Recovering Overdue LC Payments from Bangladeshi Issuing Banks

TRW Law Firm’s Practical Playbook (with a Real-World Case Context)

This article is designed for international banks, commodity traders, and corporates who face delayed or disputed payments under Letters of Credit (LCs) issued by Bangladeshi banks. It distills how TRW Law Firm would respond—quickly, decisively, and with a multi-track strategy—using as context a typical email inquiry we receive about overdue LC obligations where partial realizations have occurred but substantial sums remain outstanding alongside penal/overdraft interest.

1) The Situation We Commonly See (Case Context)

A foreign beneficiary ships goods under irrevocable LCs subject to UCP 600. The Bangladeshi issuing bank accepts documents and the bills mature, yet full payment is not made on due dates. Months pass. The beneficiary (or its confirming/negotiating bank) pursues the issuing bank with SWIFT chasers, legal notices, meetings at head office, and escalations to the central bank. Partial payments trickle in; the majority remains unpaid, and interest/penalties accrue.

Illustrative client context (figures paraphrased from a typical intake):

• Three LCs issued in November 2023 for approx. USD 3.0M each to a global sugar trader; maturities in September 2024.
• Part realizations in Q1 and Q3 2025, but ~USD 7.0M remains outstanding as of early August 2025, inclusive of penal/overdraft interest and late fees.
• The issuing bank promises staged repayments in meetings but misses timelines; regulator is notified; legal notice served; governor’s office escalated; still no complete resolution.
• Cumulative recoveries to date: ~USD 3.58M; significant balance still due.

This is not an isolated scenario. Over the last few years, Bangladesh’s import ecosystem has seen episodic settlement delays—particularly in commodities and capital machinery—stemming from FX tightness, internal bank risk governance, and documentary/operational bottlenecks. None of that negates the LC’s independence principle or the issuing bank’s obligation once documents are compliant and bills mature.

2) Core Legal Anchors: Where Your Rights Live

When we act for beneficiaries (or for the bank that negotiated/financed the documents), we ground the case in these pillars:

• UCP 600 and the independence principle. The bank’s undertaking is distinct from the underlying sale; once the bank accepted documents or committed to deferred payment, non-payment at maturity is a breach of the LC obligation (subject to any surviving documentary discrepancy defense, which we test hard at intake).
• Bangladesh’s domestic law. In parallel to UCP 600, the Contract Act 1872, the Code of Civil Procedure (CPC), the Evidence Act, the Bank Companies Act, and foreign exchange governance under Bangladesh Bank provide the litigation and enforcement architecture.
• Regulatory oversight. Bangladesh Bank has authority to nudge or direct licensed banks towards settlement compliance, particularly where reputational and prudential concerns intersect. You cannot “sue” the regulator for private payment obligations, but targeted regulatory engagement—done properly—often accelerates a bank’s internal approval dynamics.
• Interest & costs. Contractual LC terms, coupled with Bangladesh law, generally allow claims for interest and reasonable costs where payment is wrongfully delayed post-maturity.

3) TRW’s Multi-Track Strategy (Litigate, Regulate, Negotiate—All at Once)

We never rely on a single pressure point. Our default approach runs on three synchronized tracks so that if one slows, the others continue to generate leverage.

Track A — Litigation in Bangladesh (Primary Pressure)

Forum. For LC non-payment claims against a private commercial bank, we typically file a Money Suit before the Joint District Judge’s Court, Dhaka (chosen for cause-of-action and defendant’s principal office considerations). Where jurisdictional facts support a different district, we advise accordingly.

Interim relief we seek on Day 1–14:

• Attachment before judgment under Order XXXVIII Rule 5 CPC over identifiable assets/receivables to prevent dissipation.
• Temporary injunction under Order XXXIX Rules 1–2 CPC to restrain acts that may frustrate the decree or to compel the bank to maintain sufficient liquidity buffers specific to the LC exposure.
• Discovery and disclosure to flush out the bank’s current provisioning, FX allocation, and internal instructions regarding the specific LCs.

Pleadings & Proofs. We anchor the claim on the LC instruments (MT700s), bank acceptances/advices, SWIFT trails (MT103/202 where relevant), documentary compliance records, maturity dates, part realizations, and interest computations. If the issuing bank raises “discrepancies,” we evaluate whether they were waived, cured, or are precluded by the bank’s own conduct (e.g., acceptance or reimbursement actions inconsistent with later objections).

Timeline (indicative):

• Filing & first interim hearing: 7–21 days from instruction, once documents are in our data room.
• Written statement by defendant: 30–60 days (extensions are possible; we counter-calendar aggressively).
• Evidence & trial: 6–12 months depending on court load and procedural efficiency.
• Decree: 12–18 months (faster if settlement crystallizes into a consent decree).
• Execution: 2–6 months if assets are identifiable and unencumbered.

Note: We usually see meaningful movement during the interim stage—when the bank realizes the case is real, urgent, and supported by asset-protective orders.

