The Fraud Rules in the Letter of Credit under Jordanian Legal System

Emad Mohammad Al Amaren,Mohd Zakhiri Bin Md Nor,Che Thalbi Bt Md Ismail

doi:10.28946/slrev.vol5.iss2.1058.pp218-235

Emad Mohammad Al Amaren, Mohd Zakhiri Bin Md Nor + Show 1 more

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https://doi.org/10.28946/slrev.vol5.iss2.1058.pp218-235

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Abstract

Letter of credit (L/C) has a massive role in expanding international trade operations. It is considered the most secure and stable banking service to finance foreign trade operations such as import and export. As an international contract, potential legal issues arise due to fraud practices. In this case, L/C users have to be aware of different approaches followed by domestic courts while dealing with fraud at the international level. This paper aims to identify the fraud means under the fraud rule governing L/C and its impact on Jordan's practice. By applying a qualitative and doctrinal legal approach, this paper analyses the lack of organization of the uniform customs and practice for the letter of credit (UCP No. 600). It also examines, via interviews with Jordanian judges, the perceptions of the Jordanian courts' policy regarding the fraud rule exception in L/C. The finding reveals that to protect the interests of all parties in a letter of credit transaction, Jordanian courts should extend the scope of fraud to cover sale contracts fraud in cases where bona fide holder is involved and when a confirming bank is absent, or when the credit amount has not been paid yet by the issuing bank. In respect of the bank practices, such special provisions implemented to commercial code must be issued due to the lack of legal provisions of the L/C in Jordan legislation.

Highlights

IntroductionIt is considered the most secure and stable banking service to fiCourts; Jordanian Legal nance foreign trade operations such as import and export
According to the custom established by the Jordanian judiciary, the fraud exception means an exception in which Jordanian banks have the opportunity to refuse to honour the payment to the beneficiary based on a court order issued by a competent court, and that when clear
Material evidence of fraud is established in documents or the underlying sale contract, whether this fraudulent act is committed by the beneficiary or by others under his knowledge

Summary

Introduction

It is considered the most secure and stable banking service to fiCourts; Jordanian Legal nance foreign trade operations such as import and export. Contract, potential legal issues arise due to fraud practices. In this case, L/C users have to be aware of different approaches followed by domestic courts. The perceptions of the Jordanian courts' policy regarding the fraud rule exception in L/C. 1058pp[218-235] holder is involved and when a confirming bank is absent, or when the credit amount has not been paid yet by the issuing bank. In respect of the bank practices, such special provisions implemented to commercial code must be issued due to the lack of legal provisions of the L/C in Jordan legislation. Fraud is considered a controversial and confusing area as it touches the heart of the L/C and forces the bank to look for the facts other than a complying presentation by the beneficiary to withhold

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