Ryoden Lift & Escalator Company Limited V.China Everbright Bank, Shenzhen Branch

Updated：2003-03-21 Views：2771 
    Appellant (plaintiff of the original trial): Ryoden Lift & Escalator Company Limited

    Domicile: 8/F., Manulife Tower, 169 Electric Road, North Point, Hong Kong.

    Litigation Representative: HU FAGUANG, Board Chairman of the Company. 

    Entrusted Agent: PU WANYU, Lawyer from Guangdong Hua Han Law Firm.



    Appllee (defendant of the original trail): China Everbright Bank, Shenzhen Branch 

    Domicile: 2/F, Tower Three, Shenzhen Huaqiang Industry Co., Ltd., North of Huaqiang Rd., Shenzhen.  ????

    Litigation Representative: ZHU FAQING, President of the Bank.??

    Entrusted Agent: YAO ZHAOWU, Lawyer from Guangdong Jing Tian Law Firm

    Entrusted Agent: LIN LING, Assistant of the General Manage of the Bank 



    Appellant, Ryoden Lift & Escalator Company Limited (hereinafter referred to as ?°RC?±), taking exception to the Civil Judgment (Ref.2001 SICE2O 108) rendered by the Intermediate People??s Court of Shenzhen on a dispute of L/C, versusing appellee, China Everbright Bank, Shenzhen Branch (hereinafter referred to as ?°EBank?±), lodged an appeal with this court. This court set up a collegiate bench to take up the cases and has now finalized the case.

    On August 6th, 2001, the appellant, RC, brought an appeal to the original court, stating: on April 20th, 1998, based on the application of the applicant for the credit, SHENZHEN XINWANG INDUSTRIAL & COMMERCIAL DEVELOPMENT CO., LTD (hereinafter referred to as ?°XWC?±) and the publication No.500 of International Chamber of Commerce, the UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (hereinafter referred to as ?°UCP500?±), EB opened an irrepealable sight L/C with RC as the beneficiary. When RC negotiated this L/C, EB held that the bill had some discrepancies, however, during the process that EB decided to hold the bill and wait for the direction, it was not based on the regulations of UCP500 to strictly fulfill its obligations of noticing the applicant for the credit and consulting the applicant??s opinions. EB did not notice the applicant and ask the applicant to waive the discrepancies, but allowed the beneficiary to change the discrepancies. It intentionally made the beneficiary miss the 15-day-period of time for presentation of document, which occurred the new discrepancy of ?°late for presentation of document?±. Again, during the process of keeping the bill and waiting for the disposition, EB waved aside the direction, waiving the discrepancies, of the applicant, XWC, and refused to base on the regulations of UCP500 to fulfill the paying obligation under items of the L/C, which led to the situation that up to now, the beneficiary, RC, had not got the sum of money and incurred great economic losses. Thereby, ask the court to order EB to pay the sum of money, 5,160,000HKD, under the terms of the L/C, the interest of deferring payment, 821,076.00HKD, and pay fees of this case in accordance with law.       

