- •Table of Cases
- •Table of Statutes
- •Table of Statutory Instruments
- •Table of European Legislations
- •Table of Statutes and Other Instruments
- •Table of Abbreviations
- •Preface
- •Introduction
- •Overview
- •1 Standard Trade Terms
- •Introduction
- •Ex works
- •CIF contracts
- •CIF contracts under INCOTERMS 2010
- •C&F contracts
- •C&F and INCOTERMS
- •FOB contracts
- •Variants of an FOB contract
- •FAS contracts
- •Conclusion
- •Further reading
- •2 The Vienna Convention on the International Sale of Goods 1980
- •Introduction
- •The Vienna Convention
- •Conclusion: Recent international initiatives
- •Further reading
- •Overview
- •Introduction
- •Policy considerations, e-commerce and international regulatory measures
- •Electronic data interchange (EDI) and interchange agreements
- •UNCITRAL model law on e-commerce
- •Other international initiatives – the International Chamber of Commerce
- •The EU directive on e-commerce
- •The United Nations Convention on the use of electronic communications in international contracts
- •Conclusion
- •Further reading
- •Introduction
- •Electronic signatures and UNCITRAL
- •The EU directive on electronic signatures and the UK legislation: Electronic Communications Act 2000 and the Electronic Signatures Regulation 2002
- •Electronic medium and computer misuse
- •Conclusion: a bright future for e-commerce?
- •Further reading
- •Overview
- •Introduction
- •Types of charterparties
- •Common law implied obligations in a voyage charterparty
- •Common law immunities
- •Usual express terms
- •Conclusion
- •Further reading
- •6 Bills of Lading
- •Introduction
- •Nature of a bill of lading
- •Rights and liabilities of consignee/endorsee
- •The Carriage of Goods by Sea Act 1992
- •Bills of lading and fraud
- •Electronic data interchange (EDI) and the Carriage of Goods by Sea Act 1992
- •Conclusion
- •Further reading
- •7 Bills of Lading and Common Law
- •Introduction
- •Implied obligations on the part of the shipowner
- •Implied obligations on the part of the shipper
- •Common law exceptions
- •Contractual exceptions
- •Other terms in bills of lading
- •Conclusion
- •Further reading
- •Introduction
- •Limitation of liability
- •Scope of application
- •Contracting out
- •The future
- •Further reading
- •9 The Hamburg Rules and the Rotterdam Rules
- •Introduction
- •The Hamburg Rules
- •Scope of application
- •The Rotterdam Rules (The UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea)
- •Conclusion
- •Further reading
- •10 International Carriage of Goods by Air
- •Introduction
- •The Warsaw system
- •Approach to interpretation of the Warsaw Convention in the English courts
- •Scope of application of the Warsaw Convention (unamended and amended versions)
- •Contracting out
- •Documentary responsibilities
- •Air waybill and negotiability
- •Electronic data interchange (EDI) and the Warsaw regime
- •Carrier liability
- •Proceedings
- •The Montreal Convention
- •Further reading
- •11 International Carriage of Goods by Rail
- •Introduction
- •Interpretation of the CIM
- •Scope of application
- •Documentary responsibilities
- •Electronic data interchange (EDI) and the CIM rules
- •Contracting out
- •Proceedings
- •Conclusion
- •Further reading
- •12 International Carriage of Goods by Road
- •Introduction
- •Interpretation of the CMR by the English courts
- •Scope of application
- •Contracting out
- •Documentary responsibilities
- •Electronic data interchange (EDI) and the CMR
- •Proceedings
- •CMR – the future
- •Further reading
- •13 International Multimodal Transport
- •Introduction
- •Freight forwarder – agent or principal?
