Precedent No. 13/2017/AL on the validity of payment of a letter of credit (L/C) in case the international goods sale contract which is the basis of the L/C is cancelled in Vietnam

1. What is precedent?

Precedents are arguments and judgments in judgments and decisions that have come into legal effect of the Court on a specific case selected by the Council of Judges of the Supreme People’s Court and announced by the Chief Justice of the Supreme People’s Court as precedents for the Courts to study and apply in adjudication. (Article 1 of Resolution 04/2019/NQ-HDTP)

The selected precedent must meet the following criteria:

– Has the value of clarifying legal provisions that can be understood differently, analyzing and explaining legal issues and events, and pointing out principles, handling guidelines, and legal norms that need to be applied in a specific case or demonstrating fairness for issues that do not have specific legal provisions;

– Have standards;

– Has guiding value in uniform application of law in trials.

2. Precedent No. 13/2017/AL on the payment validity of a letter of credit (L/C) in case the international goods sale contract which is the basis of the L/C is cancelled

2.1. Source of case law

Final judgment No. 17/2016/KDTM-GDT dated November 10, 2016 of the Council of Judges of the Supreme People’s Court on the business and commercial case “Dispute over a contract for the purchase and sale of goods” in Ho Chi Minh City between the plaintiff A Limited Liability Company (represented by Mr. Nguyen Duy T under authorization) and the defendant B Company; the persons with related rights and obligations include Joint Stock Commercial Bank E (represented by Mr. Hua Anh K under authorization) and Bank N (represented by Ms. Nguyen Thi V under authorization).

Location of case law:

Paragraphs 34 and 36 of the “Court’s Observations” section.

2.2. Overview of the content of the precedent

– Case law:

The international goods sale contract has an agreement on the payment method by letter of credit (L/C), an agreement to implement the L/C according to international trade practices (Uniform Customs and Practice for Documentary Credits 6th Edition 2007 (UCP 600) of the International Chamber of Commerce) and in accordance with the provisions of Vietnamese law. The international goods sale contract is the basis of the cancelled L/C.

– Legal solutions:

In this case, the Court must determine that the letter of credit (L/C) is not invalid for payment because the international goods sale contract that is the basis of the letter of credit (L/C) is cancelled.

Legal provisions related to precedent:

– Article 3 of the Civil Code of Vietnam 2015 (corresponding to Article 5 of the Civil Code of Vietnam 2015);

– Decision No. 226/2002/QD-NHNN dated March 26, 2002 of the State Bank on “Regulations on payment activities through payment service providers”;

– The sixth revision of the Uniform Customs and Practice for Documentary Credits (UCP 600) of the International Chamber of Commerce, 2007.

Keywords of the case:

“Letter of Credit”; “L/C”; “UCP 600”; “International Commercial Practices”; “Contract for the Sale of Goods”; “International Contract for the Sale of Goods”; “Contract Cancelled”.

CASE DETAILS :

In the petition dated September 15, 2011, the amended petition dated September 22, 2011 and the litigation process, the plaintiff, Ms. Mai Thi Tuyet N – legal representative of One Member Limited Liability Company A, stated:

On June 7, 2011, One Member Limited Liability Company A (hereinafter referred to as the Buyer, Company A) and Company B (hereinafter referred to as the Seller) signed an international goods sale and purchase contract No. FARCOM/RCN/IVC/036/2011 dated June 7, 2011 (hereinafter referred to as the Sales Contract dated June 7, 2011). According to the content of the Sales Contract dated June 7, 2011, the Buyer purchased raw cashew nuts of Ivory Coast origin, the quantity is 1,000 tons x 1,385.50 USD/ton with the payment method of 98% L/C deferred payment within 90 days from the date of delivery based on the bill of lading (B/L) according to the following quality standards:

– Recall 47 lbs/80kg and have the right to refuse to receive goods when recalled below 45 lbs/80kg.

– Seeds: maximum seed count is 205/kg. Rejected is 220 seeds/kg.

– Maximum humidity is 10%. Rejection humidity is above 12%.

Goods will be inspected for quality and quantity by Vinacontrol at the time of delivery at the port of destination, Ho Chi Minh City.