    The appellee, EB, defended in the original trail that: 1. RC was incompetent appellant and EB asked the court to reject RC??s claims. In this dispute over L/C referred to this case, RC was not the appellant for credit, but only the beneficiary. Based on Article 3, Paragraph 1 of UCP500, ?°Credits, by their nature, are separate transactions from the sales or other contract(s) on which they may be based and banks are in no way concerned with or bound by such contract(s),?± and Paragraph 2: ?°A Beneficiary can in no case avail himself of the contractual relationships existing between the banks or between the Applicant and the Issuing Bank?±, EB had no interested relationship with RC. Thereby, RC was incompetent with the essentials of complain of CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA; and please the court to reject its claims. 2. EB should not be the appellee. Before this litigation, RC had submitted an application of arbitration to China International Economic and Trade Arbitration Committee on December 16th, 1999, based on the same facts. The Arbitration Committee made effective arbitration award on April 5th, 2000, confirming that it was XWC who need to pay RC the money for cargoes. Instead of applying to enforce the arbitration award, RC suited EB to the court, which obviously violated Article 9 of ARBITRATION LAW OF THE PEOPLE??S REPUBLIC OF CHINA, ?°The single single ruling system shall be applied in arbitration. The arbitration commission shall not accept any application for arbitration, nor shall a people's court accept any action submitted by the party in respect of the same dispute after an arbitration award has already been given in relation to that matter.?± Thus it can be seen that RC??s act in action was against the arbitration award and asked to remove it, which means that the appellee should be the arbitration organization making the arbitration award, but not EB. 3. EB had strictly abided the relevant regulations of UCP500 in respect of L/C when issuing the L/C, transacting the modification, looking through the bills, protesting and returning the bill, with no fault during the operation process of L/C. RC had no objection on both unconformities brought by EB in two separate time in its bill of complaint, however, it stated that the efficient amse occurring its economic losses was the act of nonfeasance of EB. This viewpoint was absolutely wrong. Based on Article 4 and Article 9 of UCP500, the issuing bank bears the payment liability only under the condition that the documents are coherence with each other. In the event that the documents contained the unconformities, the issuing bank can be released from the payment liability, according to Article 14, Item (d) of UCP500, if only the disposal of the documents of the issuing bank is coherence with the requirement of this regulation. It has no legal liability to accept documents; even it receives an announcement from the applicant, claiming to give up the unconformities. On 1997, in ICC??s QUESTIONS AND REPLIES OF UCP500, the above viewpoints have already been confirmed by experts of ICC. The claims of RC had no facts and basis, thus please the court to reject its claims.     

Through the trail, the original court found that: on March 31st, 1998, RC signed a Sales Contract of Lift & Elevator with XWC. The contract agreed that: RC sole to XWC eight passenger-service- elevators of MITSUBISHI ELECTRIC, controlled by computers; the payment for goods were totally 6,880,000HKD and XWC paid the subscription, 10% of all the payment, by itself; the balance of 90% of the payment, counting for 6,192,000HKD, would be paid by XWC through the irrepealable sight L/C issued by EB. After signing the contract, EB, as the issuing bank, issued the irrepealable sight L/C (No. EBSZ98LC0104) on April 20th, 1998: the applicant of this L/C was XWC; the beneficiary was RC; the payment for cargoes was 6,192,000HKD, paid in three times, separately as part A 5,160,000HKD, part B 963,200HKD and part C 68,800HKD. The bills for negotiation that stated in the L/C are: 1. Two copies of original commercial invoices which have been signed and give clear indication of number of the L/C, name of the facture and the number of the contract, 1521-8054; 2. The whole set clear maritime bill of loading, which the goods have already been loaded, with the title of the issuing bank and clear indication that ?°freight paid?± and the numbers of the L/C and the contract through ?°CHINA??GUANGAO DEVELOPMENT??GROUP IMP AND EXP CO OF 18??F.??SHANRONG BLDG.??JINSHA EAST ROAD??SHANTOU??CHINA(Tele??0754-8160080)?±; 3. Two original copies of packing list, giving clear indication of quantity and the gross weight, net weight and packing of every box; 4. One original copy of insurance policy or credence, in which the amount insurance is 110% of the sum of the invoice and clear indication that the place of compensation is China, the way of paying is money of BE which endorsed blankly by the policy holder and the risks of insurance are Comprehensive Freight Risk (full insurance), War Risk (on freight) and Strikes Risk (on freight); 5. One original certificate of quantity issued by the commodity-manufacturing unit; 6. One original certificate of quality issued by the commodity-manufacturing unit; 7. One original certificate of producing area issued by the commodity-manufacturing unit; 8. A fax, which is faxed to the applicant within 48 hours after loading and has been confirmed by the beneficiary, notifying name of the ship, date of loading, quantity, weight and worth of cargoes and giving clear indication of numbers of the L/C, the B/L and the invoice. Additional conditions of negotiating the L/C are: 1. The P.O. with EB as the payer; 2. Any discrepancy that has been found in any set of documents, the beneficiary needs to pay the fee, 50USD, for the discrepancy and the fee will be deducted while balance every set of documents; 3. Documents must be submitted through the bank within 15days and the period of validity after forwarding; 4. The applicant and the beneficiary of the L/C will pay 10% of the invoice through other means.       

