the_moot_problem.pdf

7/27/2019 The_Moot_Problem.pdf

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2ndInternational Banking and Investment LawMoot Court Competition 2013

Arbitration Concerning Letter of Credit

Between

Arcaland Tea Company Limited (ATCL) (Applicant)

AndThe Global Bank of Norland (GBN) (Respondent)


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Moot Problem

1. Albert Mondego Company Limited (AMCL) is a company incorporated in Batumi, capitalof Adjara, since 1920. It has export-import business worldwide. AMCL enters into a joint

venture with TINOCL (Townshend International Nickel and Copper Limited), a

government undertaking of the Republic of Townshend with 51:49 shareholding, with

AMCL given power to appoint the Chairman. The joint venture is incorporated as

Arcaland Tea Company Ltd. (ATCL) in the province of Arcaland, Republic of

Townshend. ATCL entered the export business in 1980.

2. The Republic of Townshend is a developing country, independent since 1971. Even after50 years of independence it remains predominantly an agricultural economy, the main

export being tea and coffee reflecting the largely mountainous topography of the country.

Arcaland tea has been registered worldwide under the Geographical Indications Registers,

pursuant to WTO system. The special feature of the tea is that it consists of large leaves

(larger than usual tea leaves), with a special aroma when dipped in hot water and a special

taste of tea with a few drops of lemon. It is generally consumed without sugar and milk,

particularly after food. It has a wide market in Europe and the United States.

3. Norland, a European city bordered in the west by the Baltic Sea and influenced by atemperate seasonal climate, has been traditionally importing Arcaland tea.

4. Norland Importers Ltd. (NIL) is a Norland company which has near-monopoly inimporting all food products into Norland, including tea. In the case of tea, NIL imports

about 40% Arcaland tea produced annually. It also imports Rinjiling tea from the Rinjiling

province of Starkland, depending on the market requirements in Norland. The major

difference between the two teas is that Rinjiling tea leaves are smaller, and very brittle,

and therefore preferred more in the form of tea dust. This is not exactly suitable for after

meal consumption, although taste-wise, both teas taste similar.


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I. THE CONTRACT OF SALE AND LETTERS OF CREDIT

1. On 10October 2011, the tea import division of NIL enters into a contract with ATCL forpurchase of 500 tonnes of Arcaland tea to be supplied in two equal instalments. The

shipment containing first instalment should leave Arcaland Port during the time range of

15-31 March 2012, destination being the Pearl Harbour, Norland and the time range for

shipment of the second instalment is to be 15-30 September 2012.The agreed price for the

tea is US$ 3,000 per tonne, f.o.b. The agreement (attached herewith) contains conditions

relating to identification of the shipper, and method of payment for the two instalment

deliveries.

2.

The conditions include a standby performance guarantee by ATCL bankers, the StateBank of Townshend, and two irrevocable letters of credit of equal amount (matching each

delivery instalment) to be opened by NIL with the Global Bank of Norland (GBN) in

favour of ATCL, by 15th January, 2012, designating the State Bank of Townshend (the

State Bank of Townshend is one of the correspondent banks of GBN) to be the confirming

and advising bank, payable within 15 days of delivery on board of the ship as certified by

NIL representative and production of the original of consignors copy of the Bill of

Lading and originals of all other documents as specified in the export contract of 10

October 2011.

3. Entering into contract with NIL, ATCL approaches the Export-Import Bank ofTownshend (ExIm Bank), a Government controlled Export Credit Agency situated in the

republic of Townshend, for an Export Credit Insurance against the order placed, as it had

taken a loan for the processing of goods from the State Bank of Townshend.

Consequently, ATCL enters into contract with the ExIm Bank.

4. The ExIm Bank lays down a condition in the Export Credit Insurance Agreement that inorder to be eligible for the complete payment of the insurance sum, at least 75% of the tea

to be exported shall be that of Townshend and that the ExIm Bank should be notified of

proper delivery of goods.

5. Adequate Insurance from Lloyds Insurance is also to be procured at the cost of theconsignee.


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II. FIRST SHIPMENT

1. ATCL succeeds in placing on the cargo-hold of the vessel HMS Beagle on 15thMarch,2012, the first instalment of the tea by way of 5000 plywood boxes 50 kg each. A Norland

consular officer located in Arcaland Port certified proper delivery at the ship.

2. However, on its onward voyage,HMS Beagle runs into heavy weather, develops technicalsnags, and undergoes repairs at the port of Aden. Consequently, the vessel arrives at Pearl

Harbour on 10thApril, 2012, some 16 days later than usual.

3. On 30th March, 2012, ATCL presents the necessary documents to the State Bank ofTownshend and asks for its confirmation and immediate advice to GBN, with notice to

NIL. Although NIL receives the notice documents by CFL Express by 25th March, 2012

and the notice of demand for encashment of the Letter of Credit on 6th of April, it decides

to instruct GBN to delay encashment until it is advised to release it after arrival of the

cargo at Pearl Harbour and its satisfactory receipt by NIL representatives. NIL in fact has

no clue about the probable date of arrival of the shipment at Pearl Harbour.

4. Upon its arrival on 10th April, NIL representatives inspect the cargo and find two of theboxes broken and the cardboard cartons inside severely damaged. Many of these cartons

are somehow drenched in sea water, for want of waterproof protection. In view of all this,

NIL decides to seek clarifications from the Norland consular agent at Port Arcaland, the

shipper and the insurers, ask the GBN to delay payment further.

5. On refusal of immediate encashment of the Letter of Credit even after confirmation andadvice of the State Bank of Townshend, ATCL institutes a civil suit before a Hastinapur

Court against GBN for specific performance of the L/C. GBN contests the jurisdiction of

the Hastinapur Court on the basis of the dispute settlement clause of the L/C as also on the

ground of non-impleading of essential parties. The Court, however, proceeds with the

case, orders specific performance against GBN and issues a Mareva injunction against the

assets of GBN in Townshend.

6. In the meantime, on 4th May, the State Bank of Townshend advices ATCL thatencashment of the letter of credit has been made without prejudice to the liability of

ATCL in respect of the damage suffered by NIL for defective delivery of 3 plywood

boxes, and consequent loss of profits in the market coupled with legal and other


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expenses. On the same day, ATCL replies NIL that ATCLs obligation of delivery ends

with proper delivery at the ship as certified by NIL representative, but that both NIL and

GBN continue to be liable for the breach of conditions of the letter of credit. However,

ATCL accepts the encashment without waiving its rights which may be invoked at any

appropriate time in future during the pendency of the current contract or thereafter.

III.SECOND SHIPMENT1. By July 2012, ATCL suddenly finds in hot waters in view of riots spreading all over the

tea producing regions of Arcaland. Since the beginning of August, it becomes clear to

ATCL that it will be impossible for it to procure the entire 250 tonnes of Arcaland tea

ready to be delivered during the time range stipulated in September, 2012. It, therefore,

writes to NIL that in view of the riot situation, which was an unforeseen circumstance, it

can only deliver 125 tonnes of Arcaland tea, which it has in its godowns, and that if NIL

wishes ATCL will be more than happy to deliver 200 tonnes of Rinjiling tea which it can

easily procure from Rinjiling Tea Corporation (RTC), a government company, and get it

delivered by RTC as per the export agreement at the Arcaland Port at no extra cost. NIL

found this offer attractive and agreed for this change. NIL and ATCL duly inform the

Global Bank of Norland of this change.

2. By 20thSeptember, 2012, ATCL delivers Arcaland tea in 2500 plywood boxes of 50 kgeach, and RTC also at the same time delivers Rinjiling teain 4000 boxes of 50 kg each.

Both are received as one delivery from ATCL on the instructions of NIL, by the Captain

of SS Savannah, the vessel designated by NIL for the f.o.b. delivery. This time, the

delivery is verified by a representative of NIL.

3. The vessel arrives at Pearl Harbour on 30th September. NIL takes the cargo off the ship thevery next day. On inspection it discovers that each of the 4000 boxes contain cartons filled

with at least 20 kgs of stones and rubbish. It lodges an immediate protest to ATCL and

instructs GBN to dishonour the confirmation and advice it may receive from the State

Bank of Townshend.