The payment method of documentary credit (L/C) is deferred payment within 90 days, so on July 7, 2011, the Buyer requested Joint Stock Commercial Bank E, Branch D to open deferred payment L/C No. 1801ILUEIB110002 (hereinafter referred to as L/C No. 1801) for the Buyer to complete the procedures for purchasing the shipment from the Seller.

After receiving the goods, according to Article 8 of the Contract, the Buyer re-checked the quality and quantity of the shipment at the Port of discharge, Cat Lai Port, Ho Chi Minh City, under the supervision of Vinacontrol, and discovered that the Seller’s goods did not meet quality standards. Specifically, according to two certificates of Vinacontrol No. 11G04HN05957-01 and No. 11G04HN05939-01 dated August 31, 2011, assessing the quantity, quality and condition of the goods, the assessment results showed that the average rate of cashew nut recovery for two times of cutting cashew nut samples was 37.615 lbs/80kg (this rate is too low compared to the conditions for rejecting nearly 10 lbs). In the face of such commercial fraud, the Buyer repeatedly tried to contact the Seller to resolve the problem arising from the quality of the imported cashew nut shipment but did not receive any response from the Seller.

Therefore, on September 15, 2011, the Buyer filed a lawsuit with the People’s Court of Ho Chi Minh City requesting the Court to force the Seller to receive back the 1,000-ton shipment of cashew nuts because the quality of the recovered kernels was within the conditions of refusal to receive the goods of the Contract, which was under 45 lbs, and did not agree to pay for the purchase price, and at the same time requested the Court to apply temporary emergency measures forcing E Joint Stock Commercial Bank to temporarily suspend payment to the Seller of the amount of 1,313,308.85 USD under L/C No. 1801 according to the Buyer’s payment commitment until there is another decision of the Court.

On August 12, 2013, the Buyer paid the advance court fee for the additional lawsuit request to cancel the Sales Contract dated June 7, 2011, and at the same time requested to cancel L/C No. 1801.

At the first instance trial, the plaintiff requested:

1. Cancellation of Sales Contract dated June 7, 2011.

2. The Seller must come to the Buyer’s warehouse at Hamlet C2, National Highway 1A, Commune C, District L, Dong Nai Province as soon as the judgment comes into legal effect to receive the entire shipment according to the Contract. After 30 days from the date the judgment comes into legal effect, if the Seller does not come to the Buyer’s warehouse to receive the shipment, the Enforcement Agency has the right to sell the above shipment to return the warehouse space to the Buyer.

3. Cancel the Buyer’s payment obligation for L/C No. 1801 and request E Joint Stock Commercial Bank to immediately refund the deposit to secure L/C payment of 1,313,308.85 USD to the plaintiff.

4. Request the Court to continue to maintain the Decision on applying temporary emergency measures No. 101/2011/QD-BPKCTT dated September 23, 2011 until the judgment comes into effect. At the same time, allow the Buyer to receive back the amount of VND 1,500,000,000 that the Buyer has made as security under the Court’s Decision at Bank T, branch P when the judgment comes into effect.

The Defendant is Company B (Seller)  headquartered abroad and has been duly served by the Court to the Seller through the Ministry of Justice of Vietnam in accordance with the provisions of the Civil Procedure Code, the Law on Judicial Assistance 2007 and Joint Circular No. 15/2011/TTLT-BTP-BNG-TANDTC dated September 15, 2011, but the Seller is still absent and has no response.

The person with related rights and obligations is Joint Stock Commercial Bank E , presenting:

At the request of the Buyer, on July 7, 2011, Joint Stock Commercial Bank E, Branch D issued L/C No. 1801 with the following content:

– L/C value 1,357,790 USD

– Purpose of importing 1,000 tons of raw cashew nuts from Ivory Coast;

– Beneficiary bank: Bank N, Singapore.

– Beneficiary: Company B.

– Deferred payment L/C opened under UCP 600; with confirmable terms.

– Security measures: third party guarantee, collateral; savings card.

– Payment due dates: September 29, 2011 ($961,813.66) and October 17, 2011 ($351,495.19).

After receiving the valid set of documents, the Buyer signed to pay the full value and on time for the L/C. Based on the Buyer’s confirmation, Joint Stock Commercial Bank E, Branch D signed to accept the bill of exchange.

Based on the confirmed L/C and the status of the documents, Bank N discounted without recourse for the Seller 03 sets of documents worth 1,313,308.85 USD on July 25, July 28 and August 8, 2011.