    After issuing the L/C and seven-time modifying, the last agreed date of the L/C is July 13th, 1999; the effective cutoff time is January 25th, 2001; the dead line of the shipping is August 10th, 1999; the conditions of delivering the cargoes and the delivery place are ?°CIF Shenzhen, China?±. Item 1 of the negotiating bill has been changed to: ?°following documents and the D/D of 5,160,000.00HKD, issued by the beneficiary, attached?±; Item 2 has been changed to: ?°the whole set undertake carrying documents with blank title, which is issued by the shipper, indicating that the freight has been paid and noticing the applicant of the L/C.?± Item 4 has been changed to: ?°the insured amount is 7,568,000.00HKD on Comprehensive Land Transportation Risk, War Risk and Strike Risk?±; Item 8 ?°delete the name of the ship and the number of the B/L?±. Then, RC shipped the cargoes on July 19th, 1999 and submitted the shipping documents of part A to negotiate to Bank of China, Hongkong Branch on July 27th, 1999. On August 4th, 1999, after checking up the documents applied by EB, RC brought up three discrepancies and notified Bank of China, Hongkong Branch by telegraph, expressing ?°keep the documents and wait the indication of your bank?± and ?°the risks will be bore by your bank?±. Bank of China, Hongkong Branch sent word of the discrepancies to RC, asking RC to modify them. Three discrepancies are: 1. The brand of car ?°CE609?± is different with those in the other documents; 2. It is unreasonable and later than the consignment day that three certificates of producing area of the customer-service elevators were issued on August 25th, 1999; and 3. The name of cargoes in the invoice did not give clear indication of packing. After modification, RC submitted the documents, again, to the negotiating bank, the Bank of China, Hongkong Branch, on August 6th, 1999. On August 11th, 1999, EB received the documents, however, through checking up, EB hold that the documents still had the unconformity of ?°late to submit?± and notified the Bank of China, Hongkong Branch by telegraph on August 13th, 1999, stating: ?° Our bank will keep the documents and wait the indication from your bank. The risks will be born by your bank.?± On September 7th, 1999, the applicant of issuing the L/C, XWC, faxed to EB, stating that: agree your bank to pay 5,160,000.00HKD externally in time and now ask your bank to pay externally again, but do not agree your bank to return the documents. If not, all aftereffects occurred by doing so would be bore by your bank. Then, EB twice notified the presentation bank, the Bank of China, Hongkong Branch, by telegraph, stating that it does not accept the discrepancy and has intention to return the whole set of documents to the Bank of China, Hongkong Branch as soon as practicable. On September 15th, 1999, EB notified the Bank of China, Hongkong Branch, by telegraph, stating that it refused to accept the discrepancy and would return the whole set of documents to the presentation bank Thereafter, RC and XWC have consulted many times on how to pay for the cargoes, however, no result came out. On December 16th, 1999, RC brought an application for arbitration on this payment for cargoes to the China International Economic and Trade Arbitration Committee, Shenzhen Chamber, asking to arbitrate that XWC pays the cargoes on 5,160,000HKD and its interest and fees for storage. The China International Economic and Trade Arbitration Committee, Shenzhen Chamber made the arbitration award on April 5th, 2000, supporting the application of RC. XWC did not pay as scheduled in according to the arbitration award; thus RC suited EB to this court at the dispute over the L/C, asking EB to pay the cargoes on 5,160,000HKD and its interest and the cost of this case.                  