- •Fiata negotiable multimodal bill of lading
- •Conclusion
- •Further reading
- •Overview
- •14 Marine Insurance
- •Introduction
- •Scope and nature of marine insurance contracts
- •Principles of marine insurance law
- •Warranties on the part of the insured – implied and express
- •Deviation
- •Liability of insurer
- •Institute cargo clauses (A), (B) and (C)
- •Conclusion
- •Further reading
- •15 Letters of Credit
- •Introduction
- •Open account
- •Bills of exchange
- •Documentary bill
- •Letters of credit
- •Performance bonds/guarantees and standby letters of credit
- •Other means of minimising risk of non-payment
- •Conclusion
- •Further reading
- •Overview
- •16 Civil Jurisdiction
- •Introduction
- •Submission by appearance
- •Ordinary contracts
- •Tort claims
- •Ancillary jurisdiction
- •Jurisdiction clauses
- •Simultaneous actions
- •Interim relief
- •Conclusion
- •Further reading
- •17 Choice of Law
- •Introduction
- •The proper law – express choice
- •The proper law – implied choice
- •The proper law – closest connection
- •Particular issues
- •English public policy and overriding mandatory rules
- •Certain particular types of contract
- •Torts and restitutionary obligations
- •Conclusion
- •Further reading
- •18 Foreign Judgments
- •Introduction
- •European judgments
- •External judgments
- •Conclusion
- •Further reading
- •19 Arbitration
- •Introduction
- •Characteristics
- •Arbitration in international commercial contracts
- •Arbitration under English law
- •Foreign arbitral awards
- •Conclusion
- •Further reading
- •Introduction
- •International developments
- •Developments in England
- •Features and associated issues
- •Mediation online
- •The EU Directive on mediation in civil and commercial matters
- •Conclusion
- •Further reading
- •Overview
- •21 Fighting Corruption in International Business
- •Introduction
- •The OECD Convention
- •The OECD and the UK Bribery Act 2010
- •The UNCAC
- •Business codes of conduct
- •Conclusion
- •Further reading
- •Appendix 7
- •Index
476 | |
LETTERS OF CREDIT |
applicable to competing claims (Art 22) and priority (Art 30). It also provides alternative models of priority rules in the Annex for the contracting state to adopt. In the absence of adopting one of the suggested models, the national law will be relevant for deciding priority in relation to the receivables that have been assigned.175 However, the Receivables Convention does not affect all matters relating to an assignment – for instance, the validity of an assignment agreement.176 This will be determined according to the applicable law.
The Receivables Convention is equally applicable to another risk-minimising practice that is commonly found in the financing of international sale of goods known as ‘forfaiting’.177 In a forfaiting arrangement, the forfaiter purchases bills of exchange which evidences the buyer’s obligation without recourse to the seller (the exporter). However, the forfaiter will require security from a bank that is normally given, after the bill of exchange has been accepted, in the form of an aval178 (a signature) on the back of the bill of exchange. The avaliser (i.e., the bank) backs the bill of exchange, thus assuring payment on the bill of exchange.179
Given that only five states need to take action for the Receivables Convention to come into force, there is a high likelihood for it to come into force.This of course raises the all-important issue of its affect on the Factoring Convention. Article 38(1) of the Receivables Convention addresses the issue of conflict with other international agreements by stating that the ‘convention does not prevail over any international agreement that has already been or may be entered into and that specifically governs a transaction otherwise governed by this convention’. However, there is a proviso to Art 38(1), which is important from the Factoring Convention perspective. Article 38(2) provides that ‘notwithstanding para 1 . . . this convention prevails over the UNIDROIT Convention on International Factoring (“the Ottawa Convention”). To the extent that this convention does not apply to the rights and obligations of a debtor, it does not preclude the application of the Ottawa Convention with respect to the rights and obligations of that debtor’. Of course, this is in the event of the factoring agreement coming within the ambit of the Receivables Convention.
Conclusion
Letters of credit are a useful payment mechanism in international trade and are extremely popular and rightly deserve to be called ‘the life blood of international commerce’. However, in certain circumstances, such as fraud and insolvency of the bank, the documentary credit method may not provide absolute assurance to the seller that he will get paid. It is possible for him to increase his protection through other mechanisms, such as performance guarantees and factoring.The law in relation to the variety of protective mechanisms available have been harmonised to some extent through rules formulated by the ICC and international conventions,180 thus imparting some degree of certainty.
175For a fuller account of the framework of the Receivables Convention, see Sigman and Smith, ‘Toward facilitating cross-border secured financing and securitization: an analysis of the United Nations Convention on the Assignment of Receivables in International Trade’ (2002) 57 Business Lawyer 727.
176See UN Doc A/CN 9/489, para 25.
177See UN Doc A/CN 9/489, para 8.
178Normally, the phrase ‘bon pour aval’ is used. The UNCITRAL Convention addresses the issue of guaranteeing payment of payment instruments in its Art 46. See also Arts 30–32 of the Convention Providing a Uniform Law for Bills of Exchange and Promissory Notes, Geneva 1930. This convention is reproduced in Carr and Goldby, International Trade Law Statutes and Conventions, 2nd edn, 2011, Routledge-Cavendish. The framework embodied in this convention is often referred to as the Geneva system and is followed in most civil law countries such as France and Switzerland.
179No special provision in the BEA, although avals are recognised in the UK. See G&H Montage GmBH v Irvani [1988] 1 Lloyd’s Rep 460; [1990] 1 WLR 667. See also Gerald MacDonald and Co v Nash and Co [1924] AC 625; Steele v M’Kinlay (1880) 5 App Cas 754.