According to the content of the issued L/C, the L/C is governed and applied according to  the latest version of the ” Uniform Customs and Practice for Documentary Credits ” (  currently UCP 600). According to the provisions of UCP 600, Joint Stock Commercial Bank E as the issuing bank commits to pay based on the set of documents and the payment commitment, which means that the Buyer has paid the Seller. Based on the valid set of documents and the Buyer’s acceptance of payment, Joint Stock Commercial Bank E has signed to accept the bill of exchange. Bank N has discounted the Seller without recourse for the 03 sets of documents of the above L/C.

Joint Stock Commercial Bank E does not agree with the Plaintiff’s request to request the Court to cancel L/C No. 1801 and request that Joint Stock Commercial Bank E immediately return the deposit of 1,313,308.85 USD to the Plaintiff. Joint Stock Commercial Bank E requests the Court to immediately cancel the Decision on applying temporary emergency measures No. 101/2011/QD-BPKCTT dated September 23, 2011 so that Joint Stock Commercial Bank E can pay Bank N in accordance with the agreement in the L/C.

The person with related rights and obligations, Bank N, presents:

Pursuant to the Sales Contract dated June 7, 2011 and L/C No. 1801, Bank N (Singapore branch) is the Seller’s designated bank to execute the payment guarantee letter of credit issued by Joint Stock Commercial Bank E.

In accordance with the content of UCP 600, Bank N has discounted the valid set of documents presented by the Seller and paid the value of the letter of credit to the Seller on July 25, 2011, July 28, 2011 and August 8, 2011. Thus, Bank N has legally purchased L/C No. 1801 and related documents and become the direct beneficiary of all and any payment under this letter of credit. After the set of documents was presented in accordance with the provisions of the above letter of credit, Joint Stock Commercial Bank E confirmed its acceptance of the set of documents and committed to pay Bank N on September 29, 2011 and October 17, 2011, but the payment was not made due to the Buyer’s request and the Court issued Decision on applying temporary emergency measures No. 101/2011/QD-BPKCTT dated September 23, 2011.

Bank N requests the Court to immediately cancel the Decision on applying temporary emergency measures No. 101/2011/QD-BPKCTT dated September 23, 2011 and request the Buyer to compensate for damages caused to Bank N from the illegal act of requesting the application of temporary emergency measures, causing Bank N to not receive payment of the above letter of credit value from Joint Stock Commercial Bank E. The amount of money that Bank N requests for compensation is the loan interest that Bank N is currently paying based on the total amount payable according to the 03 sets of documents presented in accordance with the Joint Stock Commercial Bank E corresponding to the period of late payment calculated from the payment due date as committed by Joint Stock Commercial Bank E (September 29, 2011) to the date Bank N submits the Application to participate in the litigation in the lawsuit and based on the interbank non-term US Dollar loan interest rate at the time of application (3.8%/12 months). The total amount of damages that Bank N requires the Buyer to compensate is 33,270.49 USD equivalent to 694,188,774 VND.

In the First Instance Commercial Judgment No. 356/2014/KDTM-ST dated April 7, 2014, the People’s Court of Ho Chi Minh City decided:

“1. Cancel the Sales Contract No. FARCOM/RCN/IVC/036/2011 dated June 7, 2011 between the Seller, Company B, and the Buyer, One Member LLC A.

Compel Company B to take back the entire shipment of 1,000 tons of Ivory Coast raw cashew nuts delivered under the Sales Contract No. FARCOM/RCN/IVC/036/2011 at the address: warehouse of One Member Co., Ltd. A, Hamlet C2, National Highway 1A, Commune C, District L, Dong Nai Province. After 30 days from the date the judgment comes into legal effect, if Company B does not come to take back the above shipment, the Enforcement Agency has the right to auction the shipment in accordance with the provisions of law and return the warehouse space to One Member Co., Ltd. A.

2. Deferred payment L/C No. 1801ILUEIB110002 issued by Joint Stock Commercial Bank E, Branch D on July 7, 2011 is no longer valid for payment. Joint Stock Commercial Bank E is not obliged to pay Bank N under deferred payment L/C No. 1801ILUEIB110002 issued by Joint Stock Commercial Bank E, Branch D on July 7, 2011.

