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UNCITRAL Model Law On International Credit Transfers, 1992

CHAPTER I. - GENERAL PROVISIONS  1 

Article 1 - Sphere of application  2 

Article 2 - Definitions

Article 3 - Conditional instructions

Article 4 - Variation by agreement

CHAPTER II. - OBLIGATIONS OF THE PARTIES

Article 5 - Obligations of sender

Article 6 - Payment to receiving bank

Article 7 - Acceptance or rejection of a payment order by receiving bank other than the beneficiary's bank

Article 8 - Obligations of receiving bank other than the beneficiary's bank

Article 9 - Acceptance or rejection of a payment order by beneficiary's bank

Article 10 - Obligations of beneficiary's bank

Article 11 - Time for receiving bank to execute payment order and give notices

Article 12 - Revocation

CHAPTER III. - CONSEQUENCES OF FAILED, ERRONEOUS OR DELAYED CREDIT TRANSFERS

Article 13 - Assistance

Article 14 - Refund

Article 15 - Correction of underpayment

Article 16 - Restitution of overpayment

Article 17 - Liability for interest

Article 18 - Exclusivity of remedies

CHAPTER IV. COMPLETION OF CREDIT TRANSFER

Article 19 - Completion of credit transfer  3 

Explanatory Note by the UNCITRAL Secretariat on the Model Law on International Credit Transfers  4 

Introduction

A. Funds Transfers In General

B. Unification of the Law

C. Scope of Application

1. Categories of transactions covered by Model Law

2. Portions of an international credit transfer

D. Extent to which Model Law is Mandatory

E. Salient Features of the Model Law

1. Obligations of sender of payment order

2. Sender's payment to receiving bank

3. Obligations of receiving bank

4. Bank's liability for failure to perform one of its obligations

5. Completion of credit transfer and its consequences

Endnotes

Endnotes

Metadata

SiSU Metadata, document information

Manifest

SiSU Manifest, alternative outputs etc.

UNCITRAL Model Law On International Credit Transfers, 1992

United Nations (UN)

copy @ Lex Mercatoria

UNCITRAL Model Law On International Credit Transfers, 1992

Explanatory Note by the UNCITRAL Secretariat on the Model Law on International Credit Transfers

E. Salient Features of the Model Law

3. Obligations of receiving bank

33. The obligations of a receiving bank are divided into the obligations that are part of a successful credit transfer and the obligations that arise when something goes wrong. Most payment orders that are received by a bank are executed promptly and the credit transfer is completed successfully. In a real sense, a receiving bank in such a credit transfer never has an unexecuted obligation in regard to the payment order.

34. The Model Law provides in articles 8(2) and 10(1) the obligations of a receiving bank to execute a payment order that it "accepts". The obligation of a receiving bank other than the beneficiary's bank is to issue a payment order that will properly implement the payment order received. The obligation of the beneficiary's bank is to place the funds at the disposal of the beneficiary. Until the receiving bank "accepts" the payment order, it has no obligation to execute it. The rules as to when a receiving bank accepts a payment order are in articles 7(2) and 9(1).

35. In most cases a receiving bank that is not the beneficiary's bank accepts a payment order when it issues its own payment order intended to carry out the payment order received. A beneficiary's bank accepts a payment order when it credits the account of the beneficiary. In those two situations the receiving bank, whether it is or is not the beneficiary's bank, undertakes its primary obligation and discharges that obligation by the same act. However, a receiving bank may accept a payment order in some other way before it executes the payment order received.

36. Some funds transfer systems have a rule that a receiving bank is required to execute all payment orders it receives from another member of the funds transfer system. The Model Law provides that in such a case the receiving bank accepts the payment order when it receives it.

37. A receiving bank that debits the account of the sender as the means of receiving payment or that notifies the sender that it accepts the payment order, accepts the payment order when it debits the account or gives the notice.

38. A final method of accepting a payment order deserves special attention. The philosophy of the Model Law is that a bank that receives a payment order and payment for it must either implement the payment order or give notice of rejection. If the receiving bank does neither within the required time, the receiving bank is deemed to have accepted the payment order and the associated obligations. Article 11 provides that normally the receiving bank must execute the payment order by the banking day after it is received and for value as of the day of receipt.

39. The receiving bank also has obligations when something goes wrong. Some payment orders, or would-be payment orders, are defective. A message received may contain insufficient data to be a payment order or, being a payment order, it cannot be executed because of insufficient data. For example, a payment order that expresses the amount of money to be transferred in two different ways, such as in words and in figures, may indicate the amount in an inconsistent manner. The same thing may occur in identifying the beneficiary, for example, by name and by account number. Where there is insufficient data, the receiving bank is obligated to notify the sender of the problem. Where there is an inconsistency in the data and the receiving bank detects the inconsistency, the receiving bank is also obligated to notify the sender.

40. Other obligations may arise after the receiving bank has issued its own conforming payment order. Completion of an international credit transfer may be delayed and neither the originator nor the beneficiary knows what has happened. To help in such situations article 13 provides that each receiving bank is requested to assist the originator and to seek the assistance of the next receiving bank to complete the banking procedures of the credit transfer.

41. If the credit transfer is not completed, article 14(1) provides that "the originator's bank is obligated to refund to the originator any payment received from it, with interest from the day of payment to the day of refund." The originator's bank can in turn recover what it paid to its receiving bank, with interest, and that bank can recover from its receiving bank. The chain of responsibility for refunding stops at the bank that is unable to complete the credit transfer.

42. In practice, the chain of refunds may stop one bank before the bank unable to complete the credit transfer. A credit transfer may fail because a receiving bank becomes insolvent before it executes the payment order it has received, or because the State has issued an embargo on transfers of the type in question or because of war or unsettled conditions in the receiving bank's country. In those cases the same events that cause the credit transfer to fail may make it impossible for the bank to refund to its sending bank. Sometimes it is evident that use of a particular bank or of banks in a particular country would be risky. In such a situation a bank, and particularly an originator's bank, may refuse to accept the payment order unless it is directed by its sender to use a particular intermediary bank to complete the credit transfer. Where a receiving bank is directed to use a particular intermediary bank and it is unable to obtain a refund from the intermediary bank because that bank has suspended payment or is prevented by law from making the refund, the receiving bank is not required to make a refund to its sender. However, in order to be sure that such special situations are not used as a pretext to undermine the obligation to refund, a receiving bank that systematically seeks directions from its senders as to the intermediary banks to be used in credit transfers remains obligated to refund in all cases.


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