Documentary Letters Of Credit Research Articles

Načelo nezavisnosti i prevara u poslovima dokumentarnog akreditiva i samostalne bankarske garancije

This paper analyzes the independence principle and the impact of fraud on the obligation to pay letter of credit or guarantee amount in documentary letter of credit and independent bank guarantee. The independence principle implies that participants in legal relations base their rights and obligations only on facts of the relations in which they find themselves in. The most important exception to independence principle is fraudulent claim for collection. First of all, rules of the ICC and UNCITRAL were discussed. It is necessary to start from rules of these organizations because they adopted the most important autonomous sources of law for these transactions. Then, rules of American and German law are analyzed with the aim of determining the necessary standard of fraud in these legal systems, since this issue is not regulated in detail in Serbian law. Therefore, it is necessary to consider comparative solutions. In the last part, fraud is discussed from Serbian law point of view. In Serbian law, the most important mechanism for protection against fraud are court interim measures which prohibit payment of the letter of credit, i.e. the guarantee amount.

Standby akreditiv kao sredstvo obezbeđenja u međunarodnim ugovornim odnosima

The subject of this paper is a type of letter of credit that is not commonly encountered in the practices of domestic banks. It is not specifically regulated by domestic legislation; however, its significance is expected to grow in the international business relations of our businessmen with companies from other countries where the use of this payment security instrument is common in the banking industry. This type of letter of credit is theoretically of disputed legal nature, raising questions about whether it qualifies as a letter of credit, a type of guarantee, or a distinct legal institute. The focus of the research is on the standby letter of credit as a security measure in international contractual relations, particularly in sales and construction contracts. In sales contracts, the standby letter of credit serves to secure the interests of the seller, while in construction contracts, it can secure interests of both the client the contractor, depending on the party for whose benefit it was issued. The paper aims to define the standby letter of credit, explain its role in protecting the rights and interests of contracting parties, and explore its legal nature. In particular, we will conduct a comparative analysis between this legal institute and a 'classic' documentary letter of credit and a bank guarantee. In our legal theory, and to a greater extent in American and English legal theory, there are numerous works that deal with the topic of standby letters of credit. However, the legal regulations related to banking operations have changed over time, which requires a fresh perspective. The goal of this work is to familiarize our companies and banks engaged in transactions with foreign entities, where the issuance of this type of letter of credit is customary, with the role of a standby letter of credit as an instrument for ensuring contractual obligations. In addition to that, the paper aims to explore the legal relationships established with this type of letter of credit.

STRICT CONFORMITY OF DOCUMENTS UNDER A PERFORMANCE GUARANTEE. DOES A SIGNED COPY OF A DOCUMENT QUALIFY AS AN ORIGINAL? Stefanutti & Bressan (Pty) Ltd v Nedbank Ltd (unreported judgment delivered on 30 July 2008) (case no 5311/2008) (D&CLD)

Unlike in many overseas jurisdictions, there is a paucity of South African reported case law dealing with certain instruments of payment and guarantees for payment such as documentary letters of credit and performance guarantees, to mention but two examples of instruments prevalent in the field of payment and financing. For this reason any new case law dealing with either letters of credit or performance guarantees is to be welcomed as it would hopefully not only contribute to our understanding of this area of the law, but also provide an opportunity for comment and reflection. This holds especially true since the International Chamber of Commerce has recently (in July 2007) accepted and introduced a new version of the Uniform Customs and Practices for Documentary Credits (hereinafter “the UCP”): UCP 600. In passing: Apart from the main distinction between direct (three-party) and indirect (four-party) demand guarantees, they (ie, demand guarantees) may also be classified by reference to the phase or part of performance theyare designed to secure, hence the following classification of the different types of demand guarantees: tender guarantee (tender bond); performance guarantee (performance bond); advance payment guarantee (repayment guarantee); retention guarantee; and maintenance guarantee (warranty guarantee). In what follows below the author will use the concept of “guarantee”, being a genericterm, when referring to demand and/or performance guarantees in general. The recent decision in Stefanutti & Bressan (Pty) Ltd v Nedbank Ltd (unreported judgment delivered on 30 July 2008 (case no 5311/2008) by the Durban & Coast Local Division of the High Court (now: KwaZulu-Natal High Court, Durban) is a rare and welcome addition to the rather modest collection of South African decisions dealing with performance guarantees.

