Fortis Bank S.A /N.V & Anor v Indian Overseas Bank

Documentary credits require strict compliance, but strict compliance is not identical to literal compliance in every circumstance. Documents must be assessed intelligently and in accordance with the credit’s actual documentary requirements. Where those requirements are ambiguous, a bank acting on a reasonable construction may remain entitled to reimbursement. The court ordinarily considers the documents alone and should not require factual investigation to determine whether a discrepancy is trivial. A confirming bank is authorised for the purposes of UCP 600 where the issuing bank permits the nominated bank to add confirmation, including at the beneficiary’s request and cost. An issuing bank must reimburse a nominated bank that has honoured or negotiated a complying presentation and forwarded the documents.

Fortis, a Belgian bank, and Stemcor, an English steel-distribution company, sought summary judgment on claims arising from five letters of credit issued by Indian Overseas Bank in favour of Stemcor. Fortis claimed as confirming bank, alternatively nominated bank, under three credits. Stemcor claimed as beneficiary under two unconfirmed credits.

Indian Overseas Bank alleged documentary discrepancies, disputed Fortis’s status as a confirming bank, relied on preclusion issues under UCP 600, and raised a bill-of-lading presentation point. Some drawings were accepted to be non-discrepant. The principal questions concerned strict compliance, ambiguity in credit instructions, the scope of confirmation and nominated-bank reimbursement, preclusion, and the relevant bill-of-lading date.

1. Alleged discrepancies. The court held that the documents complied with the credits where they named MSTC, identified SESA as a notify party, referred to Haldia rather than Haldia/Kolkata, or otherwise satisfied the specific documentary terms. The relevant question was the documentary requirement in the credit, not the underlying commercial facts. Ambiguous instructions could be construed reasonably by the confirming bank.
2. Strict compliance did not require mechanical or exact literal compliance. The documents were to be read intelligently. A discrepancy was not trivial merely because the issuing bank might know the relevant facts; documentary examination should not require factual investigation.
3. The consolidated certificate was discrepant. The reference to “OUR” cost meant Stemcor’s cost because Stemcor issued the certificate. Replacing it with “ISSUING BANK’S” cost changed the certification and was not an ambiguity.
4. Confirmation. Under Article 2 of UCP 600, Fortis was a confirming bank. The statements that it “MAY ADD” its confirmation and that the credit might be confirmed at the beneficiary’s request and cost constituted authorisation by the issuing bank.
5. Nominated bank. Even if Fortis had not been a confirming bank, reimbursement under Article 7(c) depended on the fact that it had negotiated a complying presentation and forwarded the documents, not on the further factual matters advanced by the defendant.
6. Preclusion and bill of lading. The court deferred the preclusion issue under Article 16 pending further evidence and argument concerning any implied obligation to return documents and compliance with it. The bill-of-lading presentation was within 21 days of the bill’s issue date, which was the relevant date rather than the shipment date.

All defences failed except the consolidated-certificate discrepancy defence, subject to the unresolved preclusion issues.