Fortis Bank v. Indian Overseas Bank

[2011] EWHC 538 (Comm) (2011)

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Fortis Bank v. Indian Overseas Bank

England and Wales Court of Appeal
[2011] EWHC 538 (Comm) (2011)

Facts

Stemcor UK (Stemcor) (plaintiff) entered into five contracts to sell steel. In connection with the sales, the buyer procured letters of credit from the Indian Overseas Bank (IOB) (defendant). Fortis Bank (Fortis) (plaintiff) was the confirming bank. Each letter of credit was subject to Article 16 of the Uniform Customs and Practice for Documentary Credits, 2007 Revision (UCP 600). In November 2008, the buyer (through IOB) cited discrepancies between the requirements of the letters of credit and the documents that Stemcor (through Fortis) submitted in support of payment (payment documents). Specifically, IOB claimed that Stemcor did not comply with the requirement that Stemcor certify that Stemcor was paying for transmitting the payment documents to IOB because the certifications stated that IOB was being charged for the transmittals. IOB’s rejection notice stated that IOB was returning the payment documents (with a limited exception) to Fortis, but IOB did not return them until February 2009. Fortis and Stemcor sued IOB, seeking payment, and moved for summary judgment, arguing that the certifications sufficiently complied with the letters of credit and that UCP 600 Article 16(f) precluded IOB from claiming that the certifications were noncompliant because IOB took too long to return the payment documents. IOB countered that its only obligation under Article 16 was to notify Fortis of its rejection and that even if IOB had to return the payment documents, Article 16 did not specify how quickly it had to do so. The trial court concluded that the certifications were noncompliant, ruling that the discrepancy between the certifications and the letters of credit were not trivial because IOB could not determine from the face of the certifications that it was not being charged for the transmittals. However, relying on expert testimony, the trial court also ruled that IOB was obligated to return the payment documents to Fortis with reasonable promptness because IOB’s rejection notice stated that IOB was returning the documents. The trial court further ruled that Article 16(f) precluded IOB from relying on the document discrepancies because IOB breached its obligation to promptly return the payment documents.

Rule of Law

Issue

Holding and Reasoning (Thomas, J.)

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