4. Predictably, on 1st of October, 2012, the State Bank of Townshend confirms and advicesthe Global Bank of proper delivery, on the strength of the documents that it has received

from the beneficiary. GBN informs the State Bank of Townshend and ATCL that the

second letter of credit will not be paid out because of the fraud in delivery of goods,


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besides for the reason of change of original stipulations, not permissible in an irrevocable

letter of credit.

5. ATCL sends a strong response to GBN that the amendment of contract has been dulynotified to it by both parties and that therefore GBN has no power to question the freedom

of parties to alter their contract. ATCL contends further that it is not for GBN to rely on

the issue of fraud, in view of the autonomy principle that governs letters of credit. At any

rate, ATCL is at liberty to proceed against NIL before a separate forum.

6. On receipt of ATCL letter, GBN replies that it has decided not to change its stand. ATCLinvokes the dispute settlement clause in both the letters of credit and serves on GBN

notice of arbitration before ICC Centre at Singapore, questioning the conduct of GBN

under both the letters of credit. As soon as NIL becomes aware of this, it moves the

Supreme Court of Norland for a stay of the proposed arbitration, and GBN joins the

proceedings as an intervener. The Supreme Court hears the petition ex parte since ATCL

refuses to appear before it, and issues a writ restraining the ICC from proceeding with the

arbitration until the claims of NIL are settled.

IV.REFERRAL TO ARBITRATION1. The International Court of Arbitration of the ICC Asia Office, Hong Kong appoints a three

member arbitration tribunal and the constitution of the tribunal is accepted by both parties.

The tribunal issues notices to both parties to submit their memorials accompanied by

evidence. On receipt of the memorials the tribunal is ready to hear the parties.

2. For the purposes of these proceedings ATCL is deemed to be the Applicant and GBN theRespondent.


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ANNEXTURE I

Arcaland Tea Company Ltd (ATCL)

Arcaland Tea Tower,

Central Arcade, Hastinapur,

Arcaland Province, Republic of Townshed

EXPORT SALES CONTRACT

Contract No. 25/2011

To:

Norland Importers Limited (NIL)10th Floor, 12 Seaside Point

Harbour RoadPearl Harbour, NorlandE-mail: [email protected],nor; Tel: 295-3663623980/88 Fax: 295-3663623979

Dear Sirs:

We, Arcaland Tea Company Ltd. (ATCL), a company incorporated in the province of Arcaland,

Republic of Townshend, as Seller, hereby agree to sell you, as Buyer, the following goods subject

to the terms and conditions hereinafter set forth and on the reverse side hereof:

Description of Goods Quantity Unit Price Amount

Arcaland Tea

1st shipment (15-31 March 2012)

2nd shipment (15-30 September 2012)

250 tonnes

250 tonnes

US$3,000 per

tonne f.o.b. US$ 7,500,000.

US$ 7,500,000.

Total 500 tonnes US$3,000 per

tonne f.o.b.

US$15,000,000.

Contract Amount USD Fifteen Million only

Quality Arcaland Tea as recognized in the Geographical Indications Register of

Norland.Packing To be packed in cardboard cartons of 50 kg each and then boxed in plywood

boxes

Shipment As stipulated above two shipments f.o.b. at Arcaland Port, Townshend to

Pearl Harbour, Norland

Payment Two Irrevocable Commercial Letters of Credit to be opened by NIL with the

Global Bank of Norland (GBN) in favour of ATCL, by 15th January, 2012,

designating the State Bank of Townshend to be the confirming and advising

bank, each payable within 15 days of delivery of each shipment on board of

the designated ship as certified by NIL representative and production of theoriginal of consignors copy of the Bill of Lading and originals of all other

Export Division

Tel: 182-9783263663 to 669, Fax:182-9783263664

E-mail: [email protected]
mailto:[email protected],normailto:[email protected]:[email protected]:[email protected],nor


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documents with the confirming and advising bank.

Other Terms and

Conditions

F.O.B. Vessel for each shipment to be designated by the Buyer

Refer to General Terms and Conditions on the reverse side hereof which are incorporated herein

and make an integral part hereof.Agreed and confirmed by

Norland Importers Limited (NIL) Arcaland Tea Company

Ltd (ATCL)

By: (Signature) By: (Signature)Name Dr. Damon Woolfe Name: Mme Mme MarlineKeshotTitle: Director, Food Imports Title: Director, ExportDivision

Date: 10 October 2011 Date: 10 October 2011

GENERAL TERMS AND CONDITIONS

Unless otherwise stipulated on the face hereof, the sale and purchase specified on the face hereof

shall be subject to the following terms and conditions:

1. QUANTITY: The total quantity stipulated on the face hereof shall be subject to a variationof ten percent (10%) plus or minus at Sellers option.

2. SHIPMENT: The date of the bill of lading shall be accepted as the conclusive date ofshipment. Any shipment made within seven (7) days after the date of shipment specified

on the face hereof shall be deemed as a contracted delivery, if agreed to by both parties.

Partial shipment and/or transhipment shall not be permitted, except as stipulated on the

face hereof. Each shipment shall be considered as a separate and independent contract for

the purposes of release of a Letter of Credit. In case of CIF or CFR term, shipment of the

goods within the time stipulated on the face hereof shall be subject to shipping space being

available. In case of FOB term, Buyer shall provide necessary shipping space and give

shipping instructions in a timely manner. Failure of Buyer to provide such shipping spaceor to give such instruction shall be a breach of the contract and Buyer shall bear any

additional costs incurred therefrom and all risks of the goods. If requested by Seller, Buyer

shall amend the Letter of Credit and take full responsibility to enable Seller to make the

necessary procedure to fulfil such shipment.

3. PAYMENT: All payment hereunder shall be made in United States Dollars. Buyer shallestablish in favour of Seller irrevocable Letters of Credit negotiable on sight draft through

a first class international bank satisfactory to Seller, which shall be received by Seller

immediately upon delivery of each shipment under the contract. Each Letter of Creditshall be valid and effective for at least fifteen (15) days after the final date provided for


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delivery on the face hereof. The substance and form of the Letter of Credit shall be

acceptable to Seller in writing. If Buyer fails to furnish the Letter of Credit in the manner

and form specified above or to fulfil the payment term under the contract, Seller may

reserve the right to stop or suspend the shipment or to cancel all or any part of the contract

and/or may dispose of the goods on Buyers account and risk.

4. TITLE: The absolute title to and ownership of the goods shall remain in Seller until Buyerpays the contract amount in full.

5. PACKING: The make-up, packing, packaging and marking shall be at Sellers option,unless specified herein.

6. INSPECTION: The inspection of the goods shall be performed by Seller or its designee inthe country (from which the goods are exported) according to the export regulations of the

country and such inspection shall be considered as final and conclusive in all respects

regarding the goods. Buyer or his representative shall be at liberty to inspect the cargo at

the time of delivery at the designated ship.

7. INSURANCE: In case of CIF term, one hundred and ten percent (110%) of the invoiceamount will be insured. In case of FOB term, insurance may be arranged by Seller at the

request of Buyer at the latters cost.

8. INCREASED COST: If Sellers costs of performance are increased after the date of thecontract by reason of increased freight rates, taxed or other governmental charges, and

costs arising from unforeseen circumstances, Buyer shall reimburse Seller for suchincreased cost or loss of income.

9. FORCE MAJEURE: If any performance of the contract is prevented or delayed in whole orin part, by reason of any legal prohibition of export or import, flood, typhoon, Act of God,

fire, war whether declared or not, armed conflict, civil commotion, riot, strike or other

labor disputes of Seller or of the manufacturer or suppliers of the goods, severe economic

dislocation, peril or accident of the sea, the bankruptcy or insolvency of the manufacturers

or suppliers, or any other cause beyond the reasonable control of Seller or of the

manufacturers or suppliers of the goods, Seller shall not be liable for the non-performance

of the contract including non-shipment or late shipment of the goods, and Buyer shall

accept any shipment made within a reasonable time, or shall accept the cancellation or

modification of all or any part of the contract at Sellers option. Provided that nothing

herein shall relieve buyer from its obligation to pay for the goods.

10.WARRANTY: Unless expressly stipulated on the face of the contract, Seller makes nowarranty or condition, express or implied, as to the fitness and suitability of the goods for

any particular purpose.