Track B — Regulatory Escalation (Targeted, Document-Heavy)

• FICSD & line departments. We lodge a structured pack with FICSD and the relevant Bangladesh Bank departments, encapsulating (i) LC particulars, (ii) acceptance/maturity proofs, (iii) correspondence showing broken repayment assurances, and (iv) systemic risk signals (e.g., serial delays across multiple LCs).
• Governor’s Secretariat brief. Short, verifiable, non-rhetorical summaries that emphasize prudential risks, reputational damage, and cross-border settlement credibility—without trying to “litigate” through the regulator.
• Regulatory follow-through. Where BB issues advice/directions to the bank, we blend that into our litigation narrative (and into settlement terms) to close gaps between promise and delivery.

Track C — Negotiated Resolution with Teeth

We never turn down a viable commercial solution—but only with enforcement-backed structure:

• Board-approved repayment schedule with default triggers, step-up interest, and consent to decree in the event of default.
• Security overlay (where feasible):
• Primary: Issuing bank’s unconditional undertaking tied to the LC and lawsuit reference number.
• Secondary: Importer’s guarantees and, where possible, registered charges over movable assets/receivables under the Companies Act framework (for parallel recourse against applicant).
• Escrow arrangements for offshore-onshore bridging—so that any FX allocation translates to immediate value for the beneficiary.

4) What Court, Exactly? And Why There?

Why the Joint District Judge’s Court, Dhaka?

• It has pecuniary jurisdiction to hear large-value money suits.
• The cause of action often arises where the issuing bank maintains its head office/central processing (commonly Dhaka for national banks), simplifying service and enforcement logistics.
• Bangladesh’s High Court Division primarily handles writ, company, admiralty, and specialized original jurisdictions—not generic money suits against private banks. Hence, the District Court path is principled and proven.

5) Expected Timeline to Final Judgment (and When Money Usually Moves)

• Pre-action (7–10 days): Data room setup, computations, draft notice, and interim motion papers.
• Filing + Interim Relief (2–4 weeks): Attachment/injunction applications; early hearings.
• Pleadings close (1–3 months): Written statement & replication (if needed).
• Evidence & Hearing (6–12 months): Affidavits, cross-examination, final arguments.
• Decree (12–18 months typical): Often earlier if the bank opts for consent terms to avoid asset attachment and adverse publicity from persistent non-compliance.
• Execution (2–6 months): Depends on asset mapping and resistance levels.

Commercial reality: In LC matters, serious interim orders and regulatory heat typically unlock staged settlements well before trial completion.

6) Fees & Costing: Clear, Phase-Based, and Board-Friendly

We prepare a Board-ready fee note that allows internal sanctioning at your Head Office. A representative structure (illustrative only; tailored to your brief and venue) looks like this:

• Phase 1 — Intake & Pre-Action (Fixed):
• Case mapping, legal opinion on merits, interest computation methodology, regulatory pack, and draft pleadings for interim relief.
• Deliverables in 7–10 days from complete documentation.
• Phase 2 — Filing & Interim Relief (Fixed + Cap):
• Money Suit filing, urgent attachment/injunction motions, hearings, and first set of court orders.
• High-impact milestone—this is where leverage is created.
• Phase 3 — Trial to Decree (Blended or Capped):
• Evidence, cross-examination, and arguments to final decree.
• Discounted rates for early consent decree.
• Phase 4 — Execution & Collections (Success-Linked):
• Execution petitions, garnishee/attachment steps, and distribution.
• Optional success fee band if recoveries exceed agreed thresholds.
• Disbursements:
• Ad-valorem court fees (statutory), process server, certified copies, translations, notarizations, and incidental charges—at cost against vouchers.
• We provide a line-item estimate before filing and update it at each stage.

We work in BDT or USD (with conversion references) and can contract with foreign counsel/clients under compliant billing arrangements.

7) What We Need from You on Day 1 (Document Checklist)

Please share a secure data-room link or encrypted package containing:

• LC texts (MT700/MT701), amendments, and confirmations (if any).
• Bank acceptances, maturity advices, and any deferred payment schedules.
• Complete presentation documents: invoice, packing list, B/L or AWB, certificate of origin, inspection certificates, etc.
• SWIFT trails: chasers, part-payment MT103/202, refusal/waiver notices.
• Ledger of part realizations and interest calculations to date (or permission for TRW to compute on agreed rates/bases).
• Copies of legal notices, email trails with bank management, and records of meetings.
• Any regulatory correspondence with Bangladesh Bank (FICSD/other departments).
• Importer/applicant information and any collateral/guarantees available for parallel recourse.

8) Key Questions Our Clients Ask (and Straight Answers)

Q1: Can the issuing bank refuse payment post-maturity citing FX allocation issues?
A: FX/liquidity constraints are internal to the bank and do not vitiate an LC once documents are compliant and the bank has accepted liability. This goes to performance risk, not legal liability. Courts recognize this distinction.

