Precedent no. 13/2017/AL on validity of letter of credit (l/c) in case where the contract for international sale of goods providing for the use of the l/c is cancelled

- Situation:

A contract for international sale of goods provides for the use of Letter of Credit (L/C) as the method of payment and L/C shall be used in conformity with international trade practices (the sixth revision of the Uniform Customs and Practice for Documentary Credits 2007 (UCP 600) of International Chamber of Commerce) and in accordance with laws of Vietnam. Such contract for international sale of goods was cancelled.

- Legal solution:

In this case, the Court should have determined that the L/C will not cease to be valid on the ground that the contract for international sale of goods providing for the use of such L/C was cancelled.

Law provisions relating to the precedent:

- Article 3 of the Civil Code 2005 (corresponding to Article 5 of the Civil Code 2015);

- Decision No. 226/2002/QD-NHNN dated March 26, 2002 of the State Bank on “Regulation on payment activities through payment service suppliers";

- The sixth revision of the Uniform Customs and Practice for Documentary Credits 2007 (UCP 600) of International Chamber of Commerce.

Representation of the plaintiff A Single Member Limited Company, represented by Mrs. Mai Thi Tuyet N, in the lawsuit petition dated September 15, 2011, the additional lawsuit petition dated September 22, 2011 and during the legal proceedings:

On June 7, 2011, A Single Member Limited Company (hereinafter referred to as the Buyer, Company A) and Company B (hereinafter referred to as the Seller) signed a contract for international sale of goods No. FARCOM/RCN/IVC/036/2011 dated June 7, 2011 (hereinafter referred to as the sales contract dated June 7, 2011). Under this contract, the Buyer buys raw cashew nuts, Ivory Coast origin, with quantity of 1,000 tonnes x price 1,385.50 USD/tonne, using deferred L/C 98% within 90 days from the shipment date based on the bill of lading (B/L) with the quality standards below:

- Outturn: 47 lbs/80kg and the Buyer has the right to reject cargoes if outturn is lower than 45 lbs/80kg.

- Nut count: 205 nuts/kg (max). 220 nuts/kg: rejection.

- Moisture: 10% (max). Moisture more than 12%: rejection.

The cargoes will be inspected by Vinacontrol in terms of quality and quantity at the loading time at the discharge port in Ho Chi Minh City.

According to agreement on the deferred L/C 90 days, on July 7, 2011, the Buyer asked D Branch of E Joint-Stock Commercial Bank to issue a deferred L/C No. 1801ILUEIB110002 (hereinafter referred to as L/C No. 1801) in order for the Buyer to complete the purchase procedures.

Upon receipt of cargoes, as specified in Article 8 of the agreement, the Buyer checked the quality and quantity of the shipment at the discharge port, which is Cat Lat Port in Ho Chi Minh City, under the supervision of Vinacontrol, and then detected that the cargoes of the Seller do not meet the quality assurance. Based on two inspection certificates No. 11G04HN05957-01 and No. 11G04HN05939-01 issued by Vinacontrol on August 31, 2011 in terms of quantity, quality and conditions of cargoes, the inspection result shows that the average outturn in two cutting tests performed on samples of raw nuts is 37.615 lbs/80kg (this outturn is too lower than the outturn mentioned in clause of rejection, approximately 10 lbs).  Facing that commercial fraud, the Buyer has attempted to contact with the Seller many times to deal with the issue relating to the quality of imported cashew nuts but no response from the Seller has been received.

Thus, on September 15, 2011, the Buyer filed a lawsuit petition with People’s Court of Ho Chi Minh City, requesting the Court to force the Seller to receive back 1,000 tonnes of cashew nuts because their outturn is lower than 45lbs, falling on the clause of rejection, the Buyer refuses to make the payment and requests the Court to adopt temporary emergency measures to force E Joint-Stock Commercial Bank to suspend the payment of USD 1,313,308.85 under the L/C No. 1801 to the Seller according to the undertaking of the Buyer until there is any other decisions of the Court.

On August 12, 2013, the Buyer paid the court fee advance for the additional lawsuit petition, which requests cancellation of the sales contract dated June 7, 2011 and cancellation of L/C No. 1801.

At the first instance court hearing, the plaintiff requested:

1. Canceling the sales contract dated June 7, 2011.

2. Forcing the Seller to receive back the whole delivered shipment at the warehouse of the Buyer at C2, Highway 1A, Commune C, District L, Dong Nai Province as soon as possible after the Judgment takes effect. 30 days after the Judgment takes effect, if the Seller fails to receive back the shipment at the warehouse of the Buyer, the enforcement agency has the right to sell the above-mentioned shipment so as to leave the empty warehouse to the Buyer.

