On 6 April 2020, the ICC Banking Commission released the "Guidance paper on the impact of COVID-19 on trade finance transactions subject to ICC rules". This paper, amongst other relevant and necessary information, provided guidance in one of the main areas of concern today i.e., the ability of a nominated or confirming bank to hand over documents to a courier or postal service for delivery to the confirming bank or issuing bank, or the ability of that courier or postal service to deliver documents to the confirming bank or issuing bank at the location determined by the terms and conditions of the letter of credit.
A number of possible scenarios were highlighted in the paper and a suggested outcome provided for each. For the scenarios under sections B (iii), (iv) and (v) and C (iii), (iv) and (v) reference is made to the nominated and confirming banks being covered by UCP 600 article 35 if it were unable to hand the documents over to a courier or postal service; and, in the absence of the issuing bank providing a new location for the delivery of the documents, or the issuing bank failing to respond to requests from a nominated or confirming bank for fresh instructions or an alternative solution for the further handling of the transaction.
For ease of reference, the content of the first paragraph of article 35 reads:
A bank assumes no liability or responsibility for the consequences arising out of delay, loss in transit, mutilation or other errors arising in the transmission of any messages or delivery of letters or documents, when such messages, letters or documents are transmitted or sent according to the requirements stated in the credit, or when the bank may have taken the initiative in the choice of the delivery service in the absence of such instructions in the credit. (emphasis added)
Since the issuance of the paper, there has been little or no comment from the banks BUT the addition of "when such messages, letters or documents are transmitted or sent according to the requirements stated in the credit," does, however, for many lawyers, change their naturally legalistic interpretation of Article 35 by adding a new condition of forwarding whereas the emphasis should be as it always was on "delay", essentially intentional delay by the nominated or confirming bank.
This was not deliberate or intended, and the additional words were not designed to change the position that had existed in previous versions of the UCP. Indeed, no drafting group could have envisaged the circumstances that are being faced today globally, as opposed to an event that may have been localised and short-lived, such as the Iceland volcanic eruption of 2010.
In the first UCP (UCP82) the equivalent wording in article 12 was:
Banks assume no liability or responsibility for the consequences arising out of delay and/or loss in transit of cables or telegrams, letters and/or documents, or for delay, mutilation or other errors in the transmission of cables or telegrams, or for errors in translation or interpretation of technical terms, and Banks reserve the right to transmit credit terms without translating them.
UCP 500 article 16 stated:
Banks assume no liability or responsibility for the consequences arising out of delay and/or loss in transit of any message(s), letter(s) or document(s), or for delay, mutilation or other error(s) arising in the transmission of any telecommunication. Banks assume no liability or responsibility for errors in translation and/or interpretation of technical terms, and reserve the right to transmit Credit terms without translating them.
As can be noted, there is no mention of "when such messages, letters or documents are transmitted or sent according to the requirements stated in the credit," or any equivalent, and the wording has hardly changed in substance since 1933. The wording changed in UCP 600.
Gary, as Chair of the UCP 600 Drafting Group, has reviewed his notes and comments made by National Committees at the time and it is clear that there was NO intent to change the scope of the application of this first paragraph of UCP 600 article 35. And, certainly, it would not have been envisaged during the UCP 600 drafting period that such an event as we are all experiencing today would arise.
In fact, the change to include reference to sending the documents according to the requirements stated in the credit was made in conjunction with similar additions in sub-article 7 (c) i.e., "and forwarded the documents to the issuing bank", sub-article 8 (c) i.e., "and forwarded the documents to the confirming bank"; and the introduction of a new article (article 15), where sub-articles 15 (b) and (c) indicated, respectively, "and forward the documents to the issuing bank" and "it must forward the documents to the confirming bank or issuing bank".
These phrases were incorporated due to a single reason. as highlighted in the Commentary on UCP 600 at page 70 for article 15, "The reference to the forwarding of documents was seen as a critical issue for a number of ICC national committees, who commented that nominated banks did not release the documents immediately, even in cases where the nominated bank had been reimbursed."
This was considered at the time to be a bad practice and one that the UCP should not permit to continue, thus the inclusion of the wording highlighted above. There was no deliberate intent to change the interpretation or application of the first paragraph of article 35 from that which had existed in the previous 6 revisions of the UCP.
The ICC Banking Commission considered it appropriate to ensure that the COVID-19 guidance paper is interpreted correctly and, as such, have released a follow-up interpretative paper. This can be found at the following link:
The key elements are repeated below; however it is strongly recommended that the full paper be downloaded from the ICC website:
"For the avoidance of any doubt, the ICC Banking Commission confirms that, in its true interpretation, article 35 of UCP 600 should be read also to apply to the case where the nominated bank or the confirming bank is not able to transmit or to send letters or documents in paper form (collectively "Documents") in accordance with the requirements stated in the documentary credit because:
provided that, in both cases, the nominated bank or the confirming bank has first made reasonable efforts to (a) find a courier or postal service provider that would accept or collect and thereafter deliver the Documents and (b) obtain the consent of, or instructions from, the issuing bank approving delivery in that manner.
This Interpretative Paper applies generically to all situations involving the application of UCP 600, including to documentary credits that are outstanding at the time of its publication. It does not amend Article 35 of UCP 600, but merely states its correct interpretation.
Where operational problems arise or are anticipated, it is recommended that all banks involved in the documentary credit are encouraged to liaise without delay to seek to agree on a mutually acceptable solution."