Lloyd's Maritime and Commercial Law Quarterly
BANK-TO-BANK REIMBURSEMENTS UNDER DOCUMENTARY CREDITS: THE UNIFORM RULES
Howard N. Bennett*
A bank-to-bank reimbursement is a means by which the issuing bank under a documentary credit can honour its obligation to reimburse a confirming or negotiating bank which has paid against or negotiated documents tendered under the credit. Until recently, reimbursements were the subject of outline regulation by Art. 19 of the Uniform Customs and Practice for Documentary Credits (“UCP”)1 and national law. Now, however, the International Chamber of Commerce has drafted Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits (“URR”), designed to emulate the harmonization of rules governing documentary credits achieved by the UCP.2 The URR are complementary to the UCP, which they “are not intended to override or change”.3 They entered into force on 1 July 1996.
1. The contractual matrix
Under a documentary credit, the issuing bank undertakes an obligation directly to the beneficiary of the credit to pay against tender of documents which conform to the terms of the credit.4 However, unless the credit states that the beneficiary may seek payment from the issuing bank alone, the credit must authorize payment by at least one further bank, termed the “nominated bank”.5 If so authorized or requested by the issuing bank, this bank may add its own independent undertaking to pay, in which case it becomes the confirming bank. Alternatively, the credit may be negotiable, in which case the nominated bank is authorized to purchase the documents without undertaking any obligation to do so.6 In the case of a freely negotiable credit, all banks are so authorized.7
Although the fact of nomination creates no obligation on the part of the nominated bank, the making of a nomination by the issuing bank generates an obligation on the part
* Senior Lecturer in Law, University of Nottingham. I am grateful to Lloyds Bank Documentary Services Area for comments on a draft of this article.
1. The current revision of the UCP, referred to as UCP 500, entered into force on 1 January 1994, superseding the 1983 revision, UCP 400.
2. The International Chamber of Commerce has also published an explanatory booklet on the rules: ICC Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits: A Commentary (hereafter “Commentary”).
3. URR, Art. 1.
4. Depending upon the terms of the credit, the issuing bank’s obligation to pay may be discharged by immediate transfer of funds, by incurring a deferred payment obligation, by accepting a bill of exchange or by negotiating the documents: UCP 500, Art. 9(a). The same options apply to a confirming bank’s obligation: Art. 9(b).
5. UCP 500, Art. 10(b)(i).
6. UCP 500, Art. 10(c). For confirmation that negotiation requires the giving of value for the documents, see Art. 10(b)(ii).
7. UCP 500, Art. 10(b)(i).
114