Preclusion under UCP600 - Banks Beware!

In what we believe to be one of the first reported judgments of the English High Court on the application of UCP600, it was held earlier this year in a dispute between Fortis Bank ("Fortis") and Indian Overseas Bank ("IOB")¹ that the preclusion provided for by Article 16(f) of UCP600² will apply to the conduct of an issuing bank even after it has issued a notice rejecting documents presented under a documentary credit.

Background

Documents were presented by Fortis on behalf of its customer Stemcor UK Limited under five letters of credit. Payment was refused by IOB on the basis of a series of grounds all of which, save for one, were subsequently held by the Court to be invalid. One documentary discrepancy was found to be valid, the "Consolidated Certificate Discrepancy"; however, Fortis argued that IOB was in any event precluded from relying on such a discrepancy because it had waived its right to do so by having failed to act in accordance with the provisions of