Important Aspects Related To Foreign Exchange Operations Of Commercial Banks

This article provides analytical, critical and econometric analysis of the factors influencing the off-balance sheet operations of commercial banks of the Republic of Uzbekistan. Factors influencing documentary letters of credit, currency forward transactions, bank guarantee-related transactions, currency spot, currency futures and options from off-balance sheet operations, which are highly profitable for commercial banks, were studied.

Pravni položaj korespondentne banke u akreditivnom poslu

Considering that the documentary letter of credit is the most frequently used instrument of free foreign currency payments, as well as that the correspondent bank is an almost indispensable participant in the international letter of credit transaction, this paper is dedicated to analysing its position. The correspondent bank may take on the role of advising a letter of credit to a beneficiary, honour presented documents, or add its confirmation to a letter of credit. Depending on whether it appears as an advising, nominated or confirming bank, its rights, obligations, and responsibilities will be determined. This paper discusses the legal position of the correspondent bank depending on the role it plays, but also the liability of the issuing bank for the damage that the correspondent bank causes to the beneficiary by its actions.

PROBLEMS OF TRADE FINANCING DEVELOPMENT IN THE RUSSIAN FEDERATION

From the standpoint of enterprises, searching for the minimum-risk methods and ways of organizing settlements in foreign trade is always a topical problem. The research study identifies the problems of trade finance in the Russian Federation (RF) after the sanctions have been imposed. The key features of trade finance management are formulated. The influence of economic sanctions on trade financing mechanisms is analyzed. Some mechanisms are considered for using a documentary letter of credit, one of the most popular trade financial instruments in international settlements today. Measures for eliminating the factors restraining the growing use of trade finance instruments and the possibility of their implementation under the conditions of current economic sanctions are grounded. System analysis methods and techniques, analogy methods, expert assessments and projection methods are used as part of this research study.

Mitigating the Risk of Documentary Discrepancy in Process of Estonian Export Letters of Credit Transaction

Abstract The main subject of this paper is to study relations between metrics which affects payment risk under documentary letters of credit (DLC) from the exporters perspective in Estonia. This will result in reducing the risk of documentary discrepancy in presentation of documents to banks, decrease relevant costs to rectification of discrepancies which are nothing but a loss to exporter and improving the flow of international trade. For this purpose, the author takes an empirical approach in his strive to find answer to following questions: What are different types of discrepancy in Estonian export landscape? How relevant are deferent attributes of the DLC to attributes types of discrepancy? What measures should be in place to prevent risk of documentary discrepancy in DLC operation? (In Estonian export trade).

Fraud in documentary letters of credit: A comparative study of excising international legal frameworks

Documentary letters of credit are among most popular trade finance instruments used in international business. Despite the fact that main purpose derived from application of documentary letters of credit is to reduce the risk of trade, their mere documentary nature makes them vulnerable to the problem fraud. There is a huge interest among legal scholars and academicians to analyse the nature of fraud in documentary letters of credit due to its important financial effect on smooth process of international trade and also diversified approach of different legal systems to this particular problem. However, majority of conducted studies are limited to most popular legal systems including British and American law. Need for studying the LC fraud in a comprehensive comparative manner among existing international legal frameworks is well noticed for long time. Due to their international nature, LC operation is subjected to substantial number of legal frameworks which most of them are either taking a silent position towards problem of fraud or do not show uniform approach to the it. In this paper, author tries to study di$erent sources of law in documentary letters of credit and their approach to the problem of fraud in a comparative manner. The main research question is what would be the position of fraud rule in applicable legal frameworks to the international LC operation and how do they approach the problem of fraud committed by beneficiary in documentary letters of credit? For this purpose, paper is divided into four main parts: After the introduction, second part will discuss the sources of law applicable to international LC transaction. Third section will analyse the legal nature of fraud in LC transaction. Fourth section will scrutinize the legal approach of different legal frameworks to fraud in documentary letters of credit and finally, the last section will sum up the discussion with concluding remarks.