180It must, however, be remembered that not all of the conventions are in force.
FURTHER READING |
| 477 |
Further reading
Arkins, ‘Snow white v frost white: the cold war in banking law’ (2000) 15 Journal of International Banking Law 30.
Arora, ‘The legal position of banks in performance bond cases’ [1981] LMCLQ 264.
Arora, ‘The dilemma of an issuing bank: to accept or reject documents under a letter of credit’ [1984] LMCLQ 81.
Bennett, ‘Bank-to-bank reimbursements under documentary credits: the Uniform Rules’ [1998] LMCLQ 114.
Bennett, ‘Performance bonds and the principle of autonomy’ [1994] JBL 574. Bennett, ‘Documentary credits: a reasonable time for what?’ [1997] LMCLQ 169. Bennett, ‘Strict compliance under UCP 500’ [1997] LMCLQ 7.
Bennett, ‘Original sins under the UCP’ [2001] LMCLQ 88. Buckley, ‘Potential pitfalls with letters of credit’ (1996) 70 ALJ 217.
Chatterjee, ‘Letters of credit transactions and discrepant documents: an analysis of the judicial guidelines developed by the English courts’ (1996) 12 Journal of International Banking Law 510.
Creed, ‘The governing law of letter of credit transactions’ (2001) 16 Journal of International Banking Law 41.
Davidson, ‘The evolution of letters of credit transactions’ [1995] Butterworths Journal of International Banking and Financial Law 128.
Dolan, ‘Standby letters of credit and fraud’ [1985] Cardozo LR 1.
Dolan, ‘Strict compliance with letters of credit: striking a fair balance’ [1985] Banking LJ 18. Ellinger, ‘The tender of fraudulent documents under documentary letters of credit’ (1965) 7(1)
Malaya LR 24.
Ellinger, ‘Documentary credits and fraudulent documents’, in Kee and Chan (eds), Current Problems of International Trade Financing, 2nd edn, 1990, National University of Singapore.
Ellinger, ‘The uniform customs and practice for documentary credits – the 1993 revision’ [1994] LMCLQ 377.
Gao, The Fraud Rule in Letters of Credit: A Comparative Study, 2002, Kluwer. Goode, ‘The new ICC Uniform Rules for demand guarantees’ [1992] LMCLQ 190.
Goode, ‘Abstract payment undertakings and the rules of international chamber of commerce’ (1995) 35 St Louis ULJ 725.
Goode, Commercial Law, 3rd edn, 2004, Butterworths.
Guest, Chalmers and Guest on Bills of Exchange, Cheques and Promissory Notes, 16th edn, 2005, Sweet & Maxwell.
International Chamber of Commerce, Commercial Crime Bureau, Special Report: Prime Bank Instrument Frauds, 1994, ICC Commercial Crime Bureau.
Jack, Documentary Credits, 2009 (new publication expected)
Kee, ‘The fraud rule in letters of credit transactions’, in Kee and Chan (eds), Current Problems of International Trade Financing, 2nd edn, 1990, National University of Singapore.
King, Gutteridge and Megrah’s, Law of Banker’s Commercial Credits, 2001, Europa.
Kozolchyk, ‘Bank guarantees and letters of credit: time for a return to the fold’ (1989) 11 University of Pennsylvania Journal of International Business Law 1.
Kozolchyk, ‘Strict compliance the reasonable document checker’ (1990) 56 Brooklyn LR 48. Kozolchyk, ‘The paperless letter of credit and related documents of title’ (1992) 55 Law and Con-
temporary Problems 39.
Maduegbuna, ‘The effects of electronic banking techniques on the use of paper based payment mechanisms in international trade’ [1994] JBL 338.
Mann, The Legal Aspect of Money, 5th edn, 1997, Clarendon.
McGuinness, The Law of Guarantee: A Treatise on Guarantee, Indemnity and the Standby Letter of Credit, 1996, Carswell.
478 | |
LETTERS OF CREDIT |
Ortego and Krinick, ‘Letters of credit: benefi ts and drawbacks of the independence principle’ [1998] 115 Banking LJ 487.
Postan, ‘Credit in medieval trade’ (1927) 1 Economic History Review 234.
Usher, ‘The origin of the bill of exchange’ (1914) 22 Journal of Political Economy 566.
Wunnicke Wunnicke & Taylor Standby and Commercial Letters of Credit, (Looseleaf) Last update 2008, Wolters Kluwer.
Part V
Dispute Resolution
This page intentionally left bank