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11.STANDBY PERFORMANCE GUARANTEE: Seller shall, upon opening of the irrevocableLetters of Credit at the instance of Buyer, present to the satisfaction of Buyer a standby

performance guarantee by his bankers.

12.PATENTS: Buyer shall hold Seller harmless from liability, loss, or expenses in connectionwith any infringement with regard to patent, pattern, design, copyright, trademark and thelikes originated or chosen by Buyer.

13.CLAIM: Buyers claim of whatever nature arising under the contract shall be notified inwriting by Buyer to Seller within fifteen (15) days after the arrival of the goods at the

destination stipulated on the face hereof. Unless such notice is accompanied by particulars

of such claim together with proof certified by an authorized surveyor, Buyer shall be

deemed to have waived such claim. In no event may Buyer assert a claim for any reason

whatsoever after the goods are delivered at ship, used, sold, cut, proceed or otherwise

altered. In no event shall Seller be liable for prospective profits, or indirect, special,

incidental or consequential damages.

14.TERMINATION: Seller may terminate the contract by notice in writing, without prejudiceto any remedy it might have against Buyer for the breach of contract, (i) if Buyer fails to

comply with any of the provisions of the contract and does not remedy the violation or

breach within fifteen (15) days after it has been notified thereof, or (ii) if any proceeding

for insolvency or bankruptcy is instituted by or against Buyer or a receiver is appointed for

Buyer. Seller shall have independent right to make claims against the Issuing Bank of

Letters of Credit, for any conduct that it may deem inconsistent with the terms of the L/Cs.

15.TRADE TERMS: Unless otherwise specified herein, all trade terms used in the contractshall be interpreted in accordance with the latest INCOTERMS of the International

Chamber of Commerce.

16.GOVERNING LAW & ARBITRATION: The contract shall be governed as to all matters,including validity, construction and performance by and under the LexMercatoria. All

disputes, controversies, or differences which may arise between the parties, out of, or in

relation to, or in connection with the contract, or for the breach thereof, shall be finally

settled by arbitration in Hastinapur, Arcaland Province, Republic of Townshend, inaccordance with the Commercial Arbitration Rules of the Townshend Commercial

Arbitration Board and under the Laws of the Republic of Townshend. The award rendered

by the arbitrator(s) shall be final and binding upon both parties concerned.


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Annexure II


Arcaland Tea Tower,Central Arcade, Hastinapur,


EXPORT CREDIT INSURANCE CONTRACT

To:Export-Import Bank of Townshend10th Floor, 12 Staten PointBankers StreetStaten Island, TownshendE-mail: [email protected]; Tel: 295-3663623786/99 Fax: 295-3663623892

Dear Sirs,

We, Arcaland Tea Company Ltd. (ATCL), a company incorporated in the province of Arcaland,

Republic of Townshend, hereby wish to, get the following goods insured, subject to the terms and

conditions hereinafter set forth and on the reverse side hereof:

Description of Goods Quantity Unit Price Amount

Arcaland Tea1st shipment (15-31 March 2012)

2nd shipment (15-30 September 2012)

250 tonnes

250 tonnes

US$3,000 per

tonne f.o.b. US$ 7,500,000.

US$ 7,500,000.

Total 500 tonnes US$3,000 per

tonne f.o.b.

US$15,000,000.

Contract Amount USD Fifteen Million only

Quality Arcaland Tea as recognized in the Geographical Indications Register of

Norland.

Packing To be packed in cardboard cartons of 50 kg each and then boxed in plywood

boxes

Shipment As stipulated above two shipments f.o.b. at Arcaland Port, Townshend toPearl Harbour, Norland

Payment Two Irrevocable Commercial Letters of Credit to be opened by NIL with the

Global Bank of Norland (GBN) in favour of ATCL, by 15th January, 2012,

designating the State Bank of Townshend to be the confirming and advising

bank, each payable within 15 days of delivery of each shipment on board of

the designated ship as certified by NIL representative and production of the

original of consignors copy of the Bill of Lading and originals of all other

documents with the confirming and advising bank.

Other Terms and

Conditions

F.O.B. Vessel for each shipment to be designated by the Buyer

Export DivisionTel: 182-9783263663 to 669, Fax: 182-9783263664

E-mail: [email protected]
mailto:[email protected]:[email protected]


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Refer to General Terms and Conditions on the reverse side hereof which are incorporated hereinand deemed an integral part hereof.

Agreed and confirmed by

Norland Importers Limited (NIL) Arcaland Tea Company Ltd (ATCL)

By: (Signature) By: (Signature)Name: Dr. Damon Woolfe Name: Mme Marline KeshotTitle: Director, Food Imports Title: Director, Export DivisionDate: 10 October 2011 Date:10 October 2011

GENERAL TERMS AND CONDITIONS

Unless otherwise stipulated on the face hereof, the agreement shall be subject to the following

terms and conditions:

1. ELIGIBILITYIn order to be eligible for the complete payment of the insurance sum, at least 75% of the tea to beexported shall be that of Townshend.

2. RISKS NOT COVEREDa) Commercial disputes including quality disputes raised by the buyer, unless the exporter

obtains a decree from a competent court of law in the buyer's country in his favour;

b) Causes inherent in the nature of goods;c) Buyer's failure to obtain necessary import or exchange authorization from authorities inhis country;

d) Insolvency or default of any agent of the exporter or of the collecting bank;e) Loss or damage to goods;f) Exchange rate fluctuation;g) Failure of the exporter to fulfil the terms of the export contract or negligence on his part.3. PERIOD OF VALIDITYa) The policy would be valid for shipment(s) made from the date of receipt of proposal up to

the last date allowed under the relevant contract for shipment. If the exporter has chosen tocover the shipments to be made during a particular period, the policy would be issued forthat period.

b) In case the policy is issued to cover a shipment already made before the proposal issubmitted, the policy would be valid only for that shipment. If the proposal is to cover theshipment already made under a contract and to cover further shipments to be made underthe same contract, the policy shall be issued for the period from the date of the shipmentalready made up to the period of contract or the period as desired by the exporter,whichever is earlier.


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4. PERCENTAGE OF COVER PROVIDEDThe percentage of cover available under the policy would be 75% of the gross invoice value of

the shipments covered. However, policy could also be issued with a lower percentage of cover

with proportionate reduction in the amount of premium payable and the amount of maximum

liability. The percentage of cover in respect of countries under restricted cover category would

depend upon the underwriting policy applicable for the country at the relevant point of time.

5. CIRCUMSTANCES UNDER WHICH COVER CAN BE WITHDRAWNIn case of any adverse experience/report on the buyer or his country EXIM or the exporter can

withdraw the cover, upon immediate notice to the Buyer. For the shipments made prior to such

withdrawal, cover would be available.

6. OBLIGATIONS OF THE EXPORTERa) SUBMISSION OF STATEMENT OF SHIPMENTS MADE: On or before 15th of every month the

exporter is required to submit a statement of shipment(s) made during the previous month

under the contract, which is covered under the policy. This statement has to be submitted

along with the proposal itself if the shipment for which cover is sought has already been

made;

b) SUBMISSION OF STATEMENT OF OVERDUE: On or before 15th of every month the exporteris required to submit a statement of payments against the shipments covered under the

contract which have remained overdue for more than thirty days from the due date;

c) INTIMATION OF EVENT AFFECTING THE RISK: If the exporter comes to know about anyevent likely to affect the risk the same has to be intimated to EXIM immediately and inany case by not later than 30 days;

d) ACTION FOR MINIMIZING LOSS: Immediate steps are to be taken in the event of non-receipt of payment for any shipment. On learning of non-payment of the shipment, for

which the policy is obtained, exporter is required to take suitable action to

prevent/minimize the loss, including such action as may be suggested by EXIM. Action to

prevent/minimize loss will depend on the facts and circumstances of each case. Given

below is the course of action that may have to be taken immediately:-

i. Persuading the buyer to make the payment while, at the same time, maintainingrecourse against him by getting the bill noted and protested for non-payment;

ii. Not agreeing to give any extension of the due date of the bill unless there aregood reasons for doing so. Prior approval of the EXIM should be taken for

granting such extension. In case any condition is stipulated by EXIM while

granting extension, it should be ensured that the conditions are complied with;

iii. If the documents/goods have not been accepted by the buyer, taking action tosafeguard the goods and to resell them to an alternate buyer after giving due

notice to the original buyer. Prior approval of EXIM should be taken for resale, if

the loss is likely to exceed 25% of the gross invoice value.

iv. If resale is not possible, to bring the goods back to the country, with the priorapproval of EXIM (if the loss is up to 25% of the gross invoice value such


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permission is not required).

v. Desisting from making any further shipment to the buyer until he has made thepayment for the bill in default.

