary People’s Court and found no proof of Beneficiary fraud.

On 2 August 2013, Counter Guarantor responded again that it was still unable to honor due to thecourt’s injunction order.

The trial court, the Henan High People’s Court, dismissed the Plaintiffs’ claims.

On appeal, the Supreme People’s Court overturned the trial court’s decision, ordering CounterGuarantor to terminate payment obligations to Guarantor under the counter advance paymentguarantee, but make payment under the counter performance guarantee.3 The court dismissed allother claims by the Appellants.

Legal Analysis:1. Jurisdiction: Both the Supreme People’s Court and the trial court considered the dispute a

foreign-related business case as Beneficiary, Supplier and Sub-Supplier were all foreign legalidentities.

3. Guarantor also sued Counter Guarantor in another legal case under the same counter guarantee transactions. Onappeal, the Supreme People’s Court ([2018] Supreme Court Civil Retrial No. 880, [P.R. China]) also overturned the trialcourt’s decisions and ordered Counter Guarantor to honor Guarantor’s demand under the counter performanceguarantee.



The Supreme People’s Court decided that, according to the interpretations of “IndependentGuarantee”4 in Article 1 and “Independent Guarantee Disputes”5 in Article 2 of PRC IndependentGuarantee Provisions, the local guarantees and counter guarantees were independent demandguarantees based on their content and the payment obligations of Counter Guarantor and Guarantorwere independent of the underlying transaction and guarantee application.

The Supreme People’s Court considered that since the case involved foreign-related independentguarantee disputes, matters of contract performance and applicable law should be determinedseparately. The Supreme People’s Court determined that PRC law should govern the case and it wasimproper for the trial court to determine applicable law only according to the conflict of laws offoreign-related tort responsibility.

The Supreme People’s Court decided that applicable law for the fraud dispute should be PRC lawbecause URDG758 did not cover guarantee fraud issues. As the business place of the CounterGuarantor and issuance and payment of the counter guarantee were all in China, the SupremePeople’s Court determined that the case should also be governed by PRC law according to Law of theApplication of Law for Foreign-related Civil Relations of the People’s Republic of China Articles 416 and 44,7

and Article 228 of the PRC Independent Guarantee Provisions. The court also noted that the parties didnot exclude URDG758 Article 34(b).

4. PRC Independent Guarantee Provisions Article 1 [Key Terms] provides, in part: “For the purpose of theseProvisions, “Independent Guarantee” refers to an undertaking given in writing by a bank or a non-bank financialinstitution as the Issuer to the Beneficiary, by which the Issuer undertakes to pay the Beneficiary an amount up to themaximum amount of the guarantee upon the Beneficiary’s demand for payment and presentation of documentscomplying with the terms and conditions of the Guarantee.”

5. PRC Independent Guarantee Provisions Article 2 [Scope] provides: “For the purpose of theseProvisions,“Independent Guarantee Disputes” refers to disputes arising out of the issuance, revocation, amendment,transfer, payment and reimbursement and so forth of Independence Guarantees.”

6. Article 41: The parties concerned may choose the laws applicable to contracts by agreement. If the parties do notchoose, the laws at the habitual residence of the party whose fulfillment of obligations can best reflect the characteristicsof this contract or other laws which have the closest relation with this contract shall apply.

7. Article 44: The laws at the place of tort shall apply to liabilities for tort, but if the parties have a mutual habitualresidence, the laws at the mutual habitual residence shall apply. If the parties choose the applicable laws by agreementafter any tort takes place, the agreement shall prevail.

8. PRC Independent Guarantee Provisions Article 22 [Choice of Law] states, in part:

“Where no governing law is specified in a foreign-related Independent Guarantee, and the Issuer and theBeneficiary fail to reach consensus on the governing law prior to conclusion of court arguments in the trialproceedings, the dispute between the Issuer and the Beneficiary shall be governed by the law of the Issuer’shabitual residence; and where an Independent Guarantee is issued by a legally registered branch of a financialinstitution, the law of the branch’s registration place shall govern.”

“In relation to disputes of foreign-related Independent Guarantee fraud, if the parties fail to reach consensus on thegoverning law, the law of the habitual residence of the Issuer of the Independent Guarantee, under which thepayment is requested to be suspended, shall govern. Where an Independent Guarantee is issued by a legallyregistered branch of a financial institution, the law of the branch’s registration place shall govern. Where theparties have the same habitual residence, the law of such habitual residence shall govern.”



The Supreme People’s Court did not support the arguments by Appellants that a court in Chinamay only hear the dispute regarding the Guarantor’s demand under the counter guarantee and didnot have jurisdiction concerning post-payment reimbursement by Counter Guarantor to Guarantor.The Supreme People’s Court referred to PRC Independent Guarantee Provisions Article 2 which includesdisputes arising out of reimbursement and considered the scope of hearing the case should includereimbursement.

2. Guarantee Fraud: The trial court rejected Appellants’ arguments that Beneficiary had madefraudulent demands under the guarantees and the payments by Guarantor under the two guaranteeswere not malicious.

The trial court determined that based on PRC Independent Guarantee Provisions Article 14,9 the courtshould examine whether the Guarantor’s payments were made in good faith under the localguarantees. The trial court did not consider the Guarantor’s action of accepting the Hong Kong SARHigh Court’s decision and making payment as malicious, nor did it contradict ICC’s ‘pay first, arguelater’ principle, said the trial court, for processing demands under independent guarantees.Furthermore, the trial court determined that Appellants failed to provide evidence that Co-Applicants had performed their obligations under the Contract; instead, Appellants only stated thatone Co-Applicant – Supplier – was in breach of the underlying contract.

The trial court did not accept Appellants’ arguments that the demands presented by Guarantor on9 and 15 December 2011 under the counter advance payment guarantee were untrue and that therewere contradictory statements. The trial court did not find that Guarantor committed fraud,therefore payment should not be terminated under the counter advance payment guarantee. Itdecided that, even if the Beneficiary’s demands were discrepant or contradictory, Guarantor’s rightto make a separate demand should not be prohibited according to URDG758 Article 18(a), andGuarantor’s demand under the counter guarantee should not affect its paying Beneficiary under thelocal guarantees in good faith as per URDG758 Article 5(b).

However, the Supreme People’s Court overturned the trial court’s decision. The court decidedthat Guarantor committed fraud and Counter Guarantor was justified in denying payment under thecounter advance payment guarantee according to PRC Independent Guarantee Provisions Articles 1110

9. PRC Independent Guarantee Provisions Article 14 [Suspension of Payment], third paragraph, states: “Where theIssuer has paid in good faith under the Independent Guarantee which has been issued upon instructions of theInstructing party, a People’s Court shall not suspend the payment under another independent Guarantee whosepurpose is to secure the Issuer’s right to reimbursement.”

10. PRC Independent Guarantee Provisions Article 11 [Termination] states, in part: “A party’s claim that the rights andobligations under an Independent Guarantee have terminated shall be supported by a People’s Court:

(1) Where the expiry date or expiry event specified in the Independent Guarantee has occurred, and the Beneficiaryhas failed to present documents compliant with the terms and conditions of the Independent Guarantee on orbefore its expiry;

(2) Where the complete amount payable under the Independent Guarantee has been paid;(3) Where the amount available under the Independent Guarantee has been reduced to zero;(4 )Where the Issuer receives any document issued by the Beneficiary to release the Issuer from its payment

obligation under the Independent Guarantee; or(5) Where any other termination event by operation of law or as agreed by the parties occurs....



and 12.11 Referring to PRC Independent Guarantee Provisions Article 12(5) the Supreme People’s Courtdetermined:

“Guarantor stated in its demand on 15 December 2011 to Counter Guarantor that ‘We havereceived a first demand in writing for payment under our advance payment guarantee inaccordance with the guarantee quoted above.’ In fact, Guarantor did not receive a complyingdemand under the advance payment guarantee at that time. The time Guarantor receivedBeneficiary’s complying presentation was on 19 December 2011. Therefore, the demand made byGuarantor on 15 December 2011 to Counter Guarantor did not match the real situation, andGuarantor knew such fact. The statement in the complying demand by Guarantor on 15 December2011 did not occur until 19 December 2011. Where Guarantor did not receive Beneficiary’scomplying presentation under the local advance payment guarantee, it refused to pay Beneficiaryon 14 December 2011 and was knowingly aware that it had no rights to demand payment.However, Guarantor informed Counter Guarantor on 15 December 2011 that it had received thecomplying demand. Guarantor concealed the truth and falsely presented a demand appearing onits face to be in compliance with the counter advance payment guarantee in order to induceCounter Guarantor to pay. Such act was an abuse of its right to demand payment, and itconstituted fraud.”

Unlike the Hong Kong SAR High Court, the Supreme People’s Court did not consider Guarantor’spayment to Beneficiary as “payment in good faith”. The Supreme People’s Court stated:

“Although Guarantor paid Beneficiary under the advance payment guarantee according to theHong Kong SAR High Court’s decisions made on 24 October 2012, such decisions were madebased on the complying demand by Beneficiary to Guarantor on 19 December 2011. This casedetermined that Guarantor itself committed fraud when it claimed from the Counter Guarantoron 15 December 2011. Therefore, Guarantor’s payment based on Hong Kong SAR High Court’sdecisions did not fall within the circumstances of ‘payment in good faith’ described in Article 14third paragraph of PRC Independent Guarantee Provisions.”

Appellants also argued that Beneficiary had committed fraud due to abuse of demanding rightsunder the guarantee. The Supreme People’s Court considered that Appellants’ petition in the firstinstance was only raised for the injunction order under the counter guarantee instead of the localguarantee and rejected Appellant’s petition for following reasons:

“The court shall only examine whether Guarantor has committed fraud or not in its demandunder the counter guarantee, and it has no relationship with the fact whether the demandBeneficiary presented is fraudulent or not. To say the least, though Guarantor has paid

11. PRC Independent Guarantee Provisions Article 12 [Fraud] states: “Independent Guarantee fraud shall be found bya People’s Court under one of the following circumstances:

(1) The Beneficiary acting in collusion with the Guarantee Applicant or any other party has fabricated the underlyingtransaction;

(2) Any of the third-party documents presented by the Beneficiary is forged or contains false information;(3) Any court judgment or arbitral award finds that the party obligated on the underlying transaction shall not be

liable for payment or damages;(4) The Beneficiary acknowledges that the obligations under the underlying transaction have been fully discharged

or that the payment triggering event specified in the Independent Guarantee has not occurred; or(5) The Beneficiary otherwise knowingly abuses its right to demand payment when it has no such right.



Beneficiary according to the Hong Kong SAR High Court’s decisions. Beneficiary’s demand toGuarantor was complying based on the facts found by the trial court and it is unable to prove thatBeneficiary has abused its right of claim according to Article 12(5) of PRC Independent GuaranteeProvisions as alleged by Appellants based on the existing evidence. At the same time, there is noproof evidencing that Guarantor paid despite being knowingly aware of Beneficiary’s fraud.Therefore, whether Beneficiary has committed fraud or not is not the focus of this case inexamining whether Guarantor has committed fraud in its demand under the counter guarantee.”

Based on this analysis, the Supreme People’s Court decided: “Guarantor committed counteradvance payment guarantee fraud. According to Article 11 and 12 of PRC Independent GuaranteeProvisions, Counter Guarantor shall terminate performing payment obligations under suchguarantee.”