Force Joint Stock Commercial Bank E to return to One Member LLC A the collateral for L/C payment, which is the deposit of 1,313,308.85 USD.

3. Continue to maintain the temporary emergency measures applied in Decision No. 101/2011/QD-BPKCTT dated September 23, 2011 of the People’s Court of Ho Chi Minh City and the security measures applied in Decision No. 100/2011/QD-BPDB dated September 23, 2011 of the People’s Court of Ho Chi Minh City until the judgment comes into legal effect. One-member LLC A is entitled to receive back the entire amount of VND 1,500,000,000 (one billion five hundred million dong) deposited in blocked account No. 1022130.3441.012 at Bank T, branch P, which One-member LLC A has deposited as collateral according to Decision on compulsory implementation of security measure No. 100/2011/QD-BPDB dated September 23, 2011 of the People’s Court of Ho Chi Minh City when the judgment comes into legal effect.

4. Do not accept Bank N’s request that One Member LLC A must compensate for damages in the amount of 33,270.49 USD equivalent to 694,188,774 VND”.

In addition, the judgment also stated the court fees, late interest and the appeal period.

On April 21, 2014, E Joint Stock Commercial Bank filed an appeal against the entire content of the above first instance commercial judgment.

In Decision No. 29/2015/QDPT-KDTM dated August 26, 2015 to suspend the appeal trial, the High People’s Court in Ho Chi Minh City decided:

1. Suspend the appeal trial of the commercial business case No. 40/2014/TLKDTM-PT dated August 18, 2014 regarding “Dispute over a contract for the sale of goods”.

2. The first instance commercial judgment No. 356/2014/KDTM-ST dated April 7, 2014 of the People’s Court of Ho Chi Minh City takes legal effect from August 26, 2015.

In addition, the Court also decides on court costs.

On September 10, 2015, E Joint Stock Commercial Bank submitted a request to the Chief Justice of the Supreme People’s Court to review the above-mentioned First Instance Commercial Judgment and Decision to suspend the appeal trial according to the cassation procedure.

In Decision No. 11/2016/KN-KDTM dated March 7, 2016, the Chief Justice of the Supreme People’s Court protested the Decision to suspend the appeal trial of the commercial business case No. 29/2015/QDPT-KDTM dated August 26, 2015 of the High People’s Court in Ho Chi Minh City; requested the Council of Judges of the Supreme People’s Court to review the case and annul the Decision to suspend the appeal trial No. 29/2015/QDPT-KDTM dated August 26, 2015 of the High People’s Court in Ho Chi Minh City and annul the First Instance Commercial Business Judgment No. 356/2014/KDTM-ST dated April 7, 2014 of the People’s Court of Ho Chi Minh City; and transferred the case file to the People’s Court of Ho Chi Minh City for retrial according to the first instance procedure in accordance with the provisions of law.

At the appeal hearing, the representative of the Supreme People’s Procuracy requested the Supreme People’s Court’s Judicial Council to accept the appeal of the Chief Justice of the Supreme People’s Court.

JUDGMENT OF THE COURT:

[1] On June 7, 2011, One Member LLC A (Buyer) and Company B (Seller) signed a Sales Contract dated June 7, 2011 with the following content: The Buyer purchased 1,000 tons of cashew nuts with a payment method of 98% L/C deferred payment within 90 days from the date of delivery based on the bill of lading.

[2] To perform the above contract, Company A requested and paid a deposit of 1,313,308.85 USD for Joint Stock Commercial Bank E to issue L/C No. 1801.

[3] When the goods arrived at Ho Chi Minh City port, the Buyer requested Vinacontrol Ho Chi Minh City to inspect the quality and quantity of the goods according to Article 8 and Article 11 of the contract.

[4] According to the Certificate of inspection on quantity, quality and condition of goods dated August 31, 2011 of Vinacontrol, the rate of recovered cashew kernels for 2 sample cuts: 1st time is 38.2 lbs/80kg; 2nd time is 37.03 lbs/80kg.

[5] Because the rate of recovered cashew kernels was lower than the agreement in the Contract, the Buyer complained by email to the Seller but the Seller did not cooperate. Therefore, the Buyer filed a lawsuit requesting to cancel the Sales Contract dated June 7, 2011, return the entire shipment to the Seller and cancel the payment obligation under L/C No. 1801 issued by Joint Stock Commercial Bank E on July 7, 2011 and requested Joint Stock Commercial Bank E to refund the deposit of 1,313,308.85 USD to ensure payment under L/C No. 1801 dated July 7, 2011.

