scholarly journals International Trade and Letters of Credit: A Double-Edged Sword in Times of Crises

2022 ◽  
Author(s):  
Matthieu Crozet ◽  
Banu Demir ◽  
Beata Javorcik
Keyword(s):  
International Trade ◽  
Letters Of Credit

scholarly journals Remedies to Fraud in Documentary Letters of Credit: A Comparative Perspective / Opravné Opatrenia Pri Podvodoch S Dokumentárnymi Akreditívami: Komparatívna Perspektíva

2016 ◽  
Vol 5 (1) ◽  
pp. 1-13
Author(s):  
Hamed Alavi
Keyword(s):  
International Trade ◽  
Legal System ◽  
Current Paper ◽  
Comparative Perspective ◽  
Legal Systems ◽  
Letters Of Credit ◽  
Legal Frameworks ◽  
American Legal System ◽  
Article 5

Abstract Article 4 of the Unified Customs and Practices of Documentary Letters of Credit establishes the notion of autonomy principle by separating credit from underlying contract between account party and beneficiary. Article 5 by recognizing the autonomy principle confirms that effectuate the payment under credit, banks only deal with documents and not with goods. As a result, while documentary letters of credit are meant to facilitate the process of international trade, their sole dependency on compliance of presented documents to bank by beneficiary to actualize the payment will increase the risk of fraud and forgery in the course of their operation. Interestingly, UCP (currently UCP600) takes a silent status regarding the problem of fraud in international LC operation and leaves the ground open for national laws to provide remedies to affected parties by fraudulent beneficiary. National Laws have different approaches to the problem of fraud in general and fraud in international LC operation in particular which makes the access of affected parties to possible remedies complicated and difficult. Current paper tries to find answer to the questions of (i) what available remedies are provided to affected parties in international LC fraud by different legal systems? (ii) And what are conditions for benefiting from such remedies under different legal systems? In achieving its objective, paper will be divided in two main parts to study remedies provided by intentional legal frameworks as well as the ones offered by national laws. Part one will study the position of UCP and UNCITRAL Convention on Independent Guarantees and Standby Letters of Credit (UNCITRAL Convention) and remedies, which they provide to LC fraud in international trade. Part two in contrary will study available remedies to LC fraud and condition for access them under English and American legal system.

scholarly journals DOUBLE INVOICING IN INTERNATIONAL TRADE: THE FRAUD AND NULLITY EXCEPTIONS IN LETTERS OF CREDIT – ARE THE AMERICA ACCORD AND THE UCP 500 CROOKS’ CHARTERS!?

2012 ◽  
Vol 18 (1) ◽  
pp. 115-156
Author(s):  
Ademuni Odeke
Keyword(s):  
International Trade ◽  
White Collar ◽  
Status Quo ◽  
Specific Reference ◽  
Bank Of Canada ◽  
The Status ◽  
Letters Of Credit ◽  
The Uk ◽  
Exchange Control ◽  
The Imf

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 Crooks’ Charter for money launderers, documentary fraudsters and other white collar crimes.

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

2008 ◽  
Author(s):  
Tenielle Appanna
Keyword(s):  
International Trade ◽  
Letter Of Credit ◽  
Fraud Exception ◽  
Letters Of Credit

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.

scholarly journals Autonomy Principle and Fraud Exception in Documentary Letters of Credit, a Comparative Study between United States and England

2015 ◽  
Vol 15 (2) ◽  
pp. 47-68 ◽  
Author(s):  
Hamed Alavi
Keyword(s):  
International Trade ◽  
Common Law ◽  
Legal Aspects ◽  
International Operation ◽  
Legal Personality ◽  
Letter Of Credit ◽  
Law System ◽  
American Law ◽  
Standards Of Proof ◽  
Letters Of Credit

Abstract Despite the fact that Documentary Letters of Credit are involved in process of International Trade for many centuries, but their legal personality is very new and their life span is much shorter than their existence. In the middle of Eightieth Century, Lord Mansfield introduced legal aspects of LC operation for the first time to the Common Law System. Later, International Chamber of Commerce started to codified regulations regarding international operation of Documentary Letters of Credit in 1933 under the title of Uniform Customs and Practices for Documentary Letters of Credit and updated them constantly up to current date. However, many aspects of LC operation including fraud are not codified under the UCP which subjects them to national laws. Diversified nature of National Laws in different countries can be source of confusion and problem for many businessmen active in international operation of Documentary Letters of Credit. Such differences are more problematic in Common Law countries as a result of following precedent. For Example, legal aspects of International LC transactions under British Law are only based on case law, however, American Law addresses Letter of Credit Operation under Article 5 of Unified Commercial Code. Due to important role of English and American law in practice of international trade, current paper will try to compare their approach to autonomy principle of in LC operation, fraud rule as a recognized exception to it and search for answer to following questions what is definition of fraud, and what are standards of proof for fraud in LC operation, under English and American law?

scholarly journals Risk Analysis in Documentary Letter of Credit Operation

2017 ◽  
Vol 0 (0) ◽  
Author(s):  
Hamed Alavi
Keyword(s):  
Risk Management ◽  
International Trade ◽  
Risk Analysis ◽  
Current Paper ◽  
Management Theory ◽  
Letter Of Credit ◽  
Legal Principles ◽  
Strict Compliance ◽  
Letters Of Credit

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.

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