However, the Supreme People’s Court decided that Guarantor did not commit fraud under thecounter performance guarantee. That is, it found that Guarantor’s demand on 30 December 2011complied with the counter performance guarantee and URDG758. The Supreme People’s Courtrejected Appellants’ arguments that Guarantor’s notice of payment suspension to Beneficiary on 12January 2012 constituted refusal of Beneficiary’s demand. The Supreme People’s Court stated:

“Firstly, different from the circumstances of the counter advance payment guarantee, whereGuarantor claimed from Counter Guarantor on 15 December 2011 under the counter advancepayment guarantee when it had not received Beneficiary’s complying demand, Guarantor didreceive Beneficiary’s complying demand under the performance guarantee on 29 December 2011when it claimed from Counter Guarantor under the counter performance guarantee. Secondly,since Counter Guarantor had already informed Guarantor of the Chinese court’s injunction orderfor the counter performance guarantee, and Guarantor was unable to determine whetherBeneficiary had committed fraud, Guarantor’s SWIFT message on 12 January 2012 was notevidence that Guarantor had determined Beneficiary fraud and hence refused to pay Beneficiary.”

The Supreme People’s Court noted that there was no evidence of fraud regarding Guarantor’sdemand on 30 December 2011. The Supreme People’s Court said of the injunction order received byCounter Guarantor:

“The injunction order in its nature is a measure of property preservation, and only a temporarypayment suspension due to judicial enforcement. It does not necessarily exempt the paymentobligor from a final payment obligation. Upon expiration of the injunction order or relative finaldecision, Counter Guarantor shall still perform its payment obligations. Therefore, the court doesnot support the petition of Appellants to terminate payment under the guarantee.”

3. Effectiveness of Counter Advance Payment Guarantee: The trial court rejected the argumentsby Appellants that the counter advance payment guarantee was not effective because advancepayment was made to account no. 001. It noted that Counter Guarantor had informed Guarantor ofaccount no. 001 for advance payment on 14 January 2011, and Guarantor did not object to suchinformation, nor did it inform Counter Guarantor that the advance payment had been made toaccount no. 051. Instead, Guarantor notified Counter Guarantor on 11 February 2011 that Supplierhad made full advance payment through Commercial Bank of Qatar to Sub-Supplier into account no.



051. The trial court considered that Guarantor’s action breached the principle of good faith althoughGuarantor argued that account no. 001 was an account denominated in Qatar Riyals instead of beinga USD account. The trial court quoted URDG758 Article 7 and further stated:

“The advance payment was remitted to Sub-Supplier before the Guarantor’s demand.Furthermore, Counter Guarantor did not state in the counter advance payment guarantee orSWIFT message of 14 January 2011, that the guarantee shall not become effective if payment wasnot made to account no. 001, neither did it specify a document to indicate compliance with suchcondition. Instead, Counter Guarantor only stipulated that the counter advance paymentguarantee should become effective from the time of the actual receipt of the advance payment bySupplier from Beneficiary.”

Nor did the Supreme People’s Court accept the argument that the counter advance paymentguarantee had never become effective. The court noted that the effectiveness condition stated in thecounter advance payment guarantee was met when Supplier received the proceeds of the advancepayment of USD5,980,833.40 received from Beneficiary. Referring to URDG758 Article 4, as well asthe previous URDG45812 Article 6, and PRC Independent Guarantee Provisions Article 4 regarding therules of guarantee issuance and effectiveness, the court considered that the concerned parties hadestablished an effective condition of the guarantee. The Supreme People’s Court stated:

“Independence is one of the core characteristics of an independent guarantee and thedocumentary condition is an important embodiment of independence. According to URDG758Article 7 [Non-documentary conditions], the concerned parties should specify a document toindicate fulfilment of an effective condition while stipulating the effective conditions in theguarantee.”

The Supreme People’s Court, noting that the actual account designated for receiving the advancepayment was with Commercial Bank of Qatar instead of with Counter Guarantor or any of itsbranches, further stated:

“Counter Guarantor was unable to determine whether the Sub-Supplier had received the advancepayment or from its own record. Under such circumstances, Counter Guarantor only stipulatedthat the counter guarantee should become effective when the Sub-Supplier received the advancepayment without stipulating a document fulfilling such condition, or having another index thatcould determine the fulfillment of the condition. Therefore, the counter guarantee would becomeeffective upon its issuance.”

Comments by Jun XU:1. Payment in Good Faith: It is worth noting that the PRC Independent Guarantee Provisions

establishes extremely high standards for the determination of guarantee fraud and protects aguarantor making payment in good faith in a counter guarantee transaction. After the Provisionscame into effect in 2016, it has been quite rare for a guarantee applicant to obtain an injunction courtorder successfully from the Supreme People’s Court.

12. In the case of Guarantor suing Counter Guarantor, ([2018] Supreme Court Civil Retrial No. 880, [P.R. China]), thecourt considered URDG458 and found URDG758 Article 4 did not change regarding the rules of guarantee effectivenessin essence.



This case is thought to be the first case heard by the Supreme People’s Court based on the PRCIndependent Guarantee Provisions deciding that a guarantor committed counter guarantee fraud anddid not make payment in good faith.

The court’s analysis about “payment in good faith” is reasonable. According to URDG758:“Demand guarantee or guarantee means any signed undertaking, however named or described,providing for payment on presentation of a complying demand.” It was improper for Guarantor toclaim from Counter Guarantor by refusing Beneficiary’s demand on the one hand, and falsely statingthat Beneficiary’s demand was complying on the other hand. As a local guarantee and a counterguarantee are independent of each other, and a counter guarantor will only examine a guarantor’sdemand under its counter guarantee instead of a beneficiary’s demand under the local guarantee, itis critical for a guarantor to act in good faith.

2. Separate Demand: The trial court improperly applied URDG758 Article 18(a) regarding theseparate demand in analyzing whether Appellants’ request for termination of payment under thecounter advance payment guarantee was justified.

In this case, a new, separate, complying demand was presented by Beneficiary under the localadvance payment guarantee after Guarantor’s refusal of Beneficiary’s first demand on 9 December2011 due to discrepancies. Guarantor was obliged to honor the corrected demand under the localadvance payment guarantee according to URDG758.

However, Counter Guarantor relied only on Guarantor’s demand and not on Beneficiary’sdemand to determine whether to honor or not. When Guarantor made a misrepresentation aboutthe compliance on 15 December 2011 in its separate [second] demand regarding Beneficiary’sdemand presented on 9 December 2011, Counter Guarantor suspended payment due to a courtinjunction although Guarantor’s second demand appeared to be complying on its face. The fact thatBeneficiary’s separate [second] demand complied under the local advance payment guarantee on 19December 2011 does not automatically excuse Guarantor’s false statements in its demand on 15December 2011 referring to Beneficiary’s original demand on 9 December 2011. The SupremePeople’s Court correctly focused on Guarantor’s separate demands under the counter advancepayment guarantee.

3. Discrepancy: Appellants argued that Counter Guarantor was entitled to refuse paymentbecause Guarantor mistakenly wrote the reference number of the guarantee as GC…000165” insteadof GC…0000165.

The Supreme People’s Court rejected such argument. The court noted that Guarantor only missedone “0” in the first paragraph of the SWIFT message, but correctly quoted the guarantee referencenumber in the heading and second paragraph of the SWIFT message. The Supreme People’s Courtcorrectly decided that Counter Guarantor could not be misled for the missing “0” according to PRCIndependent Guarantee Provisions Article 7.13 The Supreme People’s Court’s rationale is consistent withICC’s position on the examination of documents. ■

13. Article 7 [Compliance], second paragraph, states: “Documents which do not appear on their face to be completelyconsistent with the terms and conditions of the Independence Guarantee or with one another shall be found by aPeople’s Court to be complying on their face if no different meaning is thereby caused.”

January 2021 ■ Documentary Credit World 15


Leonardo S.p.A. v. Doha Bank Assurance Co. LLCCivil and Commercial Court of the Qatar Financial

Centre (Appellate Division),[2020] QIC (A) 1 (16 March 2020) [Qatar]

Summarized by Dr. Karl MARXEN*

Topics: Independent Guarantees; PerformanceGuarantees; Advance Payment Guarantee;Independence Principle; IndependencePrinciple, Strict Compliance; Reduction Clause;Excessive Demand; Notice of Rejection;Discrepancy; Non-Documentary Condition;Preclusion; Qatar International CourtProcedural Rules; URDG 458; URDG 758Articles 5, 6, 7, 15, 17, 19, 24, and 34

Type of Lawsuit: Beneficiary sued Issuer for wrongful dishonorof demands for payment under twoindependent guarantees.

Parties: Claimant/Beneficiary/Main Contractor –Leonardo S.p.A.

Defendant/Appellant/Issuer – Doha BankAssurance Co. LLC

Applicant/Subcontractor – PAT EngineeringEnterprises Co. WLL

UnderlyingTransaction: Subcontract agreement to provide engineering,

procurement and construction of infrastructureworks and plants for radar system installationin Qatar.

Instruments: Advance payment guarantee for maximumamount of EUR 12,210,000 and performanceguarantee for maximum amount of EUR4,070,000. Both guarantees subject to URDG758.

* Brunswick European Law School, Ostfalia University of Applied Sciences(Germany); Research Fellow of the IIBLP (USA); Research Associate, Facultyof Law, University of Johannesburg (South Africa).

16 Documentary Credit World ■ January 2021

Decision: First Instance Circuit Court of the Qatar Financial Centre gave judgment in favor ofBeneficiary. Civil and Commercial Court of the Qatar Financial Centre (Appellate Division)dismissed appeal and confirmed judgment against Issuer to honor the demands on the twoguarantees.

MARXEN

Rationale: If an independent guarantee includes a conditionwithout specifying the document with which the condition can besatisfied, the condition is non-documentary. According to URDG758 Art. 7, such non-documentary conditions are to bedisregarded when determining compliance. Further, if an issuerrejects a demand due to alleged non-compliance, it must specifyall discrepancies it relies on in its timely notice of rejection. Theissuer is precluded under URDG 758 Art. 24 (f) from relying onany discrepancy not stated in its notice of rejection. Also, thereduction clause in a guarantee can only be triggered if thecondition for the reduction mechanism in the guarantee is met. Ifin the guarantee’s terms the presentation of a certain document isnecessary to do so, only presentation of this document willreduce the amount available under the guarantee. Failing that, thefull amount of the guarantee continues to be available to thebeneficiary.

Factual SummaryFactual SummaryFactual SummaryFactual SummaryFactual Summary:Leonardo S.p.A., an Italian defense and aerospace services company (Beneficiary/Main

Contractor/Claimant) entered into an agreement with the Qatar Armed Forces to provide a radarsystem. It then subcontracted certain engineering, procurement and installation works to a localcompany called PAT Engineering Enterprises Co. WLL (Applicant/Subcontractor). The subcontractobligated Applicant to obtain two guarantees in favor of Beneficiary: an advance payment guaranteeto secure repayment of a cash advance of EUR 12,210,000 that Applicant received from Beneficiary,and a performance guarantee for the maximum amount of EUR 4,070,000 to ensure Applicant’soverall performance under the subcontract. The independent guarantees were issued to Beneficiaryby Doha Bank Assurance Co. LLC (Defendant/Appellant/Issuer) and subject to the ICC’s UniformRules for Demand Guarantees (URDG 758).

Dissatisfied with Applicant’s performance, Beneficiary gave notice to Applicant of cancellation ofsubcontract agreement and presented to Issuer a demand on the advance payment guarantee forEUR 10,549,440 and a demand on the performance guarantee for EUR 4,070,000. After Issuer rejectedboth demands, Beneficiary sued for wrongful dishonor and to enforce the payment obligationsunder the guarantees. First Instance Circuit Court of the Qatar Financial Centre granted summaryjudgment in favor of Beneficiary.1 The trial court rejected allegations by Issuer against Beneficiary ofdishonesty, fraud, and unconscionability.

