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Industrial and Commercial Bank of China (ICBC) has denied liability for US$147.4mn in trade finance losses allegedly suffered by ING, but has lost a preliminary bid to shift the court dispute from Hong Kong to mainland China.

ING last year sued ICBC, the world’s largest bank by assets, for allegedly releasing ownership documents to since-collapsed Chinese copper trader Maike Metals International Ltd without collecting the payments on behalf of ING.

The Dutch lender claims that in doing so, ICBC destroyed its security for export financing it had extended to Triway International Ltd, a Maike subsidiary, according to a recent Hong Kong court judgment.

Triway sold 30 shipments of copper worth US$171mn to its parent between June and August 2022, on a documents against payment basis.

The trades took place just weeks before Maike’s chairperson He Jinbi revealed the company was in a “liquidity crisis”, and the company filed for bankruptcy in late 2023.

The Hong Kong High Court judgment, handed down on August 23, deals primarily with an application by ICBC to have the case stayed in favour of a mainland Chinese court. But it also provides an insight for the first time into ICBC’s defence against ING’s suit.

Maike was ICBC’s customer and the Chinese lender acted as the collection bank in the transaction, while ING banked Triway and was the remitting bank. ICBC claims it received direct instructions from Triway, as principal, to release the documents to Maike without payment.

ICBC  claims there was a “common practice” of releasing documents without collecting payments, of which it says ING was aware. ING denies the practice existed.

ICBC further contends ING’s loss “was not reasonably foreseeable” and in any case was not caused by its delivery of the documents without payment.

The bank also argues that it is not the proper defendant in this case and ING does not have legal basis to sue.

The judgment says the transactions were governed by the International Chamber of Commerce’s Uniform Rules for Collections (URC). ING claims the rules forbade ICBC from releasing the documents to Maike without first receiving payment.

When ING did not receive payment in August 2022, it asked ICBC to confirm if the bank still held the documents, the judgment shows. ICBC responded that it had been told by Triway that no payments were required, and asked ING to confirm “if we can deliver documents… free of payment” even though it had already done so.

ICBC did not answer further requests from ING to confirm it still held the documents, according to the judgment, and only admitted to releasing them without collecting payment after ING filed its lawsuit last year.

Although noting that he was not required to “adjudicate on the defences” at this stage of proceedings, Judge Anthony Chan noted that “ICBC’s release of the documents to Maike without payment was quite contrary to the express terms of the collection instructions”.

The court dismissed ICBC’s application to have the proceedings stayed in favour of China.

It sided with ING’s argument that because the parties agreed to use the URC, a mainland court is no better placed to hear the dispute than one in Hong Kong.

ING also argued that adjudicating the dispute in Hong Kong would provide assurance that the URC “would be fully effected”, whereas if the case was heard in China “there is a real risk that the URC would not be applied in full force in accordance with international trade law and practice”.

The court also found that there was sufficient connection to Hong Kong in the case, and there was no evidence of any serious practical hurdles to holding a trial in the city, versus China.

“The dispute between ING and ICBC is the bread-and-butter type of work carried out by the Hong Kong commercial court,” the judgment says.

ING declined to comment due to the ongoing proceedings. ICBC could not be reached for comment and King Wood & Mallesons, the law firm representing the bank, did not respond to a request for comment.

Before its collapse last year, Maike was reportedly one of China’s biggest copper importers. He, the chairman, went “missing” in October and was presumed to have been detained by police, Bloomberg reported at the time.

Several international banks have been stung by losses from lending to China’s vast but opaque metals sector. The industry has seen a slew high-profile suspected warehouse frauds in aluminium, copper and nickel over the last decade, hitting lenders including ANZ, Citi and Deutsche Bank.