    The facts mentioned above have been proved by the Sales Contract of Elevator, the revision and the translation of the L/C, the contacting telegraphs and the revised documents coming and going amount RC, the presentation bank, EB and XWC provided by RC and the Arbitration Award of the China International Economic and Trade Arbitration Committee provided by EB. Both parties have no objection to the other party. The original court has confirmed the above-mentioned facts.   

    The original court holds that: the Sales Contract of Elevators signed by RC and XWC is the truth declaration of will of both parties, thus it is lawful and valid, further, the Sales Contract has been fulfilled by both parties. After receiving the cargoes of RC, XWC has paid RC Part B and Part C. The payment for Part A referred to this case has been applied the arbitration to the Arbitration Award of the China International Economic and Trade Arbitration Committee by RC, asking XWC to pay for the cargoes; and the Arbitration Award of the China International Economic and Trade Arbitration Committee, Shenzhen Chamber has made the arbitration award on this dispute over the payment for cargoes between both parties. As the finial award, it has already settled the dispute over the payment for cargoes between the parties. Now the party brings a lawsuit to the People??s Court on the same dispute over the payment for cargoes, whereas, the People??s Court would not settle this complain again. In this case, by the application of XWC, EB issued the L/C, with RC as the beneficiary, thus the bill relation of the L/C between RC and EB occurred and was separate with the original Sales Contract of Elevator. Article 13 of UCP500 stipulates: Banks must examine all documents stipulated in the Credit with reasonable care, to ascertain whether or not they appear, on their face, to be in compliance with the terms and conditions of the Credit. Compliance of the stipulated documents on their face with the terms and conditions of the Credit shall be determined by international standard banking practice as reflected in these Articles. Documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in compliance with the terms and conditions of the Credit. Article 14 stipulates: If the documents appear on their face not to be in compliance with the terms and conditions of the Credit, such banks may refuse to take up the documents. If the Issuing Bank determines that the documents appear on their face not to be in compliance with the terms and conditions of the Credit, it may in its sole judgment approach the Applicant for a waiver of the discrepancy (ies). This does not, however, extend the period of seven banking days following the day of receipt of the documents. This Article also stipulates: If the Issuing Bank acting on its behalf, decides to refuse the documents, it must give notice to that effect by telecommunication or, if that is not possible, by other expeditious means, without delay but no later than the close of the seventh banking day following the day of receipt of the documents. Such notice shall be given to the bank from which it received the documents. Such notice must state all discrepancies in respect of which the bank refuses the documents and must also state whether it is holding the documents at the disposal of, or is returning them to, the presenter. To view the case from the operation handled by EB: after receiving the documents submitted by the presentation bank on July 27th, 1999, EB found three discrepancies on the face of the documents and the L/C through examining. Then, EB noticed the presentation bank on August 4th, 1999, the sixth day after receiving the documents, stating, ?° Our bank will hold the documents and wait the direction of your bank?±. Receiving the notice of the discrepancies, RC did not bring up any objection and modified the documents, then, presented the documents again to be negotiated. On August 11th, 1999, when EB received the modified documents submitted by the presentation bank, the date had exceed the presenting period that the documents must be submitted within 15 days after shipping and the period of validity of this L/C (the shipment date was July 19th, 1999), which occurred a new discrepancy of late presentation. Again, EB noticed the presentation bank for this discrepancy on August 13th, 1999, the second day the bank received the documents. On September 6th, 1999, the applicant, XWC, sent a correspondence to EB, directing to loan and stating to waiver the discrepancy, however, the date had already far away exceed the seven banking days after receiving the documents that stipulated by UCP500. It is obvious that the operation of EB did not violate the regulations of UCP500, and it is right that EB refused to pay the sum under the terms of the L/C at the situation that the documents not to be in compliance with the L/C. Furthermore, the claim of the payment for cargoes brought up by RC has been supported by the Arbitration Award. Now it had no legal basis for RC to ask, again, EB to pay for cargoes, thus the original court did not support the claim. Based on Article 13 and Article 14 of UCP500, Article 259 of CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA and Article 9 of ARBITRATION LAW OF THE PEOPLE??S REPUBLIC OF CHINA, the original court decided to reject the complain of RC and the fee for accepting the case was 42,008.76RMB which shall be paid by RC.