7. PAYMENT OF THE PROCESSING FEE AND PREMIUMa) Along with the proposal the exporter is required to pay a processing fee of US$ 500/-

which is non-refundable. Premium at the prescribed rates applicable has to be paid by the

exporter at the time of issue of policy deducting US$ 500/- paid at the time of submitting

the proposal. Premium will be charged on the gross invoice value.

b) Where the exporter has chosen to cover shipments to be made during a particular periodpremium shall be charged for the shipments scheduled to be made during the chosen

period. In case the proposal is not accepted by the Corporation due to any adverse report

on the buyer or for any other reasons, the exporter shall be informed of the same.


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ANNEXURE III

LETTEROF CREDIT (FOB)

(First shipment)

I. FROM: The Global Bank of Norland (GBN), 12, East Harbour Avenue, Pearl Harbour,Norland.

II. TO: The State Bank of Townshend, The State Bank Town, Victoria Street, Hastinapur,Arcaland Province, Republic Townshend.

III. TYPE OF L/C: IRREVOCABLEIV. L/C NUMBER: 74/01/2012V. DATE OF ISSUE: 15th January, 2012

VI. DATE. &PLACE OF EXPIRY: 16th day after date of delivery of 1st shipment within thetime range of 15-31/03/ 2012

VII. NAME &ADDRESS OF THE APPLICANT:Norland Importers Limited (NIL), 10th Floor,12 Seaside Point, Harbour Road, Pearl Harbour, Norland

VIII. NAME & ADDRESS OF THEBENEFICIARY: Arcaland Tea Company Ltd (ATCL)Export Division, Arcaland Tea Tower, Central Arcade, Hastinapur, Arcaland

Province, Republic of Townshend

IX. AMOUNT OF CREDIT IN US DOLLARS (IN FIGURES &WORDS): US$ 7,500,000. USDSeven Million and Five Hundred Thousand only.

X. PERCENTAGE CREDIT AMOUNT TOLERANCE: As Per ContractXI. CREDIT AVAILABLE WITH: The Global Bank of Norland (GBN)

XII. CREDIT AVAILABLE BY:On AccountXIII. DRAFT:At Sight As Per ContractXIV. DRAFT TO BE DRAWN ON:Arcaland Tea Company Ltd (ATCL) Export Division,

Arcaland Tea Tower, Central Arcade, Hastinapur, Arcaland Province, Republic of

Townshed

XV. SHIPMENT FROM: Arcaland Port, Arcaland Province, Republic Of Townshend.XVI. SHIPMENT TO: Pearl Harbour, Norland

XVII. LATEST DATE OF SHIPMENT: 31ST MARCH, 2012XVIII. DESCRIPTION OF GOODS:

a. Description of Materials: Arcaland Tea, as Recoded In geographical IndicationRegisters

b. Size/weight and Quantity (in MT): 5000 plywood boxes 50 kg each _ 250 MTS


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c. Specification: as aboved. Tolerance : NILe. Quantity: AS ABOVEf. Quantity Tolerance: 1% MORE OR LESSg. Price per MT (in USD) USD 3,000

DOCUMENTS REQUIRED:

1. Beneficiarys Commercial Invoice - one original plus two signed copies coveringmaterials shipped. Invoices will be raised on the basis of ACTUAL WEIGHT.

2. Full set 3/3 original on board ocean or charter party Bills of Lading (CONGEN) issued tothe order of the Shipper notifying applicant and blank endorsed marked Stowed under

deck furthermore marked freight to pay evidencing shipment from ARCALAND Port,

REPUBLIC OF TGWONSHEND to PEARL HARBOUR Port in NORLAND. Bills of

Lading (CONGEN) with remarks Materials partly rust stained/ rusty edges/ wet before

shipment/ rust stained/ some rusty edges and/or unprotected cargo and/or said to be

and/or said to weigh and/or stored in open area prior to loading are NOT acceptable.

3. Shipment Inspection certificate issued by Buyers representative certifying the following:a.

The cargo packages were inspected at the time of loading at the load port and that themarkings were as per General Terms and Conditions for Export (FOB) between

beneficiary and the opener.

b. Quantity loaded on board the vessel, as per the shippers scales. c. The materials were loaded on board the vessel without apparent damage and were found

to be in good order and condition. That the loading was done under the supervision of the

shipper, and were properly lashed and secured inside the hatches / holds of the vessel.

d. Beneficiarys packing list indicating details of the materials shipped - 3 copies.e. Certificate of origin.f. Copy of Telex/e-mail or Fax from Arcaland Tea Company Ltd (ATCL) addressed to the

openers FAX No. 295-3663623979 within FIVE working days after the on board Bill of

Lading (CONGEN) date advising the name of the vessel, Bill of Lading (CONGEN)

number and date, materials and quantity, destination port in Norland.

ADDITIONAL CONDITIONS:

1. Ocean freight is payable by the openers over and above the value of this Letter of Credit.


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2. Marine Insurance to be covered by the opener.3. In the event of (a) the failure of the opener to nominate a suitable vessel within 21 days,

including lay days , from the date of beneficiarys Notice of Readiness of cargo (herein

after referred to as NOR) OR (b) the vessel nominated by the opener and accepted by the

beneficiary failing to arrive at Arcaland Port within 21 days including lay days from the

date of NOR for reasons other than Force Majeure as defined under Clause 10 of the said

contract OR (c) the vessel (nominated by the opener and accepted by the beneficiary)

being found unsuitable after its arrival at Arcaland Port as certified by independent marine

surveyors from Lloyds, this credit is payable at sight at your counters in Arcaland Port

against presentation of beneficiarys draft drawn on ourselves for 100 per cent value of

invoice accompanied by the following documents:

a.

Beneficiary's commercial invoice in duplicate.b. Copy of Beneficiarys Notice of Readiness,c. One copy of Food Standards Authoritys Certificate issued by the said Authority,

Hastinapur, Arcaland, and Townshend.

a) Certificate issued by Buyers representative certifying as to (a) and (b) of Document No. 3above and further that the materials and quantity as per the Commercial Invoice are ready

for shipment.

b) Beneficiarys declaration that suitable vessel has not been nominated by the opener within21 days including lay days from the date of NOR OR that the vessel nominated by the

Buyer failed to arrive at Arcaland Port within the agreed lay days for reasons other than

Force Majeure OR that the vessel being found unsuitable after its arrival as certified by the

independent Marine Surveyors (copy of certificate of Marine Surveyors to be presented in

such an event) as the case may be.

c) Beneficiarys declaration thati. The materials as mentioned in the commercial invoice will be held in custody by the

beneficiary at the risk and responsibility of the opener at the storage yard of the

beneficiary at Arcaland Port.

ii. The materials will be covered by adequate waterproofing material at the cost of the Buyer.iii. the Materials shall be held by the beneficiary free of ground rent for a period of 15 days

from the date of expiry of Sellers NOR (against documents negotiated under this clause)

and for storage extending beyond 15 days from the date of expiry of Sellers NOR the

cost of holding the materials (ground rent) calculated at the rate of USD 1.00 per metric

tonne for every week(s) (7 days) or part thereof shall be paid by the opener to the


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beneficiary till the date of acceptance of vessels NOR, when the vessel finally calls at

the load port.

1) Opener/Buyer to ensure that payment towards Ground Rent and/or Tarpaulin cost isremitted and remittance instruction duly forwarded by SWIFT message, before actual

shipment, against the debit invoice.

2) Upon nomination of suitable vessel within reasonable time by the opener for takingdelivery of the materials for which payment has been realized by the beneficiary as

aforesaid and subject to such vessel arriving at Arcaland Port within the agreed lay days,

the beneficiary shall at his cost deliver FOB (Stowed) as per terms of the said contract the

materials for which payment has been realized by the beneficiary as aforesaid.

