Singapore: SWIFT MT103 – An Irrevocable Instruction?

Malayan Banking Berhad v Barclays Bank PLC [2019] SGHC (I) 04
Last Updated: 25 April 2019
Article by Liew Kai Zee

 The Singapore International Commercial Court ("Court") had to decide if an instruction given via the SWIFT MT103 is revocable and the legal obligations of the sending bank and receiving bank. The Court held that there was an implied contract between the sending bank and the receiving bank, which required the sending bank to reimburse the funds paid by the receiving bank after it acted on the SWIFT MT103 message. The Court also considered the granularities of the SWIFT system as well as current market practices vis-à-vis the payment instruction.


Barclays Bank PLC ("Sending Bank") sent a Society for Worldwide Interbank Financial Telecommunication ("SWIFT") MT 103 Single Customer Credit Transfer payment instruction ("MT 103 STP") to Malayan Banking Bhd ("Receiving Bank"), to credit funds into the account of PLG International ("Customer"). As the MT 103 STP was a US dollar transaction, the Sending Bank sent a SWIFT MT 202 COV to its corresponding bank in USA ("Corresponding Bank 1") to make payment or confirmation of payment ("MT 202 COV") to the Receiving Bank's corresponding bank in USA ("Corresponding Bank 2"). However, a few hours after the MT 103 STP and MT 202 COV were sent, the Sending Bank received information that the funds originally intended to be transferred had been received by the Customer in "questionable circumstances". The Sending Bank thus cancelled the MT 103 STP, simultaneously instructing Corresponding Bank 1 to cancel the MT 202 COV to Corresponding Bank 2.

Corresponding Bank 1 received the cancellation request during its opening hours, and duly acceded to the cancellation instruction. Consequently, Corresponding Bank 2 did not receive any payment. However, the Receiving Bank had already credited the Customer's account after receiving the MT 103 STP. At the time of the cancellation request, the Receiving Bank had already closed (ie the effective receipt by the Receiving Bank of the cancellation request was on Monday following the weekend). The Receiving Bank sought to debit the funds credited to the Customer, but the Customer refused. Therefore, the Receiving Bank sought from the Sending Bank, payment of the sums paid to the Customer.


The Court had to decide on the following issues:

(a) was there an implied contract between the Sending Bank and the Receiving Bank when the latter accepted and acted on the MT 103 STP?

(i) if so, what did this implied contract entail and whether the Sending Bank was in breach of it?;

(ii) whether the MT 103 STP was irrevocable by the Sending Bank once the Receiving Bank acted on it?

(iii) did the current market practice in dealing with MT 103 STPs differ from SWIFT guiding principles?; and

(b) was there a defence in illegality?


Implied Contract

On the first issue, the Court held that when the Sending Bank sent the MT 103 STP (for the Receiving Bank to pay the Customer), the Receiving Bank's acceptance of the MT 103 STP and making the payment as instructed, led to an implied contract. This implied contract consisted of the Sending Bank reimbursing the Receiving Bank in respect of the payment made.

In the absence of an express written or oral agreement, a court would only imply a contract if the parties' conduct were inexplicable on any other basis. Accordingly, the Court found that in the modern banking paradigm, it would be inconceivable and uncommercial that any receiving bank would comply with a payment instruction without a reimbursement obligation arising on the part of the sending bank.

The only bar to this implied contract would be the conditionality of the payment instruction (ie whether the Receiving Bank had to wait for some confirmation before acting on the instruction). To this end, the Court examined the documentation and guidance available, and distilled a list of guiding principles to better define the nature of the SWIFT system. The following points are noteworthy:

(a) the MT 103 STP is an instruction by one bank to another to pay a beneficiary, with no element of conditionality in it;

(b) a bank which receives an MT ST 103 STP is expected to fulfil the instruction and can do so when it is received without receiving notification that an MT 202 COV has been issued to cover the payment it makes in accordance with the MTP 103 STP;

(c) the credit risk undertaken by the receiving bank has no impact on the legal obligations of the parties;

(d) a receiving bank which pays out in accordance with the payment instruction contained in an MT 103 STP is entitled to expect reimbursement by the sending bank; and

(e) cancellation of an MT 103 STP can occur but a bank which wishes to cancel, has to send a message requesting the recipient of the MT 103 STP to consider cancellation and, if payment has already been made pursuant to the instruction, to seek the consent of the beneficiary to reverse the payment it has received. There is no unilateral ability, to cancel the payment instruction, once payment has been made. Although, if no payment has been made and no commitment by the receiving bank to pay, there is no reason why the receiving bank should refuse.

The Court went on to examine the market practices and found that they were in line with the aforementioned guiding principles. While it was the general practice to wait for the assurance of available funds in a correspondent bank before acting on a payment instruction, nothing pointed to receiving banks' lack of entitlement to claim reimbursement in situations where payment was made before confirmation of receipt of cover payment. There was also no universal market practice indicating that an MT 103 STP instruction to pay was capable of cancellation following implementation by the receiving bank. In fact, the evidence showed that payments have been continued to be made, and in certain cases especially so if same day value was to be given.

On the facts, the Court found that the MTP 103 STP was an unconditional payment instruction given by the Sending Bank to the Receiving Bank, and that the Receiving Bank could act on these instructions before receiving confirmation of receipt of funds in Corresponding Bank 2. These instructions could not be unilaterally revoked or cancelled since it had already been acted on. Therefore, the Receiving Bank was entitled to reimbursement by the Sending Bank.

Importantly, the Court also highlighted that a receiving bank's entitlement to recover from a beneficiary paid out to pursuant to payment instructions does not in any way change the sending bank's implied promise to reimburse.


A defence in illegality would have defeated the Receiving Bank's claim. However, this was not advanced by the Sending Bank and there was thus no countervailing consideration to defeat the Sending Bank's contractual commitment to reimburse the sums paid out by the Receiving Bank. The Court did encourage all banks to fulfil their obligations in respect of suspected fraud or money laundering, but the possibility of a customer being involved in wrongdoing of this kind which impacts upon the bank's own obligations to other banks is an occupational hazard.


This case is a timely reminder to both sending banks and receiving banks of their respective rights and obligations when communicating via the SWIFT platform. They should also be fully aware of the specificities in SWIFT messages, which might include conditions and other assumed obligations within the payment instructions. While this case was limited to the scope of an MT 103 STP, the larger proposition would be that an implied contractual obligation of reimbursement exists unless market practices and/or the terms of the SWIFT messaging system renders the payment instructions, offer or obligation, conditional in some way.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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