3. Canceling the payment obligation of the Buyer to L/C No. 1801 and requesting E Joint-Stock Commercial Bank to refund the plaintiff the deposit secured for L/C of USD 1,313,308.85.

4. Requesting the Court to keep implementing the decision on temporary emergency measures No. 101/2011/QD-BPKCTT dated September 23, 2011 until the Judgment takes effect. Concurrently, refunding the Buyer VND 1,500,000,000 as the security under the decision of the Court at Branch P of Bank T after the Judgment takes effect.

The defendant, Company B (the Seller), is situated abroad and was duly served by the Court through the Ministry of Justice of Vietnam in accordance with the Civil Procedure Code, the Law on Mutual Legal Assistance 2007 and Joint Circular No. 15/2011/TTLT-BTP-BNG-TANDTC dated September 15, 2011 but the Seller was still absent and gave no response.

Representation of the person with relevant rights and obligations, E Joint-Stock Commercial Bank:

At the request of the Buyer, on July 7, 2011, Branch D of E Joint-Stock Commercial Bank issued L/C No. 1801 as follows:

- Value of L/C: USD 1,357,790

- Purpose: import of 1,000 tonnes of raw cashew nuts from Ivory Coast;

- Beneficiary bank: Bank N, Singapore.

- Beneficiary: Company B.

- Deferred L/C issued under UCP 600; with confirmation term.

- Security interests: guarantee by a third party, collateral: a passbook.

- Latest payment date: on September 29, 2011 (USD 961,813.66) and on October 17, 2011 (USD 351,495.19).

Upon receipt of the set of complying documents, the Buyer confirmed to make full payment on schedule under the L/C. According to the confirmation of the Buyer, E Joint-Stock Commercial Bank accepted the draft.

Based on the confirmation of L/C and the conditions of the set of documents, the Bank N negotiated 3 sets of documents without recourse for USD 1,313,308.85 on July 25, July 28 and August 8, 2011.

According to the issued L/C, L/C is governed by the latest version of “the Uniform Customs and Practice for Documentary Credits” (UCP 600). Pursuant to UCP 600, E Joint-Stock Commercial Bank as the issuing bank undertakes to honour after receiving the documents, it means that the Buyer made the payment to the Seller.  According to the complying documents and acceptance of the Buyer, E Joint-Stock Commercial Bank accepted the draft. The Bank N negotiated 3 said sets of documents without recourse.

E Joint-Stock Commercial Bank disagrees with the plaintiff’s claim, requesting the Court to cancel L/C No. 1801 and requesting E Joint-Stock Commercial Bank to refund the deposit of USD 1,313,308.95 to the plaintiff. E Joint-Stock Commercial Bank requests the Court to annul the decision on temporary emergency measures No. 101/2011/QD-BPKCTT dated September 23, 2011 in order for E Joint-Stock Commercial Bank to pay the Bank N as agreed in L/C.

Representation of the person with relevant rights and obligations, the Bank N:

Under the sales contract dated June 7, 2011 and L/C No. 1801, the Bank N (branch in Singapore) is the nominated bank of the Seller at which the letter of credit issued by E Joint-Stock Commercial Bank is available.

In compliance with UCP 600, the Bank N negotiated the comply documents presented by the Seller and paid the Seller the value of L/C on July 25, 2011, July 28, 2011 and August 8, 2011. Accordingly, the Bank N purchased L/C No. 1801 and relevant documents legally and became the direct beneficiary of all and any payments under this L/C. After receiving the complying presentation in accordance with the said L/C, E Joint-Stock Commercial Bank confirmed the presentation and committed to pay the Bank N on September 29, 2011 and October 17, 2011 but the payments were not made because the Buyer requested and the Court issued the decision on temporary emergency measures No. 101/2011/QD-BPKCTT dated September 23, 2011.

The Bank N requests the Court to cancel the decision on temporary emergency measures No. 101/2011/QD-BPKCTT dated September 23, 2011 immediately and requires the Buyer to compensate for damage suffered by the Bank N from its illegal request for temporary emergency measures, leading to the Bank N’s failure to receive the payment of L/C amount from E Joint-Stock Commercial Bank. The amount of damages claimed by the Bank N is the interest amount incurred by the Bank N on the sum payable for 3 sets of complying documents corresponding to the late payment period from the latest payment date as undertaken by E Joint-Stock Commercial Bank (September 29, 2011) to the date on which the Bank N filed a request for participating in legal proceedings and this interest amount is calculated according to the USD interest rate on demand loan of interbank on the date of submission of the request (3.8%/12 months). Total amount of damages claimed by the Bank N against the Buyer is USD 33,270.59, equivalent to VND 694,188,774.

