In a judgment that will be of general interest to the international trade finance market, in Re Unity Trade Capital Limited  EWHC 2488 (Ch), the Court considered the circumstances in which the UCP 600 can be modified by an issuer of a letter of credit purporting also to incorporate by reference other, apparently contradictory, terms.
Unity Trade Capital defaulted on a letter of credit and sought to resist a winding up petition presented by the beneficiary on numerous grounds, including that it had incorporated by reference its “credit norms” which (it said), properly construed, released Unity Trade Capital from its payment obligations upon waiver of discrepancies in the documents presented.
The Court found that the documents presented were not discrepant and the credit norms, properly construed, governed the facility between bank and applicant but did not extend to the credit issued under that facility to the beneficiary.
In any event, if the credit norms were construed in the way contended for by Unity Trade Capital, the Court considered that they would entail “a dramatic departure” not only from fundamental principles in letters of credit but also from the regime prescribed by the UCP 600 (which was otherwise validly incorporated into the credit). Given the degree of market standardisation for letters of credit, that meant that the incorporation of the credit norms would have required very clear notice (“the equivalent of Denning LJ’s ‘red hand’”). The Court concluded that a reference to the credit norms in the small print of the wrong field of the SWIFT message constituting the credit did not meet that threshold.