CASE - LAW

INTERNATIONAL SALE – DOCUMENTARY CREDIT
Company A, Spanish, buys from Company B, Chinese, by means of a Documentary Credit, 100% cotton t-shirts

The Documentary Credit is irrevocable and confirmed by a Chinese bank.

Once the goods arrive to the Barcelona port, an inspection is conducted by an authorized company which results in the t-shirts being 50 % cotton and 50 % polyester instead.

However, the Chinese company has presented to the notifying bank the full set of documents requested by the Documentary Credit, which the bank has accepted without any reserve (clean).

These are the issues:

How can the Spaish importer avoid payment of the Documentary Credit which is owed to his bank?
Can he use the report from the inspecting company before the bank?

In order to stop payment the importer must ask before the civil courts of justice the adoption of precautionary measures (preventive measures which are very quickly executed and that hold on to the result of the subsequent law suit). After that and if the court agrees, it will pass an order to the bank to suspend payment until a definite verdict on the issue is passed. It is necessary that the interested party puts down a deposit / bank warrat as well as providing the jugde with some evidence that proves, in principle, his position. For instance, the report by the inspection company could be used. Once the precautionary measures adopted, the complainant has 20 days to file his plaint in court.

The report by the inspection company is not valid to be presented to the bank and avoid payment. It is the judge, as previously explained, who must tell the bank to stop the Documentary Credit execution.

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INTERNATIONAL AGENCY AGREEMENT
Company A, Spanish manufacturarer, signs an international sales agency agreement with company B, French, by which the sales exclusivity is granted to the Frenh company for a period of three years and the French company agrees to buy only from the Spanish company with a no competition clause.

Company B incurs in unfair competition, by buying the same kind of product from a concurrent company of Company A, which they sell in the territory granted and to the same clients to which it sells the prodcuts of Company A.

Issues are:

Can the Spanish company terminate unilaterally the contract?

Can the Spanish company ask for damages indemnity?

Can the French company ask for client indemnity?

In which country must the Spanish company file its plaint against its agent, the French company?

Which law applies, the French or the Spanish one?

Being the purchase exclusivity an essential element of the agreement, as established in corresponding contract clause, and having suffered a considerable prejudice, as sales reduction as a consequence of the conduct of the French agent, the Spanish company would be entitled to terminate unilaterally the contract.

Yes, the amount of the indemnity depending on the amount of the prejudice suffered and provable.

The French agent will not be entitled to ask for the client indemnity, since the contract has been termitated because of the agent´s breach of agreement (art. 30 Law 312/92 and 18 EU Directive 86/653).

Company A must sue Company B in France. Submission to a different jurisdiction is not possible in application according to applicable regulations.

As per conflict rules established in the Rome Convention, the national law chosen by the parties would rule the case. Otherwise, the national law of the party which performs the service, in this case, the French company.

CUSTOMS: FINES
On 1/1/6 a company imports an order of shirts origin North Korea, which is subject to quantity limitations and therefore subject to import licence.

However, its agent proceeds with customs clearance without the import licence, since it would take too long to get it and also to avoid a fine for clearing out of the delay granted by law.

As a consequence, the importer receives a fine for submitting an incomplete customs declarations (SAD). The customs authorities start up the file processing on 1/3/6 and becomes definitive on 1/12/6, date in which the fine becomes effective.

Issues are:

Can the importer use as an argument, against the fine for incomplete declaration, the fact that he had to submit the customs declaration in order to avoid the fine for clearing out of the delay granted by law?

Which defense options does the importer have?

The importer will not be able to plead the lack of necessary delay for clearance, since the law foresees the possibility of asking for an additional delay in these cases.

The fine file expires 6 months after it is started. In this case, a total of 10 months have passed by since it was opened until it became definitive. Therefore, the importer could have pleaded the file expiration.