3) Any amendment to the letter of credit without the prior written consent of the beneficiaryshall not be taken cognizance of, under this letter of credit.

4) The opener shall not vary the terms of this letter of credit, nor issue instructions to theissuing Bank contrary to the terms of this Letter of Credit or the contract of sale covered

by the said letter of credit.

CHARGES:

All Bank charges incurred outside India including payment of Cable/communication charges,

reimbursement charges, etc. shall be borne and paid for by the opener.

All Bank charges incurred in the Republic of Townshend shall be borne and paid for by the

beneficiary.

PERIOD FORPRESENTATION:

Within 21 days from the date of B/L.

CONFIRMATION INSTRUCTIONS:

Paying Bankmay add their confirmation to this Letter of Credit at the request and expense of the

beneficiary and such confirmation shall also apply to any amendment (s) to this credit.

REIMBURSEMENT INSTRUCTIONS:

Upon presentation of documents complying in all respects to Letter of Credit terms, the

negotiating bank is authorized to claim on us by tested telex certifying that all terms and


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conditions have been complied with and that the relative documents have been forwarded to us by

Registered Airmail/ Courier. We undertake to remit within two working days after receipt by us

of your tested telex/swift claim in US Dollars/Euro/any other freely exchangeable currency in

accordance with your instructions. This Letter of Credit is subject to the Uniform Customs and

Practice for Documentary Credits (latest Revision). This telex/swift may be treated as the

operative instrument.

DISPUTES SETTLEMENT

All disputes arising out of or in connection with the present Letter of Credit shall be finally settled

under the Rules of Arbitration of the International Chamber of Commerce by one or more

arbitrators appointed in accordance with the said Rules, the place of arbitration being ICC

Centre, Jaipur, India. The Emergency Arbitrator Provisions shall not apply.

All apparent spelling mistakes/mistakes in LC documents, which do not alter meaning/

specification/ description/ Quantity/ value of goods are acceptable and will not count as a

discrepancy.


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ANNEXURE IV

LETTEROF CREDIT (FOB)

(Second shipment)

I. FROM: The Global Bank of Norland (GBN), 12, East Harbour Avenue, Pearl Harbour,Norland

II. TO: The State Bank of Townshend, The State Bank Town, Victoria Street, Hastinapur,Arcaland Province, Republic Townshend.

III. TYPE OFL/C: IRREVOCABLEIV. L/C NUMBER: 75/01/2012V. DATE OF ISSUE: 15th January, 2012

VI. DATE &PLACE OF EXPIRY: 16th day after date of delivery of 1st shipment within thetime range of 15-30/09/2012

VII. NAME &ADDRESS OF THE APPLICANT:Norland Importers Limited (NIL), 10th Floor,12 Seaside Point, Harbour Road, Pearl Harbour, Norland

VIII. NAME & ADDRESS OF THEBENEFICIARY: Arcaland Tea Company Ltd (ATCL)Export Division, Arcaland Tea Tower, Central Arcade, Hastinapur, Arcaland

Province, Republic of Townshend

IX.

AMOUNT OF CREDIT IN US DOLLARS (IN FIGURES &WORDS):US$ 7,500,000. USDSeven Million and Five Hundred Thousand only

X. PERCENTAGE CREDIT AMOUNT TOLERANCE: As Per ContractXI. CREDIT AVAILABLE WITH: The Global Bank of Norland (GBN)

XII. CREDIT AVAILABLE BY : On AccountXIII. DRAFT: At Sight As Per ContractXIV. DRAFT TO BE DRAWN ON: Arcaland Tea Company Ltd (ATCL) Export Division,

Arcaland Tea Tower, Central Arcade, Hastinapur, Arcaland Province, Republic of

Townshed

XV. SHIPMENT FROM: Arcaland Port, Arcaland Province, Republic Of Townshend.XVI. SHIPMENT TO: PEARL HARBOUR, NORLAND

XVII. LATEST DATE OF SHIPMENT: 30th September, 2012XVIII. DESCRIPTION OF GOODS:

a. Description of Materials: ARCALAND TEA, AS RECODED IN GEOGRAPHICALINDICATION REGISTERS

b. Size/weight and Quantity (in MT): 5000 plywood boxes 50 kg each _ 250 MTS


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c. Specification: AS ABOVEd. Tolerance : NILe. Quantity: AS ABOVEf. Quantity Tolerance: 1% MORE OR LESSg. Price per MT (in USD) USD 3,000

DOCUMENTS REQUIRED :

1. Beneficiarys Commercial Invoice - one original plus two signed copies coveringmaterials shipped. Invoices will be raised on the basis of ACTUAL WEIGHT.

2. Full set 3/3 original on board ocean or charter party Bills of Lading (CONGEN) issued tothe order of the Shipper notifying applicant and blank endorsed marked Stowed under

deck further more marked freight to pay evidencing shipment from ARCALAND Port,

REPUBLIC OF TGWONSHEND to PEARL HARBOUR Port in NORLAND. Bills of

Lading (CONGEN) with remarks Materials partly rust stained/ rusty edges/ wet before

shipment/ rust stained/ some rusty edges and/or unprotected cargo and/or said to be

and/or said to weigh and/or stored in open area prior to loading are NOT acceptable.

3. Shipment Inspection certificate issued by Buyers representative certifying the following:4. The cargo packages were inspected at the time of loading at the load port and that the

markings were as per General Terms and Conditions for Export (FOB) between

beneficiary and the opener.

5. Quantity loaded on board the vessel, as per the shippers scales. 6. The materials were loaded on board the vessel without apparent damage and were found

to be in good order and condition. That the loading was done under the supervision of the

shipper, and were properly lashed and secured inside the hatches / holds of the vessel.

7. Beneficiarys packing list indicating details of the materials shipped - 3 copies.8. Certificate of origin.9. Copy of Telex/e-mail or Fax from Arcaland Tea Company Ltd (ATCL) addressed to the

openers FAX No. 295-3663623979 within FIVE working days after the on board Bill of

Lading (CONGEN) date advising the name of the vessel, Bill of Lading (CONGEN)

number and date, materials and quantity, destination port in Norland.


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ADDITIONAL CONDITIONS:

1. Ocean freight is payable by the openers over and above the value of this Letter of Credit.2. Marine Insurance to be covered by the opener.3. In the event of (a) the failure of the opener to nominate a suitable vessel within 21 days,

including lay days , from the date of beneficiarys Notice of Readiness of cargo (herein

after referred to as NOR) OR (b) the vessel nominated by the opener and accepted by the

beneficiary failing to arrive at Arcaland Port within 21 days including lay days from the

date of NOR for reasons other than Force Majeure as defined under Clause 10 of the said

contract OR (c) the vessel (nominated by the opener and accepted by the beneficiary)

being found unsuitable after its arrival at Arcaland Port as certified by independent marine

surveyors from Lloyds, this credit is payable at sight at your counters in Arcaland Port

against presentation of beneficiarys draft drawn on ourselves for 100 per cent value of

invoice accompanied by the following documents:

a) Beneficiary's commercial invoice in duplicate.b) Copy of Beneficiarys Notice of Readiness,c) One copy of Food Standards Authoritys Certificate issued by the said Authority,

Hastinapur, Arcaland, and Townshend.

d) Certificate issued by Buyers representative certifying as to (a) and (b) of Document No. 3above and further that the materials and quantity as per the Commercial Invoice are ready

for shipment.

e) Beneficiarys declaration that suitable vessel has not been nominated by the opener within21 days including lay days from the date of NOR OR that the vessel nominated by the

Buyer failed to arrive at Arcaland Port within the agreed lay days for reasons other than

Force Majeure OR that the vessel being found unsuitable after its arrival as certified by the

independent Marine Surveyors (copy of certificate of Marine Surveyors to be presented in

such an event) as the case may be.

f) Beneficiarys declaration thati. the materials as mentioned in the commercial invoice will be held in custody by the

beneficiary at the risk and responsibility of the opener at the storage yard of the

beneficiary at Arcaland Port.

ii. the materials will be covered by adequate waterproofing material at the cost of the Buyer.iii. the Materials shall be held by the beneficiary free of ground rent for a period of 15 days

from the date of expiry of Sellers NOR (against documents negotiated under this clause)

and for storage extending beyond 15 days from the date of exp iry of Sellers NOR the cost


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of holding the materials (ground rent) calculated at the rate of USD 1.00 per metric

tonnefor every week(s) (7 days) or part thereof shall be paid by the opener to the

beneficiary till the date of acceptance of vessels NOR, when the vessel finally calls at the

loadport.

iv. Opener/Buyer to ensure that payment towards Ground Rent and/or Tarpaulin cost isremitted and remittance instruction duly forwarded by SWIFT message, before actual

shipment, against the debit invoice.

v. Upon nomination of suitable vessel within reasonable time by the opener for takingdelivery of the materials for which payment has been realized by the beneficiary as

aforesaid and subject to such vessel arriving at Arcaland Port within the agreed lay days,

the beneficiary shall at his cost deliver FOB (Stowed) as per terms of the said contract the

materials for which payment has been realized by the beneficiary as aforesaid.vi. Any amendment to the letter of credit without the prior written consent of the beneficiary

shall not be taken cognizance of, under this letter of credit.

vii. The opener shall not vary the terms of this letter of credit, nor issue instructions to theissuing Bank contrary to the terms of this Letter of Credit or the contract of sale covered

by the said letter of credit.