Permission to appeal was granted and Issuer pursued its argument that the demands were non-compliant, that it was not precluded from relying on the alleged discrepancy, and that the demand

1. Leonardo S.p.A. v. Doha Bank Assurance Co. LLC, [2019] QIC (F) 6 (5 September 2019) [Qatar].



on the advance payment guarantee was excessive and therefore not permissible. Analyzing the termsof the guarantees and the demands by the Beneficiary, Civil and Commercial Court (AppellateDivision) confirmed the trial court’s decision and dismissed the appeal. Therefore, Issuer wasobligated to honor both demands on the guarantees and pay Beneficiary the requested total sum ofEUR 14,619,440.

Legal AnalysisLegal AnalysisLegal AnalysisLegal AnalysisLegal Analysis:On appeal, the court decided three main arguments advanced by Issuer to justify its refusal to pay

the demanded sum to Beneficiary.

Compliance: First, the court considered whether the demands were in compliance with the termsof the guarantees. The Issuer argued that the Beneficiary first had to make claims against theApplicant before any demand on the guarantees and subsequently attach a record of such claimsagainst the Applicant to any demands made on the guarantees. Issuer relied on the followingwording in the advance payment guarantee: “Therefore, [Issuer] irrevocably guarantee … any sumsup to Euro 12,210,000 … that [Beneficiary] might have to claim back in writing from [Applicant].”Similarly, the Issuer referred to corresponding wording in the performance guarantee: “Therefore,[Issuer] irrevocably guarantee … any sums up to Euro 4,070,000 … that [Beneficiary] might have toclaim in writing from [Applicant].” The Issuer argued that a demand on the guarantees alwaysrequires a copy of the claim letter previously sent by Beneficiary to the Applicant, so that “doublecounting” would be prevented.

The Appellate Court asked “whether the terms of the Guarantees requires a statement in thedemand or in a supporting document that claims in writing have been made against [Applicant]”(para 56). It examined the condition captured in the guarantees and concluded that “[i]t is clear …from the Guarantees that no documents were required to be served beyond the demands forpayment. They make no reference to anything other than a written demand being served” (para 57).Accordingly, the condition that Beneficiary first has to claim against Applicant was, in terms of theguarantees, a non-documentary condition and applying URDG 758 Art. 7, it was to be disregardedwhen determining compliance of the demand. Therefore, even if Beneficiary failed to present toIssuer a record that it had first attempted to receive payment from Applicant, this would not rendera demand on the guarantees non-compliant.

Preclusion: The second issue related to the doctrine of preclusion in independent undertakingsfollowing an incomplete notice of rejection sent by an issuer to a beneficiary. In the case underappeal, the demands by the Beneficiary were both rejected by the Issuer. The rejection notice by theIssuer asserted insufficient information regarding the extent of the alleged breaches of thesubcontract and whether Applicant had been allowed by Beneficiary to remedy the alleged breacheswithin a certain period. At a later stage and in addition to the first objections, the Issuer complaintthat the Beneficiary had not claimed money from the Applicant first before resorting to calling-upthe guarantees and attached a copy or record of such claim letters. Because the Appellate Courtdecided the matter already when determining that such a condition was non-documentary and to bedisregarded under URDG 758 Art. 7, this particular matter was actually moot. Nevertheless, thejudges continued their investigation and held that the Issuer was, in any event, precluded fromraising this discrepancy as a defense because of URDG 758 Art. 24(f) as this particular allegeddiscrepancy was not listed in the earlier notice of rejection.



Reduction Clause: The final matter concerned reduction of the guarantee amount by way of areduction clause. The advance payment guarantee contained a reduction mechanism that decreasedproportionally the available amount after receipt of an invoice that indicates completion of certainmilestones by Applicant, and acceptance of such an invoice by Beneficiary in a specific manner. Therelevant clause in the advance payment guarantee read: “This guarantee will be automaticallyreduced proportionally to the value of each partial delivery and/or completion [certain works andinstallations] upon presentation by [Applicant] to [Issuer] of copies of the above mentioned project’srelevant documents (Progress Invoice) approved, certified and signed by [Beneficiary’s] projectrepresentative” (para 21). The Issuer argued that the demand on the advance payment guaranteewas excessive, because the available amount was allegedly reduced to below the demanded sum.The Issuer presented an invoice for the amount of EUR 3,874,640 sent by Applicant to Beneficiaryafter completion of certain sections of the subcontract work and also a separate letter sent inresponse by Beneficiary to Applicant in which Beneficiary accepted the invoice as due. However, theAppellate Court rejected the notion that “taking these documents together” (para 77) could triggerthe reduction clause in the advance payment guarantee. Only “presentation of the invoice approved,certified and signed by [Beneficiary]” (para 78) would make the reduction mechanism operational.As a result, the condition for decreasing the amount of the advance payment guarantee was notsatisfied and the original full balance was still available.

The Appellate Court upheld the trial court’s decision that Issuer had to honor the two demandsby Beneficiary and the Issuer’s appeal was dismissed with costs.

Comments:Comments:Comments:Comments:Comments:This decision of the Civil and Commercial Court of the Qatar Financial Centre (Appellate

Division) is an important judgment. Not only does it explain the basic principles of independentguarantees (paras 29-45) in a fashion typical for judges trained in the United Kingdom, but it does sowith repeated and appreciative references to the ICC’s Uniform Rules for Demand Guarantees(URDG 758). The court emphasizes the importance of internationally developed practice regardingindependent guarantees and the benefits of the codification of such expectations in balanced practicerules. The need for harmonized international interpretation, without resorting to domestic conceptsand legal precedents, is stressed at various points. URDG 758 was praised and deferred to over caselaw that predates the existence of URDG 758 as codified practice rules.

This case confirms that it is prudent to ensure incorporation of internationally accepted practicerules such as URDG 758. Otherwise, important concepts such as preclusion, the treatment of non-documentary conditions or even the independent nature of the guarantee may be ignored ormisconstrued. This advice should not only resonate with beneficiaries but with all parties involved,as internationally accepted practice rules foster predictability and legal certainty. Also, carefuldrafting of the terms of the guarantee is vital. For example, as the court pointed out at para 57, itwould have been easy for the Issuer to insert only documentary conditions when drafting theguarantee (and avoid any non-documentary conditions), and thus protect its own legitimate interestsand ultimately those of the Applicant too. Adding this to the incomplete notice of rejection, theIssuer created unnecessary problems for itself.



The judges’ willingness todecide important questions ofindependent guarantee lawand practice that arose duringthe appeal proceedings wasalso remarkable, even thoughthat was not always strictlynecessary. The Beneficiaryargued that the demands werecompliant and even if not,relying on the particulardiscrepancy alleged by theIssuer was not permissible dueto preclusion to the detrimentof the Issuer. Thus, applicationof the doctrine of preclusionwould have automaticallybrought the dispute to an end.With this in mind, theBeneficiary suggested anefficient approach andrequested the Appellate Courtto determine the preclusionissue first, as that wouldpotentially render thecompliance point moot (para46). The judges ignored thissuggested sequence anddecided first the complianceissue – and in fact held that thedemands were compliant.This, in turn, madedeliberating the preclusionquestion moot, since in anyevent the demand wascompliant (para 59). However,again the judges seized theopportunity and ruled in detailon this issue – even though thejudges could have simplypointed out the fact that thenotice of rejection wascertainly not made timely asper URDG 758 Art. 24(e), as itwas given more than three


Qatar International Court and QIC Rules –Explained

There are two independent civil and commercial proceduralrules in Qatar. One applies at the Qatar International Court,while the other applies solely to the other national courts. Theprocedures at the Qatar International Court differ in a specificway to the ones applied at the other national courts. The QatarInternational Court procedural rules (the “QIC Rules”) are alsoknown as the QFC Civil and Commercial Court Regulationsand Procedural Rules. The QIC Rules were issued byMinisterial Decision No. 1/2011 On the Procedural Regulationsand Rules for the Civil and Commercial Procedure Before theCivil and Commercial Court of Qatar Financial Centre,published in the Official Gazette on 14 February 2011. Theyentered into force on 14 March 2011.

The QIC Rules are inspired by the Commercial CourtsGuide for England and Wales, which in practice make thejudges’ work in a similar legal mindset and manner inconducting all matter pertaining to the court rules andpractices. Having said that, the Qatar International Courtcannot be considered as a typical and purely Common Lawcourt as it is thought generally. The Court does not routinelyapply English case law or precedents in its determination of acase, and is further not bound by such case law or precedent.In addition, it must be noted that what happens in CommonLaw jurisdictions judicially is not necessarily adopted andapplied at the Qatar International Court. In practice, theparties before the Qatar International Court have at timesreferred to cases in Common Law jurisdictions in order tohighlight the approaches that have been applied by courts inthose jurisdictions in dealing with similar legal issues. TheQatar International Court might reference such legal mattersof other jurisdictions in its rulings, but the Court is not boundby these cases, as it will determine the outcome by applyingthe specific relevant legislation and the Court’s own principlesto the merits of the case based on the court’s understanding.

Source: Qatar International Court and Dispute Resolution Centre)



weeks after receipt of the demands. The URDG 758 rules require that notice by the issuer “be sentwithout delay but not later than the close of the fifth business day following the day ofpresentation”.

The judges’ eagerness to examine matters without necessity is rather unusual yet highlycommendable, because the judgment provides valuable guidance for future cases and commercialpractice in general. In the above instances, the judges clearly acknowledged that deciding the issueswas not strictly necessary. It is humbly suggested that even the third main issue of the case, theallegation of an excessive demand and the reference to the reduction clause (paras 73-79), could havebeen decided more easily. Since URDG 758 Art. 17(e)(i) stipulates that “[a] demand is a non-complying demand if … it is for more than the amount available under the guarantee”, the allegationof excessiveness should have been raised by the Issuer in its notice of rejection. It was not, and inany event the notice was not made timely. Therefore any objection based on excessiveness of thedemand would have been precluded, too, because URDG 758 seems to treat it as a matter ofcompliance. Again, the Appellate Court’s guidance on this issue, despite not being strictly necessary,contributes to a better understanding of reduction clauses and their operation in independentguarantee practice.

It should also be appreciated that the judgment refers to established practice rules (URDG 758),case law from different jurisdictions (Qatar, Singapore, Hong Kong, and England) as well asinternational academic writing. This judgment took a truly international perspective thatcorresponds to the international character found in many independent guarantee transactions. ■


64

London Court Halts Bank’s USD 11m Case in RussiaLondon Court Halts Bank’s USD 11m Case in RussiaLondon Court Halts Bank’s USD 11m Case in RussiaLondon Court Halts Bank’s USD 11m Case in RussiaLondon Court Halts Bank’s USD 11m Case in Russia

In Louis Dreyfus Company Suisse SA v. International Bank of St. Petersburg, [2021] EWHC 1039(Comm), High Court Judge Neil Calver of the Commercial Court, Queen’s Bench Divisiongranted an anti-suit injunction against International Bank of St. Petersburg (IB St. Petersburg)

to stop its lawsuit against Louis Dreyfus Company Suisse SA, (LD-Swiss) in a Russian court.

IB St. Petersburg had sued LD-Swiss in Russia to invalidate a nearly USD 11 million agreement,but Judge Calver ruled that the contractual provisions which provide that English law and Londonarbitration are applicable in relation to any dispute for payment arising under the sale transactions.

LD-Swiss purchased USD 10,998,519 in Brazilian soya beans from Louis Dreyfus’ Asian subsidiaryin September 2017 and LD-Swiss then sold the goods on to Cyprus-registered Hervet InvestmentLtd. (Hervet) for the same price.

