Abstract
In international trade where the buyer and the seller do not have information about each other, letter of credit is used to assure the other parties' fears in the sale contract. For instance, the sellers are afraid of not being paid after sending the goods bought by the purchasers, meanwhile, the buyers have no reasonable grounds to believe the sellers will send the conforming goods under the requirements of the sale contracts. The letter of credit is a settlement between parties to reduce the risks and inserts security into the international sale of goods. However, there are fraudsters who tries to defraud the process of the letter of credit and fraud rule is expected to prevent this issue. There are countries tried to develop specific regulations for the letter of credit and fraud rule, one of those countries is the People's Republic of China (P.R.C). The practices of letter of credit in China had been an aiming point of critiques through years by letter of credit experts. In such wise, the Supreme People's Court of P.R.C has issued the Rules of the Supreme People's Court Concerning Several Issues in Hearing Letter of Credit Case (``the 2005 Rules'') in an effort to partly solve the problems. This paper will give a brief introduction about the letter of credit's operation, the law regulating the letter of credit in international trade as well as illustrate the specify law for the fraud rule in letter of credit law in P.R.C by emphasizing the history and summarizing the structure of the fraud rule. Thenceforward, the author will evaluate the case study in Vietnam to show the situation of Vietnam in these days and giving recommendations.
Highlights
The documentary credit is adopted universally in the global trade
This paper will give a brief introduction about the letter of credit's operation, the law regulating the letter of credit in international trade as well as illustrate the specify law for the fraud rule in letter of credit law in P.R.C by emphasizing the history and summarizing the structure of the fraud rule
The author will explain the regulation of letter of credit and the fraud rule in P.R.C, and last part, the author will consider the situation in Vietnam by giving the opinion about Case Law
Summary
The documentary credit is adopted universally in the global trade. The rationale of the letter of credit is to assure with the seller that they will get the payment in the sales contract for presenting the complying documents belonging to the requirements of the letter of credit. At the recommendation in the Case Law No 13/2017/AL, the Supreme People’s Court of Vietnam notices the courts must realize the independence between the letter of credit and the sale transaction and even the underlying contract is invalid, the payment responsibility of the bank must be continued. Other action should be defined in this Judicial Interpretation is what conducts will be taken once the fraud is involved to the transaction, which should be either 1) the bank should dishonor the documents or 2) the applicant or the bank should bring a court action to prevent payment This part will be spelling out the procedural matters of the law when courts receive the allegations and issue the remedies as a consequence of fraud in the letter of credit. Legal experts and legislators need to consult the international sources for the regulations of national letter of credit law in case of conflicting of law
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