The principle of autonomy of letters of credit is sacrosanct in nature

Abstract

Identifiable judicial guidelines exist to confirm the autonomous character of letters of credit. Unless clear fraud is established in a case, no bank can derogate from this principle. Disputes arising under an underlying contract do not affect the principle of autonomy of letters of credit, nor may a set-off or counterclaim be allowed in order to depart from obligations arising by virtue of issuing a letter of credit. One of the issues in the recent Sirius case was whether an agreement between the parties concerned subsequent to the issuance of the relevant letter of credit can change the terms of the latter. The court answered it in the negative.