Story behind Applicant Bank in ISP98

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Query from O.:
Dear All,
Could you please share with your opinion on the following issue.
We (applicant Bank) have requested Bank T (issuing bank) to issue the credit confirmed by Bank C.
Confirming bank has taken up the documents and effected payment to the beneficiary.
We have received the documents from the issuing bank (Bank T) and found the discrepancy.
We are going to refuse the documents and seek the applicant's waiver.
UCP 600 and the 'Examination of Documents, Waiver of Discrepancies and Notice under UCP 500' do not cover the position of the applicant bank with regards to discrepant documents.
Whether our position will be correct if will refuse the documents?
Thank you in advance.
Kind regards,
O.

Response from T.O. Lee:
Dear O.,
Many years ago, I encountered a LC dispute case in Hong Kong involving a bank (AB) (a local bank registered in Hong Kong) applying for an LC for its client, to be issued by another bank (IB) (a branch of a PRC Chinese bank in Hong Kong). Why? Because before 1997, a bank in Hong Kong under UK jurisdiction cannot have a license for operation in China.
IB paid the beneficiary due to compliant presentation. When the shipment was proved fraudulent, in which no goods were found on board, IB asked AB to reimburse its payment to Beneficiary, AB refused saying that AB was merely an agent of the real applicant, his client who also disappeared, possible ganged up with the beneficiary.
Supported by my expert's report, IB had successfully convinced AB to settle amicably for a discount.
As inspired by this case, I suggested to the drafting group of ISP98 to define the role of the "applicant bank" ( a term created by me at that time) in the ISP98.
From my view the applicant bank is the applicant. Now this concept goes into ISP98 Rule 1.09 (a):
“Applicant” is a person who applies for issuance of a standby or for whose account it is issued, and includes (i) a person applying in its own name but for the account of another person or (ii) an issuer acting for its own account."
So now at least under ISP98 the applicant bank has assumed the same role as an applicant. This concept should apply to UCP 600 as well.
However, the draft group of UCP 600 did not take my same advice seriously and the definition of applicant in UCP 600 is not as clear as in ISP98. UCP 600 article 2 says only:
"Applicant means the party on whose request the credit is issued."
AB may still say: "Hey, don't shoot me, I am merely an agent!"
T. O.

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