    RC, taking exception to the original judgment, lodged an appeal with this court, asking this court to withdraw the original judgment and order EB to pay the cargoes under the items of the L/C and the interest and bear the legal cost of this case. The reasons were: 1. It was inappropriate of the original court to apply Article 13 and Article 14 of UCP500. The original court held: ?°On September 6th, 1999, the applicant, XWC, sent a correspondence to EB, directing to loan and stating to waiver the discrepancy, however, the date had already far away exceed the seven banking days after receiving the documents that stipulated by UCP500. It is obvious that the operation of EB did not violate the regulations of UCP500?±. On this point, the law applied by the original court was inappropriate. Article 14 of UCP500 stipulates: If the Issuing Bank determines that the documents appear on their face not to be in compliance with the terms and conditions of the Credit, it may in its sole judgment approach the Applicant for a waiver of the discrepancy (ies). This does not, however, extend the period mentioned in sub Article 13 (b). Sub Article 13 (b) stipulates: The Issuing Bank, the Confirming Bank, if any, or a Nominated Bank acting on their behalf, shall each have a reasonable time, not to exceed seven banking days following the day of receipt of the documents, to examine the documents and determine whether to take up or refuse the documents and to inform the party from which it received the documents accordingly. It could be seen form the above Articles: the so-called seven banking days was aimed at the working procedure ruled by the bank and the time XWC stated wavering the discrepancy had no relation with the seven banking days at all; thus it was inappropriate for the original court to applied Article 13 and Article 14 of UCP500 on this point. 2. The standard whether the discrepancy brought by EB was effective discrepancy shall be determined by international standard banking practice. Based on the opinions of Export Committee of International Chamber of Commerce in the QUESTIONS AND REPLYS OF UCP500, within the discrepancies stated by EB, at least one of them, the certificate of producing area being late of the shipping day, did not composed the effective discrepancy. As regards the cargo invoice without noticing the packing, it does not compose the discrepancy in the banking practice of Hongkong. 3. The original court held that the parlance of RC, no legal basic to ask EB to pay for the cargoes on the condition that the claim on the payment for cargoes having gained the support of the Arbitration Award, denied the relation of L/C between RC and EB. The Arbitration Award settled the contractual relationship of sale of the cargoes, however, the original trailed the relationship of the L/C, in which different parties referred to these two organizations. Although the Arbitration Award went in advance, it did not mean that the original court could not trail the dispute over the L/C. In practice, RC could not get double payments for cargoes. The parlance of the original court mentioned above actually denied the relationship of the L/C between the parties.   

    During the investigation of this court, RC claimed that transport vehicles were not the objects of the contract, thus the first discrepancy stated by EB, the brand of the vehicle, ?°CE609?±, in the insurance policy being different with the other documents, cannot be the effective discrepancy. RC also claimed that since the applicant of issuing waived the discrepancies, EB should pay the sum of money.   