On 10 October 2017, LD-Swiss entered into a “letter of credit issuance agreement” (LC Agreement)with IB St. Petersburg whereby IB St. Petersburg would issue an LC for USD 10,998,519 on behalfof LD-Swiss in favour of beneficiary, LD-Asia. The LC Agreement, governed by English law andproviding for resolution of disputes by arbitration in London, also called for issuance of a standbyletter of credit by KBC Bank NV on behalf of LD-Swiss in favour of IB St. Petersburg for the sameamount to ensure the performance of payment obligations by LD-Swiss to IB St. Petersburg underthe LC Agreement.

Under a discharge of obligations agreement, LD-Swiss then assigned its rights to receivepayments from Hervet and IB St. Petersburg entered into under which LD-Swiss. The DischargeAgreement provided that all amounts due from LD-Swiss in connection with the LC “have beenrepaid in full by [LD-Swiss] to [IB St. Petersburg]’s satisfaction” and that IB St. Petersburg willhave no further recourse to LD-Swiss.

According to the Court, on 16 October 2017 LD-Asia “received” payment from IB St. Petersburgunder the LC in fulfillment of LD-Swiss’ payment obligation to LD-Asia for the goods. Hervet,however, subsequently failed to pay IB St. Petersburg “as assignee of the debt which originallyarose under the Hervet Sale Contract”.

In October 2018, the Bank of Russia placed IB St. Petersburg under provisional administrationand shortly thereafter revoked its banking license. In September 2019, the Russian Court declaredthe bankruptcy of IB St. Petersburg and the State Corporation Deposit Insurance Agency wasappointed as IB St. Petersburg bankruptcy receiver (Trustee).

The Trustee filed court proceedings against LD-Swiss in an attempt to invalidate the dischargeagreement and cited in its application that this was under the jurisdiction of the Russian courtsbecause it related to “the invalidation of a debtor’s transactions in connection with a bankruptcycase before that court.” The Trustee then filed a further application to amend its claim and seekUSD 11 million from LD-Swiss.

In his decision, Judge Calver stated: “In effect, this proposed clarification (the “New Debt Claim”)changes the nature of [IB St. Petersburg’s] consequential claim against [LD-Swiss] from one whichrelates purely to a declaration invalidating and unwinding the Discharge Agreement itself … into

https://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/Comm/2021/1039.html&query=(standby)+AND+(letter)+AND+(of)+AND+(credit)


65

a claim for payment of USD 10,998,519 arising from the underlying and distinct commercialtransactions governed by English law and containing a mandatory LCIA arbitration agreement.”

“Furthermore, the New Debt Claim involves enforcement of the [LC Agreement] and/or the[LC], both of which are separate agreements from the Discharge Agreement subject of [IB St.Petersburg’s] original application for invalidation. This is not restitution consequent uponinvalidation of the Discharge Agreement. The New Debt Claim creates a risk for [LD-Swiss] that ajudgment issued by the Russian Court can be enforced and executed against [LD-Swiss’] assets.”

Judge Calver ordered the Russian court proceedings to be restrained under the UK Senior CourtActs 1981. He also directed IB St. Petersburg to pay GBP 20,000 (USD 27,700) to LD-Swiss for costsin the Russian case and GBP 200,000 in costs for the anti-suit injunction proceedings.

February 2021 ■ Documentary Credit World 11


Punjab National Bank v. Malayan Banking Bhd[2018] No. 22NCC-28-01-2014 (High Court Malaya,

Kuala Lumpur, 13 Nov. 2018) [Malaysia][2020] No. W-02(IM)(NCC)-1891-09

(Putrajaya Ct. of Appeal, 18 Jun. 2020) [Malaysia]

Summary by Dr. SOH Chee Seng*

Topics: Negotiation; Compliant Presentation; UCP600Article 7(c); Freight Forwarder’s Bill ofLading; Certificate of Analysis, Weight andQuality; Negotiation against Faxed Copies ofDocuments; Negotiation Credit vs. DeferredPayment Credit; ICC Opinion R734; ICCOfficial Opinions, Court’s Acceptance of;Amendment, Proposed; Signing Capacity;Reimbursement

Type of Lawsuit: Negotiating bank sued issuer forreimbursement.

Parties: Plaintiff/Respondent/Negotiating Bank/Second Advising Bank – Malayan BankingBhd (“Maybank”) (Counsel: Mong ChungSeng & Chia Oh Seng of LeeHishammuddin Allen & Gledhill)

Defendant/Appellant/Issuer – Punjab NationalBank (“PNB”) (Counsel: T Gunaseelan &Keshvinjeet Singh of Gunaseelan & Assoc)

Applicant – Sara International Limited

Beneficiary – SIMS Copper Sdn Bhd

First Advising Bank – Royal Bank of Scotland(“RBS”)

Correspondent Bank – Wells Fargo BankUnderlyingTransaction: Sale of continuous cast copper wire rods for

USD1,962,500.

* Dr. SOH Chee Seng is Technical Consultant to the Association of Banks inSingapore (ABS), Associate Director of the Institute of International BankingLaw & Practice, and a Contributing Editor of Documentary Credit World.

12 Documentary Credit World ■ February 2021

Dr. SOH Chee Seng


Instrument: LC subject to UCP600.

Decisions: The High Court allowed plaintiff’s claim but the Court of Appeal (Putrajaya)permitted the appeal and set aside the High Court’s decision.

Factual Summary:The LC was issued by PNB and advised through RBS, the First

Advising Bank, on 22 November 2011 to Maybank, the SecondAdvising Bank, and available by negotiation against drafts drawnat 60 days from the date of BL with any bank in Malaysia. Inreimbursement, in MT700 field 78, Issuing Bank irrevocablyengaged with the bona fide holders that the draft drawn underand negotiated in conformity with the terms of the LC would beduly honoured on maturity and payment should be made on duedate as per Negotiating Bank’s instructions or the draft amount.

The LC with an amendment required the following documentsto be presented:

i. Commercial invoice in triplicate signed by the beneficiary;

ii. Packing list in triplicate issued by the beneficiary;

iii. Full set signed clean on board ocean bills of lading;

iv. Certificate of origin in triplicate issued by the beneficiary or the manufacturer in the country oforigin;

v. Marine insurance policies or certificates in full set in duplicate;

vi. A certificate issued by a shipping company or agent stating the vessel is registered with anapproved classification society and is seaworthy.

vii. A certificate from a shipping company or agent stating the carrying vessel is ISM certified andnot more than 20 years of age.

In field 47B, para. G, the LC stated that: “Short form, blank back, stale, freight forwarder, housebill of lading is not acceptable, charter party bill of lading is acceptable”. The LC and the amendmentwere advised through First Advising Bank to Second Advising Bank on 23 November 2011. Theamendment required presentation of document iv, certificate of origin. Second Advising Bankadvised and informed Beneficiary of the LC and amendment accordingly.

On 24 November 2011, Beneficiary presented faxed copies of the documents and bills of exchangeand requested Second Advising Bank to negotiate them. On 25 November 2011, Second AdvisingBank (hereinafter Negotiating Bank) negotiated and paid a total sum of USD1,983,765.65 toBeneficiary in anticipation of submission of the original documents by Beneficiary.

On 30 November 2011, Negotiating Bank received the original documents and bills of exchangefrom Beneficiary and found no difference from the faxed copies presented by Beneficiary on



24 November 2011. Negotiating Bank forwarded the original documents and bills of exchange toIssuing Bank by courier and certified documents were received within presentation period andvalidity of the LC. In reimbursement, Negotiating Bank expressly instructed Issuing Bank to remitpayment to its account with Correspondent Bank.

After documents were forwarded to Issuing Bank, amendment two (the “proposed amendment”)was advised through First Advising Bank to Negotiating Bank on 5 December 2011 requiringpresentation of “Certificate of Analysis, Weight and Quality in triplicate issued by SGS at loadingport”. The proposed amendment was not accepted by Beneficiary.

On 20 December 2011, Negotiating Bank received a notice of refusal dated the same from IssuingBank claiming that the documents were discrepant; (1) freight forwarder bills of lading presentedcontrary to the terms of LC and (2) certificate of analysis, weight and quality in triplicate issued bySGS not presented.

Prior to 20 December 2011, Issuing Bank had never sent any notice of refusal to Negotiating Bank.Negotiating Bank disputed the discrepancies and the validity of the notice of refusal as it failed tocomply with UCP600 Article 16. Subsequently it found that the notice of refusal was wrongly sent byIssuing Bank to Correspondent Bank on 8 December 2011. The documents were subsequentlyreturned to Negotiating Bank unpaid.

Negotiating Bank sued Issuing Bank to enforce the reimbursement undertaking given by IssuingBank under the LC.

Judgements:The High Court ruled in favour of Negotiating Bank as the original documents complying with

the LC terms were received by the Issuing Bank. Issuing Bank failed to give a valid notice of refusalto Negotiating Bank and was precluded and estopped from claiming that the documents werediscrepant. The notice of refusal sent to Correspondent Bank could not be accepted as the documentswere not presented by Correspondent Bank. The High Court also accepted ICC Opinion R734 (2011)and held that the BL presented was not discrepant. The certificate of analysis, weight and qualityissued by SGS was not required to be presented as the proposed amendment had never beenaccepted by Beneficiary. Issuing Bank appealed.

On appeal, the Court of Appeal held that Negotiating Bank’s payment to Beneficiary based onfreight forwarder’s BL (FBL) was a fundamental breach of a term of the LC. It was not a discrepancyissue and the giving of notice of refusal was a non-issue, because even if there was a noticerequirement, a proper notice had been given on the special facts of the case. The Court of Appealconsidered the FBL “a weak form of document in contrast to ocean bill of lading”. NegotiatingBank’s submission that it had negotiated the documents based on fax copies and not the originaldocuments was also a violation of the LC terms and the disbursement of funds by Negotiating Bankto Beneficiary was a loan. The Court of Appeal also held that Negotiating Bank’s attempt to rely onan ICC Opinion without calling the provider of the opinion was “not sustainable at all under [section90A of Malaysia’s] Evidence Act [1950].” The Court of Appeal unanimously allowed the appeal andset aside the High Court’s decision.



Comments:1. Freight Forwarder’s Bill of Lading: FBLs are commonly used in international trade and the

Court of Appeal erred in stating that the FBL was more of a domestic bill of lading and there was noassurance that the goods had been actually loaded on board the ship. Even if this was the case, it isnot for a document examiner to determine on the face of the documents whether or not the namedagent signed for the carrier or the named carrier is indeed a freight forwarder and not a shippingcompany. Other than checking the documents under the requirement of AML/CTF guidelines fromthe authorities, banks are not required to go beyond the documents to determine whether the partysigning the documents is authorised.

In a similar case in Singapore, Abani Trading Pte Ltd v. BNP Paribas,1 the LC issued by BNP Paribasat the request of Abani did not accept FBL to be presented. The BL presented was issued by a freightforwarder, Caretta, as agent of a carrier, Delmas. Applicant rejected the FBL. The appellate court inSingapore correctly accepted DOCDEX Decision 312 that the BL was acceptable if it complied withthe provisions of UCP600 Article 20. The appellate court also quoted “UCP600: AN ANALYTICAL

COMMENTARY” written by Professor James E. Byrne with three others published by the Institute ofInternational Banking Law & Practice, at p. 1254 that:

“... There is absolutely no duty on the part of a letter of credit bank, whether an issuing bank orconfirming bank, to investigate the veracity or accuracy of representations contained in the documents thatare presented under a letter of credit, to investigate claims made by the applicant, or to not honor acomplying presentation when claims of fraud are made. Insofar as there is a “duty” as regardsallegations, it might be said to be the opposite, namely to focus on the documents alone and todisregard any allegations related to the underlying transaction. ... The risk of the fraudulent or falsecharacter of the documents rests with the applicant”. [emphasis added by court]

The trial judge in the High Court Malaya correctly accepted ICC Official Opinion R734 as well asan excerpt from “JACK: DOCUMENTARY CREDITS; THE LAW AND PRACTICE OF DOCUMENTARY CREDITS INCLUDING

STANDBY CREDITS AND DEMAND GUARANTEES”, quoting para 1.29: “… From time to time the [ICC Banking]Commission publishes their decisions or opinions on questions concerning UCP … . These representthe views of considerable experts, and it is suggested that they should be given substantial weightby a court in accordance with the merits of the particular decision.”