CHARGES:

All Bank charges incurred outside India including payment of Cable/communication charges,

reimbursement charges, etc. shall be borne and paid for by the opener.

All Bank charges incurred in the Republic of Townshend shall be borne and paid for by the

beneficiary.

PERIOD FORPRESENTATION:

Within 21 days from the date of B/L.

CONFIRMATION INSTRUCTIONS:

Paying Bankmay add their confirmation to this Letter of Credit at the request and expense of the

beneficiary and such confirmation shall also apply to any amendment (s) to this credit.

REIMBURSEMENT INSTRUCTIONS:

Upon presentation of documents complying in all respects to Letter of Credit terms, the

negotiating bank is authorised to claim on us by tested telex certifying that all terms and


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conditions have been complied with and that the relative documents have been forwarded to us by

Registered Airmail/ Courier. We undertake to remit within two working days after receipt by us

of your tested telex/swift claim in US Dollars/Euro/any other freely exchangeable currency in

accordance with your instructions. This Letter of Credit is subject to the Uniform Customs and

Practice for Documentary Credits (latest Revision). This telex/swift may be treated as the

operative instrument.

DISPUTES SETTLEMENT

All disputes arising out of or in connection with the present Letter of Credit shall be finally settled

under the Rules of Arbitration of the International Chamber of Commerce by one or more

arbitrators appointed in accordance with the said Rules, the place of arbitration being ICCCentre, Jaipur, India. The Emergency Arbitrator Provisions shall not apply.

All apparent spelling mistakes/mistakes in LC documents, which do not alter meaning/

specification/ description/ Quantity/ value of goods are acceptable and will not count as a

discrepancy.


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ANNEXURE V

Norland Importers Limited (NIL)

10th Floor, 12 Seaside Point, Harbour Road, Pearl Harbour, Norland

E-mail:[email protected],nor;

Tel: 295-3663623980/88 Fax: 295-3663623979

MOST URGENT

To 7th April, 2012Mr. David Bull,Documentary Credits DivisionGlobal Bank of Norland12, East Harbour Avenue, Pearl Harbour, Norland

CCMme Marline Keshot,Director, Export DivisionArcaland Tea Company Ltd (ATCL),Arcaland Tea Tower, Central Arcade,Hastinapur, Arcaland Province, Republic of Townshend

Sir,

REF: Irrevocable Letter of Credit No. 74/01/2012, issued on 15th

January, 2012

We are in receipt of a notice of documents from ATCL on 25 th March, 2012 and also a copy of

the notice of demand for encashment of the above L/C on 6 th April, 2012, the originals of both

having been sent to you for release of funds covered by the above L/C.

The purpose of this letter is to instruct you to delay the encashment of the said L/C until you are

advised to release it only after the arrival of the cargo at Pearl Harbour and its satisfactory receipt

by NIL representatives. NIL in fact has no clue about the probable date arrival of the shipment atPearl Harbour as the vessel, HMS Beagle, seems to have encountered rough weather during its

voyage from Arcaland Port and is undergoing extensive repairs at the Port of Aden. We are

indeed worried about the condition of the cargo.

We greatly appreciate your cooperation.

Yours truly,Dr. Damon WoolfeDirector, Food Imports,

NIL
mailto:[email protected],normailto:[email protected],normailto:[email protected],normailto:[email protected],nor


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ANNEXURE VI



E-mail: [email protected],nor; Tel: 295-3663623980/88 Fax: 295-3663623979

MOST URGENT

To 15th April, 2012Mr. David Bull,Documentary Credits DivisionGlobal Bank of Norland

12, East Harbour Avenue, Pearl Harbour, Norland

CCMme Marline Keshot,Director, Export DivisionArcaland Tea Company Ltd (ATCL),Arcaland Tea Tower, Central Arcade,Hastinapur, Arcaland Province, Republic of Townshend

Sir,


January, 2012

This is in continuation of our earlier letter of 7 th April, 2012 in respect of release of payment

under the above L/C.

We wish to inform you by this letter that HMS Beagle finally arrived at Peal Harbour on 10 th

April, 2012. Upon its arrival, NIL representatives inspected the cargo and found two of the

plywood boxes of teas broken and the cardboard cartons inside severely damaged. Many of these

cartons are somehow drenched in sea water, for want of waterproof protection. In view of all this,

NIL has sought clarifications from the Norland consular agent at Port Arcaland (who acted as our

agent at the time of cargo shipment), the shipper and the insurers.

We therefore instruct you to further delay release of payment under the above L/C, until you hear

from us again.

We greatly appreciate your cooperation.

Yours truly,

Dr. Damon Woolfe

Director, Food Imports,
mailto:[email protected],normailto:[email protected],nor


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ANNEXURE VII


Arcaland Tea Tower, Export Division Tel: 182-9783263663 to 669,

Central Arcade, Hastinapur, Fax: 182-9783263664Arcaland Province, Republic of Townshed E-mail: Arcalandtea @ATCL.org

To 20th April, 2012Mr. David Bull,Documentary Credits DivisionGlobal Bank of Norland12, East Harbour Avenue, Pearl Harbour, Norland

And

Dr. Damon WoolfeDirector, Food Imports,

Naorland Importers Limited,10th Floor, 12 Seaside Point,Harbour Road, Pearl Harbour, Norland

Sir,


January, 2012Refusal of

payment undernotice of arbitration

This is to inform you that the delivery of goods for the first shipment was made, duly certified by

NIL representative on 15th March, 2012, and that on 30th March, 2012, ATCL presented the

necessary documents to the State Bank of Townshend and asked for its confirmation and

immediate advice to GBN, with notice to NIL. The State Bank of Townshend did so promptly.

The documents and notice thereof and demand notice were sent to you both by DHL Express.

However, we understand from the State Bank of Townshend that at the instruction of NIL, GBN

has unilaterally decided to delay release of payment under the above L/C f.o.b.

This constitutes a clear breach of conditions of the irrevocable Letter of Credit as delay means

refusal of immediate encashment of the L/C even after confirmation and advice of the State Bank

of Townshend.

By this letter, we put GBN and the NIL on notice that we intend to invoke the arbitration clauses

in the export agreement and the letter of credit, if the default is not remedied by or before 5 th May,

2012.

Yours truly,

Mme Marline Keshot,

Director, Export DivisionArcaland Tea Company Ltd (ATCL),


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ANNEXURE VIII

State Bank of Townshend

The State Bank Tower, Victoria Street,

Hastinapur, Arcaland Province, Republic Townshend.

Tele: +182-9977668800/809, FAX: +182-9977668810

www.sbt.org.ts

To 4th May, 2012Mme Marline Keshot,Director, Export DivisionArcaland Tea Company Ltd (ATCL),Arcaland Tea Tower,Central Arcade, Hastinapur,Arcaland Province, Republic of Townshed

Dear Madam,


January, 2012Release of

payment by Global Bank of Norland

This is to advise you that payment under the above L/C has been released by the Global Bank of

Norland without prejudice to the liability of ATCL in respect of the damage suffered by NIL for

defective delivery of 3 plywood boxes, and consequent loss of profits in the market coupled with

legal and other expenses.

