23,820 research outputs found
Letters of Credit:Model for the Illegality Exception and for the UCP to Address Exceptions to the Principle of Autonomy
Documentary Credits and Independent Guarantees: A Critique of the âFraud Exceptionâ Position in English and Jordanian Law.
Underpinning the law on documentary credits and independent guarantees is a legal principle of autonomy which dictates that these financial instruments should, as a matter of law, be treated separately from a traderâs contractual agreement. However, despite this, fraudulent behaviour may still occur when these financial and legal instruments are used in practice. In response, a fraud exception to the autonomy principle has been recognised by many national and international courts in an attempt to mitigate the effects of fraudulent trade practices. The application of this exception within the English courts is, however, problematic owing to the narrowness of its construction and application. Additionally, the paucity of alternate legal instruments for regulating fraudulent trade practices means that Jordanian courts are not in any better position than their English counterparts, leaving traders confused as to their legal position when a fraud dispute arises. Given the large financial value of fraudulent transactions and the risks involved, the use of these legal instruments has declined as has the banksâ investment in this area creating a problem for legal policy makers.
The aim of this dissertation is to, first, critically examine the fraud exception under English and Jordanian law by exploring the problems associated with the application of the fraud exception; and, second, to propose legal reforms which would alleviate both the legal and practical problems associated with the fraud exception as it stands currently. The thesis is that, whilst the autonomy principle plays a vital role in international trade, the courts should facilitate the fraud exception application and recognise other exceptions, such as the non-genuinity and the underlying contract exception, where the former exception would be unable to prevent fraud occurrence. The approach is based upon a critical evaluation of Anglo-American and Jordanian case law, supplemented by secondary sources and a qualitative examination of the Jordanian approach to the fraud exception based upon interviews with Jordanian judges. The dissertation concludes that an effective legal approach to fraudulent transactions using documentary credits and independent guarantees must be founded upon objective rather than subjective principles and that the courtsâ use of injunctions should be different in cases involving holders in due course from those not involving such parties. These findings will impact upon legal policy debates within both English common law and international trade law more generally and the examination of the Jordanian position is instructive in that it is the first such study of its kind
Right of Issuing Bank to be Subrogated to the Applicant of Letter of Credit Under the Insurance Contracts
This article discusses the case where the efforts of the issuing bank prove futile to recovering the payment - paid to the beneficiary - from the applicant of the letter of credit. In particular, when the sold goods - the subject matter of the letter of credit - received damaged or lost. This scenario is envisaged when the applicant refuses to make the payment imposed under the letter of credit. The necessity of discussing this matter is to clarify whether or not the issuing bank can be subrogated to the beneficiaryâs rights acquired under insurance contract. The analysis will focus on the English law and Uniform Customs & Practice for Documentary Credits (UCP600), in order to illuminate the legal grounds on which the issuing bank can stand so as to enjoy such rights, through which the paid fund can be reimbursed
Four uncertainties around the fraud exception in documentary letters of credit under English law
The principle of independence underpins the financial attractiveness and utility of documentary credits, since it makes the assurance of payment by banks concrete. Fraud is however a well-known exception upon which the principle of independence can be set aside. It is argued in this article that English law suffers from four uncertainties as to the fraud exception and it is evaluated how such uncertainties can be remedied. It is mainly advocated that English courts should consider the issue of allocating the risk of fraud, as commercially expected by parties, as a factor in fashioning rules and equitable concerns for the fraud exception. Regrettably, the commercial reality of the distinction between complex (chain of banks) and simple documentary credits, as a core factor in determining liability, is overlooked by English courts. In contrary, there is a tendency by courts to overdramatise the role of contractual analysis. Finally, it is argued that the decision of the Privy Council in Alternative Power cannot be an authority to accept any kind of fraud that is not related to the presented documents (non-documentary fraud) as an exception to the principle of independence
DOUBLE INVOICING IN INTERNATIONAL TRADE: THE FRAUD AND NULLITY EXCEPTIONS IN LETTERS OF CREDIT â ARE THE AMERICA ACCORD AND THE UCP 500 CROOKSâ CHARTERS!?
This article: First, (a) re-examines the fraud exception rule in letters of credit transactions with specific reference to the United City Merchants v Royal Bank of Canada (the American Accord) and against the background of a recent commonwealth decision accepting nullity as a new exception; (b) evaluates its impact on over/under invoicing under the WTO Agreement on Pre-shipment Inspection of Goods in International Trade (PSI); and (c) assesses its implication on the IMF Agreement on Exchange Control implemented in the UK by the IMF Agreement Regulations 1946 made under the IMF Agreement Acts 1945 as amended. Secondly, it argues that the current UCP 500 is outmoded and inadequate to meet current needs and is therefore in need of urgent revision. Thirdly, it recommends, inter alia, that in accordance with the said commonwealth decision, fraud by third parties should be recognised by English law as an independent and separate nullity exception. Fourth, and finally, it concludes that the status-quo acts as an unwitting Crooksâ Charter for money launderers, documentary fraudsters and other white collar crimes
The Unique Jurisprudence of Letters of Credit: Its Origin and Sources
This Article seeks to illumine the legal nature of the letter of credit instrument, and catalogue the various sources of law and rules that can govern it; and, by doing so, render a service to those who must quickly come to grips with letter of credit law. The Article is in two parts. The first part examines the legal nature of the letter of credit by looking at its definition, operation, and history and by comparing it with negotiable instruments and contracts. The second part considers the rules, customs, and regulations governing letters of credit and introduces the two fundamental principles of the law of letters of credit, the principle of independence and the principle of strict compliance, which in slightly varying form are applied to credits in all legal systems
Towards a more flexible approach to the fraud exception in letters of credit under South African law: a comparative analysis with select common law approaches and the UNCITRAL Convention
The aim of this dissertation is to recommend an alternative approach to the fraud exception in South African law. The Current South African position as with the English law, places more weight on upholding the sanctity of the autonomy principle in letters of credit than preventing fraud. This is mainly because the courts have traditionally taken the view that protection of the autonomy principle is central to promoting the needs of trade and maintaining the integrity of the international banking community. Hence, this dissertation argues that an approach to the fraud exception in South African law that is more in line with that of the American law and/or the UNCITRAL Convention strikes a better balance in upholding the value of letters of credit and combatting fraud than the current South African position. Based on the comparative analysis of the position in the United Kingdom, United States of America and under the UNCITRAL Convention, the dissertation seeks to draw upon important lessons and principles pivotal to a preferable approach to the fraud exception in South African law that would enhance a better balance between the autonomy arguments and deterrence of fraud
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