Risk Analysis in Documentary Letter of Credit Operation
cytuj
pobierz pliki
RIS BIB ENDNOTEChoose format
RIS BIB ENDNOTERisk Analysis in Documentary Letter of Credit Operation
Publication date: 04.2017
Financial Law Review, 2016, Issue 4 (4)/2016, pp. 27 - 45
Authors
Risk Analysis in Documentary Letter of Credit Operation
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.
Alavi H., Mitigating the Risk of Fraud in Documentary Letters of Credit, Baltic Journal of European Studies 2016, Vol. 6, No. 1. Google Scholar
Alces P.A., An Essay on Independence, Interdependence and the Suretyship Principle, University of Illinois Law Review 1993, No. 480. Google Scholar
Exporting Against Letters of Credit available at http://www.financepractitioner.com/operations-management-best-practice/exporting-against-letters-of-credit?page=1 (last visited 10 March 2017). Google Scholar
Bank Melli Iran v Barclays Bank (Dominion, Colonial & Overseas), Lloyd’s Law Reports 1951, Vol. 2, No. 367. Google Scholar
Botosh, H. M. S., Striking the Balance between the Consideration of Certainty and Fairness in the Law Governing Letters of Credit, http://etheses.whiterose.ac.uk/3063/ (last visited 09.03.2017). Google Scholar
Buckley R., P&Gao X., The Development of the Fraud Rule in Letter of Credit Law: The Journey so Far and the Road Ahead, University of Pennsylvania Journal of Economic Law 2002, Vol. 23, No. 663. Google Scholar
Chuah J., Law of International Trade, 4th ed, London 2009. Google Scholar
Courtaulds North America, Inc. v. North Carolina Nat. Bank 528 F.2d 802, C.A.N.C [1975]803. Google Scholar
Cranstom R., Principle of banking law, Oxford, New York, Athens 1997. Google Scholar
Dolan J., The Law of Letters of Credits, Boston 2002. Google Scholar
Eakin v Continental Illinois National Bank & Trust Co. (1989) 875 F.2d 114.116. Google Scholar
Garcia R. L. F., Autonomy principle of the letter of credit, Mexican Law Review 2009, Vol. 3, No. 1. Google Scholar
Gian Sing & Co.Ltd v. Banque de l’Indochine 2 All E.R. 754 (1974). Google Scholar
Godier K., Trends Show a Declining Reliance on Letters of Credit, Documentary Credits Insight 2001, Vol. 7, No. 3. Google Scholar
Hao Y., Xiao L., Risk Analysis of Letter of Credit, International Journal of Business and Social Sciences 2013, Vol. 4, No. 9. Google Scholar
Hare C., Not so Black and White: The Limits of the Autonomy Principle, The Cambridge Law Journal 2008, No. 288. Google Scholar
Hotchkiss C., Strict Compliance in Letter-of-Credit Law: How Uniform is the Uniform Commercial Code?, Uniform Commercial Code Law Journal 1991, No. 23. Google Scholar
ICC Thailand 2002, Examination of documents waiver of discrepancies and notice under UCP500, ICC Thailand, (last visited on 10 January 2017), http://www.iccthailand.or.th/article2.asp?id=9. Google Scholar
Staughton L.J., IE Contractors Limited v. Lloyds Bank Plc., Lloyds Rep 1990, Vol. 2. No. 496. Google Scholar
JH Raynor & Co. Ltd v. Hambro's Bank Ltd [.9Q3] Q.B. 71. Google Scholar
Kozolchyk B., Commercial Letter of Credit in the Americas: A Comparative Study of Contemporary Commercial Transactions, Albany 1980. Google Scholar
Kražovska D., Impact of the Doctrine of Strict Compliance on a Letter of Credit Transaction, http://pure.au.dk/portal-asb-student/files/2543/Krazovska_MasterThesis.pdf (last visited 09.03.2017), Google Scholar
Raymond J., Malek A., Quest D., Documentary Credits – The Law and Practice of Documentary Letters of Credits including standby credits and demand guarantees, Haywards Heath 2009. Google Scholar
Mann R. J., The role of letters of credit in payment transactions, Michigan Law Review 2000, Vol. 98, No. 8. Google Scholar
Information: Financial Law Review, 2016, Issue 4 (4)/2016, pp. 27 - 45
Article type: Original article
Tallin Law School, Tallinn University of Technology, Estonia
Published at: 04.2017
Article status: Open
Licence: CC BY-NC-ND
Percentage share of authors:
Article corrections:
-Publication languages:
EnglishView count: 3102
Number of downloads: 4183