It would be disastrous for LC banks if document examiners are required to verify the signingcapacity of the issuer in a document even if on the face of the document, the document complies withthe LC terms and the provisions of UCP600. Fortunately, in the case decided in Singapore which isalso a common law country, Abani Trading Pte Ltd v. BNP Paribas, the appellate court ruled that theFBL was acceptable if it complied with UCP600 Article 20 even if the LC prohibited presentation of aFBL.

2. Certificate of Analysis, Weight and Quality: The discrepancy cited by Issuing Bank that thesubject certificate was not presented is not valid as the proposed amendment had never beenaccepted by the Beneficiary. Bear in mind that the LC issued by Issuing Bank was an irrevocable LCand the terms could be amended only with Beneficiary’s consent.

1. Abani Trading Pte Ltd v. BNP Paribas [2014] SGHC 111 [Singapore], abstracted at 2015 ANNUAL REVIEW OF INTERNATIONAL

BANKING LAW & PRACTICE 347.



3. Negotiation against Faxed Copies of Documents: Whether or not the Negotiating Banknegotiates against faxed copies of the documents, it is purely an arrangement between theNegotiating Bank and the Beneficiary. It could be classified as a loan. However, the NegotiatingBank bears the risk of non-payment by the Issuing Bank if subsequently the original documents arenot presented or are presented but fail to comply with the LC terms.

The trial judge in the High Court correctly quoted the decision made by the Court of Appeal inHong Kong in China New Era International Ltd v. Bank of China (HK) Ltd.2 It held that “As a matter of

interpretation, [UCP600] art. 7cdid not stipulate that paymentcould not be made to thebeneficiary by the negotiating bankuntil there was a fully compliantpresentation, and not before. Theprecise manner of negotiation ofthe documents was a matter for thenegotiating bank. If it wished to

make payment under the credit in anticipation of submission of a compliant document in lieu of onethat was not compliant, … it did so at its own commercial risk … .” [emphasis added by court]

Though Negotiating Bank had negotiated against faxed copies of the documents, it subsequentlyreceived the original compliant documents within the validity of the LC and forwarded them toIssuing Bank. Issuing Bank is bound under the provisions of UCP600 and the terms and conditions ofits LC to reimburse Negotiating Bank accordingly on the due date.

4. Negotiation Credit vs. Deferred Payment Credit: The LC issued by Issuing Bank was availableby negotiation against drafts drawn at 60 days from the date of the BL with any bank in Malaysia.Negotiation is defined in UCP600 as “the purchase by the nominated bank of drafts (drawn on abank other than the nominated bank) and/or documents under a complying presentation, byadvancing or agreeing to advance funds to the beneficiary on or before the banking day on whichreimbursement is due to the nominated bank.”3 Negotiating Bank had purchased compliantdocuments by advancing funds to the Beneficiary before reimbursement was due to it. It is anegotiating bank as defined in UCP600. The Appellate Court erred in referring to the case, BancoSantander SA v. Bayfern Ltd and others [1999] 2 All ER (Comm) 18, QBD4 as the LC in Banco Santanderwas available by deferred payment at the counter of the nominated bank subject to UCP500. Thelearned judge viewed that in a deferred payment credit, the nominated bank was authorised to payonly at the maturity. However, even if it was a deferred payment credit, UCP600 allows thenominated bank to prepay or purchase the documents before maturity date and the issuing bank isbound to reimburse the nominated bank.

2. China New Era International Ltd. v. Bank of China (H.K.) Ltd., [2010] 5 HKC 82 (2010) [HK], abstracted at 2011 ANNUAL

REVIEW OF INTERNATIONAL BANKING LAW & PRACTICE 411.

3. UCP600 Article 2.

4. Banco Santander SA v. Bayfern Ltd abstracted at 2000 ANNUAL SURVEY OF LETTER OF CREDIT LAW & PRACTICE 290.

“Whether or not the Negotiating Bank negotiates

against faxed copies of the documents, it is

purely an arrangement between the Negotiating

Bank and the Beneficiary.”



Conclusion:UCP600 Article 34 (Disclaimer on Effectiveness of Documents) states: “A bank assumes no liability

or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of anydocument, or for the general or particular conditions stipulated in a document or superimposedthereon; nor does it assume any liability or responsibility for the description, quantity, weight,quality, condition, packing, delivery, value or existence of the goods, services or other performancerepresented by any document, or for the good faith or acts or omissions, solvency, performance orstanding of the consignor, the carrier, the forwarder, the consignee or the insurer of the goods orany other person.” Whether or not the FBL is a weak form of document compared to an ocean bill oflading which relates to a bill of lading issued by the owner of the ship or charterer of the ship asclaimed by the Appellate Court, on the face of it, it complies. That is, it meets the provisions ofUCP600 Article 20 if it, however named, appears to be signed by the carrier or a named agent for oron behalf of the carrier, or the master or a named agent for or on behalf of the master.

Even if the discrepancy is valid — and in this situation it is not — the Issuing Bank has wronglysent the notice of refusal to Correspondent Bank. It has failed to give a single notice of refusal to thepresenter, the Negotiating Bank, as required by UCP600 Article 16(c) within the maximum of fivebanking days.5 The Issuing Bank shall be precluded from claiming that the document do notconstitute a complying presentation.6 ■

5. UCP 600 Article 14(b)

6. UCP600 Article 16(f)


72

English Court Dismisses Petition for Injunction to Restrain DemandEnglish Court Dismisses Petition for Injunction to Restrain DemandEnglish Court Dismisses Petition for Injunction to Restrain DemandEnglish Court Dismisses Petition for Injunction to Restrain DemandEnglish Court Dismisses Petition for Injunction to Restrain Demandunder Standbysunder Standbysunder Standbysunder Standbysunder Standbys

In Salam Air SAOC v. Latam Airlines Group SA [2020] EWHC 2414 (Comm) (8 September 2020), theQueen’s Bench Division, Commercial Court, denied a standby LC Applicant’s request for aninjunction to restrain the Beneficiary from drawing under three standby letters of credit.

The standbys were issued to secure rent payment under aircraft leases granted to SalamAirSAOC (Applicant) by Latam Airlines Group SA (Beneficiary). Applicant sought to enjoin paymenton the basis that the purpose of the leases was frustrated by the effects of the COVID-19 pandemicand restrictions on air passenger flights imposed by the authorities of Oman where Applicant isbased.

The salient question before the Court was whether it should grant an injunction which wouldinterfere with the operation of the standbys, and if so, what must the Applicant show to obtainsuch an injunction?

Before taking up the arguments of the instant case, the Court noted that “[i]t has long been acardinal principle of English commercial law that the court will only intervene by injunctive relief inthe operation of irrevocable letters of credit and similar instruments (such as performance bonds)in exceptional circumstances.” The court then quoted from various past cases involving injunctionsagainst credit issuers and injunctions against beneficiaries.

Turning to the Applicant’s frustration case, the Court said the nature of the contract and itsterms are of obvious relevance when considering whether the contract has been frustrated by aparticular event and how particular risks have been allocated. The Court determined that the riskthat Applicant might be unable to operate passenger flights for some significant period or that itmight experience an appreciable decrease in demand for air travel were risks inherent in thecommercial operation of aircraft and assumed by Applicant under the leases. Additionally, theCourt noted that three years remained on its six-year leases of Beneficiary’s aircraft. Observingthat Applicant is retaining six aircraft leased from others but does not expect to have sufficientbusiness for three additional aircraft, the Court viewed Applicant’s contention that the effects ofOmani authorities’ flight prohibitions were sufficient to frustrate aircraft leases with three years torun is a “weak argument”.

Regarding Applicant’s frustration case, the Court stated: “It is … far too weak to justify the stepof interfering with the operation of the SBLCs which [Applicant] agreed to provide as an alternativeto paying a cash deposit, and which were commercially and legally intended to be equivalent tocash.”

https://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/Comm/2020/2414.html&query=(standby)+AND+(letter)+AND+(of)+AND+(credit)

20 Documentary Credit World ■ April 2021


United Coals, Inc. v. Attijariwafa BankCiv. No. 1:19-cv-95 (N.D.W.Va. Apr. 14, 2020) [USA]

Abstracted by Jacob MANNING*

Topics: Breach of Contract; Promissory Estoppel; PersonalJurisdiction

Type of Lawsuit: Seller sued Bank alleging that Bank had contractedto issue a letter of credit to Seller’s Supplier asBeneficiary or had promised that it would do soand was liable under a promissory estoppel theory.

Parties: Plaintiff/Seller – United Coals, Inc.(Counsel: James Varner and Debra TedeschiVarner of Varner & Van Volkenburg, PLLC,Clarksburg, WV and James Marketos andWilliam Coffield of Berliner, Corcoran & Rowe,LLP, Washington, DC)

Defendant/Bank – Attijariwafa Bank(Counsel: William Wilmoth and Kaitlin Lane

* Jacob Manning, a Partner at the law firm of Dinsmore & Shohl, is a member of the Pennsylvania, Ohio, and WestVirginia Bars. His practice focuses on business and commercial litigation and appellate practice. Manning is also anAssociate Fellow of the Institute of International Banking Law & Practice.

MANNING

Robidoux of Steptoe & Johnson, PLLC, Bridgeport, WV)

Ultimate Buyer – Electricity Branch of the Moroccan National Office of Electricityand Drinking Water

UnderlyingTransaction: Bank contracted with Seller to issue (or promised Seller that it would issue) a

letter of credit to support Seller’s purchase of coal from a supplier to be exportedfrom the United States to Morocco.

LC: Amount of the Commercial LC intended was to be USD 2,496,000.

Decision: The United States District Court for the Northern District of West Virginia, Kleeh,J., denied a Motion to Dismiss on personal jurisdiction grounds.

Factual Summary:United Coals (Seller) had agreed with the Electricity Branch of the Moroccan National Office of

Electricity and Drinking Water (Ultimate Buyer) to supply coal to it. Seller was to purchase the coalfrom a supplier in Kentucky in the United States. Seller established a registered agent in Morocco,

April 2021 ■ Documentary Credit World 21


who negotiated the terms with Ultimate Buyer and who also was to negotiate payment to the Seller.

Seller had agreed with Ultimate Buyer that payment was to be by letter of credit. While initiallyUltimate Buyer indicated that it would apply to Attijariwafa Bank (Bank) to issue the letter of credit,Ultimate Buyer eventually applied to another bank to issue the letter of credit. Bank was to advisethe letter of credit, though. After a second change, Ultimate Buyer applied for a letter of credit to beissued in favor of Seller. Bank agreed, that when funds were available from the letter of credit, itwould issue a second letter of credit in favor of Seller’s supplier to support Seller’s purchase of thecoal from its supplier.