In the First Instance Commercial Judgment No. 356/2014/KDTM-ST dated April 7, 2014, People’s Court of Ho Chi Minh City judged:

“1. Cancel the sales contract No. FARCOM/RCN/IVC/036/2011 dated June 7, 2011 between the Seller, Company B, and the Buyer, A Single-Member Limited Liability Company.

Compel Company B to receive back the shipment of 1,000 tonnes of raw cashew nuts Ivory Coast which has been delivered under the sales contract No. FARCOM/RCN/IVC/036/2011 at the address: the warehouse of Company A, Village C2, Highway 1A, Commune C, District L, Dong Nai Province. 30 days after the Judgment takes effect, if Company B fails to receive the said shipment bank, the enforcement agency shall sell it by order of the court as per the law to leave the empty warehouse to Company A.

2. The deferred L/C No. 1801ILUEIB110002 issued by the Branch D of E Joint-Stock Commercial Bank on July 7, 2011 shall cease to be valid. E Joint-Stock Commercial Bank does not have the payment obligation to the Bank N under deferred L/C No. 1801ILUEIB110002 issued by the Branch D of E Joint-Stock Commercial Bank on July 7, 2011.

Compel E Joint-Stock Commercial Bank to refund Company A the collateral secured for the payment of L/C which is the deposit of USD 1,313,308.85.

3. Keep adopting temporary emergency measures under the decision No. 101/2011/QD-BPKCTT dated September 23, 2011 of People’s Court of Ho Chi Minh City and security interest under the decision No. 100/2011/QD-BPDB dated September 23, 2011 of People’s Court of Ho Chi Minh City until the Judgment takes effect. Company A may receive VND 1,500,000,000 (one billion five hundred million dong) of deposit in the blocked account No. 1022130.3441.012 at the Branch P of Bank T put up by Company A under the decision on compulsory security interest No. 100/2011/QD-BPDB dated September 23, 2011 of People’s Court of Ho Chi Minh City until the Judgment takes effect.

4. Do not accept the Bank N’s claim for damages against Company A of USD 33,270.49, equivalent to VND 694,188,774”.

In addition, the Judgment also announces the court fee, late payment charge and time limit for appeal.

On April 21, 2014, E Joint-Stock Commercial Bank filed an appeal against the entire First Instance Commercial Judgment.

In the decision on suspension of appellate trial No. 29/2015/QDPT-KDTM dated August 26, 2015, the Superior People’s Court in Ho Chi Minh City judged:

1. Suspend appellate trial of commercial case No. 40/2014/TLKDTM-PT dated August 18, 2014 on “dispute over contract for sale of goods”.

2. The First Instance Commercial Judgment No. 356/2014/KDTM-ST dated April 7, 2014 of the People's Court of Ho Chi Minh City takes effect from August 26, 2015.

In addition, the Court decided the court fee.

On September 10, 2015, E Joint-Stock Commercial Bank requested the Chief Justice of the Supreme People’s Court in writing to review the First Instance Commercial Judgment and decision on suspension of appellate trial under cassation procedure.

In the Appeal No. 11/2016/KN-KDTM dated March 7, 2016, the Chief Justice of the Supreme People’s Court appealed the decision on suspension of appellate trial of the commercial case No. 29/2015/QDPT-KDTM dated August 26, 2015 of the Superior People’s Court in Ho Chi Minh City and requested the Council of Judges of the Supreme People’s Court in charge of cassation trial to quash the above decision on suspension of appellate trial No. 29/2015/QDPT-KDTM dated August 26, 2015 of the Superior People’s Court in Ho Chi Minh City and quash the First Instance Commercial Judgment No. 356/2014/KDTM-ST dated April 7, 2014 of People’s Court of Ho Chi Minh City, and then refer the case to People’s Court of Ho Chi Minh City for re-conduct the first instance trial as per the law.

At the cassation court hearing, representative of the Supreme People’s Procuracy requests the Council of Judges of the Supreme People’s Court to accept the Appeal of the Chief Justice of the Supreme People’s Court.