We have deposited the amount into your account with us. We shall in due course debit our

fees/charges from your account.

We appreciate your business,

Yours Sincerely,

Ashok Mehta,Documentary Credit Division,State Bank of Townshend,Hastinapur.
http://www.sbt.org.ts/http://www.sbt.org.ts/


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ANNEXURE IX

Arcaland Tea Company Ltd (ATCL)Arcaland Tea Tower, Export Division Tel: 1829783263663to669,

Central Arcade, Hastinapur Fax:1829783263664

Arcaland Province, Republic of TownshedEmail: [email protected]

To 4th May, 2012Mr. David Bull,Documentary Credits DivisionGlobal Bank of Norland


And


Norland Importers Limited,10th Floor, 12 Seaside Point,Harbour Road, Pearl Harbour, Norland

Dear Sirs,


January, 2012

Acceptance of payment without prejudice by ATCL

Today we received advice from the State Bank of Townshend that encashment of the letter of

credit has been made without prejudice to the liability of ATCL in respect of the damage

suffered by NIL for defective delivery of 3 plywood boxes, and consequent loss of profits in the

market coupled with legal and other expenses.

By this letter we place on record our strong condemnation of the conduct of the Global Bank of

Norland whether at the instance of NIL or on its own, and also of the conduct of NIL. We

continue to consider that such conduct constitutes a grave violation of the L/Cf.o.b. as well as of

the export contract of sale and that both GBN and NIL are jointly and severally liable for the

losses suffered by ATCL. We clearly point out the under the f.o.b. system, certification of

delivery of cargo at the designated ship entitles the Seller to claim encashment of the L/C.

However, we have decided to accept the encashment without prejudice to its rights which may be

invoked at any appropriate time in future during the pendency of the current contract or thereafter.

Yours truly,Mme Marline Keshot,

Director, Export DivisionArcaland Tea Company Ltd (ATCL),


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ANNEXURE X


Arcaland Tea Tower, Export Division Tel: 182-9783263663 to 669,

Central Arcade, Hastinapur, Fax: 182-9783263664

Arcaland Province, Republic of Townshed E-mail: [email protected]

To 5th August, 2012Dr. Damon WoolfeDirector, Food Imports,


CC

Mr. David Bull,Documentary Credits Division copy to GBNGlobal Bank of Norland12, East Harbour Avenue, Pearl Harbour, Norland

Sir,

REF: Export Contract of Sale of 10th

October, 2011 and Irrevocable Letter of Credit No.

75/01/2012, issued on 15th

January, 2012Request for variation of terms

This letter refers to the above contract of sale whereby ATCL has undertaken to make the 2nd

shipment f.o.b. to Pearl Harbour 250 tonnes of finest Arcaland tea within the time range of 15-30

September 2012 for a total cost of US$ 7,500,000 i.e., at the rate of US$3,000 per tonne f.o.b.

Beginning with July 2012, Arcaland tea producing regions have been witnessing unprecedented

riots on the so-called foreigners issue. This has caught us by surprise, even as we have been

earnestly preparing ourselves to fulfil our obligations under the contract. The riots continue to

remain as intense as before even at the moment and they threaten to spread to other areas, as you

may have watched the BBC telecasts since mid-July.

Since the beginning of August, it has become clear to us that it will be impossible for ATCL to

procure the entire 250 tonnes of Arcaland tea ready to be delivered during the time range

stipulated in September, 2012. We, therefore, propose to NIL that in view of the riot situation,

which was an unforeseen circumstance, ATCL deliver 125 tonnes of Arcaland tea, which ATCL

has collected before the riots broke out and kept in its godowns in good deliverable condition, and

that if NIL wishes ATCL will be more than happy to deliver 200 tonnes of Rinjiling tea which it

can easily procure from Rinjiling Tea Corporation (RTC), a government company, and get it

delivered by RTC as per the export contract at the Arcaland Port at no extra cost to NIL. We are

aware that NIL also deals in Rinjiling tea for the Norland domestic market.


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We look forward to receiving an urgent response on this proposal.

Yours truly,

Mme Marline Keshot,Director, Export DivisionArcaland Tea Company Ltd (ATCL)


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ANNEXURE XI

Norland Importers Limited (NIL)10th Floor, 12 Seaside Point, Harbour Road, Pearl Harbour, Norland


MOST URGENT

To 11th August, 2012Mme Marline Keshot,Director, Export DivisionArcaland Tea Company Ltd (ATCL),Arcaland Tea Tower, Central Arcade,Hastinapur, Arcaland Province, Republic of Townshend

CC

Mr. David Bull,Documentary Credits DivisionGlobal Bank of Norland, 12, East Harbour Avenue, Pearl Harbour, Norland

Dear Madam,

REF: Your letter of 5th

August 2012 re. Second Shipment under the export contract and

Irrevocable Letter of Credit No. 75/01/2012, issued on 15

th

January, 2012

We are in receipt of your above letter containing a proposal that we convert the previously agreed

second shipment of 250 tonnes of Arcaland tea into 125 tonnes of Arcaland tea plus 200 tonnes of

Rinjiling tea f.o.b. with no extra cost to us. In other words, we would pay only the originally

agreed amount of US$ 7.5 million only for the entire shipment delivery, other terms of the

contract remaining the same.

We appreciate the difficulties you are currently experiencing in your part of the world. In view of

them, we readily accept your new proposal, and look forward to your delivery schedule within the

time range of 15-30 September 2012.

We are instructing our bankers the Global Bank of Norland to note the change in the terms of the

export contract and to vary the terms of the above L/C accordingly. GBN may please treat an

endorsed copy of this letter to contain these instructions as if these were specifically addressed to

them.

Yours truly,

Dr. Damon WoolfeDirector, Food Imports,NIL


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ANNEXURE XII

Norland Importers Limited (NIL)10th Floor, 12 Seaside Point, Harbour Road, Pearl Harbour, Norland


MOST URGENT

To 1st October, 2012Mme Mme Marline Keshot,Director, Export DivisionArcaland Tea Company Ltd (ATCL),Arcaland Tea Tower, Central Arcade,Hastinapur, Arcaland Province, Republic of Townshend

Dear Madam,

REF: Fraudulent Second Shipment under the export contract and Irrevocable Letter of

Credit No. 75/01/2012, issued on 15th

January, 2012

SS Savannah arrived in Pearl Harbour on 30th September with the purported cargo. We took the

cargo off the ship this morning. We were shocked to discover on inspection that each of the 4000

boxes contained cartons filled with at least 20 kgs of stones and rubbish. The local representative

of Lloyds Insurance was the witness. We strongly protest this fraud and breach of faith committedby ATCL. Rest assured, we shall soon inform you of the next course of action that we have in

mind, to compensate for the breach of contract and the consequential damages, besides indeed,

any possible criminal action.

We are instantly instructing GBN to dishonour any confirmation and advice that it may receive

from the State Bank of Townshend and to refrain from releasing payment against the said L/C,

until this matter is sorted out to our satisfaction.

Yours truly,


NIL


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ANNEXURE XIII




MOST URGENT

To 1st October, 2012Mr. David Bull,Documentary Credits DivisionGlobal Bank of Norland,12, East Harbour Avenue, Pearl Harbour, Norland

Sir,

REF: Fraudulent Second Shipment under the export contract and Irrevocable Letter of

Credit No. 75/01/2012, issued on 15th

January, 2012

SS Savannaharrived in Pearl Harbour on 30th September with the purported cargo. We took the

cargo off the ship this morning. We were shocked to discover on inspection that each of the 4000

boxes contained cartons filled with at least 20 kgs of stones and rubbish. The inspection was

carried out in the presence of the local representative of Lloyds Insurance. We have registered

with ATCL a strong protest on this fraud and breach of faith committed by ATCL.

In view of the above, we hereby instruct you to dishonour any confirmation and advice that you

may receive from the State Bank of Townshend and refrain from releasing payment against the

said L/C, until further instructions to the contrary.