In reliance on Bank’s promise, Seller alleged that it agreed with Ultimate Buyer to proceed withthe shipment of coal and it arranged for a vessel to transport the coal. Seller began incurringdamages associated with the shipment of coal, but the letter of credit was never issued to Seller’ssupplier. Seller sued for breach of contract and promissory estoppel. Bank moved to dismiss thecomplaint on the basis that courts in West Virginia lacked personal jurisdiction over Bank.

Legal Analysis:Bank was subject to service of process under West Virginia’s long-arm statute, since the

allegations were that the contract or promise to issue a letter of credit were to be performed, inwhole or in part, in West Virginia. Seller had made a prima facie showing of purposeful availment aswell, given that Bank had engaged in sufficient contacts with an individual it knew to be Seller’sagent in Morocco and it had directed contacts regarding issuance of the letter of credit to Seller’sprincipal in West Virginia. Litigation was also foreseeable in West Virginia, and it was reasonable toallow the action to proceed in West Virginia, since Bank had directed contacts to the State.

Finally, the Court refused to enforce a forum selection clause contained within an accountagreement that specified a Moroccan forum for litigation between the parties. The Court found thatthe clause did not specify that such forum was the exclusive forum for litigation, and therefore, itdid not exclude the possibility that Seller would seek to litigate the issue in West Virginia. ■

https://shop.iiblp.org/collections/lc-seminars/products/atfclondon21

March 2021 ■ Documentary Credit World 23

FEAFEAFEAFEAFEATURETURETURETURETURE

* Jun Xu is Deputy General Manager at Bank of China, Jiangsu Branch, China. She is a member of ICC BankingCommission’s Executive Committee, ICC Market Intelligence Team, ICC Global Survey of Trade Finance EditorialTeam, Global Supply Chain Finance Forum (GSCFF), ICC China Banking Committee Forfeiting and Factoring ExpertTeam. She is also co-leader of ICC SCF Rules Drafting Team, ICC DOCDEX Expert, team leader of ICC China BankingCommittee Translation Expert Team, and a DCW Editorial Advisory Board member.

YAPI KREDI V. SHENYANG YUANDA ALUMINUM INDUSTRYENGINEERING CO.

[2020](Supreme Court Civil Retrial No. 265) (P.R. China)

by Jun XU*

Topics: Bank Guarantee; Independence; Injunction; Counter Guarantee; Abusive Demand;Fraud; Advance Payment Guarantee; Performance Guarantee; Jurisdiction; GoodFaith; Validity; PRC Independent Guarantee Provisions

Type of Lawsuit: Applicant sued Local Guarantor and requested suspension of payment ordersfrom the trial court prohibiting Counter Guarantor from honoring LocalGuarantor’s claim due to independent guarantee fraud. Both trial court andappellate court ruled in favor of Applicant. Local Guarantor petitioned for retrialin the Supreme People’s Court of P.R. China.

Parties: Retrial Petitioner/Appellant/Defendant/Local Guarantor/Beneficiary of CounterGuarantees– Yapi ve Kredi Bankasi A.S., Esentepe Corporate Banking CenterBranch, Turkey

Retrial Respondent/Appellee/Plaintiff/Applicant– Shenyang Yuanda AluminumIndustry Engineering Co. Ltd., Shenyang, P.R. China

Counter Guarantor– China Construction Bank, Liao Ning Branch, Shenyang,P.R. China

Defendant/Beneficiary of Local Guarantees/ Contractor– “LLC Rasen Story”

Subcontractor– Russia Yuanda Curtain Wall Co. Ltd.

Advising Bank– Yapi ve Kredi Bankasi A.S. Moscow BranchUnderlyingTransaction: Design, manufacture, supply, and instalment of building’s external curtain wall.

Instruments: A counter performance guarantee and performance guarantee were issued forUSD 6,636,169.86 on 20 March 2008 and a counter advance payment guarantee andadvance payment guarantee were issued for USD 6,636,169.86 on 23 August 2010.

24 Documentary Credit World ■ March 2021


The guarantees were issued subject to the lawof Russia and any disputes related to theguarantees would be resolved by theArbitration Court of Moscow. The counterguarantees were issued subject to the law ofTurkey and the jurisdiction of Turkish courts.

Decision: The Supreme People’s Court of P.R. Chinaoverturned the appellate court decision andrejected Applicant’s claims.

Rationale: Beneficiary’s demands under independentguarantees cannot be considered fraudulent ifApplicant is unable to provide sufficientevidence. Local Guarantor’s payments in goodfaith shall be protected and payments underthe counter guarantees shall not be suspendedprovided there is no evidence of Local Guarantor’s fraudulent action in itsdemands under the counter guarantee, nor making payment to Beneficiarydespite having known of such fraud.

Factual Summary:Subcontractor signed Design and Construction Contract with the Contractor for a building project on

30 January 2008.

The contract stipulated that an advance payment guarantee be issued and remain valid until theactual date of work completion and then should be returned by Contractor upon receipt of actualcompletion of work record. The contract also called for issuance of a performance guarantee thatshould remain valid until 90 days following the actual date of work completion of work and thenshould be returned by Contractor within 14 days of the validity of the guarantee.

On 20 March 2008, Local Guarantor issued a performance guarantee for USD 6,636,169.86 in favorof Beneficiary and on 23 August 2010 an advance payment guarantee for USD 6,636,169.86 againstcounter guarantees issued by Counter Guarantor at Applicant’s requests. Both the counterperformance guarantee and counter advance payment guarantee expired on 30 April 2016 (afterextensions). The advance payment guarantee stated that it was to be effective upon receipt ofadvance payment of USD 6,636,169.86 (later reduced to USD 1,000,000) in Subcontractor’s account atLocal Guarantor’s Moscow Branch.

Both guarantees (hereafter “local guarantees” when referenced together) indicated that LocalGuarantor shall irrevocably undertake to honor a demand of up to the maximum amount USD6,636,169.86 within five banking days without delay from the date of receipt of Beneficiary’s firstdemand in writing stating that Contractor has failed to perform its obligations under the contract.

Both counter guarantees called for receipt of Local Guarantor/Counter Guarantee Beneficiary’sfirst demand in writing through an authenticated SWIFT (or authenticated telex) referencing the

XU



guarantee number and the issuance date of the counter guarantee and stating that Local Guarantorhas received a demand request according to the stipulated terms and conditions under theguarantee.

On 15 April 2016, Beneficiary presented demands to Local Guarantor requesting payment underthe local guarantees.

On 19 April 2016, Local Guarantor/Counter Guarantee Beneficiary presented demands under thecounter guarantees, stating that it received Beneficiary’s complying demands.

On 22 April 2016, Applicant sued Beneficiary in China and petitioned for orders to suspendpayments by Local Guarantor to Beneficiary under the local guarantees due to fraudulent demands.On the same day, Applicant sued Local Guarantor in China and petitioned for orders to suspendpayments by Counter Guarantor to Local Guarantor/Counter Guarantee Beneficiary under thecounter guarantees due to independent guarantee fraud.

On 25 April 2016, the trial court issued suspension of payment orders under the local guaranteesOrder No. 185 and counter guarantees (Order No. 186) respectively under the two lawsuits. CounterGuarantor therefore refused to honor demands by Local Guarantor/Counter Guarantee Beneficiaryon the same day due to court orders. The suspension periods were from 25 April 2016 until 24 April2017 (later extended to 24 April 2018 at Applicant’s request).

On 9 May 2016, Local Guarantor sent a SWIFT message to Beneficiary through Advising Bankinforming of notification from Counter Guarantor that it was prohibited by the trial court in Chinafrom honoring Beneficiary’s demand under the local guarantees and Counter Guarantor wasprohibited from honoring its demands under the counter guarantees.

Counter Guarantor also informed Local Guarantor that Subcontractor would file a lawsuit inRussia. Local Guarantor informed Beneficiary that, due to consideration of the two paymentsuspension orders by court in China, it was unable to honor its demands at the present stage and itthought best to wait for the outcome of the lawsuits in China and Russia.

On 3 June 2016, Local Guarantor notified Counter Guarantor that Beneficiary forwarded theRussian court decision, indicating that Subcontractor’s petition for injunction was rejected.Beneficiary warned Local Guarantor that it would sue under Russian law if Local Guarantor refusedto pay under the local guarantees and payment execution procedures were initiated in Turkeyagainst Local Guarantor at the same time.

On 29 August 2017, the trial court approved Applicant’s withdrawal of its two lawsuits againstBeneficiary and Local Guarantor on 22 April 2016. Applicant then brought action against LocalGuarantor and Counter Guarantor at the same time requesting payment suspension orders under thecounter guarantees.

Local Guarantor claimed that it made payments on 17 October 2016 to Beneficiary under the localguarantees.



Applicant provided the second instance judgment of 9th Arbitration Appeal Court of Moscow,determining that actual work completion was 18 December 2015 and the date for final workcompletion was 24 December 2015. The court decided that the advance payment guarantee issued byLocal Guarantor on 23 August 2010 expired on 18 December 2015 and the performance guaranteeissued on 20 March 2008 expired on 17 March 2016. The court decision was issued 23 November2017. On 25 August 2017, Applicant filed a lawsuit petitioning for payment suspension orders fromthe trial court, Shenyang Intermediary People’s Court, to prohibit Counter Guarantor from makingpayments to Local Guarantor/Counter Guarantee Beneficiary under the two counter guaranteesbecause the decisions by the Arbitration Court of Moscow had expired and there was no legal causefor Local Guarantor/Counter Guarantee Beneficiary’s demands under the counter guarantees.

On 11 September 2017, the trial court ruled to rescind Order No. 186 suspending payment andissued payment suspension Order No. 771 under the two counter guarantees on Applicant’s petition.

On appeal, the appellate court, Liao Ning Province Supreme People’s Court (Civil Judgment [2018]Liao Civil Court Final No. 471), dismissed the appeal and affirmed the original judgment of the trialcourt.

On retrial, on 26 August 2020, the Supreme People’s Court ([2020] Supreme Court Civil RetrialNo.265) affirmed Local Guarantor’s retrial petition, overturning the decisions of trial court andappellate court and rejecting the Applicant’s claims.

Legal Analysis:1. Jurisdiction: Both the appellate court and the Supreme People’s Court considered the case a

foreign-related independent guarantee dispute since Local Guarantor was an entity registered inTurkey. The courts determined that the law of P.R. China should be the applicable law as agreed byall parties of the lawsuits.

The Supreme People’s Court concluded that PRC law would determine the nature of the legalrelationship of the dispute according to Article 1,1 Article 8,2 and Article 443 of Law of the Application ofLaw for Foreign-related Civil Relations of the People’s Republic of China. After further quoting Article 14 and

1. Article 1: This Law is enacted in order to clarify the application of laws concerning foreign-related civil relations,reasonably solve foreign-related civil disputes and safeguard the legal rights and interests of parties.

2. Article 8: Lex fori shall apply to the determination on the nature of foreign-related civil relations.

3. Article 44: The laws at the place of tort shall apply to liabilities for tort, but if the parties have a mutual habitualresidence, the laws at the mutual habitual residence shall apply. If the parties choose the applicable laws by agreementafter any tort takes place, the agreement shall prevail.

4. Article 1: For the purpose of these Provisions, “Independent Guarantee” refers to an undertaking given in writingby a bank or a non-bank financial institution as the Issuer to the Beneficiary, by which the Issuer undertakes to pay theBeneficiary an amount up to the maximum amount of the guarantee upon the Beneficiary’s demand for payment apresentation of documents complying with the Beneficiary’s demand for payment and presentation of documentscomplying with the terms and conditions of the Guarantee … .