Limits of Autonomy Principle in Documentary Letters of Credit; Perspective of English Law

Abstract In this article, the author reviews the approach of English courts to limits of autonomy principle and tries to answer the following research questions: What obligations should the applicant fulfil while opening a credit in accordance with the underlying contract? What are the seller’s remedies when the buyer fails to perform his duties regarding opining and performance of the credit? On the other hand, what are the seller’s duties in the process of opening the credit and what will be the buyer’s remedy in case of his failure? What is the legal position regarding variation of the credit? What is the position of court regarding absolute or conditional nature of the credit? In order to answer the above research questions, paper is divided into seven parts: after the introductory comments, the second part will review the nature of the buyer’s obligation in opening the credit. The third part is focused on effect of non-compliance by the buyer and the fourth part studies the variation of the credit and its effect on party’s rights within the underlying contract. Part five deals with the buyer’s rights after opening the credit while part six will discuss the absolute or conditional nature of the payment obligation to pay under the LC. Last but not the least, the final part will provide some concluding remarks.

LEGAL NATURE OF THE INTERNATIONAL DOCUMENTARY LETTER OF CREDIT

This author has analysed payments by the letter of credit widely used in international trade, when the buyer of goods (importer) writes an order to his bank to transfer funds to the seller (exporter) specified in the letter of credit and in compliance with the terms of the letter. The further development of international trade created a basis for the evolvement of financial and trade letters of credit and shaped them into a secure financial tool of a documentary letter of credit. The term “documentary” has settled in practice as a part of the whole letter of credit process.

Risk Analysis in Documentary Letter of Credit Operation

Abstract Documentary Letters of Credit are among most popular methods of payment used in international trade. They function as an irrevocable promise of issuing a bank to pay instead of an applicant buyer to a beneficiary seller under the condition that the beneficiary presents complying documents with terms and conditions of the credit to the bank. One of the reasons for the popularity of the LCs in international trade is shifting the payment risk from an individual buyer to a bank with a much stronger financial standing. However, LC operation in international trade is not free of risk. Despite the fact that two main principles of the Documentary Letter of Credit’s Operation (Principle of independence and principle of strict compliance) facilitate the process of international trade significantly, but still all parties involved in LC operation are supposed to be cautious about the existing risks relevant to their role in LC operation. Current paper tries to use legal principles of documentary credits and risk management theory in order to define existing risks to each party (beneficiary, applicant and bank) in international LC transaction and find an answer to the question of what are exposing risks for involved parties? For this purpose, the paper starts with an explanation of the two main principles of LC operation and moves forward with using the risk management theory to explain existing risks for each party in detail.

Instrumenti Međunarodnog Platnog Prometa - Bankarske Garancije/ Instruments of Payment - Bank Guarantees

Rezime U izvršenju spoljnotrgovinskih plaćanja postoje mogućnosti upotrebe širokog spektra instrumenata. Svaki od njih ima svoje specifičnosti na koje ćemo ukazati. Ubjedljivo najviše korišćeni instrument međunarodnih plaćanja je dokumentarni akreditiv. Pored akreditiva i „tradicionalniih“ instrumenata plaćanja - čeka i mjenice, u spoljnotrgovinskom poslu postoji i mogućnost plaćanja bankarskim doznakama, što se uglavnom koristi za avansna plaćanja (plaćanja unaprijed, pre prijema robe), što nosi određene rizike za kupca. Postoji i mogućnosti dokumentarne naplate - tzv. dokumentarni inkaso. Kod tog instrumenta je obnut red poteza od doznačavanja sredstava unaprijed. To nosi rizik za prodavca koji šalje robu unaprijred, a posebno šalje dokumenta na naplatu, a ona se naplate kada se kupac saglasi. Instrumenti platnog prometa su predmet ovog rada.