[6] Based on the documents and evidence in the case file, it is found that: The form and content of the Sales Contract dated June 7, 2011 do not violate the provisions of law, in accordance with the provisions of Articles, Clauses, Section 2 on the rights and obligations of the parties in the goods sales contract of the 2005 Commercial Law; in Article 15 of the contract, the two parties agree that when there is a dispute, Vietnamese law will be applied to resolve it.

[7] During the settlement process, the Court of First Instance properly performed the judicial entrustment procedure in summoning the defendant (the Seller), notifying the defendant of the plaintiff’s request to initiate a lawsuit; at the same time, requesting the defendant to send a written statement stating the defendant’s opinion on the request to initiate a lawsuit; although the defendant had received these summonses and notices, the defendant had no objection to the plaintiff’s request to initiate a lawsuit.

[8] Based on the 02 Vinacontrol Appraisal Certificates presented by the Buyer, there is a basis to determine that the Seller has committed a fault in delivering goods that do not conform to the Sales Contract dated June 7, 2011, so according to Article 39 of the Commercial Law, the Buyer has the right to refuse to receive the goods. On the other hand, after having the Vinacontrol Appraisal Certificate, the Buyer complained about the quality of the goods but the Seller did not cooperate. Because the Seller delivered goods that did not conform to the quality agreed upon in the Contract, causing the Buyer to fail to achieve the purpose of concluding the Contract, there is a basis to determine that the Seller has fundamentally violated the obligations of the Contract. Therefore, the Court of First Instance’s decision to cancel the Contract is based on the provisions of Clause 13, Article 3, Article 312 of the Commercial Law. However, when resolving the legal consequences of the contract cancellation, the Court of First Instance did not resolve the issue of forcing the Seller to return the money received (if any) and compensate the Buyer for damages, which is not resolving the case properly.

[9] Regarding the settlement of the request to cancel L/C No. 1801:

[10] Based on the Buyer’s request to open a deferred payment L/C, Joint Stock Commercial Bank E, Branch D opened L/C No. 1801 on July 7, 2011, specifically:

[11] – L/C value: 1,357,790 USD;

[12] – Form of document: Irrevocable;

[13] – Purpose: to purchase 1,000 tons of raw cashew nuts from Ivory Coast;

[14] – Beneficiary bank: Bank N, Singapore;

[15] – Beneficiary: Company B;

[16] – Requester: Company A;

[17] – Applicable rules: Latest version of UCP.

[18] Afterwards, Joint Stock Commercial Bank E received 03 sets of documents demanding money from Bank N, with a total value of 1,313,308.85 USD, specifically:

[19] July 25, 2011: Document set of 961,813.66 USD, due September 29, 2011;

[20] July 29, 2011: Document set of 312,517.11 USD, due October 17, 2011;

[21] August 9, 2011: Document set of 38,978.08 USD, due October 17, 2011.

[22] After receiving the documents in accordance with the L/C terms, Joint Stock Commercial Bank E sent an Official Dispatch and the documents to the Buyer and was confirmed by the Buyer “Received all documents and committed to pay the full value, on time as above; on that basis, Joint Stock Commercial Bank E telegraphed to accept payment of the bill of exchange on the maturity date of the 03 above-mentioned documents to Bank N.

[23] According to Vietnamese law on payment of documents:

[24] Clause 4, Article 3 of the Law on Credit Institutions 2010 stipulates: “Organizations and individuals participating in banking activities have the right to agree to apply commercial practices, including: International commercial practices issued by the International Chamber of Commerce; other commercial practices that are not contrary to Vietnamese law”.

[25] Clause 1, Article 16 of Decision No. 226/2002/QD-NHNN dated March 26, 2002 of the State Bank on “Regulations on payment activities through payment service providers” stipulates: “A letter of credit is a conditional commitment document opened by a Bank at the request of a payment service user (person applying for a letter of credit) to:

[26] Pay or authorize another bank to pay immediately to the order of the beneficiary upon receipt of a set of documents presented in accordance with the terms of the letter of credit; or accept to pay or authorize another bank to pay to the order of the beneficiary at a certain time in the future upon receipt of a set of documents presented in accordance with the payment terms of the letter of credit”.