    The appellee, EB, defended: 1. It was appropriate for the original court to apply UCP500. Based on Article 3 (a), ?°Credits, by their nature, are separate transactions from the sales or other contract(s) on which they may be based and banks are in no way concerned with or bound by such contract(s),?± and (b), ?°A Beneficiary can in no case avail himself of the contractual relationships existing between the banks or between the Applicant and the Issuing Bank?±, of UCP500, there was not any interested relationship between EB and RC. Thereby, RC was not suitable to the essentials of complaint of CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA; and it was completely according to law for the original court to reject the claims. Furthermore, EB was strict to related regulations of UCP500 of L/C, during the operation of issuing the L/C, dealing with the modification, examining the documents, protesting and returning the documents etc. and had not any fault in the operation possess of the L/C. 2. The law applied by the original court was right. RC brought the complain to the court in according with the same fact, reasserting the creditor??s right, under the situation that it had already got the Arbitration Award, which violated Article 9 of ARBITRATION LAW OF THE PEOELE??S REPUBLIC OF CHINA, ?°The single ruling system shall be applied in arbitration. The arbitration commission shall not accept any application for arbitration, nor shall a people's court accept any action submitted by the party in respect of the same dispute after an arbitration award has already been given in relation to that matter. It was in line with the law that the original court rejected the claims. Based on the reasons mentioned above, EB asked the court of the second trail to reject the appeal of the appellant and maintain the original judgment. 

    Through the trail, this court finds that the facts found by the original court are real and both parties have no objection on the facts, thus this court grants the confirmation.

This court holds that this case is a dispute over the L/C. The appellant, RC, as the beneficiary of the L/C, accepted the irrevocable L/C issued by EB, thus both parties formed the contractual relation with the content of the items of L/C. The L/C referred in this case stipulates clearly that it bases on the UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (ICC Publication No. 500, that is UCP500), which shall be regarded as the regulations of law the parties agreed to choose. Based on Article 145, Paragraph 1 of GENERAL PRINCIPLES OF THE CIVIL LAW OF THE PEOPLE??S REPUBLIC OF CHINA, this regulation referred to choosing law is within the law and valid, thus, this dispute shall be applied to UCP500. 

    As one party of the L/C relation, RC??s complaint, versusing the other party, EB, is in line with the essentials of complaint stipulated by CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA. Using the Article 3 of UCP500 as the basis, EB defends that there is no interested relation between RC and EB, thus RC??s complaint is not in line with essentials of complaint stipulated by CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA. This court holds that EB makes distinctly mistakes in understanding the Article 3 of UCP500; further, the problem of the essentials of complaint is a problem of procedure, which shall apply to lex fori, that is CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA which has no relation with UCP500. Thereby, the reasons EB dependents cannot be sustained.     

    Based on Article 13 of UCP500, banks must examine all documents stipulated in the Credit with reasonable care, to ascertain whether or not they appear, on their face, to be in compliance with the terms and conditions of the Credit. Compliance of the stipulated documents on their face with the terms and conditions of the Credit, shall be determined by international standard banking practice as reflected in these Articles. Documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in compliance with the terms and conditions of the Credit. To be brief, in the Credits business, banks have document-examined obligation to insure ?°Documents being consistent with the Credit?± and ?°Documents being consistent with one another?±. During the process of performing the document-examined obligation, EB brought three discrepancies from the documents submitted by RC. One focus of the dispute between the parties is whether the discrepancies can be regarded as effective in according with the international standard banking practice stipulated by Article 13 of UCP500. This court holds: regarding to the first discrepancy, the fact that the brand of the vehicle in the certificate of insurance is CE609 but in the other documents is EC609 is obviously composed to ?°Documents being inconsistent with one another?±. During the courtroom investigation, RC??s claim held that the vehicle of transportation referred in this case was not the object of the insurance policy, thus this discrepancy cannot be the effective discrepancy, which cannot be supported by this court. The reason is that whether the vehicle for transportation is the object of the insurance or not, will not affect the confirmation of ?°Documents be inconsistent with one another?± made by the document-examined bank. This discrepancy is effective. Regarding to the second discrepancy, RC held that it could not be effective discrepancy that the certificate of producing area being late of the shipping day. Generally, this claim is sustained in international standard banking practice. The reason is: from the nature of the certificate of producing area, it has no connection with the shipping day on logic. The fact, the issuing day later than the shipping day, would not bring any effect to the ?°producing area?±. However, the day of issuing the certificate of producing area referred in this case is August 25th, 1999, the shipping day of the cargoes is July 19th, 1999 and the date presenting the documents to the presentation bank is July 7th, 1999, that is to say, the date of issuing the certificate is not only later than the shipping day, but also later that the presenting date. It is as good as to show that the certificate of producing area was issued after presenting, which is obviously absurd. Thereby, this discrepancy is effective. This court will not support RC??s claim on that the discrepancy is not effective. Regarding to the third discrepancy, based on the reason that the items of the L/C referred in this case required only the number of the L/C, name of the factory and the number of the contract to be noticed clearly in the commercial invoice but not the packing condition of the cargoes; further, the packing condition of the cargoes is not the necessary content of an effective commercial invoice, thus, this court will support RC??s claim on that without noticing the packing condition the discrepancy should be ineffective. It is thus evidence that among three discrepancies brought by EB, two are effective. In international standard banking practice, as long as on discrepancy has been found by the bank during the examination, it is enough to be regarded as that the documents appear on their face not to be in compliance with the terms and conditions of the Credit. Within seven banking days after receiving the documents, EB noticed the presentation bank, Bank of China, Hongkong Branch, regarding to the discrepancies, and held the documents, waiting the indication of the presentation bank. When RC submitted the revised documents to the presentation bank, the date had already exceeded the submitting period of 15 days after shipping the cargoes, which is stipulated by the L/C. Then, within seven banking days, EB, again, submitted the discrepancy of ?° being late to submit?± to the presentation bank in time. During dealing with the documents, the practice of EB was in line with Article 9, Article 13 and Article 14 of UCP500.  