THE BANK PAYMENT OBLIGATION

In clause the attention of essence and is paid to features ВРО, as tool of interbank calculations applied with recent times in sphere of international trade. The author, com-paring the bank payment obligation with the documen-tary letter of credit, allocates its advantages and brings to a focus to lacks on the basis of what does conclusions concerning a scope and economic expediency of the new tool.

GENEL OLARAK KEFALET SÖZLEŞMESİ, GEÇERLİLİĞİ VE TÜRLERİ

The term in general, covers all contracts according to which a person takes over a risk faced by another person. A risk is the possibility of an event which is economically detrimental to occur. Some of the guaranty contracts include the obligation to place a pledge upon a movable, an immovable, a credit or an enterprise and thus provide the creditor with a guaranty in kind. When they are fulfilled (implemented) by a delivery, by registration, by transfer of claims or endorsement of pledge, the creditor acquires a real right and the creditor will be able to collect the debt with priority from certain property belonging to the debtor or to a third person. In contracts of personal guaranty, the personal guarantor will be liable with all his distrainable patrimony. Principal kinds of such contracts are cautionment, contract of guaranty, joint debt, insurance contract, documentary letter of credit and order of credit whose legal character is controversial.

A REVIEW OF THE DECISION OF THE SUPREME COURT OF APPEAL Coface South Africa Insurance Co Ltd v East London Own Haven t/a Own Haven Housing Association 2014 (2) SA 382 (SCA)

Conventionally in construction projects, the construction contractor (principal debtor) appointed by the developer (employer) to construct the project works, will be required to procure security in favour of the developer for the proper performance of its obligations under the (underlying) construction contract. The security so procured is inter alia in the form of a construction guarantee issued by a financial institution (usually a bank or an insurance company) in favour of the developer, at the behest of the construction contractor. Generally, the guarantee can either be what is called “a conditional guarantee”, also known as a “suretyship guarantee”, in which case the guarantee will constitute an accessory obligation to the underlying construction contract – wherein the developer would be required to at least allege and, depending on the terms of the guarantee, sometimes also establish liability on the part of the contractor. Alternatively, the guarantee could be what is called an “ondemand” guarantee, in which case the guarantee will constitute a primary (independent) obligation, wherein no allegation of liability on the part of the contractor under the construction contract is required. Where a guarantee constitutes an on-demand guarantee all that is required for payment is a (written) demand by the claimant, stated to be on the basis of the event specified in the guarantee. The nature of this type of guarantee is such that it is not concerned with disputes arising out of the underlying contract and it is only in cases where there is clear fraud on the part of the beneficiary, where the demand will not be honoured. This is as a result of the principle of autonomyoriginally developed in the context of documentary letters of credit but later applied to other types of payment undertakings such as demand guarantees. The autonomy of demand guarantees (and letters of credit), which hasbeen said to be their essential characteristic, has long been accepted and has long been affirmed in a plethora of cases both locally and abroad. In Coface South Africa Insurance Co Ltd v East London Own Haven t/a Own Haven Housing Association (2014 (2) SA 382 (SCA)), the South African Supreme Court of Appeal overturned its previous decision in Dormell Properties 282 CC v Renasa Insurance Co Ltd (NNO 2011 (1) SA 70 (SCA)) and restated the independence of demand guarantees from underlying contracts. Dormell indicated a divergence from the established autonomy principle. In Dormell Bertelsmann AJA, writing for the majority, seemingly reaffirming the autonomy of the demand guarantee in question, then had regard to an arbitration award and held that the beneficiary (Dormell) had lost the right to enforce the guarantee. In Coface the SCA held that the decision of the majority in Dormell was clearly wrong and should not be followed. This paper considers the unanimous SCA decision and submits that the decision cannot be faulted and should be welcomed. The case is divided into seven sections. Section 2 provides an overview of the facts of the case, section three discusses the application before the High Court, section four discusses the second application before the High Court, section five considers the Dormell decision, section six discusses the case before the SCA. Section seven evaluates the SCA’s (unanimous) decision. The conclusion submits that the unanimous decision is arguably the SCA’s most important in the subject since its landmark decision in Lombard Insurance Insurance Co Ltd v Landmark Holdings (Pty) Ltd and should be welcomed.