[27] Clause 1, Article 19 of Decision 226 above stipulates: “Payment by letter of credit: Opening, issuance, amendment, notification, confirmation, verification of documents, payment and rights and obligations of the parties involved in payment of letters of credit shall comply with the general rules on documentary credit issued by the International Chamber of Commerce ICC, agreed upon by the parties and in accordance with the provisions of Vietnamese law”.

[28] On the other hand, in the Buyer’s L/C opening request letter, there is an agreement: The applicable rule is the latest version of UCP. According to the 6th Amendment to the Uniform Customs and Practice for Documentary Credits in 2007 of the International Chamber of Commerce (UCP 600):

[29] “A letter of credit is an arrangement, however named or described, which is irrevocable and which constitutes a definite undertaking of the issuing bank to honour the presentation of complying documents” (Article 2).

[30] “By its nature, a credit is a separate transaction from the contract of sale and other contracts on which it is based. Banks are not concerned with or bound by such contracts, even if the credit makes reference to such contracts. Consequently, the undertaking of a bank to honour or negotiate payment, etc., is not subject to any claim or defence by the applicant arising out of its relations with the issuing bank or the beneficiary” (Article 4).

[31] “Banks deal with documents and not with the goods, services or other performance to which the documents relate” (Article 5).

[32] “The issuing bank is irrevocably bound to make payment from the time the bank issues the L/C” (Article 7).

[33] “When the issuing bank determines that a presentation is complying, it must honour” (Article 15a).

[34] Thus, according to the Buyer’s L/C opening request and the content of the issued L/C, L/C No. 1801 is a separate transaction for the Goods Sale Contract dated June 7, 2011; governed and applied according to UCP 600. According to the provisions of UCP 600, E Joint Stock Commercial Bank as the issuing Bank must pay when determining that the presented set of documents is in compliance at the Bank.

[35] Regarding the set of documents of the above L/C, it is stipulated that: The set of documents includes a Certificate of Weight and Quality issued by an independent surveyor (it does not stipulate that the goods must be re-inspected at the port of arrival by an inspection agency). The set of documents presented includes a Certificate of Weight and Quality issued by a foreign independent surveyor that is in accordance with the provisions of the L/C; at the same time, the Buyer has signed to accept the set of documents and committed to pay the full value on time, but the Court of First Instance based on the assessment conclusion of Vinacontrol Ho Chi Minh City (at the port of arrival) to conclude that the set of documents is invalid and is not in accordance with the provisions of the L/C and the commitment of the Buyer.

[36] During the process of resolving the case, Bank N claimed that it had discounted a valid set of documents and paid the Seller on July 25, 2011, July 28, 2011 and August 8, 2011, and presented export invoice discount notices to prove that it had paid the Seller. However, apart from this document, Bank N could not present any other documents or papers showing that it had paid the Seller. Therefore, in this case, the Court of First Instance should have collected sufficient documents and evidence to determine whether Bank N had paid the Seller or not? If it had paid, how much was the payment? In case Bank N has paid the Seller under L/C No. 1801, Joint Stock Commercial Bank E must resolve according to Bank N’s request. Because the above issues have not been clarified, the Court of First Instance believes that the payment method by L/C No. 1801 is an inseparable part of the Goods Sale Contract dated June 7, 2011; therefore, when this contract is completely canceled, the parties do not have to continue to perform the obligations agreed upon in the contract; from there, the decision that L/C No. 1801 is no longer valid for payment and Joint Stock Commercial Bank E has no obligation to pay Bank N under the above L/C; at the same time, forcing Joint Stock Commercial Bank E to pay the buyer the deposit amount of 1,313,308.85 USD is not sufficient and not in accordance with the provisions of UCP 600.

[37] After the first-instance trial, E Joint Stock Commercial Bank appealed the entire first-instance judgment mentioned above. The appellate court issued a Decision to bring the case to trial and served the summons to the litigants to attend the court sessions on September 25, 2014, October 27, 2014, October 31, 2014, and April 16, 2015, but these sessions were all postponed for various reasons such as: absence of litigants, absence of representatives of the Procuracy, need for time to carry out judicial commissions, etc.