    In this case, the applicant of issuing the L/C, XWC, noticed EB to state to waive the discrepancies of the documents and ask this bank to pay the money. Under this situation, the other focus of the dispute, between the parties, in this case is that whether EB shall negotiate the L/C in according to the direction of the applicant. Although Article 14 (C) of UCP500 stipulate that the Issuing Bank may in its sole judgment approach the Applicant for a waiver of the discrepancy (ies), it gives the presentation bank only the sole-judgment-right to approach the applicant for a waiver of the discrepancy (ies), but not the right referred to the payment, after the applicant waiving the discrepancies, paid to the beneficiary of the L/C. To settle this problem shall base on Article 9and Article 3 of UCP500. Article 9 (a) of UCP500 stipulates: ?°An irrevocable Credit constitutes a definite undertaking of the Issuing Bank, provided that the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and that the terms and conditions of the Credit are complied with each other?±, and Article 3 (b) stipulates: ?°A Beneficiary can in no case avail himself of the contractual relationships existing between the banks or between the Applicant and the Issuing Bank.?± The regulations mentioned above show that: the Issuing Bank has legal liability to pay the Beneficiary of the irrevocable Credit as long as the documents are compiled with the terms and conditions of the Credit. To waive the discrepancy by the applicant cannot constitute the paying promise of the Issuing Bank. Under this condition, the Issuing Bank may in its sole judgment decides whether to pay the Beneficiary of the L/C in accordance with the direction of the Applicant, that is, under the condition that the Applicant waiving the discrepancy (ies), the Issuing Bank has no legal liability to pay the Beneficiary. Further, the contractual relation between the Beneficiary of the L/C and the Issuing Bank is independent of the contractual relation between the Applicant of the L/C and the Issuing Bank, thus the Beneficiary cannot use the contractual relation between the Applicant of the L/C and the Issuing Bank to plead the Issuing Bank on the reason of that the Applicant waiving the discrepancy (ies), which cannot constitute the effective plea. Thereby, it is appropriated and in line with UCP500 that EB refused to pay RC, disregarding the notice of XWC waiving the discrepancies. In the court investigation, RC holds that EB shall pay after the Applicant waiving the discrepancies, which will not be supported by this court. It belongs to improperly quote the law that: the original court connected the problem that whether the Issuing bank shall pay after RC??s waiving the discrepancies with the examining period, seven banking days stipulated by UCP500 in respect that the date XEC stating to waive the discrepancies has no legal connection with the examining period. Thereby, this court supports the claim of the Appellant that it is inappropriate for the original court to apply UCP500.    