Yours truly,


NIL


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ANNEXURE-XIV

GLOBAL BANK OF NORLAND


Tele: +295-2997766880/879, FAX: +295-2997766880 www.gbn.org.nor

To 2nd October, 2012Mme Marline Keshot,Director, Export DivisionArcaland Tea Company Ltd (ATCL),Arcaland Tea Tower,Central Arcade, Hastinapur,Arcaland Province, Republic of Townshed

CC


Naorland Importers Limited,10th Floor, 12 Seaside Point,Harbour Road, Pearl Harbour, Norland

Dear Madam,


January, 2012 Inabilityto release payment

Upon instructions from Norland Importers Limited, we hereby advise you that the Global Bank of

Norland has decided not to release payment under the above L/C. This is in view of NILs finding

in the presence of an independent witness that the delivery and the cargo of the 2nd Shipment

under the export contract have been defective and fraudulent.

Further, we find that no proper steps have been taken by the parties to the export contract

formally to incorporate the changes effected to the 2nd shipment of cargo covered by the above

L/C. Evidently this amounts to non-compliance of the required documents to accompany the

demand for release of payment, and L/C remains non-encashable, until it terminates pursuant its

terms.

Yours truly,Mr. David Bull,Documentary Credits DivisionGlobal Bank of Norland,12, East Harbour Avenue, Pearl Harbour, Norland
http://www.gbn.org.nor/http://www.gbn.org.nor/


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36

ANNEXURE XV




To 2nd October, 2012Mr. Ashok Mehta,

Documentary Credit Division,

State Bank of Townshend,

The State Bank Tower,

Victoria Street, Hastinapur,

Arcaland Province, Republic Townshend

Sir,


January, 2012 Non-

Release of payment

Upon instructions from Norland Importers Limited, we hereby advise you that the Global Bank of

Norland has decided not to release payment under the above L/C. This is in view of NILs finding

in the presence of an independent witness that the delivery and the cargo of the 2nd Shipment

under the export contract have been defective and fraudulent. We also find that the cargo was at

variance with the original contract.

Yours truly,

Mr. David Bull,

Documentary Credits Division

Global Bank of Norland,



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37

ANNEXURE XVI

Arcaland Tea Company Ltd (ATCL)Arcaland Tea Tower,Export Division Tel:1829783263663 to 669Central Arcade, Hastinapur, Fax:182978326366Arcaland Province, Republic of Townshed Email:[email protected]

To 3rd October, 2012Mr. David Bull,Documentary Credits DivisionGlobal Bank of Norland12, East Harbour Avenue, Pearl Harbour, Norland

CC

Dr. Damon WoolfeDirector, Food Imports,Norland Importers Limited,10th Floor, 12 Seaside Point,Harbour Road, Pearl Harbour, Norland

Sir,


January, 2012 Your

letter of 2nd

October, 2012 failing to release payment under L/C

Today we received your above letter informing us that you are not prepared to release payment ofthe said L/C f.o.b. An irrevocable L/C f.o.b. cannot be subject to unilateral instructions of the

Buyer, once the delivery has been certified by his representative. When the f.o.b. conditions are

fulfilled, the issuing bank is duty bound to release payment on demand by the beneficiary.

Further, the amendment of contract has been duly notified to you by both parties and that

therefore GBN has no power to question the freedom of parties to alter their contract. Your

obligations as the Issuing Bank remain separate from questions relating to performance of the

export contract, to which you are not a party, in view of the autonomy principle that governs

letters of credit.

At any rate, ATCL is at liberty to proceed against NIL before a separate forum as provided under

the export contract of sale.

By this letter, we give GBN one last chance to review its position in relation to the said L/C f.o.b.,

before ATCL decides to take other appropriate course of action.

Awaiting your immediate reply,

Yours truly,Mme Marline Keshot,

Director, Export DivisionArcaland Tea Company Ltd (ATCL), Hastinapur


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38

ANNEXURE XVII




To 8th October, 2012Mme Marline Keshot,Director, Export Division,

Arcaland Tea Company Ltd (ATCL),

Arcaland Tea Tower,

Central Arcade, Hastinapur,


CC

Dr. Damon Woolfe

Director, Food Imports,

Norland Importers Limited,

10th Floor, 12 Seaside Point,

Harbour Road, Pearl Harbour, Norland

Dear Madam,


January, 2012 Your

letter of 3rd

October, 2012

We have studied your above letter and noted the contents. We have do not see our way clear to

change our position already clearly stated in our previous letter of 2nd October, 2012.

Yours truly,

Mr. David Bull,

Documentary Credits DivisionGlobal Bank of Norland,



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39

ANNEXURE XVIII


Arcaland Tea Tower, Export Division Tel: 182-9783263663669,

Central Arcade, Hastinapur, Fax: 182-9783263664

Arcaland Province, Republic of Townshed E-mail: [email protected]

To 3rd October, 2012Mr. David Bull,Documentary Credits DivisionGlobal Bank of Norland12, East Harbour Avenue, Pearl Harbour, Norland

CC



Sir,


January, 2012 Your

letters of 2nd

and 8th

October, 2012 - failure to release payment under L/C

In view of your response of 8th October, 2012, ACTL hereby invokes the dispute settlement

clause in both the letters of credit that runs as follows:

DISPUTES SETTLEMENT

Al l disputes ari sing out of or in connection with the present L etter of Credit shall be finall y

settled under the Rules of Arbitr ation of the International Chamber of Commerce by one or

more arbi trators appointed in accordance with the said Rul es, the place of arbitr ation being

ICC Centre, Jaipur , India. The Emergency Arbi trator Provisions shall not apply.

TAKE NOTICE THAT ALL THE CLAIMS OF ATCL UNDER THE L/Os (FOB) NOs.

74/01/2012 AND 75/01/2012, ISSUED BY YOUR BANK ON 15TH JANUARY, 2012 SHALL

FORTHWITH BE SUBMITTED TO ARBITRATION BEFORE ICCs INTERNATIONAL

COURT OF ARBITRATION.

Yours truly,Mme Marline Keshot,Director, Export DivisionArcaland Tea Company Ltd (ATCL),Hastinapur


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40

ANNEXURE XIX

Arcaland Tea Company Ltd (ATCL)Arcaland Tea Tower, Export Division, Tel:1829783263663to669,Central Arcade, Hastinapur, Fax:189783263664Arcaland Province, Republic of Townshed E-mail: [email protected]

To 3rd October, 2012Ms Cheng-Yee KhongDirector and CounselSecretariat of the International Court of Arbitration of the International Chamber of Commerce,Asia Office , Suite 2, 12/F, Fairmont House8 Cotton Tree Drive, Central Hong KongTel.: +852 3607 5600 Fax: + 852 2523 1619, Email:[email protected]

CC

Mr David Bull,Documentary Credits DivisionGlobal Bank of Norland, 12, East Harbour Avenue, Pearl Harbour, Norland

And


Norland Importers Limited,10th Floor, 12 Seaside Point, Harbour Road, Pearl Harbour, Norland

Dear Madam,

SUB: Request for Arbitration in respect of Irrevocable Letters of Credit (f.o.b.) Nos.

74/01/2012 and 75/01/2012, issued by the Global Bank of Norland, Pearl Harbour, Norland

on 15th

January, 2012

Differences have arisen between Arcaland Tea Company (ATCL), Republic of Townshend and

the Global Bank of Norland, Pearl Harbour, Norland in respect of the aforesaid irrevocable L/Cs,

for unjustified delayed payment release in the case of L/C No. 74/01/2012and failure to honour

the demand for payment release in the case of L/C No. 75/01/2012, in both cases the Global Bank

of Norland citing reasons extraneous to the L/Cs (f.o.b.).

On failure on the part of the bank to resolve the differences in terms of the L/Cs, ATCL now

requests ICA of ICC to initiate arbitration proceedings. Both the parties are obliged to comply

with the ICC Rules of Arbitration, and carry out the final award of the arbitration tribunal that

may meet and hold hearings at Jaipur, India.
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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ATCL further requests that the tribunal, immediately upon its establishment, ask the Global Bank

of Norland urgently to release the payment of the second L/C, as an interim award.

We attach herewith the statement of Facts of the Case and 18 other attachments as the case

record.

Assuring you of the full cooperation of ATCL,

Yours truly,Mme Marline Keshot,Director, Export DivisionArcaland Tea Company Ltd (ATCL),Hastinapur

the_moot_problem.pdf

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