Q2: Do we sue the importer or the issuing bank?
A: The issuing bank owes the LC obligation to the beneficiary. We often add the applicant/importer as a co-defendant for parallel leverage—especially to secure structured settlements, guarantees, or charges over assets.

Q3: Can we sue Bangladesh Bank?
A: Generally no for private payment disputes. The regulator isn’t a counterparty to the LC. However, targeted regulatory engagement can be influential, and we run that track vigorously.

Q4: Is there a faster “summary” route?
A: Bangladesh’s CPC provides summary mechanisms (e.g., Order XXXVII for negotiable instruments), but LC claims typically proceed as money suits with strong interim relief, which, in practice, secures leverage early.

Q5: What about arbitration?
A: LCs are bank undertakings; unless the LC expressly contains an arbitration clause binding the bank, LC payment disputes are ordinarily litigated in civil courts. The underlying sales contract’s arbitration clause does not automatically capture the LC undertaking.

Q6: What is a realistic recovery?
A: If documents are clean and acceptances clear, principal + enforceable interest is our baseline target. The timing hinges on interim orders, the bank’s internal FX windows, and our ability to secure consent terms.

Q7: Can we freeze the bank’s assets?
A: Courts can grant attachment before judgment where conditions are met. We also seek injunctions that, while not a classic “freeze,” practically barricade disposal strategies that frustrate a decree.

9) How TRW Drives Outcomes (What’s Different About Our Method)

• Banking-grade pleadings. We draft as if the audience were risk committees—clear chronologies, SWIFT-level specificity, and maturity math that withstands audit.
• Regulatory credibility. Our submissions to Bangladesh Bank are concise and evidence-heavy, respecting the regulator’s remit while signaling systemic impact.
• Negotiation with enforcement. We do not accept “soft” schedules. Consent decrees, board-approved undertakings, and fallback attachments are our standard.
• Cross-border coordination. Where parent entities, confirming banks, or offshore intermediaries matter, we coordinate with your international counsel to keep pressure coherent across jurisdictions.
• Executive access. You deal with partners who litigate, negotiate, and brief regulators—not pass-through teams.

10) Illustrative Application to the Case Context

Given overdue amounts approximating USD ~7.0M across three LCs, with part-payments already credited and multiple broken assurances:

1. Week 0–2:

• File Money Suit(s) against the issuing bank (and, as strategy dictates, add the importer).
• Seek attachment before judgment and temporary injunctions—aimed at ring-fencing adequate assets/liquidity.
• Lodge updated regulatory pack with Bangladesh Bank referencing the filing and relief sought.

1. Week 2–6:

• Drive early hearings; secure orders.
• Table board-approved settlement terms with the bank: staged USD payments tied to FX allocation windows, default triggers, and consent-to-decree.

1. Week 6–12+:

• If the bank pays per schedule, move for a consent decree; otherwise, advance to evidence with continued regulatory follow-up and contempt-style escalations for any violation of interim orders.
• Parallel recourse against the importer where commercially sensible (guarantees/charges).

This cadence is proven to normalize recoveries faster than a single-track approach.

11) Compliance & Reputation Considerations

• Document integrity. We audit presentations for any arguable discrepancy to bullet-proof the claim before filing.
• Sanctions/AML. For commodity trades, we confirm counterparties and routes to ensure courts and regulators see a clean compliance profile.
• Public positioning. We keep filings professional and evidence-led, minimizing reputational heat while maximizing legal pressure.

12) Engage TRW: What Happens After Your First Email

• Same-day response with an initial checklist and NDA (if you require firm-level NDA even before matter-specific engagement).
• 48–72-hour merits memo (post-documents) including litigation plan, regulatory steps, and an interest computation framework.
• Board-friendly fee note with phases, caps, and disbursement estimates.
• Filing window as soon as you greenlight and advance court fee/disbursements.

To learn more about our dispute and banking practice and to contact our team, visit tahmidurrahman.com (internal reference link).

Summary Table — LC Recovery in Bangladesh (TRW Field Guide)

Final Notes & Contact

This guide is informational and does not constitute legal advice. Every LC dispute turns on its documents, acceptances, and correspondence trail. To move swiftly, engage early—interim relief is most effective before counterparties reorganize assets or policies shift.

TRW Law Firm — Banking & Trade Finance Disputes Team
Phone: +8801708000660 • +8801847220062 • +8801708080817
Email: info@trfirm.com • info@trwbd.com • info@tahmidur.com
Global Locations:

• Dhaka: House 410, Road 29, Mohakhali DOHS
• Dubai: Rolex Building, L-12 Sheikh Zayed Road

We routinely act for international banks, traders, and corporates in high-value LC and trade-finance disputes. If you are facing overdue LC payments from a Bangladeshi bank—or want a pre-filing merits memo with a board-ready fee plan—contact TRW today.