Yuchai Dongte Special Purpose Automobile Company Ltd v Suisse Credit Capital (2009) Ltd

A documentary credit transmitted in the SWIFT MT700 format will ordinarily indicate that the sender is the issuing bank. That indication may be displaced only by contractual terms which, read as a whole and in their commercial and technical context, clearly establish otherwise. Extrinsic evidence may assist in identifying the parties, but it must be relevant to that issue and known or available to both parties. The autonomy of a letter of credit does not prevent consideration of estoppel by convention concerning the parties to the credit. A nominated bank’s acceptance of documents and waiver of discrepancies may bind the issuing bank. Where the nominated bank does not pay after a complying presentation, the issuing bank remains liable under UCP 600 unless its obligations have been clearly excluded.

The claimant sought payment of US$3 million under a documentary credit transmitted by the defendant through the SWIFT system. The defendant was not a bank but provided SWIFT messaging services. The credit was sent in MT700 format, ordinarily used for issuance, while SBOL was identified in various fields as the applicant bank, nominated bank and drawee. The defendant relied on disclaimers, the surrounding transaction and an alleged estoppel by convention to deny liability.

The issues were whether the defendant was the issuing bank, whether the credit excluded the issuer’s obligations under UCP 600, and whether the claimant was estopped from asserting that the defendant was liable.

1. Issuing bank. On objective construction, the defendant was the issuing bank and SBOL was the nominated bank. The MT700 format was an important indication because it was an internationally understood form used by an issuing bank. The other fields, including fields 51D, 72 and 78, were not sufficiently inconsistent with that indication to displace it. The credit had to be read as a whole in the context of the SWIFT system and UCP 600.
2. Extrinsic evidence could be relevant to identifying the parties, but the underlying sale transaction was irrelevant to that question. The earlier credit and related communications did not establish that the parties to the second credit were SBOL and the claimant alone. The defendant’s internal understanding and charging arrangements did not determine the objective meaning of the credit.
3. UCP 600 obligations. The defendant’s liability was not clearly excluded. Field 72 was properly construed as dealing with bank charges and related matters, rather than excluding the issuer’s undertaking to pay. The provisions of UCP 600 therefore continued to apply. The requirements for the issuer’s obligation under article 7 were satisfied, notwithstanding the pleading’s reference to article 7(a)(iii) rather than article 7(a)(iv) or (v).
4. SBOL accepted the documents and waived the discrepancies. As nominated bank, it acted as the issuing bank’s agent in examining and accepting the documents. Its waiver therefore bound the defendant, which remained liable when SBOL failed to pay at maturity.
5. Estoppel by convention. The autonomy principle did not prevent the plea because the issue concerned the parties to the credit, not the underlying sale contract. However, the defendant failed to establish a shared assumption that it was not the issuer. The MT700 message objectively indicated that it was the issuer, and the presentation documents identified it as such. No adverse inference was drawn from the claimant’s failure to call Mr Black or from alleged disclosure deficiencies.
6. The claim therefore succeeded on the basis that the defendant remained liable as issuing bank.