Abstract
Even though the letter of credit was invented from a long time ago, however, its legal personalities are very new to the Vietnam Legal Framework. The International Chamber of Commerce (``ICC'') has issued principles for the documentary credit which is the Uniform of Customs and Practice (``UCP'') since 1933 and kept updating it until now, the latest version of UCP is UCP 600 which is presented in 2007. However, the UCP has not systematized many aspects of documentary credit yet and ICC considered those problems as subjects of domestic regulations. The diversification in different national laws leads to confusion thus causing many problems to merchants in international trade. Some countries do not have specified codifications to regulate the letter of credit so these countries treat UCP as ``quasi-law'' while other countries have their own legal framework for letter of credit law and even have fraud rules included. It is quite interesting that the United States which is a common law country is the first country to embody the operation of letter of credit in the Uniform of Commercial Code (``UCC'') and regulates the fraud rule within the same Code. This paper will try to explain and compare the principle of independence in the UCP and UCC, clarify the definition and regulations of fraud rule in UCC and evaluate the legal regulations of Vietnam law for the independence principle in a letter of credit.
Highlights
International business always have higher risks than domestic business
The documentary credit has gone a long way until its beginning and still keeps its commercial utility created by merchants
The fraud rule is lowering the financial benefits of the letter of credit and applicants of letter of credit should protect themselves from the fraudsters [ 7, p. 418]
Summary
International business always have higher risks than domestic business. Most of the merchants doing trade in the international market does not have specified information about their trading partners and as a results, it is very risky for seller to ship the goods before receiving money or the buyer might face the possibility of losing money if he pays before the goods land the arriving port, the seller will not send the products. The Task Force had reviewed the case law, new customs and practice as well as disclose the new technologies being used in the international trade Vietnam National Assembly had issued some legal documents about payment in international trade and the domestic letter of credit law, the independence principle was not mentioned in the previous regulations, as well as the fraud rule. The Decision must contain the substantive and procedural matters of the law which is the fraud standards, those who can be immune from the fraud rule, those who can bring case to the court for applying the fraud exception and other detailed court procedure
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