RULE 6 - Indemnity

Is it counter-signed by a first class bank?

A shipowner sought to recover from his agent who had released cargo against indemnities countersigned by the failed BCCI bank.  The agent had authority to accept indemnities  countersigned by first class banks.  The owner alleged that the ship agent had failed in his duty of care, in that BCCI was not a first class bank.  It was only when the Club pointed out to the owner that his own account had been with BCCI that the claim was withdrawn.

An agent in the Arabian Gulf received instructions from his principal to deliver 77 crates of plywood to a company who was not the consignee named on the bill of lading.  Unfortunately, despite the instruction, the agent delivered to the named consignee against an indemnity counter-signed by a local bank.  The second receiver, who was in possession of the original bill of lading, sued the agent in the local courts.  The bank refused to honour its indemnity and had to be joined into the proceedings as a third party.  The court, after proceedings which lasted nine years, ordered the bank to pay the value of the goods to the second receiver but did not award the agent his costs, which amounted to US$ 120,000.

The Club has seen several forged bank indemnities, and recommends to its Members that if they receive a bank indemnity, they should consider taking the precaution of telephoning the issuing bank to ensure that it had issued that particular indemnity.  Delivering millions of dollars worth of cargo on the strength of a rubber stamp alone is not advisable.