Despite significantly fostering international trade in India, letters of credit and the determination of applicable law in cross-border disputes arising from the same have received negligible ...attention from lawmakers. The Indian Supreme Court, too, has failed to use its power to mould the law despite regularly being confronted with disputes on this subject. This paper demystifies India's conflict of law rules on the law governing disputes on letters of credit by examining relevant judicial trends. It highlights rampant references to the lex fori - and explores reasons why it is considered the "proper law" by being the country possessing the closest and most real contractual connection. It anticipates a "ripple effect" prompting parties to evade Indian courts through choice-of-court agreements preferring a foreign forum or to avoid business with Indian traders insisting on such payment mechanisms. Accordingly, it identifies the need for coherent rules and suggests some solutions that Indian lawmakers should consider.
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The article analyses the UCP as a form of non-State law. It demonstrates that in some courts the UCP may inadvertently be applied as the governing law of the agreement instead of as contractual ...terms. The article proceeds to analyse the UCP against article 3 of the Hague Principles on Choice of Law in International Commercial Contracts as well as along a set of criteria, developed by the author, that endeavours to provide certainty in the choice of non-State law. On the basis of the application of the above criteria the article comes to the conclusion that the UCP would be suitable as a choice of governing law of the agreement.
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Abstract
Much has changed in the four decades since
United City Merchants v Royal Bank of Canada
, in which Lord Diplock established the fraud exception in transactions financed by documentary ...credit. In particular, the introduction of the UCP 600, case law on nullity documents and amendment to the American fraud exception justify a reconsideration of both the policy arguments underpinning Lord Diplock's rule and the fate of documents known to be forged or null at the time of presentation. Accordingly, two arguments are made in this paper. First, a consideration of the broader exception in the US should prompt a modern Supreme Court to re-examine his Lordship's insistence that a narrow exception was required to preserve the efficiency of the credit mechanism. In addition, it further argues that banks should be entitled to reject known nullities and forgeries as non-complying. This argument would reinstate the doctrine of strict compliance, which was overlooked in
United City Merchants
, and is based on the clarified definitions in the UCP 600, more recent judicial consideration of nullities and the existence of the ICC's International Maritime Bureau.
LEGAL ASPECT OF LETTERS OF CREDIT Jančíková, Eva; Pásztorová, Janka
Perspectives of Law and Public Administration,
10/2021, Volume:
10, Issue:
Special
Journal Article
Peer reviewed
Open access
Documentary letters of Credit are one of the most important payment methods used to facilitate international trade by mitigation of different risks connected with business partner or his country. ...Letter of credit transactions are relatively complexed and contractual relationship are governed by international rules and national laws. The aim of this scientific study is to identify legal aspects of letters of credit, to describe the relationship between parties of the letter of credit transaction and analysis the basic legal rules and laws governing these transactions. We used mainly classical scientific methods due to its descriptive character. We used the method of structured observation, determining the fundamental principles – the autonomy of letter of credit and the strict compliance, method of specification or concretisation – identification of relationship between parties and abstraction – definition of general and essential information about international rules and national laws of some countries.
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There is an issue that has been neglected by all leading texts on the documentary credits: deficiencies in the Uniform Customs and Practices on Documentary Credits (UCP) provisions regarding ...transport documents. This text will attempt to demonstrate that the UCP600 definition of ‘’clean’’ bill of lading and the effect given to the ‘’said to contain’’ type of clauses involve two controversies: they contravene the corresponding provisions of the legal regime governing carriage of goods by sea and they may also contribute to documentary fraud. The primary objective of this paper is to highlight the potential problems that may arise from the UCP in light of the risk of documentary fraud arising from those discrepancies and will propose solutions of those problems. The paper will conclude by taking a stance regarding the need to regulate fraud in the next revision of the UCP.
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X is a small producer of plastic products from China. Searching on internet for suppliers of plastic raw materials X found Y, a supplier based in the United States, offering these materials at a very ...favourable price. X and Y entered into sale contract under Cost, Insurance, and Freight (CIF) terms. Following CIF terms, payment was to be made by letter of credit. Y shipped the goods in a container and delivered for carriage within the agreed time. Carrier then inserted a ‘’said to contain’’ clause into the bill of lading, and the bank accepted such document. When X opened container it discovered that the goods were in such bad condition that they could not be used in the manufacturing process. X contacted Y, by email, and demanded delivery of substitute goods, which would conform to the contract. Y refused, claiming that the goods were delivered for carriage in good condition. Y could not be reached by telephone, and its address stated on its website was wrong. X had no redress against the Carrier, because the Carrier validly excluded its liability with a ‘’said to contain’’ clause. The Bank was also not liable, because this clause was acceptable under the letter of credit rules. X contacted a lawyer in the United States, and after receiving an estimate of attorney expenses, which would not be recoverable under the U.S. law, X decided to give up the case and bear the loss.
