Double Confirmation: Possible, but Is It Practical?

Intro

Every now and then, Mr. Old Man receives a question that looks simple at first glance but becomes rather complicated once you bring UCP 600, two confirming banks, and two places of expiry into the picture.

Here is a recent question from Firas about whether an LC can be structured with two confirming banks and two places of expiry, followed by Mr. Old Man’s thoughts based on a similar question he dealt with many years ago.

Question

Dear Mr. Old Man,

I hope this message finds you well.

As an Issuing Bank, we have issued a Letter of Credit (LC) that was initially confirmed by a bank outside the beneficiary’s country.

The applicant is now requesting an amendment to add a second confirming bank located in the beneficiary’s country—effectively creating a double confirmation setup.

Specifically, the applicant wants:

• Both banks to be explicitly named as Nominated/Confirming Banks (e.g., “Available With both Banks”).
• The Place of Expiry (Field 31D) to be in both countries (the second confirming bank’s country and the beneficiary’s country).

Could you please share your insights on the following:

1. Is this structure commercially and operationally feasible under UCP 600?
2. What are the key operational, legal, and risk challenges that we, as the Issuing Bank, will face in managing two confirming banks and two places of expiry?
3. What specific wording or clauses in Field 47A should be incorporated into the LC or amendment to clearly define the responsibilities of each bank and ensure a smooth execution?

Looking forward to your advice and best practices on this.

Best regards,
Firas

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Answer

Dear Firas,

Thank you for your question.

I actually addressed a similar question back in 2010. For reference, I wrote at the time:

“In trade finance, almost anything is possible—provided the parties involved are willing to accept the risks and the operational complexities.”

To illustrate that double confirmation can happen, I used the following hypothetical scenario:

Bank I in Cambodia issues an LC in favour of Beneficiary B in Thailand. Bank A in Thailand initially declines to add its confirmation, so Bank I approaches Bank C in Singapore, which agrees to confirm the LC. Bank C therefore acts as the advising and confirming bank, while Bank A in Thailand remains merely an advising bank.

Later, because of concerns arising from a global financial crisis, the beneficiary still insists on local confirmation. Bank A, being comfortable with Bank C as a correspondent, agrees to add its own confirmation even though the LC has already been confirmed by Bank C.

This effectively results in a second confirmation of an already confirmed LC.

There is, however, an important distinction: in that example, Bank A’s confirmation would be a silent confirmation, because it was added without the knowledge or authorization of the issuing bank. It was therefore an arrangement between Bank A and the beneficiary, with no reimbursement undertaking from the issuing bank or Bank C.

The full Q&A can be read here:

www.mroldman.net/adding-confirmation-to-an-lc-already-confirmed/

There was also a similar discussion on the DCPro Discussion Forum in the same year. The original question came from Khalid (UAE), with insightful responses from J. Smith (UK) and Glenn Ransier (USA)—two trade finance professionals whose knowledge and experience I have always greatly admired.

The full discussion can be read here:

www.mroldman.net/double-confirmation/

Regarding your specific question

I believe it is possible in principle to structure an LC/amendment involving two confirming banks. However, the structure you describe—two banks expressly designated as confirming/nominated banks, together with two places of expiry—would be considerably more complicated than the usual arrangement.

The main issue is not simply whether UCP 600 prohibits such a structure. Rather, it is whether the issuing bank and both confirming banks can clearly agree on their respective roles, obligations, presentation procedures, examination of documents, reimbursement arrangements, and liability.

In particular, having two places of expiry raises practical questions such as:

• Where may the beneficiary present documents?
• Which bank is responsible for examining a presentation made at each place?
• If documents are presented to one confirming bank and found discrepant, can the beneficiary present the same documents to the other confirming bank?
• How would the two banks coordinate their examination and any refusal?
• How would duplicate payment be prevented if both banks honour or negotiate?
• What happens if the two banks reach different conclusions on compliance?
• How would the issuing bank handle reimbursement and claims from two confirming banks?

These are significant operational and risk-management issues.

For that reason, I would be reluctant to solve the beneficiary’s requirement simply by adding both banks as “Available With” banks and specifying two places of expiry.

The wording in Field 47A cannot, by itself, eliminate the legal and operational consequences arising from the banks’ respective roles under the LC and UCP 600.

A simpler alternative

If the beneficiary’s real objective is simply to obtain local confirmation from a bank in the beneficiary’s country, I would consider the silent-confirmation solution described in my earlier example.

In that arrangement, the LC continues to have only one confirming bank under the LC, while the local bank separately agrees with the beneficiary to provide its own payment undertaking.

This avoids having to create two contractual confirmation relationships under the same LC and, in my view, is operationally much cleaner.

Of course, whether a local bank is willing to provide such a silent confirmation is entirely a matter between that bank and the beneficiary, and the bank would need to be comfortable with the associated risks.

So, in short:

Yes, a double-confirmation structure may be possible, but I would not regard “Available With both Banks” plus two places of expiry as a straightforward or risk-free solution. If the commercial objective can be achieved through a silent confirmation by the local bank, that would generally be the simpler structure.

In trade finance, as in life, simpler is often better.

Best regards,

Mr. Old Man

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Further question

Could you clarify why you consider specifying ‘Available with both banks’ and dual places of expiry as problematic from an LC structure perspective?

Firas

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Answer

Dear Firas,

Nothing is impossible. In principle, you can structure an LC so that it is available with two different banks and provides for two different places of presentation/expiry.

For example, this could be dealt with in Field 47A along the following lines:

For Bank A:

“LC is available with Bank A by negotiation/payment. Documents must be presented to Bank A within XX days after the B/L date, but no later than [date].”

For Bank B:

“LC is also available with Bank B by negotiation/payment. Documents must be presented to Bank B within XX days after the B/L date, but no later than [date].”

So, technically, such a structure can be created.

My concern is not that UCP 600 expressly says that an LC cannot be structured this way. My concern is that such a structure is unnecessarily complicated and unconventional.

Once an LC is made available with two banks at two different places, a number of practical questions immediately arise. For example: Can the beneficiary choose either bank for presentation? If Bank A refuses the documents, can the beneficiary subsequently present them to Bank B, provided the LC has not expired? What happens if the two banks reach different conclusions regarding compliance? How do we prevent two negotiations or payments against the same set of documents? And how are the respective responsibilities of the two confirming banks to be coordinated?

All these issues can probably be addressed by carefully drafted additional conditions. But the more conditions we add to solve problems created by the structure itself, the more complicated the LC becomes.

In my 35 years of involvement with LCs, I have never seen an LC made available with two banks and two places of expiry in this manner.

Therefore, I would still suggest proceeding as mentioned in my previous answer: keep the existing confirming-bank structure under the LC and, if acceptable to the parties concerned, have the second bank provide a silent confirmation separately to the beneficiary.

That achieves the commercial objective without unnecessarily complicating the LC itself.

In trade finance, as in life, simpler is often better.

Best regards,

Mr. Old Man