Mr Old Man Payment Q&A GUIDANCE ON HANDLING A NOMINATED BANK’S DEFAULT By Mr Old Man Posted on 23 hours ago 2 min read 0 0 9 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr QUESTION Dear Mr. Old Man, I need your guidance in the following scenario: If a Nominated Bank has incurred its deferred payment undertaking or has accepted a draft drawn on it but fails to honour at maturity, then what options does the beneficiary have? Please clarify. Regards, Siva Prasad —— ANSWER Hi Siva, According to UCP 600 sub-article 7 (a) (iii) and sub-article 7 (a) (iv), if the LC is available with the nominated bank by deferred payment or by acceptance with a nominated bank and that bank has incurred its deferred payment undertaking or has accepted the draft drawn on it, but does not honour at maturity, the issuing bank must pay. Therefore, the beneficiary’s first step is to claim payment from the issuing bank. If the issuing bank fails to pay, the beneficiary can choose to initiate legal action against either the nominated bank or the issuing bank. Notably, if the nominated bank is located in the same country as the beneficiary, it may be more convenient to sue the nominated bank as it has incurred its deferred payment undertaking or has accepted the draft drawn on it but does not pay. Importantly, pursuing legal action against the nominated bank does not preclude the beneficiary from suing the issuing bank as well, according to UCP 600 sub-article 7(a)(iii) and sub-article 7(a)(iv). Best regards, Mr. Old Man —- THANK YOU FROM SIVA PRADA Dear Mr. Old Man, Thank you for your clarification. What a lightning response, really great. Regards, Siva Prasad