RE: Legal Opinion regarding release of local agent commission of Company 1 on account of Company 2.
We refer to your letters no. ………………… dated August 14, 2007 on the above subject.
From perusal of your letters and documents furnished to us it appears that COMPANY 1 was the beneficiary (“the First Beneficiary”) of the L/C No. ………….dated 29.08.2006 (“the Master L/C”) issued by COMPANY 2 through advising bank, Bank 1. There was a clause in the Master L/C that penalty shall be imposed on export proceeds at different percentages from 5% – 25% in case of late shipment.
The First Beneficiary transferred partial amount of the Master L/C to Company 2 (“the Second Beneficiary”) vide transfer No. 94.06 on 05.09.06 (“Transfer Request”), which was authenticated by the Bank 1. In the Transfer Request it was stipulated that the negotiating bank shall deduct a certain amount of commission from the export bill (“the Commission”) and transfer the same to the First Beneficiary.
On the application of the Second Beneficiary, Bank 2 Bangladesh Ltd., Foreign Exchange Branch (“Bank 2”) opened Back to Back L/C by keeping lien on the Master L/C.
Due to late shipment discount penalty was deducted from the export proceeds.
Now, the First Beneficiary has requested Bank 2to transfer the Commission to them. On the other hand, the Second Beneficiary has requested Bank 2not to release the Commission.
In these circumstances, you require our legal opinion regarding whether Bank 2is legally bound to transfer the Commission to the First Beneficiary.
Any arrangement between the transferor and transferee of a letter of credit for payment of Commission to the transferor (First Beneficiary) is not part of the Master L/C. Moreover, as Bank 2 was not a signatory of the Transfer Request and has not authenticated the transfer or consented to such payment, Bank 2 is not bound by the terms of payment agreed by the said two parties. Bank 2is, therefore, not legally bound to transfer the Commission to the First Beneficiary.
Whether the Commission shall be paid to the First Beneficiary or not is a matter to be resolved between the First Beneficiary and the Second Beneficiary. Bank 2 may advise the First Beneficiary to claim their Commission from the Second Beneficiary.
If you have any further inquiries please do not hesitate to contact us.
For: “The Lawyers & Jurists”