[38] In Decision No. 09/2015/QDPT-KDTM dated May 29, 2015, the Court of Appeal of the Supreme People’s Court in Ho Chi Minh City decided to temporarily suspend the appeal trial to conduct judicial entrustment procedures in summoning Company B to participate in the appeal trial.

[39] In Decision No. dated August 10, 2015, the High People’s Court in Ho Chi Minh City decided to bring the case to appeal trial on August 26, 2015.

[40] On August 19, 2015, Joint Stock Commercial Bank E received the Summons to attend the above-mentioned trial; on August 24, 2015, Joint Stock Commercial Bank E submitted a request to postpone the trial on the grounds that the authorized representative of Joint Stock Commercial Bank E, Mr. Hua Anh K, was on a business trip. At the trial on August 26, 2015, the Court of Appeal did not accept Mr. K’s request to postpone the trial, but held that Joint Stock Commercial Bank E (the appellant) had been properly summoned for the second time but was still absent, and therefore decided to suspend the appeal trial.

[41] The decision of the High People’s Court in Ho Chi Minh City to suspend the above-mentioned appellate trial is not in accordance with the provisions of law, because Clause 2, Article 13 of Resolution No. 06/2012/NQ-HDTP dated December 3, 2012 of the Council of Judges of the Supreme People’s Court stipulates: “In case there is a decision to temporarily suspend the appellate trial of a civil case, the time limit for preparing for the trial ends on the date of the decision to temporarily suspend. The time limit for preparing for the appellate trial begins to be recalculated from the date the appellate court resumes the appellate trial of the case when the reason for the temporary suspension no longer exists”. Thus, due to the Decision to temporarily suspend the above-mentioned case, when the appellate court resumes the appellate trial of the case, the time limit for preparing for the appellate trial begins to be recalculated from the date the appellate court issues the Decision to bring the case to trial (ie August 10, 2015). Therefore, the appellate court on August 26, 2015, in which the appellant (Joint Stock Commercial Bank E) was absent, is considered to be the appellant who was properly summoned by the Court for the first time and is absent, regardless of whether there is a legitimate reason or not, the Court must postpone the trial according to the provisions of Article 266 of the Civil Procedure Code, amended and supplemented in 2011 and Article 16 of Resolution No. 06/2012/NQ-HDTP dated December 3, 2012 of the Council of Judges of the Supreme People’s Court. However, the appellate court held that the representative of Joint Stock Commercial Bank E was properly summoned for the second time but was still absent without a reason of force majeure, thereby making the decision to suspend the appellate trial incorrect; the decision of the appellate court to suspend the appellate trial was a serious violation of procedural law, affecting the rights and legitimate interests of the litigant.

For the above reasons, pursuant to Clause 2, Article 337, Clause 3, Article 343, Article 345 of the Civil Procedure Code.

DECISION:

1- Accept the Appeal Decision No. 11/2016/KN-KDTM dated March 7, 2016 of the Chief Justice of the Supreme People’s Court.

2- Annul the Decision to suspend the appeal trial No. 29/2015/QDPT-KDTM dated August 26, 2015 of the High People’s Court in Ho Chi Minh City and annul the First Instance Commercial and Business Judgment No. 356/2014/KDTM-ST dated April 7, 2014 of the People’s Court of Ho Chi Minh City.

3- Transfer the case file to the People’s Court of Ho Chi Minh City for retrial according to the first instance procedure in accordance with the provisions of law.

CONTENT OF THE PRECEDENT

“[34] Thus, according to the Buyer ‘s L/C request  and the content of the issued L/C, L/C No.  1801 is a separate transaction for the Goods Sale Contract dated June 7, 2011; governed and applied according to  U CP 600. According to the provisions of  U CP 600, Joint Stock Commercial Bank  E as the issuing Bank must pay when determining that the presented set of documents is in compliance at the Bank…

[36]… The Court of First Instance held that the payment method by L/C No. 1801 is  an inseparable part of the  Goods Sale Contract dated June 7, 2011; therefore, when this contract is completely canceled, the parties do not have to continue to perform the obligations agreed upon in the contract ; from there, the decision that L/C No. 1801  is no longer valid for payment and Joint Stock Commercial Bank E has no obligation to pay Bank N according to the above L/C; at the same time, forcing Joint Stock Commercial Bank  E to pay the buyer the deposit amount  of 1,313,308.85 USD is not sufficient and not in accordance with the provisions of UCP 600 .