    The facts of this case indicates that before RC appealed to the court, the Arbitration Award of the China International Economic and Trade Arbitration Committee, Shenzhen Chamber has made the effective arbitration award on the loan dispute between RC and XWC. Under this condition, another focus of this case is whether RC can appeal EB or not. This court holds that the contractual relation between the Beneficiary of the L/C and the Issuing Bank is independent of the contractual relation between the Applicant of the L/C and the Issuing Bank, in which the natures and subjects are different from each other. The Arbitration Award settles only the contractual dispute over sales of cargoes between the Applicant and the Beneficiary, but not the Credit dispute between the Beneficiary and the Issuing Bank, in which the Beneficiary has dependant right in litigation that the right to sue the Issuing Bank to the court. It does not violate Article 9 of ARBITRATION LAW OF THE PEOPLE'S REPUBLIC OF CHINA and Article 259 of CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA, regarding to the regulation that the party cannot submit an action to the People??s Court in respect of the same dispute after an arbitration award has already been given in relation to that matter, on the reason that in this case, the Credit dispute is clearly not the same dispute with the contractual dispute over sales of cargoes which has been settled by the arbitration award. Thereby, this court will not support EB??s defense on claiming that RC??s complain violates Article 9 of ARBITRATION LAW OF THE PEOPLE'S REPUBLIC OF CHINA. It belongs to wrong invitation of law and shall be corrected that the original court invoked Article 9 of ARBITRATION LAW OF THE PEOPLE'S REPUBLIC OF CHINA and Article 259 of CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA as the legal basis to reject RC??s complaint. 

    Although RC has right to sue EB, it does not mean this company has substantive right to claim the payment from EB for the right is only the right to sue. In this case, XWC has actually got the cargoes, but it did not operate according to the L/C??s process, which shall pay to redeem documents, and then take delivery of cargoes according to the documents. It delivered the cargoes to XWC on its own behave. Actually, on the reason that, at last, EB returned the negotiated documents to RC, neglecting the indication that XWC waiving the discrepancies, which made XWC impossible to pay to atone for the documents in according to the L/C operation process. Whereas the way XWC got the cargoes is not in line with basic principles of the mode of payment of Credit, moreover the Issuing Bank refuses to pay, it shall be regarded that both parties of the cargoes sales waive the mode of payment of Credit and have a desire to pay through other modes. Thereby, XWC??s paying claim, on substantive right, to EB cannot gain the support, that is, though RC can suit EB, the court will not support its claim of asking EB to negotiate the L/C. 

By reason of the forgoing, it is appropriate for RC to bring a lawsuit on the L/C dispute. EB??s acts, on refusing to negotiate the L/C on the reason that the documents not to be in compliance with the Credit and refusing to accept the indication of waiving the discrepancies from the Applicant, XWC, are according with the regulations of USP500. Based on law, it has no basic for RC to ask EB to negotiate the L/C, after it actually, waive the mode of paying in Credits. Thereby, this court will not support the claim of RC. 

    The facts the original court found are clear, but part of laws it applied to be wrong, which shall be correct; however, the judgment is appropriate and shall be maintained. Based on Article 153, Paragraph 1(1) of CIVIL LITIGATION LAW OF THE PAEOPLE??S REPUBLIC OF CHINA, this court now adjudges as follows:     

Dismiss the appeal and maintain the original judgment.

The fees for accepting the second trail of this case are 42,008.76RMB, which shall be paid by the Appellant, RC. 

This judgment is final.









                                                    Chief Judge   ZHANG YAO JUN

                                                    Deputy Judge  HE WEN LONG 

                                                    Deputy Judge  DU YI XING

                                                         December 12th, 2002

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                                                     Clark   HOU XIANG LEI 

                                                     LI WAN MING