Article 3(1)5 of the PRC Independent Guarantee Provisions of the PRC Supreme People’s Court (PRCIndependent Guarantee Provisions) and examining the content of the guarantees, the Supreme People’sCourt determined that the payment obligations of both the guarantees and counter guarantees wereindependent of the underlying transactions and application of guarantees, and that the wording“first demand” indicated in both guarantees and counter guarantees meant they were independentdemand guarantees.

The Supreme People’s Court also considered the disputes as tort cases since no direct guaranteecontractual relationships existed among Applicant, Local Guarantor, and Beneficiary.

2. Fraud: Applicant insisted that the demands by Beneficiary and Local Guarantor/CounterGuarantee Beneficiary were fraudulent. It claimed that the engineering projects had been completedand the function of the advance payment guarantee had become null, so Beneficiary was not entitledto claim under the advance payment guarantee and its demand was fraudulent.

Applicant further argued that Local Guarantor/Counter Guarantee Beneficiary claimed under thecounter guarantee when it was knowingly aware of the underlying transaction lawsuits ongoing inArbitration Court of Moscow, hence such action constituted fraud.

The trial court suspended payments due to Beneficiary fraud according to Article 12(5)6 andArticle 207 of PRC Independent Guarantee Provisions.

However, the Supreme People’s Court referred to the independence principle of independenceguarantee and determined that the demands by Beneficiary and Local Guarantor/CounterGuarantee Beneficiary under the local guarantees and counter guarantees respectively could not beregarded as fraudulent actions in consideration of the facts that the demands were complying and[Local Guarantor] did not abuse its right to demand payments, and [Applicant] failed to provideevidence proving that the demand by Beneficiary under the local guarantee and the demand by[Local Guarantor/Counter Guarantee Beneficiary] under the counter guarantee constituted fraud asper Article 128 of PRC Independent Guarantee Provisions.

5. Article 3: Except where a Guarantee does not specify any document against which the payment shall be made orthe maximum amount payable, a party’s claim that the guarantee is an Independent Guarantee shall be supported by aPeople’s Court if: (1) the guarantee states that it is payable on demand; ... .

6. Article 12 [Fraud]: Independent Guarantee fraud shall be found by a People’s Court under one of the followingcircumstances: … (5) The Beneficiary otherwise knowingly abuses its right to demand payment when it has no suchright.

7. Article 20 [Where Fraud Found]: After hearing a case on an Independent Guarantee fraud dispute, if a People’sCourt finds beyond reasonable doubt that there is Independent Guarantee fraud, and that the circumstances providedin the third paragraph of Article 14 [Suspension of payment] have not occurred, it shall enter a judgment terminatingthe payment obligation of the Issuer under the Independent Guarantee.

8. Article 12: Independent Guarantee fraud shall be found by a People’s Court under one of the followingcircumstances:

(1) The Beneficiary, acting in collusion with the Guarantor, Applicant or any other party, has fabricated theunderlying transaction;

(continued on next page)



3. Payment in Good Faith: Applicant argued that Local Guarantor’s payments were not made ingood faith because Local Guarantor, a professional financial institution, should not have madepayment to Beneficiary when it learned from Counter Guarantor about the injunction orders.However, Local Guarantor insisted that it honored Beneficiary’s demands in good faith andtherefore was entitled to claim from Counter Guarantor. The trial court disagreed with LocalGuarantor’s claim for two reasons:

i. The computer printed documents provided by Local Guarantor as payment evidence couldnot serve as sufficient proof of payment to Beneficiary; and

ii. Even if Local Guarantor had made payment to Beneficiary, such payment cannot beconsidered as made in good faith by Local Guarantor.

The trial court further stated: “[Beneficiary] presented its demand on 15 April 2016 to [LocalGuarantor], while [Local Guarantor] did not make payment within five banking days as stipulated inthe guarantees because it had already learned of the payment suspension decisions under theguarantees by this court. [Counter Guarantor] had also notified the suspension of payments to[Local Guarantor] requesting it to refuse payments. [Counter Guarantor] did not make paymentsunder its counter guarantees to [Local Guarantor/Counter Guarantee Beneficiary], and [LocalGuarantor] did not honor [Beneficiary’s] demands within the stipulated period of the guarantees.However, [Local Guarantor] now claimed that it made payments to [Local Beneficiary] on 17October 2016 when the trial court’s suspension of payment had not been lifted.”

Applicant also argued that Local Guarantor was unable to provide sufficient evidence of paymentto Beneficiary, and even if paid, such payments were not made in good faith because the paymentevidence provided by Local Guarantor was addressed to “Story Alliance”, which was not theBeneficiary of the guarantee.

The appellate court rejected Applicant’s arguments that payments were not made to Beneficiary.The court noted that Local Guarantor provided evidence of Beneficiary’s renaming from “LLC RasenStory” to “LLC Story Alliance” with notarization procedures, and Local Guarantor paid to the sameaccount as provided by Beneficiary. The appellate court therefore considered that Local Guarantorpaid Beneficiary under the guarantees.

However, the appellate court upheld trial court’s conclusion that Local Guarantor’s paymentswere not made in good faith and determined that Local Guarantor was at fault subjectively and didnot act in good faith by taking the liberty of paying Beneficiary on 17 October 2016.

(2) Any of the third-party documents presented by the Beneficiary is forged or contains false information;

(3) Any court judgment or arbitral award finds that the party obligated on the underlying transaction shall notbe liable for payment or damages;

(4) The Beneficiary acknowledges that the obligations under the underlying transaction have been fullydischarged or that the payment triggering event specified in the Independent Guarantee has not occurred; or

(5) The Beneficiary otherwise knowingly abuses its right to demand payment when it has no such right.

(continued from previous page)



The appellate court stated:

“[Local Guarantor] paid on 17 October 2016 for the reason that Russian Court of Arbitrationmade the decision in favor of [Beneficiary]. However, according to the advance paymentguarantee and performance guarantee, the conditions for payments were without consideringthe validity and effectiveness of the underlying contract and without examining the legal basistherein. Therefore, [Local Guarantor] had no reason or basis to determine that [Beneficiary] hasnot committed fraud before making payment. Furthermore, the suspension of payment orders bythe trial court still remained legally binding at the time of payments. According to Article 14(3)9

of PRC Independent Guarantee Provisions, the Issuer may enjoy its rights of reimbursement onlywhen it has paid in good faith. Therefore, [Counter Guarantor] does not need to make paymentsunder the counter guarantees.”

The Supreme People’s Court disagreed and ruled in favor of Local Guarantor/Counter GuaranteeBeneficiary, opposing the termination of payments under the two counter guarantees.

The Supreme People’s Court determined that neither Beneficiary’s demand on 15 April 2016 toLocal Guarantor nor Local Guarantor/Counter Guarantee Beneficiary’s demand on 19 April 2016 toCounter Guarantor constituted fraud. The Supreme People’s Court considered that the condition(beyond reasonable doubt that there is Independent Guarantee fraud) in Article 20 was not satisfied;hence the court does not support Applicant’s arguments that payments under the counter guaranteesto Local Guarantor/Counter Guarantee Beneficiary be suspended because such payments were notmade in good faith according to Article 14(3) of PRC Independent Guarantee Provisions.

The Supreme People’s Court further decided that the suspension of payment orders by the trialcourt could not relieve Counter Guarantor’s final payment obligations without evidence proving thatthe demands under the local guarantees and counter guarantees are fraudulent.

4. Validity of Guarantees/Counter Guarantees: The trial court held the same position regardingthe validity of the local guarantees and counter guarantees as the second instance judgment of 9thArbitration Appeal Court of Moscow. The trial court determined that the advance paymentguarantee expired on 18 December 2015 and the performance guarantee expired on 17 March 2016according to the stipulation about the validity of the guarantees in the contract regarding thecalculation of the validity. The trial court further considered that Applicant failed to return theguarantees, instead, claiming payments on 15 April 2016 from Local Guarantor. The trial court stated

9. Article 14 [Suspension of Payment]: A People’s Court shall issue a ruling suspending payment under anindependent Guarantee provided all the following conditions are met: … (3) The petitioner has provided securitysufficient to cover the damage probably caused by the payment suspension to the party(ies) against whom theapplication is made.

A petitioner’s application for payment suspension on the ground of the Beneficiary’s breach of contract in theunderlying transaction shall not be supported by a People’s Court.

Where the Issuer has paid in good faith under the Independent Guarantee which has been issued upon instructionsof the Instructing party, a People’s Court shall not suspend the payment under another independent Guarantee whosepurpose is to secure the Issuer’s right to reimbursement.



that according to PRC Independent Guarantee Provisions 12(5),10 when the local guarantees expired, thecorresponding counter guarantees expired as well. Local Guarantor argued in its appeal that thevalidities of the two local guarantees extended to 30 April 2016 and it was incorrect for the trialcourt to determine the validity of guarantees based on the conditions in the underlying contract.

The appellate court considered that the trial court erred in its decision about the validity of thelocal guarantees based on the underlying contract and therefore erroneously determined that theBeneficiary’s conduct constituted fraud, which went beyond the scope of the case.

The appellate court affirmed that the validities of both counter guarantees and local guaranteeswere 30 April 2016 after several extensions. Consequently, it was justifiable for Beneficiary to presentdemands to Local Guarantor on 15 April 2016 according to the local guarantees.

The Supreme People’s Court corrected the appellate court’s decision about the validity of thecounter guarantees and affirmed that the local guarantees were extended to 30 April 2016 andcounter guarantees were extended to 15 May 2016 with the agreements of the parties involved atApplicant’s requests.

Comments:1. Independence Principle: Immediately after the 2016 enactment of the PRC Independent

Guarantees Provisions, in Inmobiliaria Palacio Oriental S.A. v. Anhui Foreign Economic Construction (Group)Co.11 [2017](Supreme Court Civil Retrial No. 134)[China] (hereunder referred to IPO case), theSupreme People’s Court affirmed the independence principle of both the independent counterguarantee and guarantee and ruled in favor of the Local Guarantor who had made payment in goodfaith and claimed from the Counter Guarantor afterwards but before settlement of disputes underthe underlying transaction.

The circumstances of IPO case are to some extent similar to the current case, though the latter ismore complicated with parties and several lawsuits in different countries.

It is encouraging to see that the Supreme People’s Court has insisted on the independenceprinciple of demand guarantees and the protection rule for a guarantor in a counter demandguarantee transaction as observed in the current case.The Supreme People’s Court reasoned that:

“An independent guarantee is separate from the underlying transaction and [Local Guarantor]only needs to perform its payment obligation upon receipt of [Beneficiary’s] complyingpresentation according to the terms and conditions of the guarantee contract without the need ofconsidering the performance of the underlying transaction. … An independent guarantee is

10. Article 12 [Fraud]: Independent Guarantee fraud shall be found by a People’s Court under one of the followingcircumstances: … (5) The Beneficiary otherwise knowingly abuses its right to demand payment when it has no suchright.

11. Abstracted in April 2018 DCW at 9.



separate from the underlying transaction, guarantee, and counter guarantee and only limited12

examination13 should be conducted on the underlying transaction and the disputes under theunderlying transaction.”

The Supreme People’s Court specifically analyzed the interpretation of “payment in good faith” inArticle 14(3) of PRC Independent Guarantee Provisions: “There are guarantees and counter guaranteesin counter guarantee transactions. The ‘payment in good faith’ in Article 14(3) of PRC IndependentGuarantee Provisions is a rule to protect the legal rights of the guarantor having made payment ingood faith, and to balance the interests of guarantee applicant, beneficiary, guarantor, and counterguarantor where high probabilities of fraudulent demands or fraud by the beneficiary may existunder the guarantee. On one hand, when deciding whether there is high probability of fraud,guarantor having made payment in good faith should be protected provided there is no evidence ofthe guarantor’s high probability of getting involved in the beneficiary’s fraudulent actions normaking payment to the beneficiary despite knowing of such frauds. On the other hand, after theelimination of reasonable doubt and the finding of the beneficiary’s fraud under the guarantee,when determining whether to terminate the payment under the counter guarantee, guarantor havingmade payment in good faith should be protected. And, payment under the counter guarantee shouldnot be suspended provided there is no evidence of the guarantor’s fraudulent actions in their claimsunder the counter guarantee, nor making payment to the beneficiary despite of knowing suchfraud.”

