Kredietbank (Antwerp) v Midland Bank Plc
Karaganda Ltd v Midland Bank Plc and (2) Midland Bank International Finance Corporation Ltd
In this case the Court of Appeal has clarified the strict requirement for delivery of original documents by those claiming to rely on letters of credit.
It has always been the case that a person seeking payment under a letter of credit must present original documents unless the letter provides otherwise. The general principle is that a strict approach as to whether documents comply with the letter of credit is to be applied by bankers.
In this case the disputed document was an insurance policy and was not ‘marked original’ (as required bt Article 20(b) of the UCP code).
The claim to reject the letter of credit is based on the case of Glencore v Bank of China and the reference in the UCP to the need in certain contexts for the document to be ‘marked as original’. Here, the court distinguished Glencore as the insurance policy was clearly original (and did not need to be marked as such).
Article 20(b), it was held, did not entitle a bank to reject an original document which it was otherwise bound to accept under other provisions of the UCP.
The court's seemingly common sense approach in this instance of accepting original documents in compliance with letter of credit requirements, nevertheless flies in the face of the hitherto strict approach to delivery of documents. The court's decision has great significance for international trade and insurance.
For further information please contact Gwen Griffiths, 7 Devonshire Square, Cutlers Gardens, London EC2M 4YH, UK, Tel: 0171 655 1000
The information and opinions contained in this article are provided by Hammond Suddards. They should not be applied to any particular set of facts without appropriate legal or other professional advice.
