Partial Confirmation under UCP 600: Is It Allowed?

Introduction

Questions about L/C confirmation often resurface when transactions become large, long-term, and complex—especially in infrastructure projects where risk management is critical. One such question is whether a confirming bank may add its confirmation to only part of the credit amount, commonly referred to as partial confirmation.

Although some practitioners believe that UCP 600 does not allow partial confirmation, the issue is more nuanced. The following Q&A addresses this point from both a rules-based and a practical perspective.

Question

Dear Mr. Old Man,

I hope all is well on your side. I have a query on L/C confirmation and was referred by some Vietnamese counterparts to you as you are a Trade Finance expert in Vietnam.

I would like to ask whether you have come across partial confirmation of L/Cs. According to some colleagues, UCP 600 does not allow partial confirmation.

Assume there is an L/C issued for the construction of a large infrastructure project. The L/C amount exceeds USD 100 million and the expiry is approximately 30 months. Would it be possible for a confirming bank to add confirmation to only part of the L/C amount, if the beneficiary wishes to cover only partial risk?

I would appreciate your kind assistance.

Best regards,

David

———-

Answer

Dear David,

Thank you for your question.

Short answer: yes, partial confirmation is possible, and agreement with the beneficiary alone is sufficient.

UCP 600 is silent on the concept of partial confirmation. However, silence should not be interpreted as prohibition.

Below is what I wrote in response to a similar question on a Letter of Credit forum back in 2007:

Quote

Partial confirmation is not covered under UCP 600. Therefore, if  requested by the beneficiary, a bank wishing to add partial confirmation should have a specific agreement with the beneficiary regarding its confirmation obligation.

Unquote

To illustrate how partial confirmation can arise in practice, consider the following scenario:

• Bank I issues a confirmed L/C for USD 100,000 in favour of XYZ Company.
• Bank C adds its confirmation and advises the L/C to the beneficiary.
• One month later, Bank I issues an amendment increasing the L/C amount by USD 100,000.
• Bank C advises the amendment without adding its confirmation to the increased amount and informs the issuing bank accordingly, in compliance with sub-article 10(b) of UCP 600.

After the amendment, the total L/C amount is USD 200,000, but only USD 100,000 is confirmed by Bank C. In substance, this is a partial confirmation.

Returning to your case:

The fact that UCP 600 does not expressly mention partial confirmation does not mean that it prohibits confirmation of only part of the credit amount. If requested and clearly agreed by the beneficiary and accepted by the confirming bank,  there is no rule-based obstacle to such an arrangement.

What matters most is clarity: the extent of the confirmation must be clearly stated in the advice.

Assuming the beneficiary requests its bank to confirm the L/C for the full amount of USD 100 million, but the bank agrees to add its confirmation for only part of that amount, say USD 50 million, the confirming bank may honour complying documents without recourse for the confirmed portion of USD 50 million, and pay the remaining USD 50 million on a with-recourse basis.

The confirming bank may claim reimbursement from the issuing bank for the full amount it has paid. However, if the issuing bank fails to reimburse, the confirming bank will have no recourse to the beneficiary for the confirmed portion, but will retain recourse to the beneficiary for the unconfirmed USD 50 million, together with any applicable interest from the date of payment to the date of reimbursement by the beneficiary.

Kind regards,

Mr. Old Man