Applicant Bankrupcy

Question:
We are beneficiaries under an unconfirmed Documentary credit. We have presented credit compliant documents to the negotiating bank, my housebank. My housebank is informing us that the issuing bank has not paid due to the applicant’s bankruptcy. I thought that an issuing bank always must pay provided that the documents are credit compliant. Am I right?

Answer:
Yes, you are right. ICC Uniform Practices for Documentary Credits, UCP 600, sub-article 7, states the basic rule that an issuing bank's undertaking is to honour a presentation that complies with the terms and conditions of the documentary credit when the documents are presented to the nominated bank or the issuing bank. Any other action would constitute a violation of UCP 600.The article reflects the fundamental principle that an issuing bank is liable for its documentary credits obligations, in all situations, even where an applicant has been incapacitated to pay.