[1] On June 7, 2011, Company A (the Buyer) and Company B (the Seller) concluded a sales contract dated June 7, 2011 as follows: The Buyer buys 1,000 tonnes of cashew nuts using deferred L/C 98% within 90 days, from the shipment date indicated in the bill of lading.

[2] Following the above contract, Company A paid a deposit of USD 1,313,308.85 and asked E Joint-Stock Commercial Bank for issuing the L/C No. 1801.

[3] When cargoes arrived the port in Ho Chi Minh City, the Buyer requested Vinacontrol of Ho Chi Minh City to inspect the quality and quantity of the cargoes in accordance with Article 8 and Article 11 of the contract.

[4] In the certificate of inspection in terms of quantity, quality and conditions of cargoes dated August 31, 2011, Vinacontrol determined: The outturns in two cutting tests performed on samples of raw nuts are: first outturn: 38.2 lbs/80kg; second outturn: 37.03 lbs/80kg.

[5] Since the actual outturn is too lower than the outturn agreed in the contract, the Buyer sent a complain via email to the Seller but the Seller did not show cooperation attitude. Thus, the Buyer filed a lawsuit to request cancellation of the sales contract dated June 7, 2011, return of the whole shipment to the Seller and cancellation of payment obligation under L/C No. 1801 issued by E Joint-Stock Commercial Bank on July 7, 2011 and request E Joint-Stock Commercial Bank to refund the deposit of USD 1,313,308.85 which has been secured for the L/C No. 1801 dated July 7, 2011.

[6] According to the documents and evidence available in the case file, it can be found that: the format and content of the sales contract dated June 7, 2011 were not made against the law, in accordance with Articles, Clauses, Section 2 on rights and obligations of parties in the contract for sale of goods in the Law on Commerce 2005; in Article 15 of the contract, the contracting parties agree that any dispute arising out of or in relation with this contract shall be resolved in accordance with Vietnam’s law.

[7] During the resolution process, the Court of First Instance duly carried out judicial assistance in summoning the defendant (the Seller), notifying the defendant of lawsuit petition of the plaintiff; and requiring the defendant to give opinions in response to the plaintiff’s lawsuit petition; in fact, although the defendant received all summons and notices, the defendant did not give any dissenting opinion against the plaintiff’s lawsuit petition.

[8] According to the 2 certificates of inspection issued by Vinacontrol presented by the Buyer, there are valid grounds for determining that the Seller was at fault in delivering cargoes not conformable to the sales contract dated June 7, 2011, so pursuant to Article 39 of the Law on Commerce, the Buyer is entitled to reject the cargoes. On the other hand, after obtaining the certificates of inspection issued by Vinacontrol, the Buyer sent a complaint about poor quality cargoes to the Seller but the Seller did not show cooperation attitude. As the Seller did not deliver qualified cargoes as agreed in the contract, the Buyer did not achieve the purpose of the contract, hence there are valid grounds for determining that the Seller committed the fundamental breach of the contract. Therefore, the Court of First Instance was well-grounded when pronouncing cancellation of the contract in accordance with Clause 13, Article 3, Article 312 of the Law on Commerce. However, when it comes to resolution of legal consequences of canceling the contract, the Court of First Instance made an error when not compelling the Seller to return the sum of money which has been received (if any) and pay damages to the Buyer.

[9] Regarding resolution of request for cancellation of L/C No. 1801:

[10] Following the request for deferred L/C made by the Buyer, Branch D of E Joint-Stock Commercial Bank issued L/C No. 1801 dated July 7, 2011, in specific:

[11] - Value of L/C: USD 1,357,790;

[12] - Form of L/C: irrevocable;

[13] - Purpose: purchase of 1,000 tonnes of raw cashew nuts from Ivory Coast;

[14] - Beneficiary bank: The Bank N, Singapore;

[15] - Beneficiary: Company B;

[16] - Applicant: [17] - Applied rules: latest version of the UCP.

[18] Then, E Joint-Stock Commercial Bank received 3 sets of documents from the Bank N, totaling USD 1,313,308.85, in specific:

[19] On July 25, 2011: the set of documents of USD 961,813.66, maturity date: September 29, 2011;

[20] On July 29, 2011: the set of documents of USD 312,517.11, maturity date: October 17, 2011;

[21] On August 9, 2011: the set of documents of USD 38.978.08, maturity date: October 17, 2011.

[22] After receiving the complying documents in conformity with L/C terms and conditions, E Joint-Stock Commercial Bank sent a dispatch enclosed with the documents to the Buyer and the Buyer confirmed “Received sufficient documents and undertakes to honour; then E Joint-Stock Commercial Bank telegraphed that it accepted the draft on the maturity date of above-mentioned 3 sets of documents of the Bank N.

