Nominated But Not Obligated: What UCP 600 Really Expects from Nominated Banks

In the world of Letters of Credit, being nominated doesn’t always mean being obligated. This subtle—but crucial—distinction lies at the heart of how UCP 600 treats the role of the nominated bank.

A recent question raised by ICC-certified expert Domenico Del Sorbo highlights this exact nuance: Why doesn’t UCP 600 impose an obligation on a nominated bank—not acting on its nomination—to forward the documents to the issuing or confirming bank?

This Q&A offers a practical reading of UCP 600 Articles 12, 15, and 35 to explain why the rules are drafted this way—and what they reveal about the intended flexibility and limits of the nominated bank’s role.

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Nominated But Not Obligated: What UCP 600 Really Expects from Nominated Banks

QUESTION

Dearest Mr. Old Man :),

I am writing to sincerely thank you for your always excellent contributions to the knowledge of Trade Finance, and Letters of Credit in particular.

I have a question for you:

Article 15 of the UCP reads as follows:

1. When an issuing bank determines that a presentation is complying, it must honour.
2. When a confirming bank determines that a presentation is complying, it must honour or negotiate and forward the documents to the issuing bank.
3. When a nominated bank determines that a presentation is complying and honours or negotiates, it must forward the documents to the confirming bank or issuing bank.

My question is: why don’t the UCP impose an obligation on a nominated bank not acting on its nomination — i.e., one that does not honour or negotiate — to forward the documents to the issuing or confirming bank?

Waiting for yr reply.

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Thanks a lot & regards,

Domenico Del Sorbo

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ANSWER

Dear Domenico,

First, let me say that I have long followed and admired your insightful contributions to the field of Trade Finance. Your work has greatly enriched our shared understanding, and I thank you for it.

Now, regarding your excellent question:

Why doesn’t the UCP impose an obligation on a nominated bank—not acting on its nomination—to forward the documents to the issuing or confirming bank?

While Article 15(c) does not explicitly impose such an obligation, I believe the answer lies in the broader framework of UCP 600. Allow me to share a few thoughts:

• Article 2 defines a nominated bank as a bank with which the credit is available—or any bank, in the case of a credit available with any bank.
• Article 12(a) clarifies that unless the nominated bank is also the confirming bank, its nomination does not impose an obligation to honour or negotiate, unless it has expressly agreed to do so and communicated that agreement to the beneficiary.
• Article 15(c) states that if a nominated bank determines a presentation to be complying and honours or negotiates, it must forward the documents to the confirming bank or issuing bank.
• Most significantly, Article 35(b) provides that if a nominated bank forwards the documents to the issuing or confirming bank—whether or not it has honoured or negotiated—the issuing or confirming bank must honour or reimburse, even in the case of documents lost in transit.

I find Article 35(b) to be more protective of the beneficiary than the nominated bank. This is why, where possible, a beneficiary should request that the credit be made available with a nominated bank located in their own country. Doing so enhances certainty in document handling and minimizes cross-border risks, particularly when the beneficiary has an established relationship with that local bank.

In light of the above, I believe Article 15(c) provides a sufficient and targeted obligation for when a nominated bank does act. Further obligations—especially those applying to situations where the nominated bank chooses not to act—are deliberately left out, allowing for flexibility while still ensuring protection for the beneficiary under other provisions, such as Article 35.

Just my humble view, my friend.

Best regards,

Mr. Old Man