Documentary letter of credit fraud under criminal law regime in England and China

Purpose– The purpose of this paper mainly is to examine the relevant rules concerning documentary letter of credit (L/C) fraud under criminal law in England and China.Design/methodology/approach– The paper analyses the regulations about such crime and relevant literature.Findings– The similarities and differences of such rules have been identified briefly. L/C fraud is considered a conduct crime; and unspecific or vague provisions concerning this crime may cause difficulties of application in judicial practice in both England and China. But the possible punishment for L/C fraud criminals under Chinese criminal law seems more severe than that under English law. Dealing with L/C fraud in international trade under national criminal laws is not effective. Regional and international efforts on legal assistance in cross-border criminal cases still remain to be improved.Research limitations/implications– The limitation is that it examines merely relevant substantial rules in legislation. This opens the paths to future research on the approach towards L/C fraud demonstrated in court cases in England and in China.Social implications– The research underlies the need to take serious attitude and make more effective efforts towards cross-border criminal cases, although different countries may have different rules concerning specific economic crimes.Originality/value– This paper fills the gap of a comparative study on how L/C is regulated under criminal law regime in England and China.

The Role of Documentary Letters of Credit in International Sale Contract

International sale contract encompasses in itself several contracts, for example letter of credit contract (LOC). It is entered between the purchaser and the issuing bank. International trade law governing LOC is Uniform Customs and Practice for Documentary Credits (UCP600) that are widely accepted around the world. Although, LOC contract is a component of sales contract, yet it is independent from the latter where the bank’s focal point is on the documents.

Documentary letters of credit and electronic banking

One of the most reliable methods of payment in international trade is payment by documentary credit. Its main function is to ensure that payment is made by a neutral bank on the order of the buyer, so the seller has a solid bank guarantee for his obligation. Besides its payment function, the function of lending is also important, because payment is usually made on a deferred period. Important characteristics of documentary letters of credit are speed and reliability of transaction execution for all participants in the contracting business. By learning about the basic characteristics of letters of credit, readers will become familiar with the specifics of this payment method. Today's business requires a great analysis and selection of the most effective ways of doing business at the lowest cost and the increasing use of electronic business, which saves up to 40 % of the cost of carrying out certain transactions. This paper wants to point out all the benefits to business through documentary letters of credit, on the one hand, and savings caused by the use of electronic transmission of data, on the other.

An Analysis on the Formality of refusal in Documentary Letter of Credit

An Analysis on the Formality of refusal in Documentary Letter of Credit

THE TWO IMPORTANT DOCTRINES UNDERLYING DOCUMENTARY LETTERS OF CREDIT AND THE FRAUD EXCEPTION

Documentary letters of credit are important tools in relation to international trade. The parties who make use of these instruments usually come from different countries and usually have different views on trade and customs. The parties generally do not know each other personally and have opposite interests in relation to the contract of sale. There is a sense of distrust towards each other, as both parties have serious concerns as to the other’s performance in terms of the contract. While the purchaser has a fear of receiving goods of an incorrect quantity or quality, or not receiving goods at all, the seller fears non-payment, or that the buyer refuses to accept the goods on a mere technicality. Coupled with the abovementioned is the fact that legal recourse will be expensive and may be complex taking jurisdiction into consideration. A documentary letter of credit eases some of these fears due to the unique doctrines which form the foundation of this instrument, and these will be discussed at length. The most frequently encountered exception to documentary letters of credit not being fulfilled is that of fraud, which will also be discussed at length.