[23] Under Vietnam’s law on payment against documents:

[24] Pursuant to Clause 4 Article 3 of the Law on Credit Institutions 2010: Organizations and individuals engaging in banking operations are entitled to reach agreement on the application of commercial practices, including:
International trade practices provided by International Chamber of Commerce; other commercial practices which are not contrary to Vietnam’s laws.

[25] Pursuant to Clause 1 Article 16 of Decision No. 226/2002/QD-NHNN dated March 26, 2002 of the State Bank on " Regulation on payment activities through payment service suppliers": “Letter of credit shall be a conditional written undertaking opened by banks at the request of a payment service user (the applicant for opening the letter of credit), in order to:

[26] Effect the payment or authorize other banks to effect the payment immediately at the instruction of the payee upon receipt of a set of presented documents satisfying the conditions of letter of credit; or accept to make the payment or authorize other banks to make the payment at the instruction of the payee at a specific future time upon receipt of a set of presented documents satisfying conditions of letter of credit”.

[27] Pursuant to Clause 1 Article 19 of Decision 226: “Payment by letter of credit: The opening, issuance, amendment, notification, confirmation, examination of documents, payment and rights, obligations, etc. of related parties in payment by letter of credit shall be performed in accordance with general principles on documentary credits issued by the International Chamber of Commerce (ICC) and applicable upon agreement of parties engaging in the payment in accordance with current applicable Vietnamese laws”.

[28] On the other hand, the request for L/C of the Buyer indicates that: the applied rules is the latest version of the UCP. According to the sixth revision of the Uniform Customs and Practice for Documentary Credits 2007 (UCP 600):

[29] “Credit means any arrangement, however named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation” (Article 2).

[30] “A credit by its nature is a separate transaction from the sale or other contract on which it may be based. Banks are in no way concerned with or bound by such contract, even if any reference whatsoever to it is included in the credit. Consequently, the undertaking of a bank to honour, to negotiate or to fulfill any other obligation under the credit is not subject to claims or defenses by the applicant resulting from its relationships with the issuing bank or the beneficiary” (Article 4).

[31] “Banks deal with documents and not with goods, services or performance to which the documents may relate” (Article 5).

[32] “An issuing bank is irrevocably bound to honour as of the time it issues the credit” (Article 7).

[33] “When an issuing bank determines that a presentation is complying, it must honour” (Article 15a).

[34] Therefore, according to the request for L/C of the Buyer and the content of L/C, L/C No. 1801 is a separate transaction from the sales contract dated June 7, 2011; governed by UCP 600. Under UCP 600, E Joint-Stock Commercial Bank, as the issuing bank, must honour if it determines that a presentation is complying.

[35] In respect of documents of the L/C: Documents consist of a certificate of quantity and quality issued by an independent inspector (without stipulating that the cargoes must be re-inspected at the discharge port by any inspection agency). In the presentation, there is a certificate of quantity and quality issued by a foreign independent inspector which is accordant with L/C; and the Buyer confirmed the presentation and undertook to honour. However, the Court of First Instance, according to the inspection conclusion of Vinacontrol of Ho Chi Minh City (at discharge port), considered the presentation not complying. This conclusion was not in conformity with L/C and undertaking of the Buyer.

[36] During the lawsuit settlement, the Bank N claims that it negotiated the complying documents and honoured the Seller on July 25, 2011, July 28, 2011 and August 8, 2011, and presented notices of negotiation of export invoices to justify that it honoured the complying presentation of the Seller. However, in addition to these invoices, the Bank N does not present any other document proving that it honoured the complying presentation of the Seller. Thus, in this case, the Court of First Instance should have taken sufficient documents and evidence to determine whether the Bank N honoured the complying presentation of the Seller. How much was the payment if it was made? Where the Bank N made payment to the Seller under L/C No. 1801, E Joint-Stock Commercial Bank has to follow the request of the Bank N. Although these outstanding matters remain unclear, the Court of First Instance indicated that L/C No. 1801 is an integral part of the sales contract dated June 7, 2011; therefore, when this contract is completely cancelled, contracting parties are not required to keep performing their obligations as mentioned in the contract; then L/C No. 1801 ceases to be valid and E Joint-Stock Commercial Bank has no obligation to pay the Bank N under the L/C; and E Joint-Stock Commercial Bank is forced to pay the Buyer the deposit of USD 1,313,308.85. This decision of the Court of First Instance is ungrounded and against UCP 600.

