Click to view: 

Stockholm Arbitration Report (SAR)

Preview Page SAR 2004 - 2

Observations by Christina Ramberg and Liu Ping​

Subject-Matters:
(1) Letter of credit ― whether the paying bank is entitled to refuse to release the money when the documents presented by the seller contain some discrepancies with the conditions in the letter of credit;
(2) Letter of credit ― in case the issuing bank does ask for a waiver of discrepancies from the buyer, whether the buyer is obliged to give a waiver.
(3) Buyer’s obligation to take delivery and make payment ― after the expiry of the letter of credit.
(4) Evidence ― whether Claimant can submit new evidence during the final hearing on the ground that it is a resident outside Europe and there are sometimes difficulties with the communications.

Findings:
(1) According to Articles 13 and 14 of the UCP 500 and the doctrine of strict compliance, the paying bank is only required to examine the presented documents on their face, and therefore the paying bank is entitled to refuse payment even when the discrepancies between the documents presented and the conditions in the letter of credit are non-material.
(2) If the issuing bank does in fact ask for a waiver from the buyer, according to the principle of good faith as supported by Article 7(1) of the CISG, the buyer is obliged to examine the discrepancies in so far as it is possible within the validity period, and to give a waiver in case the discrepancies are clearly immaterial.
(3) The buyer’s obligations to pay the price and take delivery do not disappear with the expiry of the letter of credit. In the absence of an agreement to the contrary, there exists a subsidiary obligation to pay the price and take delivery should the letter of credit expire. CISG 75(1)b and 58(1).