The Supreme People’s Court was reasonable in its analysis that the payment action of LocalGuarantor to Beneficiary was not the same as the circumstances described in Article 14(3) of PRCIndependent Guarantee Provisions:

“[Local Guarantor] did not pay [Beneficiary] when the trial court decided to issue its suspensionof payment orders, so the ‘payment in good faith’ as stipulated in Article 14(3) is not an issue forconsideration.”

2. Prudent and Reasonable Duty of Care: It usually poses great challenges to a guarantor facingthe dilemma of receiving an injunction order from one jurisdiction and a payment order fromanother jurisdiction in a counter independent guarantee transaction. This case demonstrates exactlysuch situation.

12. PRC Independence Guarantee Provisions Article 18 [Underlying Transaction in Suspension Cases]: “In theadjudication of cases involving an Independent Guarantee fraud dispute or a petition for payment suspension, aPeople’s Court may hear and decide on the factors of the underlying transaction asserted by any party in relation to theparticular circumstances provided in Article 12 [Fraud].”

13. IIBLP Independent Guarantee Provisions of the PRC Supreme People’s Court (Annotated English Translation),Explanatory Note 33 (page 9): “Facts of the underlying transaction. Article 18 allows the court to disregard theguarantee’s independence and to examine the facts of the underlying transaction when deciding on a fraud case, butonly to the extent of the facts asserted by the parties in order to prove that one or more of the situations listed inArticle 12 [Fraud] have occurred.”



The Supreme People’s Court noted that after learning from Counter Guarantor about the paymentsuspension order, Local Guarantor neither disregarded such information nor made payment toBeneficiary within the stipulated payment period. Instead, it contacted Beneficiary and informed itof the payment suspension order by the Chinese court and the Subcontractor’s intention to file suitin Russian court. Local Guarantor did not make payment for prudence purposes in waiting until thedefinite results of the outcomes in the Chinese and Russian courts. Furthermore, in Beneficiary’slegal case in Russia under the underlying contract, Subcontractor was found to be in violation of thecontract by the trial court in Russia. Beneficiary had initiated a payment execution procedure againstLocal Guarantor in a Turkish court.

The Supreme People’s Court recognized that Local Guarantor had performed prudently and withreasonable duty of care in considering Local Guarantor’s practice in its handling of the paymentsand injunction orders. Such conclusion is very instructive for guarantors in counter guaranteetransactions facing injunction orders. ■


85

Spring 2021 ICC Opinions – Capsules

(Note: The following are summaries of the final opinions. For text of ICC Official Opinions,contact your respective ICC national committee or ICC.)

• TA.909 – This query raised multiple concerns about ICC’s Interpretative Paper on the FirstParagraph of UCP600 Article 35, including that the paper is undated, does not appear to be onthe ICC website, and whether or not the paper has been approved by the Banking Commission.The Opinion’s Analysis begins by confirming the paper is available on the ICC website and providesa link to the Interpretative Paper that was posted on the ICC website on 29 May 2020. TheAnalysis also states that this Interpretative Paper relates to the “Guidance Paper on the impact ofCOVID-19 on trade finance transactions subject to ICC rules” released by the ICC BankingCommission on 6 April 2020. The Opinion’s Analysis later quotes the full text of the InterpretativePaper.

The query’s three specific questions centered on the need for enhanced and more formal clarificationof the term “transmission” as used in UCP600 Article 35. The Opinion concluded that the term“transmission”, as used in Art. 35, has been interpreted in accordance with “international standardbanking practice” and the term includes failure of transmission for any reason other than thosecaused by the sender’s actions. Failure of transmission for this purpose refers specifically to thetransmission or sending of paper documents; not electronic records or messages.

During the discussion session, it was reinforced that Opinion TA.909 is about UCP600, not eUCP,and refers solely to paper documents. Although a similar situation could occur in the electronicworld, it was remarked that ICC Technical Advisors could not take up that issue in this Opinionand NC representatives were directed to ICC Paris if they want that matter covered. Otherdiscussion focused on whether or not the Interpretative Paper and Guidance Paper are OfficialICC Papers. They are. The Draft Opinion’s wording that “the Guidance Paper is not an officialpublication of the ICC Banking Commission” was removed and replaced in the Final Opinionwith “whilst the ICC endorses no responsibility in this Guidance Paper, it has been aimed atsharing practical views and guidance from experts in the management of trade finance transactions.”The sense among some ICC members is that UCP600 Article 35 was clear enough and perhapscould have benefitted from some FAQs instead of ICC issuance of a Guidance Paper, InterpretativePaper, and Official Opinion.

• TA.910 – Dealt with whether issuing bank was obligated to honour two commercial LCs underwhich beneficiary’s bank forwarded sets of documents to it. For one LC, there were nodiscrepancies; for the other LC, discrepancies were identified. In each case, issuing bank messagesreferenced “further authentication and payment from applicant”. In the case of discrepant documents,issuing bank messages to beneficiary’s bank gave no indication that applicant waiver had beenissued and accepted.


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The query asked who is liable to pay the beneficiary’s bank and the beneficiary and whether thebeneficiary’s bank can claim delay payment interest from the issuing bank. The Opinion’s Analysisstated that, in each case, the issuing bank’s reference is not acceptable and reflects bad bankingpractice. In the first case where no discrepancies were identified, the Opinion determined that theissuing bank was liable to honour on the due date. In the second case, the Opinion concluded thatthe issuer was obligated to honour if it had released the documents to the applicant without thebeneficiary bank’s agreement.

The Opinion pointed out in the second case that “Discrepancies had been advised to the beneficiary’sbank and instructions sought for their handling. However, the subsequent two messages sent bythe issuing bank, apparently sent in the absence of any instructions from the beneficiary’s bank,merely include an applicant acceptance offer rather than acceptance of the documents, or anindication of an acceptance of any waiver of the applicant, by the issuing bank.” As a result, theOpinion determined that the issuing bank’s messages did not follow defined LC practice andfailed to meet the requirements of UCP600 Article 16(c)(iii).

On the matter of interest, the Draft Opinion’s Conclusion stated that any claim for interest isoutside the scope of the UCP 600. In comments and during the discussion session, some NCrepresentatives asked for further elaboration and that this part of the conclusion be revisited. Theresponse was given that while the interest claim is beyond the scope of the rules, the responsibilityfor interest is there. Wording was adjusted on this point and the Final Opinion states: “The issuingbank is responsible for interest if reimbursement is not provided on the maturity date. The amountand/or percentage rate for such interest is outside the scope of the UCP 600.”

• TA.912 – This query dealt with a situation where an issuing bank accepted presented documentsand cited a payment maturity date, but, at a much later date, learned that the transaction wasfraudulent and stated to the nominated bank that it would offer a “scheduled settlement”. Thequery asked whether the issuing bank is liable to pay the bill amount and interest due to thepayment delay.

Citing UCP600 Article 7(a), the Opinion’s Analysis said that when stipulated documents arepresented to the issuing bank and the documents are determined to comply, the issuing bank musthonour on the presentation maturity date. The Analysis added that rescheduling of the paymentmaturity date is equivalent to an amendment and would require beneficiary agreement. Absentbeneficiary consent, as appears to be the case here, the issuing bank was obligated to honour thepayment in full on the maturity date. On the matter of interest, the issuing bank is responsible, butthe amount and/or percentage rate is outside the scope of UCP600.

As with the previously discussed Opinion, this Opinion TA.912 addresses a query describing badpractice and also features a question regarding the matter of interest (for which an identical responseis given). During discussion, it was noted the query references other interesting facts such as thefraud, however the fraud was not raised as an issue. Although certain other facets of the query’sfacts would make for interesting discussion, ICC Technical Advisors can only respond to thequestions in the query.


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• TA.913 – This query involved pre-printed text contained in a presented insurance certificatestating that “Claims must be advised with 3 months from the date of discovery of loss/damage”.The query asked if such wording constitutes indication of an expiry date for presentation of anyclaims and therefore makes the document discrepant due to ISBP745 Paragraph K9.

The Opinion distinguished between the practice described in ISBP 745 paragraph K9 involvingthe existence of an expiry date in the insurance document after which claims cannot be made (notthe situation in this case) and a time limit for advising the discovery of loss/damage by which anyclaim must be made (stipulated in this case). The Opinion stated that one is an advice of claim andthe other is the actual subsequent claim; they are not synonymous. Moreover, the Opinion pointedout that as this insurance certificate wording appeared as pre-printed text indicating that it is partof the general terms and conditions, it is not to be examined by banks, as per ISBP 745 paragraphK22. The query had also asked if it is reasonable for a party experiencing loss or damage to havean indeterminate amount of time to inform of the loss or damage to the party they are seekingcompensation, but ICC concluded that this question is outside of scope for UCP600 purposes.

Feedback from NCs generated several written comments. During discussion, some NCrepresentatives said it would have been helpful to ask the NC submitting the query for the insurancecertificate document. In fact, the actual document had been sent along with the query, but thedocument was not viewed or considered by the ICC Technical Advisors (for explanation, seeDCW Updates). One NC commenting in writing contended that the clause in the insurance certificaterepresented a clear expiry event, but the ICC Technical Advisors disagreed that the statement isanalogous to an expiry event and other NC representatives also did not believe it referred to anexpiry event.

• TA.914 – Dealt with issuance of a counter-guarantee silent to practice rules and a guaranteesubject to URDG758 and whether, following a compliant demand under the guarantee, counter-guarantor’s failure to pay or send notice of refusal within five business days after having receiveda demand under the counter-guarantee was justified while the counter-guarantor waited for acourt decision on applicant’s request for suspension of payment.

The Opinion’s Analysis first cited URDG 758 Article 1(b) that, where a counter-guarantor requeststhat a demand guarantee is issued subject to the URDG, the counter-guarantee shall also besubject to the URDG, unless the counter-guarantee excludes the URDG. Therefore, the counter-guarantee is subject to URDG 758. Regarding whether counter-guarantor’s refusal of paymentwas unfounded because the bank had not received an injunction of stop payment, but merelyreceived an advice that the applicant had initiated an injunction proceeding, the Opinion concludedthat based on URDG 758 Article 20(b) the counter-guarantor was obligated to pay because ithad not issued a notice of rejection for any discrepancies in the demand as outlined in URDG 758Article 24(e). The Opinion emphasized that when an injunction is actually issued, the counter-guarantor must follow the directions of their court and when an injunction has been received by thecounter-guarantor, it “should simultaneously be seeking to have the injunction removed/lifted.”


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Certain written comments from NCs observed that it is unclear if an injunction was issued. Inresponse, it was pointed out that the conclusion would remain the same. That is, the counter-guarantor should be seeking to have any injunction dissolved. The Opinion’s Analysis instructsthat: “In any event, in line with international standard demand guarantee practice, it is expectedthat a counter-guarantor, while complying with an injunction issued by a court with jurisdiction,challenges the appropriateness of such an injunction by stressing the independent nature of ademand guarantee and seeks to have it lifted. Additionally, a copy of the injunction should beprovided to the guarantor by the counter-guarantor.”