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The main subject of this thesis is the exceptions in documentary credits in English law. The exceptions were established during the development of the documentary credits system to solve drawbacks of ...the payment means caused by its distinctive feature of autonomy. A rationale of the research is the current decline of the market share of documentary credits as a recognized means of settlement in international trade. This thesis aims to explore an appropriate and efficient way to apply certain necessary exceptions in documentary credits system. And hopefully, the current high rate of the rejection of the documents by banks by relying on the strict compliance principle can be decreased by the improving of the application of exceptions in documentary credits. The research centres primary the application of the exceptions in English law. An early study of the original development of the fraud exception will cover both English and American authorities. Because there is no statute law in English law to regulate the exceptions in documentary credits, the thesis will analyse the exceptions mostly through the case law. The main exceptions analysed in the thesis are the fraud rule, the illegality exception and the nullity exception. The application pattern for the three exceptions will be worked out respectively; the specific application of the injunction rules in applying the fraud rule will be concluded during the analysis of the fraud rule; some common features in the application among the exceptions will also be summarized in the thesis. An effort is made to suggest a prospective development of exceptions, which is in consistent with the autonomy principle. And as the necessary exceptions are applied efficiently, the disputes existing in documentary credits system currently may be settled without the appliance of any explanatory rules.
In international trade one of the most important issues is the adoption of legal instruments that provide adequate security and guarantee to the parties that the agreements executed by them are to be ...fulfilled. Letters of credit are considered to be the instruments that achieve such purpose. This article goes through the most important characteristics and issues regarding the implementation of letters of credits into international trade agreements, both from the legislative and judiciary point of view as it has been dealt with by the most important legal doctrine.
En el comercio internacional uno de los temas de mayor importancia para los agentes del mercado es la incorporación de mecanismos contractuales que les blinden de seguridad y garantía suficientes de que su contraparte cumplirá lo prometido. Las cartas de crédito contribuyen a ese propósito. Al crearse como mecanismos que confieren a ambas partes un alto grado de seguridad de que las condiciones pactadas en el contrato internacional, especialmente el de compraventa, serán cumplidas por cada una de las partes, todo, gracias a la participación o intermediación de una institución financiera, se constituyen en instrumentos necesarios para el normal desarrollo del comercio internacional. El presente texto estudia, a manera de introducción, el crédito documentario valiéndose de la abundante doctrina y jurisprudencia que en la materia se ha generado en el ámbito local e internacional alrededor de la figura.
Čitajući vodeće tekstove o dokumentarnom akreditivu, uočljivo je da bez izuzetka svi ti
tekstovi zanemaruju neke bitne činjenice koje se odnose na prijevozne isprave, kao što je
činjenica da čista ...teretnica u dokumentarnom akreditivu ima drugačije značenje od onog
u ugovoru o prijevozu. Većina tekstova jednostavno ne spominje ovu činjenicu, kao da ne
postoji. Profesor Adodo u svojoj nedavno objavljenoj knjizi o dokumentarnom akreditivu
ide korak dalje, pa u želji da objasni izostavljanje iz svog teksta opširnije obrade prijevoznih
isprava tvrdi da prijevozne isprave nisu izazivale posebne probleme u nekoliko
zadnjih desetljeća, te da banke nemaju posebne potrebe za novijim informacijama na ovu
temu (ebenezer adodo, letters of credit: the law and practice of compliance,
oxford university press, 2014₎. Ova tvrdnja je u sukobu s činjenicom da se većina problema
vezanih uz neusklađenost dokumenata s uvjetima dokumentarnog akreditiva odnosi
upravo na prijevozne isprave, te da je u praksi čest slučaj da su prijevozne isprave bile u
centru prijevara u dokumentarnom akreditivu. Jedan od ciljeva ovog teksta je da skrene
pažnju na ovaj u literaturi posve zanemareni problem.
Za razliku od praktično cjelokupne literature iz ovog područja koja se pitanjem dokumentarne
prijevare bavi ‘’ex post’’, nakon što je do prijevare već došlo, te se bavi pitanjem
odgovornosti za prijevaru, ovaj tekst zauzima suprotan položaj, ‘’ex ante’’, fokusirajući se
na pitanje sprječavanja prijevare, te ukazujući na potrebu izmjene nekih odredbi Jednoobraznih
pravila i običaja za dokumentarne akreditive. Naime, neke od tih odredbi, koje su
predmet obrade u ovom tekstu, otvaraju mogućnost za beskrupulozne učesnike međunarodne
trgovine da počine prijevaru na relativno jednostavan način.
Najvažniji cilj ovog teksta je da popuni prazninu u postojećoj literaturi, te da ukaže na
probleme koji postoje u sadašnjem tekstu Jednoobraznih pravila i običaja za dokumentarne
akreditive, a u cilju prevazilaženja tih problema u narednoj reviziji Jednoobraznih
pravila, koja se može očekivati u skoroj budućnosti.
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Postoji jedan problem kojeg su svi vodeći tekstovi o dokumentarnom akreditivu propustili
obraditi: manjkavosti u odredbama Jednoobraznih pravila i običaja za dokumentarne akreditive
koje se odnose na ...prijevozne isprave. Ovaj tekst pokušava pokazati da odredbe Jednoobraznih
pravila iz 2007. godine (UCP600) koje se odnose na definiciju čiste teretnice i pravni
učinak klauzula tipa ‘’said to contain’’ sadrže ozbiljne manjkavosti: obje ove odredbe su
suprotne odgovarajućim pravilima koja se primjenjuju u prijevozu tereta morem, a osim toga
mogu biti zloupotrijebljene u cilju dokumentarne prijevare. Glavna svrha teksta je da ukaže
na postojeće probleme koji mogu proizaći iz navedenih odredbi teksta Jednoobraznih pravila,
kao i da predloži rješenja tih problema. U završnom dijelu autor iznosi svoj stav o tome da li
bi dokumentarna prijevara trebala biti regulirana u narednoj reviziji Jednoobraznih pravila.
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