[37] After first-instance trial, E Joint-Stock Commercial Bank appealed against the entire First Instance Judgment. The Court of Appeal issued a Decision to Bring the Case to Trial and served the summonses to litigants to appear in the court hearing on September 25, 2014, October 27, 2014, October 31, 2014, April 16, 2015 but the court hearings were delayed for various reasons, such as: absence of litigants, absence of representative of the People’s Procuracy, judicial assistance requiring more time, etc.

[38] In the Decision No. 09/2015/QDPT-KDTM dated May 29, 2015, the Court of Appeal of the Supreme People’s Court of Ho Chi Minh City suspended appellate trial to request judicial assistance in order to summon Company B to appear in the appellate court hearing.

[39] In the Decision dated August 10, 2015, the Superior People’s Court in Ho Chi Minh City decided to bring the case to appellate trial on August 26, 2015.

[40] On August 19, 2015, E Joint-Stock Commercial Bank received the summons; on August 24, 2015, E Joint-Stock Commercial Bank submitted a request for court hearing delay on the ground that the authorized representative of E Joint-Stock Commercial Bank, who is Mr. Hua Anh K, who was being on business trip. At the court hearing on August 26, 2015, the Court of Appeal did not accept the request for court hearing delay of Mr. K and stated that E Joint-Stock Commercial Bank (appellant) was still absent although it was duly served with the second summons, and then issued a decision on suspension of appellate trial.

[41] The Superior People’s Court in Ho Chi Minh City made an error when issuing the decision on suspension of appellate trial, because pursuant to Clause 2 Article 13 of Resolution No. 06/2012/NQ-HDTP dated December 3, 2012 of Council of Justices of the Supreme People’s Court: “Where there is a decision on delay of appellate trial of a civil case, the trial preparation duration ends on the date of such decision. The appellate trial preparation duration will re-begin from the date on which the Court of Appeal keep conducting appellate trial when the delay reasons no longer exist”. Accordingly, because of the decision on court hearing delay, the appellate trial preparation re-begins from the date on which the Court of Appeal issued the decision to bring the case to trial (on August 10, 2015). Thus, the absence of the appellant (E Joint-Stock Commercial Bank) on the court hearing on August 26, 2015 should have been considered as absence despite being duly served with the first summons. In this case, whether such absence was proper or improper, the Court should have delayed the hearing as prescribed in Article 266 of the Civil Procedure Code, amended in 2011 and Article 16 of Resolution No. 06/2012/NQ-HDTP dated December 3, 2012 of Council of Justices of the Supreme People’s Court. However, the Court of Appeal stated that the representative of E Joint-Stock Commercial Bank was still absent without force majeure reason despite being duly served with the second summons and issued the decision suspension of appellate trial. This was such wrong decision; the Court of Appeal made a material procedural error which substantially affecting legitimate rights and interests of the litigants.

According to facts and matters, pursuant to Clause 2 Article 337, Clause 3 Article 343 and Article 345 of the Civil Procedure Code.

“[34] Therefore, according to the request for L/C of the Buyer and the content of L/C, L/C No. 1801 is a separate transaction from the sales contract dated June 7, 2011; governed by UCP 600. Under UCP 600, E Joint-Stock Commercial Bank, as the issuing bank, must honour if it determines that a presentation is complying…

[36]…the Court of First Instance indicated that L/C No. 1801 is an integral part of the sales contract dated June 7, 2011; therefore, when this contract is completely cancelled, contracting parties are not required to keep performing their obligations as mentioned in the contract; then L/C No. 1801 ceases to be valid and E Joint-Stock Commercial Bank has no obligation to pay the Bank N under the L/C; and E Joint-Stock Commercial Bank is forced to pay the Buyer the deposit of USD 1,313,308.85. This decision of the Court of First Instance is ungrounded and against UCP 600”.

1. Accept the Appeal No. 11/2016/KN-KDTM dated March 7, 2016 made by the Chief Justice of the Supreme People's Court.

2. Quash the decision on suspension of appellate trial No. 29/2015/QDPT-KDTM dated August 26, 2015 of the Superior People’s Court in Ho Chi Minh City and quash the First Instance Commercial Judgment No. 356/2014/KDTM-ST dated April 7, 2014 of People’s Court of Ho Chi Minh City.

3. Refer the case file to People’s Court of Ho Chi Minh City for re-conducting the first-instance trial as per the law.