Decision: Credito Italiano v. Banco di Sicilia,
Corte di Cassazione – October 17, 1953
Initially, Italian jurisprudence favored the doctrine of strict compliance. More recently, however, Italian courts seem to prefer the “reasonable approach,” thanks to a decision of the Corte di Cassazione in 1953, which held that the bank’s examination of the documents must be intelligent, not automatic and that it must be based on a reasonable standard.
The case before the court dealt with the responsibility of a bank which, in a letter of credit transaction, paid the beneficiary upon presentation of documents that were not in conformity with the credit. There was a discrepancy between the letter of confirmation issued by the confirming bank and the certificate of analysis of the alcohol content of Marsala wine tendered by the beneficiary to the bank as part of the documents of the credit. The confirmation letter referred to the same terms as the purchase order issued by the customer to the beneficiary (the order referred to a certain amount of Marsala wine having a general alcohol content of seventeen percent), whereas the certificate of analysis specified an alcohol content of seventeen percent “al piccolo Malligand.”
The court of Cassazione confirmed the holding, asserting that even if the method of analysis (the “volume” method versus the “Malligand” method) was not suitable for correct measurement of alcohol content, it was not acceptable for the bank to refuse documents and payment on the ground of such a discrepancy between title and document. In other words, what is required of banks in verifying documents is a standard of reasonable care (una media ragionevole cura), for instance the diligence of an average, diligent bank employee, which has nothing to do with an analysis of the merits of the document’s substance. The court explained further that the bank’s duty is limited to that which is within the capacity of the average diligent bank employee who cannot be required to demonstrate specific knowledge in technical fields beyond his competence and expertise in the performance of his job. Both the appellate court and the court of Cassazione confirmed the acceptance of the documents and rejected the claimant’s request.
The International Standard Banking Practice (ISBP) issued by the International Chamber of Commerce states that documents presented under a letter of credit must not be inconsistent with each other, meaning that the data do not need to be identical, merely that the documents shall not be inconsistent. Thus, the decision of the lower courts, confirmed by the court of Cassazione, can be considered in compliance with the ISBP. The two documents (the confirmation letter issued by the bank following the client’s purchase order, and the certificate of analysis) are not inconsistent with each other. They are not identical, but a “mirror image” is not required.